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Saturday, June 18, 2011

More high quality stocks for more high dividend yield companies

Today’s data are much better than yesterday, following my deposit of not 1 000$, but 1 080$ on my margin account (I really gave all I could)!

Portion of the margin account that been used: 39 593.49$
Non-registered portfolio value: 109 671$
Money left available of the margin account: 21 167.70$

The portion available of my margin account is now exceeding the 21 000$. This is much better. And it will be even better once I will be selling my units of Horizons BetaPro COMEX Silver Bear Plus ETF (HZD). After proceeding with the 1 080$ deposit on my margin account, part of me really wanted to invest in something.

The year 2011 began in a real strange way. I focus almost exclusively on my dividend earning. Things were doing great, especially after finishing the year 2010 with a dividend income of 4 112.42$. I could easily double that amount. After the 8 000$ in dividend earning, the 15 000$ was just around the corner. Even while being here in Montreal, I can comfortably live on a monthly income of 1 300$. Hitting the 4k+ in dividend income was quite a breakthrough and following what, I only wanted to see that amount double, if not triple in a matter of a few weeks.

My hunger of dividend makes me proceed with different strategies. There’s been the silver strategy for a little while. Back in the time, I sell my Bell Aliant investment to buy some more units of Sprott Physical Silver Trust UTS (PHS.U). I was in heaven, until the silver crash of early May 2011. I also made different investments in Superior Plus Corp (SPB), New Flyer Industries Inc. (NFI.UN), Colabor Group Inc. (GCL), etc. I sell the first one (SPB) because it wasn’t matching too well my investment style. I can handle the market volatility, but when a title, all by itself, turn things up side down, I preferred to sell Superior Plus Corp (SPB) and I do not regret my decision. So far for 2011, my only wrong move, other than decided to day trade, was in Superior Plus Corp (SPB). Superior Plus Corp (SPB) may be a better match for more sophisticate investor.

As for NFI.UN and GCL, both are great despite being a bit more volatile than my other holdings (like PPL, ENF, PGF, ECA, JE etc...) and I plan to keep them in my portfolio. As for Sprott Physical Silver Trust UTS (PHS.U), it will gain again in value, but I have to say, the silver crash arrived like a big punch in my face. I never saw it coming. I had been holding PHS.U since late 2010, and since that time, I trade PHS.U numerous times. Until May 2011, PHS.U price value was remaining stable and then, there’s been the May 2011 silver crash. The current situation is not even better but at least PHS.U is exceeding the 15$ per unit.

I like to invest more than anything else and after proceeding with the 1 080$ deposit, I felt to invest in something! I came across Second Cup Ltd (SCU). I am a Second Cup fan and I visit their coffee shop every week days to by my now very famous medium coffee, veloute, please. Second Cup Ltd (SCU) trades at 6.60$. I have a feeling the stock price can go lower than that, so that’s a big part of the reason I didn’t invest in today. But it’s a stock I like to watch from time to time. At 8.89%, Second Cup Ltd (SCU) dividend yield is quite interesting. Good stock to buy, but 6.60$ is a bit high.

I just recently came with this new strategy, to mix high dividend payer with high quality stock. Eventually, I would like to incorporate more of high quality stock inside my portfolio. Here are some high quality stocks that I have thought of: Potash Corporation of Saskatchewan Inc. (POT), Canadian National Railway Company (CNR), TransCanada Corporation (TRP), Enbridge Inc. (ENB) and, once recently that had been review by SP Brunner, Canadian Tire Corporation, Limited (CTC.A). The trick would be to invest about 2 000$ in each of those companies to help create more of a stability value in my portfolio. Following what, I could bring more of those fantastic high dividend payers in without too much fear in front of a very volatile sensible market. That’s the plan. And the plan required a 10 000$.

POT, CNR, TRP and CTC.A, despite being among the high quality stocks, are not among the best dividend payer companies:

Potash Corporation of Saskatchewan Inc. (POT): dividend yield of 0.543%
Canadian National Railway Company (CNR): dividend yield of 1.771%
Canadian Tire Corporation, Limited (CTC.A): dividend yield of 1.773%
TransCanada Corporation (TRP): dividend yield of 4.071%

I don’t know if I am mistaking, but I think I read somewhere that Enbridge Inc. (ENB) dividend yield, following its recent split, is now of more than 6%. It does make sense, knowing that the yield was of 3.239% before the stock split. At more than 5%, a dividend yield became to be interesting. So with ENB, I will benefit of both worlds: high dividend payer and high quality stock.

At the end, the ultimate goal is to build a strong portfolio that will remain strong in front of market correction or, even worst, a stock crash. I had been able to build that so far, but I need to extend the effort to another level to result into a portfolio strong like rock. Pretty good plan isn’t? :0) Actually, that’s much much better than day trading that’s for sure. It’s all about knowing what you want. Want some fresh dividend cash? Go get it.


Arunan said...

Hi DV,
I'm so glad that you are finally looking for some high quality stocks. I feel that POT is not a good one for your portfolio. Price is too high due to the takeover bit by BHP Billiton and some other American companies, and very low dividend (lowever than saving account interest rate)

For all these stocks margin lending values is 70%; however, think a simple calculation you pay 4.25% interest rate for margin and receive less than 3% dividend. Thus, you are going to pay around 1.25% for short term. So, change a little bit in your investment strategies.

High on Dividends said...

I told you in May to sell silver, and fast! You did not listen, and now you have to pay big time.

No, you are doing another bad move!!!

CTC, CNR, and other low dividend players will take twenty years to get to a 5% dividend.

ENB does not yield 6%. Still about half that. Split does not affect yield.

TRP has a good yield, but is flat and not growing.

Long TRP.

Concentrate on good companies with a high present yield, and you will be safe.

Silver and gold will crash. They have no intrinsic value, or very little. All speculation. Beware.

High on Dividends said...

POT is for smoking, or only buying when you are high on POT.

Bad commodity.

Sunny said...

Hi Arunan,

Thanks for sharing. Maybe will I forget about POT. But the other names I think are good. It will bring stability to my portfolio. with this new project, I want to use money of my own, not coming from margin. That,s actually why I came with the number of 10 000$. Not 10k in each companies - because I will never make enough money to give that much from my pockets - but a 2 000$ or so in each companies.

Those will be my dogs, among my my previous top performers I wrote about, like PPL, ENF, etc..

I think among the way I strategy will always need some readjustment but I think focusing on high quality stock rather than high dividend is the way to go. Well actually, I want to do a mix of both in my portfolio. That's what I want to do.

Hi High on Dividends,

Well, you told me about the same thing for HOD and if I would have listen to you, I would had made a capital loss on HOD... See I have my idea straight on some stuff and when I say I am waiting for HZD I will be waiting. And there's good chance that I might be able to sell HZD in my portfolio because the stock market is not doing too well. The situation in Greece is taking more and more place and I will affect our exchange. The TSX was not sensible to Japan tsunami, but is with Greece... TSX could reached 12 000 points if not go lower at some points. It's something that could happen. If not that, the market will get another correction and when it happen, at that time, I will be selling HZD.

Yeah yeah, whatever, POT. Hope you have a good weekend. :0)

pattirose said...

Sunny, there was a stock you owned or talked about owning a few months back, you did an entire post on it. If I remember correctly it had 4-6 Canadian banks in it and it had a very very high dividend. I'm curious what's it's done the past couple months.

Anonymous said...

nevermind, I found it. It was FTN

Sunny said...

Be careful with FTN. I had sold that one. It's high paying dividend stock, but it's not a quality stock, so be careful. In a bad market situation, FTN could not be able to produce the same dividend yield and if the dividend get cut, investors will sell and FTN could drop very badly. I do not own that one in my portfolio anymore. I sell at profit before touching their first dividend. I felt anxious about FTN and sold.

Remember: prefer good quality stock, don't only target high dividend yield.

If the TSX loose more points, you will need good dogs. FTN is not one of them.

pattirose said...

No I wasn't going to buy it, but thanks for the warning. I was just wondering how it's held up lately and after checking today I see it's gone down alot. You're lucky you sold it when you did and I'm lucky I didn't buy any back in January when things looked alot rosier.

Have you heard from Mountain Lion Hero lately?

Sunny said...

Hi Pattirose,

I sometime received emails from him, he's doing fine. I have to say, FTN was not a suggestion of him. He once send me an email with some holding of his. That was way back. In January 2011, I began the year on a strange way, the only thing I wanted was to increase my dividend income. So I taught about the email he once send me... I went back in my email box, took a deeper look. Back in the days at the time he send me the email, FTN was a good pick, but not anymore. Things are different now, the market is not the same. That's why I now change my way a little. High quality stock rather than focusing too much on dividend yield.

Anyhow, lucky for me, CPA.UN, CFX, NFI.UN and GCL were all front the email... CFX is the best of the best. If it wouldn't be for the email, I wouldn't have invest in CFX. NFI.UN and GCL a bit more volatile but still worth it. As for CPA.UN, volatile too, but secured to for the dividend.

Anonymous said...

Sunny, what is going on with Encana, it's back in the 29$ range

Sunny said...

Yeah, I see that. ECA closed today at 29.47$. Well you know, it's the summer, natural gas is not needed as much as in the winter. And also, investors might have sell to reinvested some place else. Many factors play. ECA had not performed quite like I expected but still, I plan to hold my ECA stocks. It's a great stock for the long term. ECA gas reserved are enormous. I don't like to see ECA under 30$ but hey, it will "eventually" go up again ;0)


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