My portfolio’s Diversification Just Improved.
My Portfolio’s Diversification Just Improved.
Hey hey hey
Hope everyone is having a great 2019 so far. I have been continuing working on what I was trying to achieve at the end of last year. We wanted to improve the overall diversification of our portfolio. I had a bunch of holding’s quite a bit over 5% of my portfolio. At the end of December I lowered some positions and put the money right back to work in new companies. You can read about those Moves here, But overall and long term I think it was a great move.
I had one HUGE holding though….
I mean huge, it was Enbridge. We love the company and feel they are a solid dividend growth stock that could be a nice cornerstone to every portfolio. But for some reason when I started investing they were the main thing I bought, and I had enough holdings in each account to drip shares.. The total weight of Enbridge was over 13% of my portfolio and brought in roughly 20% of my total forward dividend’s.
It was too big of a position but with the 10% dividend increase last month would I sell off?
Well I decided to. It was just too massive of a position and a rookie move on my part. Now I know some of you mentioned, just holding them and eventually with new cash being deposited the percentage would drop. I was getting over a thousand bucks a year from them and the drips themselves, kept adding to those positions. Unfortunately RBC offers drips on all stocks or none in each account and since I had holding in every account, this wasn’t really a option.
Now Id like to mention that I know the purchases probably don’t offer the same type of dividend growth as Enbridge but the diversification is definitely nice.
Alright so what did I do?
First I did the math on my accounts and noticed that I could sell 40 shares in our resp account and still get a drip from Enbridge a quarter. So I sold 40 shares at around 41 bucks each. This sale lost me $118.08 in forward dividend income and lowered my exposure to Enbridge by a little bit.
At the end of November we started a position in Interpipeline in our kids resp account. We had 56 shares. (not enough to drip) So with the proceeds of the Enbridge sale we bought an additional 87 shares of Interpipeline. We now will bring in $20.37 a month from them and hopefully drip them. As of writing the price has popped up so maybe I will need to add a little more to this holding to ensure the drip.
I wrote about Interpipeline on our last purchase. No point getting into them too much (you can read about them on the link) but considering I bought these shares just under 20 bucks each. We lowered our cost basis and increased our yield on cost.
Overall this move kept the money in the same sector (Energy) and actually added $30.69 to our forward income.
Still Too Much Enbridge
Now the one problem I have here is that I will be lowering my quarter ending dividend months income. I know its minor but it is something to consider. Enbridge at this point was still way to overweight in our portfolio.
I looked at one of our accounts that held 106 shares of Enbridge and had a value of roughly $4500. If I sold this off Enbridge would now be just north of 7% of our portfolio. I could live with that and would be happy with that percentage. So I wanted a stock that paid in quarter ending month’s and also was in one of my lowest sectors.
Brookfield Property Partners
This is a stock I have been watching for awhile now. I’m a big fan of the brookfield companies and what they have been doing. BPY has dropped in price so much since the acquisition of GGP. (one of the biggest mall owners in North America) I actually love this purchase. They have the same mindset of Riocan. Build Residential Units on their commercial units.
This is absolutely huge in my opinion. Do you remember sim city 2000? The map is full and there is nowhere else to build houses, commercial or Industrial plots. Then you get offered launch arcos!
An all in one solution for your city. It houses people and offers jobs and creates food. Its the ideal building for a city. Now I doubt we will ever see industrial in residential area’s but wouldn’t it be cool to live, so close to where you work and shop? What if your a retailer? That would be incredible, having your clients right above your business.
Well this is what Bpy is planning on doing to some of the malls. But that’s not all. Brookfield already owns some of the best office and retail property’s in the world. The company is very well diversified globally.
Rida Morwa did an absolutely incredible write-up about Brookfield Property on seeking alpha. I suggest you just read his post if you want to learn more about Brookfield Property Partners.
The company offers a yield north of 7% and targets to increase it by 5-8% per year going forward. The current dividend payout ratio is approximately 65%. Its parent company Brookfield Asset Management, believes bpy is undervalued and has been buying up shares lately at these prices.
The stock has popped since we bought them and at a current price of 22.95 it has a p/e ratio of 8.6 and a yield of %5.46. Since the dividend is paid in us dollars though, after the conversion its at 7.37%. Very nice! Morningstar has a fair value price of $29.02. This would suggest a 26.44% increase to get to fair value plus that nice dividend….
We bought 204 shares at $21.93 per share all in costs. This purchase will add $257.04 usd per year, slightly lower than the $312.91 we lost from the Enbridge shares. If we do the dollar conversion currently though we will get $342.10. A little bit higher.
Well this is it, the end of all my selling. Well unless my losers rebound or something else changes.. Having such a large holding in one stock was a rookie move. But I feel good to have corrected it now. Again I’d like to state I’m a huge fan of Enbridge, but just wanted to improve my overall portfolio diversification. I think these moves definitely do that both globally and also sector wise. I still have 6 holdings between 5-7% of my portfolio unfortunately, (Enbridge, Td, Shaw, Cisco, General Mills and CNR) but with the influx of new cash I hope to lower these holding organically.
I’d love to hear your thoughts on these moves
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.
Haha, love the reference to Sim City!
You’ve made some nice moves here, and it is hard to argue with shuffling things around to reduce the exposure. I’m in the same boat with Apple as I bought that many years ago and was the only stock I held for quite some time. As a result it is also far overweight, but I have opted to leave it be for now and focus all of my purchases elsewhere to slowly lower the exposure over time.
man sim city took alot of my time back in the day… lol.
I hear ya, but it would of taken a tonne of cash to knock that down.
time to check your dividend month!
Hey Rob, nice post. I certainly understand your reasoning to reduce your position in Enbridge. I am probably in the same position that you were just in with Enbridge and Inter Pipeline. Either this week or next I will write a post about my portfolio so I will definitely find out. Thanks for sharing.
Enbridge is a solid company and i loved having them but everytime i looked at my portfolio, i thought dam thats a huge holding… Glad to have things more evenned out across the board.
Lets see what your up to.
Hey Rob. The new website design is great – really nice. The BPY purchase should be excellent – they are on my watchlist. That company is extremely well-managed and the financials are very strong. Reducing your ENB was a good move. As to Interpipeline, did you give any thought to diversifying out of that sector to replace it? I’ve got a few stocks that are overweight but I’m trying to avoid selling because of the taxes, so I will try to build up other positions instead.
thanks man, its a litle different but hopefully alot faster.
Bpy im really happy about.
Interpipeline seems like a good buy but i dont like how both them and pembina are creating a poly plastic plant at around the same time.
As for diversifying out of the energy sector? I dont know I really dont have any issues here and have actually debated adding suncor at current levels.
Why do you ask? The risk associated with energy stocks or the trend to clean energy?
Thats what stops me and keeps me just in the pipelines. Id love to see electric come faster but i still think we got some years to go.
Great move to diversify your portfolio. IPL and BPY are great businesses. Remember, that BPY owes a luxury resort in the Bahamas. I would buy that stock every month just for that resort. Gotta feel great to have a little portion of the Paradise Island. Anyway, both picks are great and you got them at the great price!
wow I didnt know that, even looked it up.
We love atlantis and have been there twice and will definately go there again.(the pic about me is actually from there)
Very cool, thanks for pointing it out!
That’s cool. What a nice coincidence. You went there and now became a shareholder.
Hey Rob. I would have expedited the diversification like you, rather than waiting for it to happen organically, especially considering how overweight the ENB position was. Thus, it all made sense to me. 😀
It certainly sounds like you are more comfortable with the current weightings, and that’s important.
Wishing you an outstanding year of DGI in 2019!
Thanks man, Maybe I should of timed it a little better though.. Enbridge has shot up since new years! Well I guess everything has but enbridge a little faster.
I feel really good about how it looks now. Maybe eventually get rid of the non dividend growers, but for now Ill keep them.
All the best in 19 to you as well.
Hey Rob, sounds like a wise move – probably a bit harsh calling it a rookie move letting it get that big! It all depends on what you want your portfolio to look like, and your obviously being mindful of concentration risk which is great. Hope the extra diversification pays off for you in 2019!
great point! Its true.
Thanks, all the best in 19 for you as well.