This article was published in the February 2013 edition of the Canadian MoneySaver, and is posted here with permission. For more information visit www.canadianmoneysaver.ca Image credit: gunnar3000 / 123RF Stock Photo Most investors would never buy a corporate bond yielding 10%. They would understand that a high yield in this low-interest rate environment would be a risky investment. They would likely lose some or all of their investment. But many investors who do not understand the risks of high yield, will buy dividend stocks paying 8% or 10%+ yields, double or triple what blue chips are currently paying at 3% to 4.5%. While high-yield stocks are not junk bonds, they do inherently carry much more risk than their blue-chip counterparts. Many investors simply focus on yield, not understanding the risks involved with these types of stocks. In this two-part series, I hope to illustrate some of these risks. What is a High Yield Stock? Wikipedia defines a high-yield stock as “a stock whose ...

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As a dividend investor I’m always on the lookout for a higher dividend yield with excellent metrics. Usually that is a hard fit to come by, since the higher the yield the higher the risk. An area that has come across my radar recently, are the Canadian asset management companies, which primarily sell mutual funds and provide wealth management services. I view this sector as an added level of diversification in the financial industry to banks and lifecos (life insurance companies). The Asset Management Companies Of the Canadian Asset Management companies, IGM Financial (IGM) is clearly the largest with over 108 billion dollars of assets under management (AUM). Most Canadians will recognize IGM through the Investors Group and Mackenzie group of mutual funds. While I currently do not own IGM, I sure would like to!  This is a well run and well managed company, with solid fundamentals under the Power Financial group. The Canadian banks also have their mutual fund families, with Royal Bank ...

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Last week I covered the first half of my 2012 Canadian Stock Picks . I covered three of my favourite companies I’ve had on my watch list for quite awhile, Husky Energy (HSE-T), Telus Communications (T-T and TU-N), and Corby Distilleries (CDL.A-T). This week I continue with my other picks, all in the financial sector. Unless noted, the following companies trade on the TSX (Toronto Stock Exchange). AGF Management (AGF.B) courtesy of www.agf.com If you invest in Canadian mutual funds, then you will be quite familiar with AGF – as you likely own some of their products. Instead of paying trailer fees, commissions, and management expense ratios to hold mediocre mutual funds, you can do much better owning the stock directly.  AGF is a $1.6 billion dollar company, which pays a very generous dividend yield of 6.5%.  However it does have a high dividend payout ratio of 82%. AGF also has a presence in the Asian and European markets. Compared to other financials such as the Life Insurance ...

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Chart courtesy of the Globe and Mail website In one of his books Derek Foster has a wonderful quote. He says “Don’t buy the bank’s products, buy the banks!” Well the same can be said for Mutual Fund companies as well. The sad fact is that buying a mutual fund is far less profitable, than actually buying the company that provides the fund. I’m excluding Bond and MMKT Funds  in my example. I’m also exluding high-risk  sector funds – a lot of people lose money on those. I’m sure there are other exceptions, but lets look at one of my recently purchased holdings AGF.B ~ AGF Management. Back in the Spring/Summer 2009 when I moved to my second financial advisor, we both picked AGF Canadian Large Cap Dividend D Fund. This is one of those large cap mutual funds that holds basically some top Canadian banks, Suncor, and any other big blue chip stock that you can think of. Over a 14 month period the investment did well, gaining 14% in share price. Not ...

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