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What to put in TFSA?

6328 Views 10 Replies 6 Participants Last post by  The Financial Blogger, 
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I'm thinking of putting an income trust such as Pengrowth in my TFSA. The yield is around 12%. What do you think?
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Hard to say

Hard to say, without knowing your full portfolio, long/short term plans, adversity to risk, etc, etc. I'm not familiar with the history of that income trust.

Personally, I've maxed out my TFSA with a high interest savings account, that I keep as an emergency fund. In future years, I plan to make changes as there's only so much emergency fund you need. They say 3 months salary is enough.
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We're all in individual stock. When the stock market drops 40%, everybody goes into bonds and short term. I'm not sure why.
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drip99, I am also going to dump my income trusts (such as Pengrowth and RioCan) into my TFSA as well come January to DRIP! :)

One quick question though: Let's say I max out my $5000 contribution limit on the income trusts. When I get the distributions, would it be able to proceed with the DRIP, since I'm basically "buying" more units, but with dividend income (and I already reached my contribution limit for the year)?
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CheckingIn said:
drip99, I am also going to dump my income trusts (such as Pengrowth and RioCan) into my TFSA as well come January to DRIP! :)

One quick question though: Let's say I max out my $5000 contribution limit on the income trusts. When I get the distributions, would it be able to proceed with the DRIP, since I'm basically "buying" more units, but with dividend income (and I already reached my contribution limit for the year)?
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The money to purchase stocks is not coming from any new contributions so you will be ok to implement a DRIP and not run into the limit.

I'd just add a note of caution to looking at only the dividend yield. Several of stocks I've purchased have cut or suspended their dividends this year. If you look at the payout ratio and each stock's historical yield, that may provide an indication whether they are more likely to have to cut.

Fortunately, most of the purchases have had sufficient capital gains to make me happy and I believe at some point they will reinstitute dividends. But, if you buy a stock for the dividend yield, and it then cuts the dividend, often the stock price will be beaten up and you come out with a lower dividend yield - a double whammy.
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The Financial Blogger
drip99 said:
I'm thinking of putting an income trust such as Pengrowth in my TFSA. The yield is around 12%. What do you think?
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Even if the yield is 12%, I would stay away from Pengrowth. A few months ago, they were in a really tough situation and they had to cut down their distributions.

I would aim more towards index funds (ETF's seem too expensive for only $5,000).
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cannon_fodder said:
The money to purchase stocks is not coming from any new contributions so you will be ok to implement a DRIP and not run into the limit.

I'd just add a note of caution to looking at only the dividend yield. Several of stocks I've purchased have cut or suspended their dividends this year. If you look at the payout ratio and each stock's historical yield, that may provide an indication whether they are more likely to have to cut.

Fortunately, most of the purchases have had sufficient capital gains to make me happy and I believe at some point they will reinstitute dividends. But, if you buy a stock for the dividend yield, and it then cuts the dividend, often the stock price will be beaten up and you come out with a lower dividend yield - a double whammy.
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Thanks for the response!

And yes, I agree about the "chasing yield". I was tempted earlier on, but I've learned from all of that.
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The Financial Blogger said:
Even if the yield is 12%, I would stay away from Pengrowth. A few months ago, they were in a really tough situation and they had to cut down their distributions.

I would aim more towards index funds (ETF's seem too expensive for only $5,000).
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According to Yahoo! Finance (http://finance.yahoo.com/q/hp?s=PG&a=00&b=2&c=1970&d=08&e=2&f=2009&g=v), Pengrowth has never lowered their distributions. In fact, they've always increased, which is a positive sign for them.
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CheckingIn said:
According to Yahoo! Finance (http://finance.yahoo.com/q/hp?s=PG&a=00&b=2&c=1970&d=08&e=2&f=2009&g=v), Pengrowth has never lowered their distributions. In fact, they've always increased, which is a positive sign for them.
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This link is for Procter and Gamble... not really close to Pengrowth

According to their site, they cut their distribution at the beginning of the year:
http://www.pengrowth.com/current_year_distributions.aspx
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The Financial Blogger said:
This link is for Procter and Gamble... not really close to Pengrowth

According to their site, they cut their distribution at the beginning of the year:
http://www.pengrowth.com/current_year_distributions.aspx
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:p Not really sure how I mis-typed that! My mistake :cool:
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CheckingIn said:
:p Not really sure how I mis-typed that! My mistake :cool:
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no worries, I had my moment of doubts when I read your reply... I was sure that Pengrowth dropped its distribution ;-)
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