Wednesday, March 11, 2020

My All Canadian Maple Retirement Income Portfolio


The sap will soon be running in the beautiful maple forests here in the Great White North. That unmistakable smell of boiling syrup will soon flood our senses. It's a beautiful time to celebrate and share what we love about spring in this beautiful country as the maple cooking revs up.

Hmmm those pancakes lathered in butter and fresh maple syrup. It doesn't get any better than sitting outside scarfing down on this Canadian tradition.

I thought I would give an example of a portfolio I've constructed using big blue chip Canadian dividend growth stocks. I just do me and this works even though it's an all Canadian, all stock portfolio. 


I let it run and the dividends just drip into the account like maple sap on a warm spring day. I'm an income investor so everything in this portfolio pays me to own it so I can live and thrive in retirement.

You can model this even if you are not retired. Matter of fact it was set up while still working.


Banks

I have chosen first the bank I bank with, BNS. You can use whatever financial stocks you want in your portfolio. I use the big five of BNS, BMO, CM, RY and TD

Dividend Yield of my financial stocks = 4.8%

But what about National Bank or Goeasy Financial? Sure, you do you nothing wrong with that. I look at a 10 year dividend growth rate and a record of steady and predictable dividend raises so I can stay ahead of inflation in retirement which is currently running at 2.4% as of January 2020. These bank stocks are double that rate so I'm happy.

Utilities

I use FTS, EMA and CU. The big 3 in the utility space. What about AQN, ALA or any of the renewable power companies like BPY or RNW?

I like big, old and stable for my retirement. Companies that have thousands/millions of customers and been around for decades. In the case of Canadian Utilities since 1927. It's never missed a dividend payment in almost a hundred years. Income you can count on that's a fact if history is any guide. Not sexy stocks in fact boring stocks. Boring works when you need income.

Dividend Yield of utility stocks = 5.1%

Pipelines

Just the big old ones I use. TRP and ENB. Nothing wrong with IPL, PPL or KEY. I chose the oldest and the biggest. As long as we keep getting winter these 2 stocks will continue to deliver steady predictable dividend income and growth. If we cancel winter in Canada these stocks will disappear with the snow.

Dividend Yield of pipelines = 6.8%

Railroads

Just so I have the east/west and north/south corridors covered I bought both rail stocks in Canada. They are low yielders but I like them because the Canadian economy simply can not run or function without them.

This despite rail blockades and First Nation upheaval throughout the country. The rails must keep running at all costs.

Dividend Yield of rail stocks = 1.6%

Total Portfolio Yield = 4.5%

You won't find any bonds, pref shares, ETFs, mutual funds or any complicated structured products like seg funds in this retirement portfolio. I don't buy or invest in them. No U.S. or international exposure in this account. Zero commodity stocks (too risky). Taxes will be more efficient when it is converted to a RRIF.

I also don't adhere to or care about about financial twaddle and jargon such as diversification, asset allocation or worry about balance.

The safety here comes from holding quality stocks for decades and not being a student of modern portfolio theory.

I invest dividends or new money into these existing positions based on what is cheaper and has come off price wise.


In Sum

Only 12 stocks that's it. That's all I believe is needed to be low risk and consistently and slowly build income.

Does it lose money?

Since the start of the year and after the big sell-offs of yesterday and previous weeks. This PF is down 10%.

When compared it XIU.TO which invests in the largest Canadian companies in the TSX 60. it was down 10.6%

Probably why I don't index. It's full of material/commodity stocks that will drag down returns as seen perfectly yesterday.

I own 7 of the top ten holdings in XIU anyway. That's why I love DIY investing. No fees paid to an ETF provider and my yield is higher along with total return. Buying the index does not save you from market corrections or recessions. That is a myth.

This portfolio gained  28% last year.

After all that has happened I am good with it's components. Looks like a nice bounce back day today. I won't include any gains if any realized after Tuesday's trading.

Of course short term market fluctuations do not make for a profitable year or really mean anything in the long run.

This is simply what I do and how I think while trying to grow money and income in retirement.

12 stocks, that's it. We're all different and that's a very good way to learn what does and doesn't work. What 12 would you choose or eliminate and why? 


Stocks Mentioned

As of writing;

Pembina Pipeline PPL - down 4% today
Interpipeline IPL - down 10%
Keyera Corp. KEY down -5%
Altagas ALA - down 4%
Algonquin Power AQN - down 2.8%


While a lot of stocks are bouncing back today. These faves are not. Choose wisely, it's your retirement.

BCE is up almost 5%. That's what I'd rather add to this portfolio with it's 5% yield. 


"Longer term bonds have become almost as risky as stocks now that bond yields are so low" - Fred Vettesse

Aim for cash flow in retirement just as the owners of Hwy 407 aim to increase the tolls on their highway in the future. Be like them!

Need ideas on how to pick stocks for income? Recommended Reading NOW!



Update

Gotta go wash my hands!


2 comments:

  1. Who says Income investing is difficult. No you don't need to hold a large number of stocks and add a few US holdings to an RRSP and one would have a great Income portfolio.

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  2. Lots of people consider it too complicated. Go buy an index like XIU or the latest craze VBAL. If they only took the time to read Henry Mah it would all become more clear. It is simple if you keep it simple and never buy high yield junk or bonds. Thanks for dropping by Henry.

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