Wednesday, February 28, 2018

How I Built My Own Dividend Stock Portfolio



When I started my own investing journey 30 years ago all I bought were high cost mutual funds. I'm sure most retirees today got their start doing the same.

What I've learned since then is that nobody will take better care of your investment dollars than you will. Also, saving on the cost to own those investments is job one.

If you don't know how to do this, it is a must that you find out how. Go to the library and or start subscribing to some financial newspapers. Becoming a DIY investor is something you should want to understand so you can better secure your retirement and your family finances.


Start Small

Keep your initial purchases to a minimum so you can better understand what you bought. I started with just 4 stocks initially. Take your time and dip your toe in slowly as you educate yourself on how a good quality high quality dividend portfolio works in your favour.  A few investments purchased cheaply will over time will grow and reap great rewards.

What Stocks?

  • I started with one bank. The bank I happen to do business with and have all my accounts with. This is an easy choice for you to make for an initial bank purchase.
  • next buy a telecomm company. At the time I was with Bell, so I bought 100 shares of BCE.
  • the next company I bought was Enbridge ENB. It's my gas company and they send me a monthly bill for the gas I use. Now, I collect a dividend every 3 months for the pleasure of owning them.
  • I next bought a utility because I use power on a regular basis. My provider is a downstream customer so I had to settle on a parent company. At the time Fortis FTS was reasonably priced so I bought it.
My initial stock portfolio was just BNS, BCE, ENB and FTS.

It has since grown considerably to include upwards of 25 stocks. Start small and build from there.

For help on stock selection you can read or purchase:

Hold On Always

You are buying individual dividend stocks for the cash flow they provide you. Whether it's paid monthly or quarterly that's the reason you buy it. It's all about the future of your retirement and how much cash flow each investment pays you to fund your future and retirement.

Quality First

You buy the best stocks when they are priced cheaply first. Concentrate on quality and not quantity. Hold only a few of the best until you know what, how and when to add to your portfolio.

Yield Matters


I like to look at what the particular bank, utility, telecomm, real estate, energy or grocery store/restaurant stock is going to pay me. I pick the highest yielding top quality stock first. I'm with Tom Connolly on picking those stocks with at least a 10 year track record of growing that dividend. At this time all the banks are reporting earnings and announcing dividend increases (27 Feb 2018).

Ignore High Yield Investments

Right now I'm talking about those companies trying to seduce you with 8-10% or even higher returns. It just won't last and the price will erode over time. IOW, your investment will lose value and your account will show that ugly RED colour. Avoid that at all costs. Stick with quality companies that have been around for decades for low risk investments.

Stay Disciplined

Your investment returns come from yield + dividend growth over time. Our holding period is forever. When you hear talk of a recession looming, ignore it and stay the course. Use these rules I've learned through the years;

  • don't chase the latest investment fads that don't pay dividends
  • ignore IPOs Initial Public Offerings, they are hazardous to your long term financial health
  • don't get overly excited and take risks with your money you can't recover from
  • block out any advice you hear from brokers, most of the time they are just pushing their own products. AKA talking up their own book.
  • never become a momentum investor and do dumb shit with your investing dollars

The Final Goal

Your goal should always be to construct a dividend stock portfolio that pays you enough yield on a monthly basis that you never have to touch your capital. Here in Canada it is a must to have to withdraw a minimum of 4% during the first year after you turn 71.

Eventually you will have accumulated enough money to double that mandatory withdrawal rate and still have your nest egg in tact. A growing income coupled with growing capital will equal a comfortable retirement and nice supplement to any pension you may be lucky enough to have.

It works for a simple guy like me and I'm confident this strategy can work for you.

Related Posts:



Related Reading:



Do you buy dividend stocks to fund your retirement? What's in your portfolio?

Tuesday, February 27, 2018

Using ETFs for Dividend Investing - Should You?



Instead of buying individual stocks you may want to consider using Dividend ETFs to get started on your dividend stock investing journey. It's not a strategy I use but if you have a limited amount of funds to invest you can get started doing this.

Let's have a look at 3 of the most popular offerings and what they are composed of. This can be a great place to get ideas from if you want to put together a dividend growth portfolio by mimicking what professional money managers do.

VDY - Vanguard FTSE Canadian High Dividend Yield ETF

Top Ten Holdings which comprise 75% of the ETF include;

Royal Bank
TD Bank
Bank of Nova Scotia
Enbridge
Bank of Montreal
Canadian Imperial Bank of Commerce
Manulife
TransCanada Cop.
Sunlife
National Bank of Canada

MER: 0.22%
Dividend Yield: 4%
Total Number of stocks: 57
5 year avg. return = 5%

XDV - iShares Canadian Select Dividend Index ETF

Top Ten Holdings which equals 54% of the ETF;

CIBC
Royal Bank
Bank of Montreal
Bank of Nova Scotia
BCE
National Bank
TransCanada Corp
TD Bank
Laurentian Bank
IGM Financial

MER: 0.55%
Dividend Yield: 3.9%
Total Number of stocks: 28
5 year avg. return = 7.5%

CDZ - iShares S&P/TSX Canadian Dividend Aristocrats Index ETF


Top Holdings comprising 25% of the fund;

Corus Entertainment
Alaris Royalty
Exchange Income Fund
Altagas
Transalta Renewables
Gibson Energy
Gluskin Sheff
Interpipeline
Enbridge Income Fund
Granite Real Estate Investments

MER: 0.66%
Dividend Yield: 3.4%
Total Number of stocks: 81
5 year avg. return = 6%

All of these funds allow you to earn monthly dividend income. As you can see they are all a bit different as far as exposure to sectors so you have to decide if you want a heavier exposure to financials or not.

They also have different costs and costs in the long run matter. You pay that price to have someone else make the buying and selling decisions for you.

All of them invest in high quality Canadian dividend paying stocks. If you have the money, let's say 100K, you can always mimic the top 10 holdings of a particular ETF mentioned here and buy the stocks individually and just pay the trading costs to buy.

This is what I do. As an example I own all 10 of the top holdings in VDY but only hold 1 of the stocks in the top ten of CDZ.


Summary

I have built my own dividend growth portfolio and don't use ETFs. While the convenience is nice, I find the ongoing cost prohibitive. I only check them out to get ideas on what to buy when I get new money to invest.

Do you use ETFs in your own portfolio?


Related Posts: Buy For the Dividends
Recommended Reading : The Little Book of Big Dividends

Monday, February 26, 2018

Bad News is Good News for Dividend Growers



As mentioned in an earlier post, I subscribe to Tom Connolly's website on dividend growth. It is only $50 a year and well worth the research and explanations he provides on a long term dividend growth stategy.

In one of his latest posts he highlights how he has never seen the dividend yields higher on 4 specific utility stocks. Let's go through them and see if they are a good buy right here for your own portfolio.

Fortis FTS.TO

Closed at $42.24 on 23 Feb 2017
52 week high/low $39.38-$48.73
Currently trading at a 12% discount to it's 52 week high
Dividend Yield - 4%

The Company

"Fortis Inc. operates as an electric and gas utility company in Canada, the United States, and the Caribbean. It generates, transmits, and distributes electricity to approximately 422,000 retail customers in southeastern Arizona; and 96,000 retail customers in Arizona's Mohave and Santa Cruz counties with an aggregate capacity of 2,834 megawatts (MW), including 64 MW of solar capacity. The company also sells wholesale electricity to other entities in the western United States; owns gas-fired and hydroelectric generating capacity totaling 64 MW; and distributes natural gas to approximately 1,008,000 customers in British Columbia, Canada. In addition, it owns and operates the electricity distribution system that serves approximately 556,000 customers in southern and central Alberta; owns four hydroelectric generating facilities with a combined capacity of 225 MW; and provides operation, maintenance, and management services to hydroelectric generating facilities. Further, the company distributes electricity in the island portion of Newfoundland and Labrador serving approximately 266,000 customers with an installed generating capacity of 139 MW; and on Prince Edward Island serving approximately 80,000 customers through generating facilities with a combined capacity of 145 MW. Additionally, it provides integrated electric utility service to approximately 66,000 customers in Ontario; approximately 44,000 customers on Grand Cayman, Cayman Islands; and approximately 15,000 customers on certain islands in Turks and Caicos, as well as holds long-term contracted generation assets in British Columbia and Belize, and the Aitken Creek natural gas storage facility. It also owns and operates transmission and distribution lines; and natural gas pipelines. Fortis Inc. was founded in 1885 and is headquartered in St. John's, Canada."



As you can see from the chart the price has been heading down. This has resulted in a rise in the yield to 3.8%. IMO there has never been a better time to buy FTS for a dividend growth portfolio.


Emera EMA.TO


Closed at $41.91 on 23 Feb 2017
52 week high/low $39.08-$48.73
Currently trading at a 15% discount to it's 52 week high
Dividend Yield - 5.4%

The Company

"Emera Incorporated, an energy and services company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity to various customers. The company is also involved in gas transmission and utility energy services businesses; and the provision of energy marketing, trading, and other energy asset management services. In addition, it transports re-gasified liquefied natural gas to consumers in the northeastern United States through its 145-kilometre pipeline in New Brunswick. The company serves approximately 375,000 customers in Florida; 525,000 customers in New Mexico; 515,000 customers in Nova Scotia; 158,000 customers in the state of Maine; and 129,000 customers in the Island of Barbados. Emera Incorporated was founded in 1919 and is headquartered in Halifax, Canada."



Another utility blue chip stock dive bombing down to test it's lows, at the same time the yield has been steadily rising as the cost of buying gets a lot cheaper. Pay less and get more yield. This is panacea to a retired income investor. I've been buying EMA steadily over the last month for the long term. 


Canadian Utilities CU.TO


Closed at $33.56 on 23 Feb 2017
52 week high/low $33.37-$42.44
Currently trading near it's 52 week low
Dividend Yield - 4.7%

The Company

"Canadian Utilities Limited engages in the electricity, and pipelines and liquids businesses. It operates through Electricity, Pipelines & Liquids, and Corporate & Other segments. The Electricity segment engages in the generation, transmission, and distribution of electricity using coal, natural gas, hydroelectric, and wind resources, as well as related infrastructure development in Western Canada, Ontario, the Yukon, the Northwest Territories, and Australia. The Pipelines & Liquids segment is involved in the integrated natural gas transmission and distribution; energy storage; and related infrastructure development activities, as well as provision of industrial water solutions in Alberta, the Lloydminster area of Saskatchewan, Western Australia, and Mexico. It owns and operates approximately 9,400 kilometers of natural gas pipelines, 18 compressor sites, approximately 4,000 receipt and delivery points, and a salt cavern storage peaking facility located near Fort Saskatchewan, Alberta in Canada. The Corporate & Other segment engages in commercial real estate; and retail energy and natural gas businesses, as well as provides billing, payment processing, credit collection, and call center services. The company was incorporated in 1927 and is headquartered in Calgary, Canada. Canadian Utilities Limited operates as a subsidiary of ATCO Ltd."


"If you want to buy stocks, why would you want the price to rise" - Warren Buffett

Tom Connolly goes on to further state that you should just ignore what the market is saying. Good quality names are being treated as lemons. Yields have never been higher in decades on some of these names.

In the case of Emera he asks; "How can you beat a 5.7% yield combined with a 9% dividend growth record. Well, it's pretty hard to find that outside the safety of a quality utility that's almost a hundred years old. 

Use this time of cheap prices to add to your dividend growth portfolio and watch your yields and money explode upward.

Do you own any utility stocks and would you be buying them here? 

Related Reading: Rising Rates and Dividends
                                    The Long Game



Sunday, February 25, 2018

Dividend Growth and Your Retirement



You want to have an income stream that grows in retirement and not have a fixed income stream. This is so you can stay ahead of the time erosion of your money. Mainly speaking about inflation. It makes no sense to be collecting the same monthly amount of money when everything you need keeps rising in price. You want to devise a plan so your income rises with inflation. This is the strategy I pursue in retirement.

Look at the Track Record

Before I put any new money to work it's important to look at the dividend payout track record of the company I'm considering of buying. Bank of Montreal has paid a dividend every year for the last hundred years. Do they increase the dividend every year? Not always but they have a consistent history of paying investors more as time goes by.

I look for at least a 10 year record of increasing that dividend. In retirement this is your safety valve that the money they say they are paying will not only be there but will grow over time allowing me to keep up with inflation.

This is mainly why I always start with looking at banks when considering making a purchase to supplement my pension income.

Dividends Always Matter

Plain and simple I don't buy stocks that don't pay me to own them. NEVER!
Here is what I own in my own Retirement Account RRSP. I'm Canadian so everything I own is a Canadian stock. If I was proficient enough I would have no problem owning some dividend payers in the U.S.

Algonquin Power AQN - 4.6% yield
Bank of Montreal BMO - 3.7%
Bank of Nova Scotia BNS - 4%
Bell Canada BCE - 5.4%
Canadian Imperial Bank of Commerce - 4.5%
Emera EMA - 5.4%
Enbridge ENB - 6.3%
Enercare ECI - 5.1%
Fortis FTS - 4%
National Bank NA - 3.8%
Power Corp of Canada POW - 4.7%
Royal Bank RY - 3.5%
Shaw Communications SJR.B - 4.7%
Toronto Dominion Bank TD - 3.2%
Transcanada Corp TRP - 4.7%

Total Yield = 4.5%


Portfolio generates a yield 2.5% above inflation and 3.5% above a high interest savings account. It is well diversified among banks, utilities, telcos and energy infrastructure companies. At 61 years old I will hold all these stocks until I'm 71 and have to convert my RSP into a RRIF.

At that point I can still withdraw 4% a year and still be ahead on yield with the potential for all stocks to grow in value. Eventually I will have accumulated more in dividends than I paid for the stock. It will take time but that's all I have left.

As you can see I don't hold any bonds. I collect an employer pension, CPP and a small military pension. I consider these as my long bond portion of my retirement account. They are all indexed and they make for a nice supplement.

I see no reason for me personally to fix any portion of my portfolio to bonds or any other fixed income product. It's just what I do.

I will just hold my dividend stocks through thick and thin and never sell them. As Warren Buffett says, " The best holding period is forever".


Related Reading: Buy For the Dividends

How do you invest for retirement and grow your income?



Saturday, February 24, 2018

Investing in Commodities



I find it really hard to even know how to buy any of this stuff. Gold, silver, copper, wheat, soybeans, heating oil, zinc and on and on.

I have no clue what to buy or how to buy it. Sure you can dabble in futures trading, options or commodity ETFs that specialize in these sectors. I don't and have no idea how to make any money buying these stocks or funds.

Most of the time the risks are too great and more important, they pay no diividend. There is nothing to support the stock price when the market turns and goes sideways.

As Kevin O'Leary once said "when they go down (commodities) they don't touch the sides". Meaning, they drop so fast and precipitously that you have no time to react and sell your position.

So, why be there? To me the risks are too great and I never want to put my life savings at risk in stocks that don't pay a dividend.

Safety First

Material stocks have never been harder to buy for anybody trying to sleep at night than they are right now. Up wildly one day and down the next with nothing in between to pay you for that discomfort.

I would need a guide like 'Commodites for Dummies' to better understand what where and how to invest in this space.

When you look at the Canadian resource stocks they have really been hammered here in February. It is really hard for me to look at anything here to invest in.


Where I Would Look


Some stocks like Westshore Terminals WTE.TO pay a dividend of 2.5% but they are a one trick pony. They are a coal storage and loading terminal in B.C.with basically one customer and that is Teck Resources. How Teck goes, so goes WTE. I do not own WTE but for diversification and less volatility than a junior gold stock it is an idea for you.

One resource stock I do own is LIF.TO Labrador Iron Ore Royalty. It pays a dividend of 3.7% on a quarterly basis. It owns a 15% interest in Iron Ore Company of Canada which operates an iron mine in Labrador City. It also has a tendency of paying a special dividend once a year which is also nice.

You can also look at some energy stocks that pay a dividend but they tend to have a higher beta and not really something a retiree like me wants to pin my future hopes on.

I would rather look at more stable areas of the market like banks and insurance companies.

How about you? Do you invest in commodities? What's your strategy with this asset class? I would love to hear from you.

Friday, February 23, 2018

Rising Rates and Dividends



How does one invest in a rising interest rate environment? The first thing I always try to do is ignore all the gurus out there who recommend stocks for you to buy.

I do listen to those who recommend a dividend growth strategy and pretty much block out all the others. Here in Canada there is a show on BNN called 'Market Call' and also 'Market Call Tonight'.

The highlight of the show is it's 'Top Picks' section near the end of the show where the expert recommends 3 top stock picks. In the course of the year that is over 1,000 recommendations for you to act on or not.

Can they all be right? I mean over a thousand stock picks in the course of a year from portfolio managers who make a living managing money.

Just ignore this nonsense is what I do. They are nice people but they change their minds on stock selection more often than most of us change our socks.

So what to do? Where to go for ideas and especially now in this environment, where the economists are saying expect at least 3 rate hikes this calendar year. Maybe, maybe not. I've heard this story before.

Rising interest rates are a sign of a strong economy. Don't get scared off buying stocks in this environment.

Also, don't let the high yield of a stock scare you out of a purchase, As the yield rises the price of the stock comes down.

Where to Look

I get ideas from a few different places as I navigate through the minefield that is the stock market.

Norm Rothery over at stingyinvestor.ca and a contributor at Moneysense magazine publishes a 'A' dividend stocks list every year. This year his list includes;

BMO, CM, GWO, POW/PWF, SLF and TD.

If you have any money to put to work this is a good starting place to implement a dividend growth strategy. Norm also runs a website over at stingyinvestor.ca

I also subscribe to Tom Connolly's website over @ dividendgrowth.ca. It is filled with a plethora of great advice and list of stocks to hold for the Long Run.

I receive no compensation for recommending Moneysense or Norm and Tom's website. I just like them and use them to hold my investing hand.

What are doing with your money as rates rise? What investments do you like in this environment?




Thursday, February 22, 2018

The Long Game


When you buy individual stocks for cash flow you are making a bet on the long term future of securing a steady stream of income to fund your retirement


Never lose sight of the fact you are in this for the long term, you are playing the long game. A game where you pick individual stocks that allow you to ensure and secure a comfortable level of income to fund those needs.

Take Charge

Understand what you are doing and take charge of your investment portfolio. If you don't then become an index investor and buy the whole market. This way you have a passive investment and don't have to worry about making stock picking decisions.

I like picking stocks and using speculation to decide what to buy but it's not for everyone and most people would be better served becoming an investor and sitting out the game on the sidelines.

DYI - Do It Yourself

Learn to rely on yourself. Go to the library and read everything you can on dividend stock investing. If they don't have them you can do no worse by building a library of your own with these great books;





Also read anything you can from Jack Bogle and Burton Malkiel

"The hidden key to investment success is long term dividend growth"
 -
Lowell Miller


Understand Your Investments

Focus your attention on asset allocation. I tend to focus on stable and safe blue chip companies like the big banks, telco/cable companies, utilities and REITs. They historically provide a steady and growing dividend you can rely on and help you sleep at night.

Try to buy them when they are cheap and have fallen in price. At the time of this writing, I believe we are presented with a once in a decade opportunity to pick up a lot of these type of stocks on sale after the correction of a coupe weeks ago.

Understand Yourself

Don't chase the next hot thing. This is NOT what this is about or this blog. You are searching for and on the hunt for dividends. I don't invest or speculate in crypto, blockchain or pot stocks. Why? They don't pay dividends.

If you want excitement or to learn about investing then you better stay out of the stock market. It's a terrible place to learn about money and how to keep it.

If it's all too much for you, buy an ETF or mutual fund and just sit back and live your life. 

If you want to build an income producing dividend machine, then read and learn who you are as a speculator/investor.

To be a successful investor the rules never change, they never will, you have to be the one to change.

You are playing the long game, remember that and stick to it!

What strategy are you using to build your own portfolio?

Wednesday, February 21, 2018

Buy for the Dividends



I buy stocks only if they pay dividends. This is the only time I agree with Kevin O'Leary on all things investing. He has often bellowed out through his years on TV that he only buys stocks that pay dividends.

Having said that you can trust he doesn't own any FAANG stocks or crypto currencies or pot stocks.

Dividends Matter



It is that underlying dividend that will support the stock when the market goes sideways. It's not the only investing strategy out there but it's one I find exciting and I love seeing that deposit into my trading account every month or quarter.

It's also a lot of fun looking for dividend paying growth stocks and researching for how long they have paid a dividend.

I'm a retiree so I invest for cash flow. Cash flow is king in my world and I submit it should be a tactic that all investor/speculators can and should follow.

You buy a cow for the milk it produces, you buy a chicken for the eggs it produces and you buy a common stock for the dividends it produces. It always supports the price of the stock. Dividends matter and so does the price you originally pay for the cow, chicken and stock.

Always look for a sale, just like you would scan your app looking for a sale on your favorite coffee. You don't buy the coffee when it's at it's most expensive price would you? No, you wait for a better price before buying.

"Shop for stocks like you do for stocks". - Jason Zweig

CU.TO  Canadian Utilities has paid a dividend for the last 40 years straight and increased it every year. That is a tremendous record of payment and a stock to own for retirees in my opinion. Dividends and the yield it pays to you as an investor is what matters. I own CU across multiple accounts and you could do no worse owning dividend paying utility stocks in your own portfolio.

Always search for stocks that pay dividends and never ever sell them!

Tuesday, February 20, 2018

Utilities on Sale!



"If you want to buy stocks, why would you want the price to rise?" - Warren Buffett

During the recent correction last week some of the babies were getting thrown out with the bath water. One of those babies were EMA.TO Emera Utilities.

Meanwhile the price was going down but the yield was rising. It is that yield + the dividend growth that will help fund retirement. It's about the future but also the price you pay for the asset today. Today it's on sale. I bought another 100 shares today and now hold Emera across 4 different accounts.

Emera sports a 4.8% yield where it hasn't been for almost 8 years and also has a dividend growth record over the last 5 years of  9%.

That is a 14% rise per year in your investment in a boring old utility company. You don't have to go way out on that risk curve to make money. You just have to look for stocks that are being tossed out like dirty dishwater.

Stocks like EMA are on sale - 52 week high of $49.48, Today's purchase was @ $41.37

I will highlight other utility companies like CU, FTS and ACO.X in the coming days which I also believe are great adds right here.


Monday, February 19, 2018

Dog Stocks Shopping List


We are now entering an era of high growth, higher inflation, higher yields and higher interest rates.

As a retiree it is that higher and growing yield that I am always after. I loved this correction as it allowed me to purchase some beaten down bond proxy/dividend yielding growth stocks.

Lots of dividend paying growth stocks are yielding higher payouts and will be used to fund my retirement in the coming years. This has been a once in a decade stock market correction that you can buy on the dip.


 Look at a company like CU.TO it has paid a dividend for the last 40 years. I bought more Friday and now own 200 shares.

Utilities, REITs, Telcos and Energy Infrastructure plays have all been on sale for the past week. I also added to my six big bank holdings. I use this list from the;


Dogs of the TSE


ENB, EMA, PWF/POW, BCE, CM, T, SJR.B, TRP, BNS, NA 

Average Yield = 4.43%

Dogs of the Dow


VZ, IBM, PFE, XOM, CVX, MRK, KO, CSCO, PG, JNJ

Average Yield = 3.43%