Pre-Screened Securities Through Your Broker

One of the investment accounts that I have is through the Canadian Shareowner’s Association’s (CSA) Co-Op Trading Service. Part of their offering is a pre-screened list of securities that passes what they call their criteria based on, “strong growth, financial and operating fundamentals [with] the capacity to continue their strong growth into the future.” Once companies meet this criteria they are added to the list of possible investments that clients can buy shares in.

Obviously there are issues with investing in this manner. The most obvious is that this limits your investment choices. The second most obvious is that you are at the mercy of the folks at the CSA to decide what you can or cannot buy through their service. They are not too clear on their site what their criteria is, other than what was quoted above. This can be limiting to you as an investor.

You are probably asking why I use them given these restrictions. I have a couple of responses to this. First is that the stocks on the list include a large number of blue chip companies that are included on the Dividend Achievers list of companies that consistently increase their dividends. These are companies that I like and tend to hold in my account.

The second reason is the dividend reinvestment factor. The CSA gives me the ability to reinvest my dividends into more shares of each company, including into fractional shares for free. Most of the big brokers allow you to reinvest dividends, but only if you dividends are large enough to buy one whole share.

The third reason I use them is because their commissions are low compare to other Canadian brokers. You need to buy shares based on their schedule (they do pooled buying) but I have not found this to be an issue.

I imagine that this post is looking like an advertisement for the CSA but I ensure you it is not. My point is to show that your actual choice of investment is only one thing that an investor needs to
consider. Other factors in my own investment philosophy (dividend reinvestment, low fees) have been considered and have lead me to give up some flexibility. Dividend investing has been most effective for me when viewing it as a whole portfolio strategy as opposed to discreet security decisions. My decision to use the CSA provides me with the package of services that I want.

Note: The CSA is only available to Canadians, U.S. investors can use ShareBuilder or NAIC to get similar portfolio features.