Chasing Yield And Getting That Drip Back – Sweet!

chasing yield

hey everyone

Hope you are all doing well.

Life is good other than this Sh!t show that is Ontario, but hey that’s another post.. The market is finally starting to show some red, but honestly I don’t really see much deals out there. (Well maybe tobacco stocks if your down with that)

I have actually been contemplating just starting to grow a cash position and not putting the money to work, the way Ontario is going and seeing this market. But the reality is other provinces and Country’s around the world are opening up.

A couple of my wealthy clients who I talk money with think we will see a massive boom. That’s a great sign. People clearly want to go out on vacations, excursions, shopping, restaurants etc etc but the govt isn’t letting us. Once things open up, boom here we go!

Also inflation will most likely be a lot bigger than what governments keep telling us it will be. Look at your groceries, lumber, house prices, corn futures, metal etc etc. They are spiking.

I was actually working for a client who has a steel fabrication business, he told me he was quoting jobs in March and now in April the price of the steel he uses has almost doubled, so he has to redo those quotes. That’s crazy! (It really reminds me of that story of someone wheel barrowing money around, going into a store to buy something. Only to come outside and find all his cash on the ground and notice his wheelbarrow being stolen.)

Clearly cash is losing its buying power.. I want to continue to putting that cash to work..

I was contemplating either Telus or Algonquin power, but utility’s are one of our highest sectors and Telus popped back up a bit.. With stock prices going up so much lately I have also lost out on the dividend reinvestment program with some of our holdings.

Simply put the stock price has went higher than the dividend we receive from that company.. I’m a huge fan of drip’s and their compounding effect, so when I see them no longer dripping it’s worth looking into growing that position..

I have also stated at the start of the year I want to get more lower yielding/ higher dividend growth companies and mix them with higher yielding companies. Since I bought some more couche-tard last month it really didn’t do much to increase our forward dividend income in the short term, why not get some yield?




smartcentres

Chasing Yield – New Buy

So this month I decided to pump up our smart centre‘s position. Why not get 2 birds stoned at once right? Get that drip back and also add a nice chunk of forward income.

Now I have bashed the retail environment during this “pandemic” but smart is very diversified and I’m a massive fan of the Walmart anchor.  These plazas are where stores want to be because the traffic is there. I really don’t see Walmart going anywhere and instead of investing in them I’ll invest indirectly with smart..

Now is smart centres a buy at the moment? I wouldn’t say its a steal.. Actually its ahead of what analysts think it should be on yahoo finance. But they didn’t cut their dividend last year like so many other reits and their q4 presentation looked good. In December their rent collection was 93.4%. Way better than most months last year but also unfortunately almost a 2% drop from October. (Guess that’s to be expected as lock downs started again in Toronto in November)

Smart Centres was a position we started last March and added 3 tranches as the market fell. One @ $27.97, next @ $21.21 and finally the largest tranche at $15.17. It’s pretty safe to say this was a great investment, so I don’t mind averaging up in price to get that monthly drip back!

So we bought another 40 shares of smart centres in the kids resp @ $27.80 adds which adds $74.01 a year. Since we now own 209 shares this will bring in $32.22 a month and active that drip again… Woot! Woot!

Conclusion

Well that’s our most recent purchase. Nothing huge, not a steal but what in the market is these days? Just got to continue beefing up our positions and growing that forward income.

Curious what have you been buying? or have you started to build up your own cash pile?

Cheers everyone!

Long – sru.un Dividend Portfolio has been updated.

14 Responses

  1. Greg St.Croix says:

    I have been topping up on SYZ and ITP recently. Both have performed very well and provide a decent dividend. I consider them both to be a ‘get and forget’ holding. Another long term position I’ve recently enhanced is ARE. With the increased funding in infrastructure I felt this was a good play to invest in. It has risen almost 15% since I bought in about 6 months ago.

    • Rob says:

      hey

      Seems like a great play. I have done very well in the past buying and selling aecon.

      itp is one I always debated. I use their products all the time, but never pulled the trigger.

      syz is not one I really follow but I think Mike (the dividend guy) is a fan of.

      Growing that income, keep it up Greg!

  2. Tawcan says:

    We just bought some more SRU.UN last month. Is it chasing yield? I suppose but I think the retail REIT sector will recover sooner than later.

    • Rob says:

      hey Bob

      Nice buy. I’m just starting to feel when I’m getting over 6% it’s kind of like chasing yield, it most likely wont have as much growth as a 3% or lower paying company long term.

      Obviously if its severely undervalued that changes the equation, but I dont think sru is at the moment. =) haha

  3. Thanks for news Rob. Glad to know your purchased shares of SRU.UN for extra dividends 😁💰 I wasn’t sure which company into REITs to choose few years back, so many, so I decided to go with an ETF to minimize the risks of dividends cut + diversification. Recently, I added another 4k$ into this ETF ZRE into REITs in my TFSA for a total of 16k$. As well, I purchased some ATD.B for my defensive sector + added some shares of BCE+ EMA + FB + GSY + INE. I’m waiting my tax income to contribute to my RRSP and add few more shares of KO +PG + PFE. The market is high but as you know when you are a long time investor, you kind of ditch the “noise” and you continue to invest. As you said, cash is losing power, we have to invest to make it grow! Keep up the good work my fellow investor friend! 🙏😃📈💰

    • Rob says:

      Honestly I agree. I really like having etf in the REIT space. Now that I got smart dripping again, I wont be adding to it for awhile (unless it really dips) I rather just grow that monthly rit etf in my REIT sector.

      Nice buys.. gsy is one I’ve always kinda kicked myself for. Stayed away as I dont really like that business but the dividend and stock price have done very well.

      pg is one I really want to grow, especially after the recent raise.

      gotta keep growing that income for sure!
      cheers

  4. Norm says:

    Chasing Yield….. great topic!

    Chasing yield is always conveyed as a negative, and for the uninitiated person I agree. However for experienced dividend and income investors, isn’t that one of the primary goals? If one’s goal is to collect dividends as income why settle for 2% when 3.5% is obtainable?

    For my dividend stocks, yield is absolutely one of the key factors. But I’m not going after companies with 9% yields, unrealistic payout ratios, and declining share prices in a bull market.

    Seeking higher yield can be obtainable if one is patient and willing to take on risks. It’s always about risk tolerance. Last year’s covid market meltdown was a huge gift to investors, growth and dividend alike. For myself, I loaded up on many a dividend stock, and also picked up several well performing REITs with 12%+ yields (at the time). Everyone panicked and thought real estate assets would spontaneously self destruct……

    My view is different than most, and maximizing yield (profit) is one of my primary goals. Of the 30 or so individual stocks I own, not a single one cut their dividend last year. Oddly enough my only cuts were the reduced distributions from indexed ETFs!

    Congrats on reinstating the SRU drips, and for having the courage to chase “smart” yield!

    • Rob says:

      haha nice Norm!

      I agree the covid drop was indeed a gift, cant wait for the next one.

      I’m starting to think companies sporting 6% plus is chasing for yield.

      All of cuts I have experienced (other than disney) have been probably north of that number..

      Obviously there are some great ones but their stock prices hasnt really done much.. At&t, reits, enbridge, bce etc.
      Good companies that have safe dividends. (well dunno about at&t)

      Just want to mix in growthier names as well. I do pay attention to yield for sure. 4% seems to be that sweet spot for income/growth.

      nice work on your holdings with no cuts! We had a couple but their incomes were high enough that they hurt. =)

      “smart yield” I see what you did there haha
      cheers!

  5. DividendsOn says:

    Hi Rob.

    Our all-Canadian dividend growth portfolio has just less than 30% allocation to the lower <3% dividend yielding sectors like Consumer Discretionary, Consumer Staples and Industrials. The much larger portion of the portfolio has the higher dividend yielders in the Financials, Energy (Pipelines), Communications and Electric Utilities. Right now I'm focused on the higher yields so it's the latter sectors that are getting the fresh cash lately. Whatever company has the lower allocation in the portfolio.

    I remember that Josh Peters never even looked at anything with less than a 3% dividend yield, and Lowell Miller's main theme was High Quality + High Current Yield + High Growth of Yield = High Total Returns. Of course they are both American and have a bigger playing field for choice than I do, but I'm quite happy investing in my own back yard and have been since I started our now second taxable portfolio in 2003.

    • Rob says:

      hey

      For sure, I’m in the same boat as you. Most of our holdings are in those sectors too. I think the 4% area is the sweet spot for yield and dividend growth.
      Never heard of peters or miller. Maybe I should check them out. Cant argue that theme.

      cheers!

  6. May says:

    I own some SRU.UN with ACB at $27 around. I hope I had your courage to have added it when it’s very low. Well, it’s still a very good income play. It’s more than 7% yield on my cost. I don’t buy REIT any more as I run out of money in my registered accounts and I don’t want to complicate the tax situation with my taxable account.

    Added some CNQ recently. With higher than 5% yield, maybe I am chasing yield too. I do feel though CNQ is still undervalued right now. I agree with you, once pandemic is over we will see some boom. Also trying hard to put my cash into working.

    • Rob says:

      hey May

      Nice buy with smart centres and cnq. I think the fact that cnq didn’t cut their dividend and actually raised theirs while things were bad says a lot about them. Love seeing you put that cash to work, keep it up May
      cheers

  7. That is very cool, Rob! I only hold 20 SRU @ 27.79 but plan to keep adding it dips a bit more which I doubt unless house market crashes, I add to my 14 REIT stocks every week so will see how that works out.

    • Rob says:

      hey vibrant

      14 different reits? why not focus on a couple first and get them dripping?

      That’s alot to watch in one sector imo

      cheers

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