Should You Build a High Yield Portfolio?

Just a short post today about diving into the world of high yield and whether you should chase stocks that are considered high yield. 

I was intrigued by a recent article in the Globe and Mail by Gordon Pape on his high yield portfolio and the results he has achieved for his subscribers. Interesting to note he has managed to slip in Shopify (SHOP) to this portfolio. It is really a high flying growth stock that pays NO dividend.

Personally I never chase high yield stocks. To grow income I invest in banks, utilities, railroads, telecoms and some food stocks. I further buy growth stocks to add juice to returns. There, I look for quality businesses that I believe contain a wide moat and command a large market share of the revenues earned. Stocks like Amazon, Facebook, Berkshire Hathaway, MTY Food Group, Costco and Constellation Software.

I missed Shopify and I can add that stock to a long list of missed opportunities. I;m not overly concerned because I'm not going to pin my retirement on more than one e-commerce stock. Right now people love to shop on Amazon (me too) so I'm there. I get that there are a ton of mom and pop entrepreneurs out there who want their own store. I wish you the best.

My go to food stock is Costco. I wrote about my reasons here. I love to shop there and am a premium member. They just continue to make money year after year, quarter over quarter. They are true price makers with their membership business model.

High Yield Duds

So many and too many to list. There have been a lot of stocks peddled by talking head TV gurus that have just not worked out. Corus Entertainment and Altagas are a couple that come to mind. Anything over 5% I rarely touch.

I don't bet my retirement income on high yield stocks in communications or commodities. I use dividend growth stocks mixed with some growth companies I believe in like FB and AMZN. I use them and understand what they do.

Investors just get sucked into the excitement of the company. Instead of being focused on the steak they buy the sizzle.

FN, RNW, GS, ESI and Boston Pizza are just some examples of these types of stock I stay away from. I'm not telling you what to invest in, this is just what I do and look for.

Check the charts and dividend yields of these stocks, What you'll see is very little price appreciation as most of them are paying out  their earnings to pay that dividend or monthly distribution.

Eventually, as in the case of CJR.B they end up cutting the dividend and the price plunges. I urge you to look at the 1 year and YTD charts before you think about buying.

Stick to the big quality companies that most of the big mutual funds and ETFs include in their top ten. Ignore the high yield stocks.

If you're young you have time to make up for mistakes. For now, I've made enough. Good Luck and choose your investments wisely.