Posts: 23
Threads: 5
Joined: Oct 2019
Reputation:
0
10-16-2019, 08:04 PM
(This post was last modified: 10-16-2019, 08:56 PM by dmonte.)
Good day.
The following is my portfolio in a Canada TFSA account.
The current overall yield is 7.79% and I will tried to keep it at least 6% yield while adding more other companies or increase current position. And eventually want to keep the list not longer than 30~40 companies.
AD.TO 12.9% (of the whole portfolio)
BEP-UN.TO 6.9%
BIP-UN.TO 7.3%
CHE-UN.TO 12.1%
FTS.TO 14.7%
IPL.TO 13.9%
NVU.UN.TO 8.9%
TCL-A.TO 6.8%
VET.TO 16.4%
Do you have any recommendation about what to add to this portfolio? Or does 6% make sense at all (most of articles I read discourage yield more than 3 or 4)
Thank you.
Posts: 6,404
Threads: 47
Joined: Aug 2018
Reputation:
63
Welcome to the forum!
I can't comment on your individual Canadian stocks. Dividend payout % should be appropriate for the sector and the the specific equity type. A closed end fund, preferred stock or an energy common stock may have a big dividend and all is well. An S&P 500 port with an average yield of 6% is likely trouble, sooner rather than later. It has to be sustainable or you will incur a large and sudden loss of capital when they cut or eliminate the dividend. Here we tend to focus on companies that grow the dividend, and start out with something at least reasonable close to market average for a comparable stock. There are exceptions of course.
crimsonghost747
Unregistered
There is nothing wrong with high yielding stocks as long as they are picked correctly. The problem is, in my opinion, that it might be very difficult to find 30-40 high quality companies with 6%+ div yield. They do exist but they are not common. It'll be even harder if you are only buying from the Canadian market. And you will most likely going to be focusing heavily on a couple of selected sectors, such as REIT, financial and energy.
Regarding the individual stocks, I also own both BIP and NVU. Both of them have served me really well and I'm probably happy to hold both for decades to come. I could recommend that you take a look at CM and BCE, both are yielding around 5% so a little under your goal but they are pretty solid companies and have the tendency to increase their dividend regularly.
Posts: 1,024
Threads: 8
Joined: Aug 2018
Reputation:
16
10-16-2019, 09:52 PM
(This post was last modified: 10-16-2019, 09:57 PM by Otter.)
Don't forget the Growth part of the Dividend Growth equation. High current yield isn't everything. Total Return is important even in the DGI investing space. For DGI investing, the Chowder Number is a handy yardstick for total return. To get the Chowder number, just add the current yield to the 5yr average (annualized) dividend growth %.
So, if a stock has a current yield of 4% and has been growing dividends by 10% annually over the past five years, the Chowder Number is 14.
Rules of thumb for using the Chowder Number in different scenarios:
For Utilities and Telcos (typically high current dividend (4%+) and low growth - low risk income farms), Chowder Number of 8+ is considered a predictor of favorable total return
For other stocks with 3%+ current yield, Chowder Number of 12+ is considered a predictor of favorable total return
For other stocks with less than 3% current yield, Chowder Number of 15+ is considered a predictor of favorable total return
You can also use this methodology to assess the overall fitness of your DGI portfolio. Your portfolio itself has a Chowder Number. It is the current yield of all your holdings (total dividends paid divided by current value of portfolio), plus the 5yr average annualized dividend growth of your holdings (you have to do a weighted average if your holdings vary in size). This can help you assess whether your portfolio as a whole is generating sufficient total return.
As crimsonghost said, it will be exceedingly difficult to find a lot of high quality stocks with a 6% current yield. Thankfully, you don't have to. Over anything other than short-term holding periods, a low-dividend high dividend-growth stock will outperform a high-dividend low/no-growth stock. You can play both ends of the spectrum.
