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The Weekly Lineup: From High Yields to Stress Tests

The bulls continue their impressive global run, albeit with a small pull-back this week. The TSX is already up over 2% this year, the DOW is up over 6% and the TD eSeries European Index Fund is up over 5.1%. For the year (1.5 months) I’m up 4.8% on my RRSP, and 3.6% on my TFSA. Those percentages include dividends and distributions. However these percentages are meaningless for me, since I’m not relying on an indexed portfolio. It’s the dividend income and monthly distributions I am after. Like my friend The Passive Income Earner, I consider my portfolio worth the monthly income it generates.

For this reason I’m not selling any of my positions. One of my holdings for example, Rogers Communications (RCI.B) has done extremely well. It’s given me a total return (share price increase + dividend income) of over 37.5% in 27 months – that’s an average annual return over 16.5%. My gain on share price alone for those 27 months is 28.5%. Although it’s been tempting to sell Rogers and take a handsome profit, I haven’t nor would I even consider it.

One of the keys of course, is dividend growth and consistent income. If I sell a winning investment now, even with a nice capital gain, then I’ll end up with cash at barely a 1% return, and no cash flow.  Rogers Communications has an annual dividend yield of 3.6%, and it’s also a dividend growth company. It just raised its annual dividend 10% from $1.58 to $1.74 per share.

If I sell Rogers Communications now, then I will have to reinvest into another dividend growth company to keep earning the same income at 3.6%. In a rising market that’s a pretty tough thing to do, and there is no guarantee that markets won’t continue to march on higher for the remainder of the year.

So I am simply tuning out the noise and sticking with the plan! For me, that means buying and holding – letting dividend growth, dividend reinvestment, and capital appreciation do their thing. How about you?

The Weekly Lineup

There were some great posts around the web this last week. Here are my favourites:

In my previous post, I discussed my recent purchase of a preferred issue for Power Financial Corp. I touched on the differences between “perpetual” and “rate reset” shares, and the potential pitfalls with rising interest rates. The Passive Income Earner is also interested in preferred shares, and wrote a detailed post in How Preferred Shares Work.

Another yield hog that has attracted income oriented investors over the last few years, with their high yields, are covered call ETFs. The Canadian Capitalist reviewed one of Canada’s most popular ETFs, ZWB - Canadian Banks Covered Call ETF. Ram found that in terms of total return, investors would have been better off holding the underlying ETF ZEB without the covered calls.

Still looking for higher yield investments? Avrex Money compared the Best Canadian REITs.

Peter Hodson with another great article for the Canadian MoneySaver blog, titled Do Not Say These Things Ever!  I’m always interested in Peter’s articles. His move from working in the financial industry to educating investors about the financial industry is an interesting one.

For those dividend die-hards, Dividend Growth Investor has really been pushing the pen and writing some great posts recently. Be sure to check out his recent post on Dividend Stocks for Young Investors. DGI makes a great case why dividend stocks are an excellent investment for young investors!

Dan from Dividend Growth Investing shared his Top 10 Reasons I Like Dividend Growth Stocks. Dan makes some excellent points about the Dividend Growth Model and why it works. The point to keep in mind when purchasing a company is to look at “dividend growth” and not just yield. Be sure to also check out Dan’s Free Dividend Growth Investing Guide! ;)

Dividend Mantra wrote about the big three expenses most of us face living in our modern society. He also made the post interesting by applying his own financial situation, and seeing how his portfolio income stacks up.

And last but not least, I thought I would stress you out this weekend. My Own Advisor (not really my advisor) took a Personal Finance Stress Test.  While I could crack a few jokes about that one, it’s a really good post. I encourage you to have a read through Mark’s post, and apply the questions to your own financial situation. How would you do if faced with a financial emergency?

Have a nice weekend everyone! :)

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8 Responses to "The Weekly Lineup: From High Yields to Stress Tests"

  1. Ninja,

    Thanks so much for the mention!

    I hear you on tuning out that noise. Just let those companies keep doing what they’re doing, which includes, of course, sending us those dividend checks!

    I’m currently looking at some Canadian companies, including some of the major communication players like RCI, SJR, BCE, TU and the like, as well as the banks like TD and BNS.

    Anything that stands out in particular for you in the major Canadian dividend paying companies?

    Best wishes!

    • Hey Mantra,

      I think diversifying into the Canadian market is an excellent idea! Delighted to hear it. As you know, many Canadian stocks trade on the NYSE. So you won’t have to worry about foreign holdings.

      Although our market here is dominated by banks, telecoms, and resource stocks, you will also partake in a higher yield. Everything on your list looks great, except for SJR. Although I own Shaw Communications, I wouldn’t recommend it – high debt, smaller player on the scene, and losing market share to Telus.

      As you know I’ll be in touch. :)

      Cheers

  2. Dan Mac says:

    Thanks for the mention Ninja! I really appreciate it!

    Like you my positions have enjoyed a nice run up since purchasing them but I’m not letting that get me to thinking about taking profits off the table. Unless the market prices get obscenely overvalued I will continue to hold for the long term and collect my annually increasing dividend checks!

  3. farcodev says:

    Great post DN!

    The only noises I take care about are the corporate news themselves, and March will be stuffed with these.
    The market is after all artificially pumped by the feds and has a smell of the good old 30s from the last century, so I holding.
    Holding is good and can bring good and unexpected news like the one from Gluskin & Sheff with its two additional semi-annual dividends this year, beside its regular ones. I’m glad to have bought it when it was undervalued and not liked by the market.

    Have a great weekend!

  4. “So I am simply tuning out the noise and sticking with the plan! For me, that means buying and holding – letting dividend growth, dividend reinvestment, and capital appreciation do their thing. How about you?”

    Same…but you knew that :)

    My dividend income updates are a testament to my plan, not deviating from it!

    Thanks for the mention my friend.

    Great list of articles here to catch up on tonight while watching my Sens kick the Leafs around. They better!

    Take care,
    Mark

  5. Oh, and another thing…just wait until all big 5 banks announce dividend hikes soon :)

  6. gibor says:

    Ninja, agree with you about RCI, this is exactly why I don’t sell RCI… don’t see better stock to buy…

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