Last week, My Own Advisor, a regular reader, asked me about my asset allocation strategy. It is true that it has been a while since I have discussed asset allocation on this blog. This is why I decided to take a look at my current dividend holdings and comment on them.
Here is my current portfolio:
|Stock||Ticker||Shares||Av Cost (CDN$)||Price||Value||Div ($)||Div Yield (%)|
|5N Plus||VNP - TSE||400||$5.93||$8.42||$3 368.00||$0.00||0.00%|
|Scotia Bank||BNS - TSE||50||$60.32||$55.91||$2 795.50||$2.08||3.45%|
|Chevron||CVX - NYSE||25||$92.85||$101.64||$2 541.00||$3.12||3.36%|
|Coca-Cola||KO - NYSE||28||$67.67||$65.37||$1 830.36||$1.88||2.78%|
|Husky Energy||HSE - NYSE||100||$27.90||$26.68||$2 668.00||$1.20||4.30%|
|Johnson & Johnson||JNJ - NYSE||25||$64.93||$62.29||$1 557.25||$2.28||3.51%|
|BMO Covered Call ETF||ZWB - TSE||125||$16.43||$14.81||$1 851.25||$1.54||9.37%|
|Telus||T - TSE||36||$55.16||$52.47||$1 888.92||$2.20||3.99%|
|National Bank||NA - TSE||87.46||$69.24||$76.71||$6 709.06||$2.84||4.10%|
And here’s my asset allocation per sector:
As you can see, there is a massive (too massive!) part of my portfolio invested in the financial industry. If you are an American reader, you might be very surprised that I have concentrated my retirement funds into such a shaky sector. However, all my financial holdings are in Canadian Banks. The reasons are simple:
#1 I am Canadian
#2 Canadian Banks are among the strongest of the world
#3 Canadian Banks pay healthy dividends and they are considered blue chips.
Nonetheless, this is definitely too much concentration in a single sector. And definitely too much in one single stock (26% of my portfolio is in National Bank stocks). On the other hand, I truly believe National Bank will do well in the upcoming years so I’m not afraid to keep so much stock in my portfolio.
As you can see, I have gotten rid of my most aggressive investments (Paladin PDN and Research in Motion). I have kept 5N Plus as they are working in the solar industry and I think this is very promising. It is the last stock from a “previous investor life”. In fact, I used to take a lot of risk with my portfolio. I started back in 2003 with an investment of $20,000 (all taken from a line of credit) and cashed out everything in 2006 to buy my second house (with some healthy profits!). I didn’t invest much in 2007, 2008 since I was working on paying off my debts. Then, I started (and finished) my MBA in 2008-2009 and this is why I wasn’t too active on the stock market. Back in 2010, I bought this blog and started to get really interested in dividend investing. Since the beginning of 2011, I’ve been restruturing my portfolio and switching towards a dividend portfolio. So far, I’m pretty happy with what I have accomplished in a single year.
I’m done with my Energy and Financial sector shopping and will be looking to make more trades in January as I will invest about $10,000 in my retirement account. At that time, I will probably add another stock from the consummer goods sector and will then look at other dividend paying sectors.
Nope, rates are bad and I prefer the power of stocks combined with dividends. I actually consider a stock such as KO as my “fixed income” portion of my portfolio! Also, I have noticed that in some cases, you get a better yield from the stocks than from its bonds!
As I previously said, I’m not expecting to make any other trades this year while I’ll be cashing my dividends till next year. In the meantime, I’ll add stocks to my watchlist and see which moves I will make in January!
What do you think?
I sometimes let you know what I think of your portfolio through email or this blog. Now it’s your turn to tell me what you think about my investing strategy ;-).
I’m a nobond guy as well (except for those in my 401K – they are the only ones with the least fees!).
I might think of allocating in long term bonds if the interest rates rise, but till then I’ll stick to boring dividend paying stocks as a substitute.
I agree with having huge companies like Coke as save investments. I have about 33% of my dividend portfolio in KO and MCD. Im making sure to keep pumping some money into these large companies as the rest of my portfolio has a rather high Dividend yield, which the risk worries me, but they are also solid companies. (T, PPL, CINF). I would like to DRIP at least one share per a quarter and I can with the smaller ones, so as I expand my portfolio, i’ll slowly add KO and MCD which require 3x the capital of these lower priced companies to DRIP one share.
I’m invested in 7 shares all in different sectors so hopefully I can keep up my diversification!
Iain from Smart Dividend Growth
Hi Dividend Guy,
I’m in complete agreement about allocating 0% to bonds at this time. Although once interests rates go up in the future do you plan on getting back into bonds?
I’m also curious about your about your investment approach. Do you take a top down or bottom up approach?
My Own Advisor
Thanks for putting this together. I guess it pays to be a regular reader 🙂
Seriously though, it is interesting to compare notes. I’m heavy in financials as well, about 50% of my unregistered and TFSA portfolio is with Canadian banks and lifecos. My reasoning is very simple: they are established companies that make money hand-over-fist.
NA is a great stock. Don’t sell any of it and let it DRIP or pay you handsomely for years to come.
“Since the beginning of 2011, I’ve been restruturing my portfolio and switching towards a dividend portfolio.”
Smart move. I’ve done the same over the last few years, although I still hold some bonds in my RRSP (XBB and CLF are my holdings).
One of my goals is to own directly, most of the stocks in ETFs XDV and CDZ at some point. I’m almost half-way there. I’ll be writing a post about that in the coming weeks.
Stay in touch!
I’ve like your approach. The Cdn banks were able to come back fully from the financial crisis, did not cut dividends, so I too am way overweight in the sector.
The dividend strategy is one I’ve been using for almost 8 yrs. I think of it as having indexed pension, (hoping) at retirement I will enjoy some inflation protection via dividend increases.
May I offer a suggestion that you explore at Canada’s rail systems. Both CNR and CPR, have a good dividend history, I see them as low on the risk scale, and have some (I hope) small capital gain upside.
Thanks for sharing! Im a no-financial guy my self. Instead I put greater weight in consumer goods.
The Passive Income Earner
I think the diversification is pretty typical for Canadians. Lots of Financial, Energy, Natural Resource and Telecoms as major companies to hold. Transportation and Consumer Goods are relatively limited in selection. One only has to look at the TSX 60 to see what Canada’s strength is 🙂
Good post. Love to see fellow investor’s asset allocation and portfolios.
I agree with you on the bonds 100%. Maybe when rates rise I’ll entertain them as a small part of my portfolio.
While you are heavy on banks, I have none. My only financial stock is HGIC, an insurance company. The USA is a lot different in this respect. A lot of us are heavy on oil, healthcare and consumer stocks. Some banks held their dividend through the crisis (BOH), but many of the big names cut heavily (WFC, BAC). I’d like to get into banks once the economy gets going again…which may be a while.
Thanks for sharing!
I always keep a component of bonds around. They’re not too attractive at the current time, but through asset diversification and rebalancing, they can act like a “war chest” on days like today where worldwide markets took a big fall.
Having classes or sectors that move inversely to each other or at least that are very uncorrelated to each other provides a powerful way to harness volatility. If one keeps X% of their portfolio in bonds, then on months when stock prices rise a lot, in order to bring that percent back up to X, I use my fresh capital to buy bonds. Then, on months like this where markets fall like bricks, and my bond percentage increases passed X, I use fresh capital to buy more stock, and perhaps even sell bonds to buy stock. And during times of huge recessions, like in early 2009 when bargains were incredible, having a bond fun to draw from to buy stocks is useful.
On a side note, I do envy Canadian banks. I’ve been considering buying an ETF that provides index exposure to Canada. My international exposure is mainly elsewhere besides Canada, and that’s a shame.
I have currently living off my dividends. I made most of my money in banks and utilities.
I have no bonds at present as rates are far to low.
The Wealthy Canadian
Not a bad selection of dividend-paying stocks if you ask me.
I too have positions in KO, BNS, JNJ, T, & NA.
From a personal standpoint (I may be going out on a limb here), I think that any serious Canadian investor that has dividend paying companies as a core part of their investment strategy has to own some of the Canadian banks. The long-term graphs speak for themselves, and the juicy dividends are fantastic.
Re: Canadian Banks. I share your views regarding these. However just at the moment Banks worlwide are not considered to be transparent in respect of the value of the assets on their books vs the market value of same. Just this morning I note that all major banks in N.A. including all 6 of ours have broken through their 10 week MA. I consider this portentious. Having said this, I believe a younger person, presumably like yourself, can take positions in all our banks and come out well ahead, as these historically have led each market recovery. All the best and good luck. I find it persuasive when someone writes a blog and relates his personal situation on the subject matter.
I currently have 20% cash, 20% oil/gas, 17% banks, 15% pipelines, 8% telcos, 7% utilities, 7% REITS, 3% commodities & gold, 3% corp bond etf. Will sub bond % with 3.0-4.5% yeild stocks (ENB, SJR.B, TRP).
Expanding on CDN midstream oil & gas (trucking, fracking, gas processing, services) – will shift some oil/gas to these.
I earn an avg 6.5% yeild on it all. I own all dividend payers and DRIP most of them. Long term holder (unless stock goes bad), I bought my first stock in 1981. My philosophy is buy what you use, DRIP it. Everybody needs a bank, runs their car & heats their house on energy, so make those a larger % of your portfolio. Read the financial papers – you can sniff out future market shifts on a macro scale most times. Buy good stocks when markets tank, so keep some cash on hand.
I use a margin account for a part of this: Rule #1 – never exceed 30% debt on your available margin. Your brokerage will never call for cash. Rule #2 – make regular payments on what you owe combined with dividends and you’ll be surprised at how fast your account builds up. Rule #3 – BE PATIENT!