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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Life isn’t perfect and for whatever reason we purchase stocks we shouldn’t have bought, lured in by the high yield, or still hang on to stocks we should have sold. Investor confidence in a company can be sudden and swift. In the case of TransAlta Corp (TA) for example (which I don’t own) this was pointed out in a recent post by John Heinzl. Management decisions over the sale of the  Sundance coal plants, and the looming threat of a dividend cut, have pummelled the stock price. TA closed at $16.81 per share today, down -20.5% from a recent high of $21.15 per share on February 26th. Back in October, TransAlta was trading over $23 per share. As well as the dividend yield now close to 7%, investors have also been concerned with TransAlta’s high dividend payout ratio at 89.2%, which is high even for a utility – it used to be over 100%! Pengrowth Energy (PGF), a smaller oil and gas producer with a crashing share price (one of my smaller holdings), has left the dividend yield ...

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This article was published in the November 2011 edition of the Canadian MoneySaver, and is posted here with permission. For more information visit www.canadianmoneysaver.ca I’ve added some additional copy to my original MoneySaver article and highlighted in blue text. Back in the September Canadian MoneySaver, I reviewed the once prevalent Income trust sector in, What Happened to the Income trusts? Part-1. I provided a review of the conversion of these Income trusts into corporations for the January 1st, 2011, deadline. I also provided a historical reference to why these trusts paid such high dividend yields, and why the dividend yields continued to remain so high, even under a corporate structure. The Illusion of High Yield The low returns of GIC’s (guaranteed investment certificates) over the years have pushed income oriented investors, many of whom are retirees, into higher yielding securities. Income trusts had fit the bill perfectly, because they offered generous yields – ...

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A Stop Loss was triggered for Pengrowth Energy Trust (PGF.UN-T) @ $12.75 on November 9th, for a net profit of $308.25 . A few more of those trades and I’m getting some good returns, and reduced commissions as well. I really liked Pengrowth since it has great growth potential, and an excellent dividend yield. So I was sad to see it sold, but I stick to my plan. Stop Losses help prevent real losses and maximize profits. I will buy Pengrowth again should the price decline or there is a breakout. From the proceeds of Pengrowth I purchased 50 shares of Rogers Communications (RCI.B) @ $36.25 on November 11th. Rogers declined on October 26th,  from missed earnings reports, and was on my watch-list. So I was pleased to purchase the stock at a discount. My target price on Rogers is $40 to $41 per share, which I expect to achieve by January 2011. My next purchase will be 50 shares of Cisco Systems (CSCO) next week, as long as I am able to purchase under US $20 per share. The massive sell-off ...

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