I’ve posted the above question on Twitter, on Seeking Alpha, in emails and texts. What are you buying? We are having a solid correction in stocks, REITs and bonds. Assets are going on sale. And sure, stocks could go lower. Bond yields could go higher (lowering bond prices). The thing is, no one knows how markets will react over the next day, week, month, year or 10 years. What we know is that the more assets fall, the more attractive they become. What stocks and ETFs are you buying? – The Sunday Reads.
On My Own Advisor, Mark offers a similar theme with – Weekend Reading, keep calm and dividend on. Stare at the dividends to help your risk tolerance level, why not?
A useful distraction?
In fact I’ve long penned that dividends can be a useful distraction. Though we should keep in mind the importance of total return. Must read:
Living off of the dividends? Don’t sell yourself short.
All said, higher yields can be a sign of favourable value as demonstrated in the Beat The TSX Portfolio or the Canadian Wide Moat stocks. Here’s an example (paywall) in the Globe & Mail, on BCE, courtesty of David Berman …
Consider several examples over the past 10 years, using quarterly figures for the dividend yield.
When the yield was a lofty 6.1 per cent on Dec. 31, 2020 – in line with today’s yield – an investor who pounced on the stock was rewarded with a total return of about 28 per cent over the next 12 months. The return includes the big dividend distributions.
Similarly, buying the stock on Sept. 28, 2018, when the yield was 5.7 per cent, generated a one-year total return of 29 per cent. And buying the stock on June 28, 2013 – yielding an attractive 5.4 per cent – generated a return of 18.2 per cent.
And yes, a nice big dividend is like a financial hug. And there are benefits to having a meaningful and growing portfolio yield – especially in retirement. Here’s the current yields of the wide moat 7.
- Scotiabank – 5.95%
- RBC – 4.15%
- TD Bank – 4.22%
- Telus – 4.77%
- Bell – 6.00%
- Enbridge – 6.66%
- TC Energy – 6.08%
The average yield is 5.4%. It’s not surprising that the yields for Vanguard’s VDY and iShares’ XEI is in the 6% area. As prices fall, the greater the current yield available. These high yield ETFs held up quite well over the last couple of years, they are now beginning to fall. XEI is down over 10% over the last 5 months, for instance.
At Questrade, you can buy ETFs for free.
REITs are getting cheap and cheaper
This was offered by Sean Pugliese, after running a screen, looking for attractive free cashflow levels and safety.
And on MoneySense, Kyle offered up some good context and a greate chart on Canadian market valuation.
Out of favour indices
Last week we looked at the value in U.S. small caps. On that front:
After falling 31% in 1973, U.S small caps rose:
- 20% in 1974
- 53% in 1975
- 57% in 1976
- 25% in 1977
- 23% in 1978
- 43% in 1979
Here’s an interesting look at out-of-favour Emerging Markets.
Seeking Alpha’s favourite core REIT is on sale. Now with a juicy yield. You can find pockets of value in U.S. stocks as well.
Timing the correction would be impossible
You can find charts such as this that suggests it could take 10 years to bring inflation down to the 2% target.
But then another Tweet counters with this fact. In the last few episodes (for the U.S.) it only took 22-28 months to tame inflation.
Once again, we don’t know what we will get. We don’t know the future. But if next week does not deliver a rally – it will be the first time since 2008 for SPX and since 2002 for Nasdaq to have 3 consecutive negative quarters. There is certainly some downside momentum. The sale might continue.
Here’s some market decline history (U.S. stocks).
And while late September is historically the worst period for stocks, October often finds the bottom. Will we rip the Band-Aid off quick in 2022? Who knows?
As always past performance does not guarantee future returns.
If you’re an accumulator, it’s time to buy, or keep buying. You can dollar cost average and try to take emotion and guesswork out of the equation. If the market decline does accelerate you might ramp up your purchase levels.
As always, ensure that you are investing within your risk tolerance level.
Perpsective for those with a longer time horizon
And here’s some shorter term perspective after some of the hard work on declines has been realized.
And a reminder from Warren Buffett, via Dividend Growth Investor.
On the real estate front
A very watchable podcast with and from our Twitter friends …
And surprise, surprise; real estate is not always a good investment. Check out this tread.
In the example, the homeowner would have “lost money”. The cost of home ownership exceeded the total appreciation of the home’s value.
Stay tuned, I have invited Sanj and Gina (who helped me with this real estate affordability post) to turn that Twitter evaluation into a post for this blog.
On stocktrades.ca, Mathieu offers the Canadian REITs to buy in September.
More Sunday Reads
On Findependence Hub, a retirement funding case study from Cascades. That is a wonderful service for the self-directed investor who wants to run the numbers to discover the most optimal order and rate of asset harvesting in retirement.
If you want some help, head on over to Cashflows & Portfolios, where Mark and Joe will run the numbers for you.
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Here’s how to navigate bear markets courtesy of Dividend Strategy.
As always, here’s the week in review on Dividend Hawk.
Bob at Tawcan offers his selection of blog reads and videos for the week.
Banker on Wheels rides in with Sequence Risk and Trend-Following. Included in the mix is – the biggest winners and losers from March of 2020.
Thanks for reading. We’ll see you in the comment section. You can follow this blog (it’s free) by entering your email address in the Subscribe area.
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Hello Dale, What are we buying? Well, with a 20 Plus % cash position and our needed expenses well covered by pensions, government benefits, and some dividend income used, we are reinvesting dividends in selected equities and making regular add-on purchases of selected quality securities trading well above longer term higher historic average yields. In the past this strategy has worked very well for us.Recent purchases have been additions to; POW, ENB, CM, BCE, ACO.X, CNQ, and FTS. In the REIT area, CTR.un and NWH.un. New positions were SJ and MEG.A security I am presently considering is Canadian Tire.
We are positioning our portfolio to generate a reliable, rising income and for selected opportunistic capital gains.As an aside, we still have the first equity we purchased 35 years ago BNS. With reinvested dividends, it is now a tidy sum. Compounding works if you stick with the process. Thank- you for your work. Regards Mike ( We are truly blessed and grateful.
Hi Dale,
As per the title the only thing we’re “buying” will be re-investing the distributions we get from ZBAL due Oct 5th. in our TFSA’s. The RRIF’s won’t be worth re-investing from our ZBAL since we’ll be withdrawing the gov’t mandated minimum in early 2023 and that will mean selling part of this ETF before the lump sum withdrawal due date.
Other than that, all is quiet. The non-registered is waiting for more cash savings combined with dividends, so that I can buy another Canadian dividend company. I’ll know what to buy when the time comes. My simple spreadsheet always tells me so.
Thanks DividendsOn, thanks for sharing. We should all have a plan, and stick to that plan. Sounds like you are doing just that 🙂
I haven’t bought anything yet, as I think the bottom is still coming.
I do have a shopping list ready. It includes the likes of BCE, FTS, TRP, PPL plus a couple small cap REITs I have traded over the last few years (NXR.UN & PRV.UN). No banks, I’m already overweight that sector and I don’t see true compelling value there.
I keep thinking about $0 Realty Income and wonder about the tax consequences. Is it a ‘dividend’ or a ‘distribution’? The tax consequences differ, and it matters what account they are in since it is US. That should be talked about…
Ha, I just bought some FTS.
My buy target was $53.50 (4% yield before the recent increase), I picked up 200 shares at a little under…