We are into a 5 year bull run where the trajectory has been nothing but straight up. Everybody during that run looks like a stock picking wizard. P/E ratios are climbing signalling to an overvalued market. Why would anyone put over 400k into the market in the last couple months? But who knows how long this will last? Nobody has a crystal ball and this run might end tomorrow or in another 10+ years.
Where else would you put it? Bonds? With interest rates keen to rise you must be crazy! Why would anyone want to lock up their cash for five or ten years at this yield. Worse yet if you cash out after interest rates rise you will actually lose money.
Obvious Canadian real estate is in a bubble currently and serious correction bound to happen. Plus yields are currently quite low as well as liquidity. Also real estate is not very tax efficient as its taxed as regular income for yields and tough to hold in your registered accounts. Although US real estate is fairly valued right now the tax implications for owning foreign real estate is not very favorable.
So whats a guy with 400k to do? Why not just pay market value for a portfolio of dividend growth stocks. This guarantees me a return on my investment via dividends and pays me currently 3.55% and that number will rise every year in the future. Makes sense to pick aristocrat stocks with long histories of dividend increases. Also companies than continue their dividend increases throughout market corrections as well has handle those corrections fairly well compared to other non dividend paying growth stocks.
With that said in the past couple of months I went all in. Constructed a plan to have a well diversified portfolio across the sectors and companies around the globe, Although I am still too light on International exposure which will be addressed in the future. I went with a higher American based company rate because many of the companies are multinational. My portfolio only contains stocks that pay a dividend. Some low (Visa at .74%) and some high ( Bell Aliant 7.08%). They are not all growth stocks as some have a very high yield and payout ratio but they are countered with some high potential growth stocks like Visa, Dollarama and Suncor. Overall it is a good mix I am pleased with the overall results. I do intend to do some mild rebalancing but nothing drastic in the future. My portfolio does contain some REITs but I do not plan on adding to those positions. I intend to reinvest all my dividends into my current positions or at times open new ones. I hope to make a buy every month or two and will blog about the buy and reasoning for it.
My final buy of my portfolio and this month is Fortis FTS a Canadian 40 year dividend aristocrat. I doubled my position from 150 shares to 300. It currently yields about 4% and total forward yearly dividends 384. It has a high payout ratio of 81% but their business is very slow and steady. It is currently undervalued I believe and its a value play. Dividend growth rate has been 16% of the last 10 years. The stock was very resilient since the 2009 crash but has not had much upside since then so there is plenty of room to catch up. I like the company as I use their services as they have pretty much a monopoly in town. I was light on utilities and made it into one my core Canadian holdings.
FTS Last Trade - 32.10
|Shares Out.||214.5M||Book Value||$28.15|
|Annual Dividend Rate||$1.28||Price/Sales (TTM)||1.6|
|Ex-Div Date||8/13/14||P/Cash Flow (TTM)||7.6x|
|Pay Date||9/1/14||Operating Margin||19.32%|
Current Total Investments
In my overall Asset mix I am close to where I want to be with my investments. I am heavier than I would like towards real estate so any future investment will go toward my equity side to increase that ratio. I consider my real estate like a bond with a safe produced fixed income. I do not anticipate much capital growth with it and for the meantime I consider it a long term hold. I have set aside about 85k to go towards a start-up brewery. It is obviously a speculative investment which is at a much higher risk but it is under 10% of my overall investment assets so its a small portion. I have a good feeling about the brewery as a good steady investment. Also what I like about the brewery is that it is tied to some real estate where they are purchasing the building it will be run in so I have some insurance their on total loss. It will be run by well established guys in the business with a great reputation and in an undeserved and growing area.
So far things have been fun with my blog. I enjoy updating my holdings, dividends and net worth regularly. I would like to thank Rockstar finance located here http://rockstarfinance.com/blogger-net-worths/ for adding me onto their net worth page and the traffic that it brings to me blog. Thank you guys I am grateful! Also for Modest Money adding my to their top finance blog list http://www.modestmoney.com/top-finance-blogs/. I have recently acquired a new domain assetgrinder.com which at some point I will switch over to the future. I am still quite the novice to blogging and my web skills are sub-par. I am thinking of taking a course on WordPress or even having someone create a fancy website for me. I plan upping the quality of my posts as well as adding some resources for people as I get more comfortable with everything.
So what do you guys think? Am I crazy for jumping into a heated market? Do you think I am well diversified too much or am I too heavy on American holdings? Your thoughts on bonds and real estate? Plus who like beer? I don't but I love profits!
Upcoming updates- Net worth in about a week as I aim to update the total every mid month
Till next update
Good Day and Grind On!