A quick update on a purchase in my portfolio earlier this week. As expected, the stock market’s decline had a wide implication on already depressed stock prices where I see good value. I decided to take the opportunity to add more shares to an already decent sized position.
Earlier this week, I decided to add 100 shares in Inter Pipeline Ltd (TSE:IPL) @ CAD$22.70. This purchase price locks in a 7.4% yield adding C$168.00 to my annual passive income stream.
I just listed all my Recent Buy Decision during my last purchase a couple of weeks ago, so I will link to that post instead of rehashing the details.
What do you think of this purchase? Share your thoughts below.
Full Disclosure: Long TSE:IPL. Our full list of holdings is available here
Dividend growth investing is a popular model followed by the investing community to build assets. Companies which not only pay dividends, but raise them year after year have been shown to perform better overall for investor returns. On the flip side, it is also important to keep an eye on the dividend cuts, which could signal troubling times ahead for a company. This post captures the announcements of changes in dividend amount for the week – both increases and cuts.
Note that only $2B+ (Midcap+) companies are included in this list.
Welcome to our monthly passive income update for January 2018. This is part of the scorecard series where we track our dividends and other sources of passive income. We also include changes and updates related to our investments during the month – showing the overall progress.
Passive Income Update
Passive income for the month of January 2018 was C$864.77.The passive income for the month comprised of US$387.43 and C$388.23 (exchange rate is US$1 = C$1.23).
Passive income change is +3.6% QoQ and +32.7% YoY for the month. This passive income achieves 7.86% of our annual goal of earning $11K.
Passive income contributing entities:
Algonquin Power & Utilities Corp (AQN.TO)
BCE Inc (BCE.TO)
Inter Pipeline Ltd (IPL.TO)
Kirkland Lake Gold (KL.TO)
Nevsun Resources (NSU) (NSU.TO)
Toronto Dominion Bank (TD.TO)
Ventas Inc (VTR)
BMO S&P/TSX Capped Composite Index ETF (ZCN.TO)
BMO Aggregate Bond Index ETF (ZAG.TO)
BMO EM CAD Hedged Bond ETF (ZEF.TO)
Vanguard Emerging Market Bond ETF (VWOB)
Vanguard FTSE All World Ex-Canada Index ETF (VXC.TO)
Scotia Diversified Monthly Income Fund (mutual fund)
The breakdown of our passive income contributing entities: dividends & options totaled $351.86 and other passive income totaled $512.91. Read more about why we consider this as passive income in the Passivity Index post.
January saw two dividend increase announcements in our portfolio.
Canadian Utilities Ltd (CU.TO) raised its dividend by 10%
Omega Healthcare Investors Inc (OHI) raised its dividend by 1.54%
During the month, we added the following position to our portfolio
Seems like the year 2018 just started, and we are already in February?! Time sure is aflyin’. Time to look at what the markets are doing and present my outlook for February 2018. Things seem to be getting interesting now. The stock market has continued its climb with some great returns just in the first 30 days. However, the last few days saw some bloodletting that was interesting to note.
As I mentioned in my Outlook for 2018 post, the US$ will be the most interesting asset to observe in the investing universe. The moves are already pretty apparent as the slide has accelerated during the first month of the year. The US budget deficits are getting more media attention, the US government saw a brief shutdown — only to kick the can down the road for a short while, interest rates are rising while the currency is sliding — the US market is behaving like an emerging market!! These are interesting times, no doubt. I will be keeping a very close eye on the US$ and continue to position myself to protect my purchasing power as the world’s reserve currency continues down the devaluation path.
Outlook for February 2018
With the slide of US$, we can expect to see asset prices starting to inflate. Assets such as stocks have already been inflated over the years, but there are still some laggards – i.e., commodities. The following chart has been shared by plenty of folks in the past, but Jeff Gundlach just re-presented this calling it the Chart-of-the-Year, showing that commodities haven’t been this cheap relative to other financial assets.
While some commodities, esp base metals have had a stellar year in 2017, others such as precious metals have lagged. I expect precious metals to start rallying sooner or later as inflation takes hold, so I am happy to sit on my portfolio of gold and silver miners that will see tremendous tailwinds when their underlying asset prices increase.
While my overall portfolio is overweight in Basic Materials sector, I am looking elsewhere to deploy cash. The other related fields that I find interesting and provide opportunity include Energy, REITs, and the cryptoasset market. In addition, I will be looking to make a few moves to align my portfolio as outlined in my Goals for 2018.
As of Jan-31-2018, our overall portfolio diversification is structured as shown below.
Looking for investment ideas? Check out this Top Investment Picks for 2018, where 35+ bloggers present their top pick and a reason to invest in those securities.
What are your thoughts on the points mentioned above? Do you have any specific thoughts on the markets and looking at anything interesting? Share with a comment below.
A quick update on another purchase to wrap up January 2018. This time, its a purchase adding to my dividend growth portfolio after a long time. Its been hard to find value in this market, except in the basic materials sector. However, as I mentioned in the Outlook for 2018 post, I am looking to pull some money off the table as I have overextended in this sector of the economy — with my investment portfolio sitting close to 50% in that one sector. I am still bullish on the sector, but looking to deploy funds elsewhere in the economy, and I have been looking at related commodity plays.
For this purchase, I have looked at the energy sector and decided that I could use with some more exposure and increase my annual dividends from an existing company in my portfolio.
I decided to add to my position with 50 shares in Inter Pipeline Ltd (TSE:IPL) @ CAD$25.00. With a current yield of 6.7%, this purchase adds C$84 to my annual passive income stream. I will probably add another tranche in the coming weeks/months if theres a significant pullback as I think its a good strong play on the overall economy. But for this iteration, I have decided to limit to 50 shares.
Recent Buy Decision
I have owned Inter Pipeline for years now and this company has been one of the most reliable monthly payers in my portfolio. It’s a company I am very familiar with and am confident to put more money to work.
My last tranche was in summer of last year (2017) and the company had just announced successfully completing the acquisition of NGL midstream business from Williams Canada for $1.35B.
Since then, the company has been busy. Recent developments include:
Announced development of Canada’s first integrated Propane Dehydrogenation (PDH) & Polypropylene (PP) complex for $3.5 billion
IPL over the last few years also started diversifying geographically with terminals in Northern Europe. As per last year, EU makes 9% of the overall market share for IPL. I will be keeping a close eye when the annual report is out to see if that has changed over the course of 2017.
A great cash flow machine that not pays well today at 6.7%, but also grows its dividends consistently. The company has raised dividends for 9 consecutive years with 1-, 3-, 5-, and 10-yr dividend CAGR at 3.8%, 7.3%, 9.1%, and 6.9% respectively.
This is part of my annual sale in my employer-offered retirement matching plan. As part of the employment compensation package, I am encouraged to contribute to a group retirement plan, to which my employer matches 50% of the funds. The catch was that I had to choose from a pool of segregated funds offered by an insurance company. These funds come with high management fees but in order to not leave money on the table, I decided to make regular contributions. I originally documented it in this post.
Once a year, I am given a freebie to withdraw funds and move them to my other self-directed retirement accounts. My last such move was exactly a year ago in Jan 2017. I sold my positions in the following two funds. Going forward I will be repeating this move each January, so that my overall expenses fees remain low.
US Equity Index Seg Fund
International Equity Seg Fund
I will continue taking advantage of this benefit from my work and regular contributions into these funds will continue as usual on a monthly basis.
Here’s a quick update on a sale in my portfolio. Sales are always hard, especially when times are good and investors are riding the coattails of one of the best performing bull markets in modern times. When things are rosy, we tend to feel that the good times will continue forever. How many times have we heard from various commentators in the media that this market will never go down, or we will never see a financial crisis in our lifetimes. It is this kind of hubris that sends me running for the hills.
Regardless, its the insane valuations for some of the stocks that I regard as a selling point. What lies ahead…can the company keep its revenues and earnings rising year after year? This particular sale has been a hard one as I consider it an extremely strong company and want to continue holding for a long time. But you know what they say about falling in love with your investments…
I decided to sell and close my position in Canadian National Railway (CNR.TO). I sold my 52 shares @ CAD$105.00 after holding them for just over 3 years. Its a company that I really admire and I believe is the strongest railroad company in N.America. However, the valuations provide no hope of future performance unless we see a major correction in share prices. P/S 5.8, P/B 5.0, P/FCF 40.34 etc. I do not see how those numbers make any sense unless the company’s financials improve drastically with exploding revenue and earnings growth — something I do not expect in the railroad business.
As I mentioned earlier, this is a company that I really admire and will be on the top of my list during the next business cycle. For now, I hop off the train (couldn’t help resist the pun :))
A new year and new set of goals/target to set. A new year is a good time to dwell on goals to set — not just financial but also personal and professional goals. To make steady progress on a regular basis requires determination, patience and of course a target in mind. Setting and writing down goals and working towards them are one of the best ways to make progress. As far as financial goals go, the long term goal still remains the same — achieve financial independence that will provide us with more freedom to do what we want out of life. Following are the goals that I am setting for 2018.
Goals for 2018
Total passive income of $11,000 – I came very close to reaching my $10K passive income target in 2017. For 2018, I am setting a target of $11,000. This is a good middle step before I aim for $12,000 in 2019, which I had set as a medium term goal a couple of years ago. I like the idea of reaching $12K per year as a nice round up figure of $1k per month.
Pay down more than our minimum dues on mortgage debt – One of our long term goals is to pay down our mortgage well before the current 25-year amortization schedule. We have been homeowners for a few years now and feel that paying down faster is better for us psychologically and want to work on putting more payments towards that goal in 2018. In 2015, we were able to pay an extra 21% easily. With no extra payments done in 2016 and 2017, we need to up our ante if we want to whittle away at our mortgage debt. We will aim to pay an extra 25% in 2018 and hopefully grow that number over the coming years.
As mentioned in the Outlook for 2018 post, our total portfolio is not well balanced and requires more attention. The goal for 2018 will be to achieve better portfolio rebalancing and diversification. Our current portfolio (as of January 2018), is shown below. Some of the action items that I had captured in that post include:
More passive investing vs. active investing approach. Leaving the cash portion aside, currently active-vs-passive investing has a 80/20 representation of the overall portfolio. For 2018, I will aim to bring that to closer to a 60/40 ratio.
Rebalance stock portfolio – I want to rebalance by reducing my basic materials/commodity exposure, which has overgrown thanks to good returns and over enthusiastic investing on my part in the sector. I will be looking to book some profits and (and perhaps cut some losses) reduce the overall exposure of the sector. My goal will be to reduce sector weighting to 35% of total stock portfolio.
Asset Class Diversification – Diversification is what saves our assets when we hit a financial storm. I want to position myself appropriately to protect and hedge my bets. In order to do this, I want to decrease my overall equity exposure and increase investments in fixed income, hard commodities and cryptoassets. I also want to diversify geographically by investing more in companies that have increased revenue internationally (outside North America).
Asset diversification as of Jan 1, 2018
Stock Portfolio as of Jan 1, 2018
Have you set your goals for 2018 yet? Share them if you have. What are your thoughts on the goals discussed above. Be sure to leave a comment below.