Canadian Money Forum banner

1 - 20 of 304 Posts

·
Registered
Joined
·
92 Posts
Discussion Starter #1
In another thread James stated the following:

"That's pretty similar to my 5 pack approach. I pick the largest XIU constituents and form an equal sector weight portfolio of: financials, utilities, industrials, energy, telecom. Currently this is RY, FTS, CNR, ENB, BCE. This portfolio has 3.7% dividend yield.

I decided on this construction due to the strong total returns, but it happens to also pay out a lot in dividends. In my case I reinvest all dividends (not DRIP, but redeploy periodically) so the dividends don't mean anything special to me."

canew90 replied: "They may not mean much to you, but look at the growth of the dividends with just those stocks mentioned, all star holdings in five sectors. IMO if one held nothing else they'd be fine."

So if someone put 100K in RY, 100K in FTS, 100K in CNR, 100K in ENB, and 100K in BCE -- then this strategy, sans an apocalyptic event, would be just fine? Really?
 

·
Registered
Joined
·
17,032 Posts
I think if I was investing very large amounts of money, I'd expand the stock list and pick the two largest weight stocks from each of the named sectors, so it would become 10 stocks. This way, you limit your single stock exposure. The performance and dividend yield should be about the same.

That list would become: RY, TD, ENB, SU, CNR, CP, BCE, T, FTS, EMA
 

·
Registered
Joined
·
5,223 Posts
i posted about this guy some time ago

The 'blazingly simple,' must-have portfolio
https://www.theglobeandmail.com/globe-investor/investment-ideas/the-blazingly-simple-must-have-portfolio/article4391968/

he used more than 5 stocks ([CN CP Enbridge Fortis RBC TD Bank and TransCanada)
and returned a cumulative 305% over 10 years

i think james 10 above is fine but i would go south and add healthcare JNJ and consumer staples KHC/PG/UL and bring it up to 7 sectors

that leaves out materials, consumer discretionary and technology which is fine though i like QQQ for tech and healthcare
 

·
Registered
Joined
·
5,501 Posts
Agreed fatcat.

I'd go with the top-2 in each sector (banks, lifecos, pipelines, utilities and CNR in particular) to feel mostly apocalyptic-safe. Get your JNJ, PG, KO, PEP, and other dividend kings from the U.S. for healthcare and consumer staples.

Index invest everything else.

I personally figure if the top stocks in Canada (banks, lifecos, pipelines, utilities, etc.) start all going under we have bigger problems to deal with...
 

·
Registered
Joined
·
2,984 Posts
Why go to a foreign country for Consumer Discretionary and Consumer Staples?

Consumer Discretionary = CTC-A, CGX, GIL, TRI, MG

Consumer Staples = MRU, SAP, NWC, PJC.A, ATD.B, L, WN

ltr
 

·
Registered
Joined
·
10,520 Posts
... So if someone put 100K in RY, 100K in FTS, 100K in CNR, 100K in ENB, and 100K in BCE -- then this strategy, sans an apocalyptic event, would be just fine? Really?
Not sure what you are questioning ... a ten pack approach to beat the Canadian index has been written up for at least forty plus years. Then there's the contributor here who has been using a five pack approach for years.

http://canadianmoneyforum.com/archive/index.php/t-27161.html
http://canadianmoneyforum.com/archive/index.php/t-12691.html


I'd add some outside of Canada exposure but for Canadian exposure ... five or ten seems just fine.


Cheers
 

·
Registered
Joined
·
59 Posts
I do like this approach. It is fairly simple, and i think i might mimic something similar. my difficulty is determining which account to put them in, especially when you have a decent cash account to work with.
say you had 100K in cash account, 52K in tfsa, and say 50K in RRSP, how would you divy up the 5 pack across accounts. unless you put only 'international' (including US) stocks in RRSP, and the rest split between TFSA and Cash account?
 

·
Registered
Joined
·
1,163 Posts
I typically consider all my accounts when deciding on allocation. The only consideration would be how taxation would play a factor. This is especially important when moving to non registered accounts. If I was starting out today I would go with a 5/10 pack strategy.

Cheers
 

·
Registered
Joined
·
5,223 Posts
Why go to a foreign country for Consumer Discretionary and Consumer Staples?

Consumer Discretionary = CTC-A, CGX, GIL, TRI, MG

Consumer Staples = MRU, SAP, NWC, PJC.A, ATD.B, L, WN

ltr
because in the case of johnson and johnson, 47% of their revenues are from outside the usa ... unilever is british and they are global (and there is no witholding tax on divys) ... coke is global and proctor and gamble is global as well

you get excellent international exposure and diversification by owning these usa and british giants
 

·
Registered
Joined
·
2,150 Posts
I would probably lean my utilities and pipelines to those with more gas transportation and electric generation from gas. I worry about oil.
 

·
Registered
Joined
·
5,223 Posts
I would probably lean my utilities and pipelines to those with more gas transportation and electric generation from gas. I worry about oil.
agree, pipelines and telco's are both facing some degree of disruption thats why i want more sector diversification
 

·
Registered
Joined
·
17,032 Posts
Just in case people think that all my money is in 5 stocks, I should clarify. Most of my stock exposure is in just these 5 stocks, but I also have other investments. The 5-pack is within the stock category of my permanent portfolio. I also have bonds, gold, and cash/GICs.

Stocks (total 26%) : the 5-pack is 80% of this, and I have 20% in other stocks including US
Bonds (total 24%) : something like VAB
Gold (total 22%) : bullion funds - MNT, CEF.A, IAU
Cash-ish (total 28%) : savings accounts and GIC ladders
 

·
Banned
Joined
·
588 Posts
If you equate gold with FI, it is also a very conservative portfolio (25/75) for a young guy still in accumulation mode.

And although I do own some bullion (physical) I have never been a fan of the Permanent Portfolio, which I assume is what you are trying to ape here.
 

·
Registered
Joined
·
2,150 Posts
Wouldnt buy my energy in any producer company. We saw what they did to dividends in the last downturn. I would buy energy indirectly through pipeline companies and midstream/downstreamers. ENB, ENF, TRP, IPL, ALA. Couple in the US of interest to is Enbridge Energy Partners and Spectra.

Also prefer to buy my banks with covered calls because those SOBs are so stingy with the dividends.
 

·
Registered
Joined
·
3,300 Posts
I would probably lean my utilities and pipelines to those with more gas transportation and electric generation from gas. I worry about oil.
Today, I spent some time trying to decide on buying "something" One thought was a steady dividend payer like FTS and EMA, but in a rising interest rate environment, maybe this is not the time to buy utilities? Fortis at $45.11 is at an all time high. If it dropped back to where it was about 4 years ago ($35) those dividends wouldn't look so good! Emera at close to $50, could pull back to it's 2012/3 level of $35 too. These dividend payers have been run up in the recent low interest environment so perhaps a correction is in the cards?

Similarly, I looked at adding one or two Preferreds. (I only have one perpetual and two splits). They are starting to trade closer to par. Tempting to buy and just collect the 5% dividends. But would need a long term view. This would be in place of corporate debentures which have benefit of short term maturity.

Need some inspiration. Have $$ sitting doing nothing :(
 

·
Registered
Joined
·
2,150 Posts
The rate hikes will be done in 6 months IMO. The US fed on its hands now. The BoC probably pulls off one, maybe two more than this whole thing rides for a number of years I bet. The biggest catalyst still in the horizon is if trump can pull off his tax reform. Since the GOP need a win, my bet is it gets done now. That could mean a lot more trade with canada - raw materials.
 

·
Registered
Joined
·
2,984 Posts
because in the case of johnson and johnson, 47% of their revenues are from outside the usa ... unilever is british and they are global (and there is no witholding tax on divys) ... coke is global and proctor and gamble is global as well

you get excellent international exposure and diversification by owning these usa and british giants
For sure, no doubt all great foreign stocks (although it doesn't really address my question, and I believe Johnson & Johnson is Healthcare sector).

I guess I didn't make my point very well. I always seem to read investors recommending Canada for financials, utilities, industrials, energy, and telecom. Then they concede that you must use foreign stocks for the remaining sectors. That's mostly what this thread has been about. I am always left wondering why Consumer Discretionary and Consumer Staples aren't included in the standard Canadian sectors, of which I feel I've indicated some good examples in my post. Look at Canadian Tire with 126% total return in the last five years, or MRU with 142% total return in the last five years, while offering tax credits on its dividends.

Myself, I exclude Materials, Information Tech, and Health Care in my portfolio for volatility reasons, but I assign equal amounts to Canadian individual stocks in the 8 sectors of Financial Bank, Financial Non-Bank, Energy, Telecom, Utilities, Consumer Discretionary, Consumer Staples, Industrial. I assign 3 stocks to each for a total of 24 Canadian stocks. I feel I'm diversified across sectors and don't require any foreign stocks. I think 3 stocks per sector suitable reduces a single companies risk.

Remember that with foreign dividend stocks, you have to overcome the advantage that the Canadian dividend tax credit offers, and also take a forex risk.

ltr
 

·
Registered
Joined
·
17,032 Posts
Kinda high on the PMs. Expecting something?
My goal was actually 25% gold, so I'm a bit shy of the my target.

If you equate gold with FI, it is also a very conservative portfolio (25/75) for a young guy still in accumulation mode.

And although I do own some bullion (physical) I have never been a fan of the Permanent Portfolio, which I assume is what you are trying to ape here.
Yes, and I'm pretty close to an ideal permanent portfolio with 25% each. Sure, it's conservative, but I love the asset class diversification beyond just stocks & bonds. I've decided that this is an allocation approach that I can follow no matter what: whether employed, unemployed, retired.

I don't have a stable enough job/income to do an all-stock approach. It's just not possible for me; I have no pension and no job security. there will be years where I have to draw 20K to 30K out of my capital. My job also has some correlation to the stock market, so a 60/40 or 100% stock portfolio is just a bad idea for me.
 

·
Registered
Joined
·
5,223 Posts
For sure, no doubt all great foreign stocks (although it doesn't really address my question, and I believe Johnson & Johnson is Healthcare sector).

I guess I didn't make my point very well. I always seem to read investors recommending Canada for financials, utilities, industrials, energy, and telecom. Then they concede that you must use foreign stocks for the remaining sectors. That's mostly what this thread has been about. I am always left wondering why Consumer Discretionary and Consumer Staples aren't included in the standard Canadian sectors, of which I feel I've indicated some good examples in my post. Look at Canadian Tire with 126% total return in the last five years, or MRU with 142% total return in the last five years, while offering tax credits on its dividends.

Myself, I exclude Materials, Information Tech, and Health Care in my portfolio for volatility reasons, but I assign equal amounts to Canadian individual stocks in the 8 sectors of Financial Bank, Financial Non-Bank, Energy, Telecom, Utilities, Consumer Discretionary, Consumer Staples, Industrial. I assign 3 stocks to each for a total of 24 Canadian stocks. I feel I'm diversified across sectors and don't require any foreign stocks. I think 3 stocks per sector suitable reduces a single companies risk.

Remember that with foreign dividend stocks, you have to overcome the advantage that the Canadian dividend tax credit offers, and also take a forex risk.

ltr
all good points ...

i don't look at going outside of canada to buy healthcare and staples as a problem, i look at as an opportunity ... you get more diversification and more international exposure

sure you can get discretionary and staples in canada

but why do you force yourself into that box ?

holding only canadian stocks is a mistake in my opinion ... you have bet all your wealth on single economy

i think that international exposure is more important than the dividend tax credit and forex risk

usa multinationals (canada has no equivalent) are a great way to do that
 
1 - 20 of 304 Posts
Top