Tuesday, 26 May 2015

Next Buy Watchlist: May 2015

   Once again I have some capital to deploy, and have been refining which areas of my portfolio to add to. As well as having to consider the encroaching maximization of my Tax Free Savings Account. Which means I am having to start planning how I manage which investments will reside inside it, and which investments will be more tax efficient outside of it.

   For that reason, as you might have noticed I have been leaning pretty heavily in the direction of higher yield, monthly payers, in particular REITs. Since a larger portion of their total return is derived from their monthly distributions rather than potential capital gains when selling a stock. And with my general inclination to buy and hold the stocks that I buy for the long term, when I do eventually setup a non-registered account it should be more tax-efficient for me to have lower yielding, consistent dividend payers outside of my TFSA since in Ontario there is a pretty good tax break on dividend income from Canadian companies. So most likely in the long term (2+, 5+ years?) I would be transitioning my bank stocks like TD, RY and BNS to there while filling up my current account with REITs. Hoping to make a post in the future on REITs and tax efficiency

Dream Office REIT (D.UN)

    Dream focuses on owning and managing quality office buildings in downtown and suburban business districts. This was my first REIT holding and I have added to it fairly recently and am planning to do so again in the future, perhaps even this time around. Dream continues to have above average occupancy rates of its offices and boosts stable tenants in its core holdings of Toronto and Calgary, despite the recent decline in oil prices. Which is a key factor in keeping its funds from operations stable and growing, which allows the REIT to pay its generous monthly distribution of  8.4%.


    RioCan is my other REIT holding and it fills the roll of focusing on owning, developing and operating small and large shopping centers. Generally, their centers are 'anchored' with a large, recognizable long-term tenant such as a bank branch, grocery store or mall outlet.I get a bit of a smile every time I go by a lot with the "Operated by RioCan" at the bottom. Knowing in part, that the property is giving me a little bit of its income every month. RioCan has a more modest distribution yield of 4.94%, but has a solid history of increasing its dividend when compared to Dream.

Suncor (SU)

    This massive Canadian integrated oil company has so far been a bit of a sore spot on my portfolio from when I initiated my position back in September 2014, as it has fallen nearly 16% since then as oil prices have declined. I continue to hold on to the position and continue monitoring it for good opportunities to buy in to. Over the past few months I have seen it oscillate from a general low in the $35 range, and in the upper range of $39 fairly consistently and I see the $36-37$ as a good valuation to get back into it. Overall, Suncor remains a massive company which has been pushing itself to continue looking for efficiencies and other cost cutting measures to keep its cost per barrel down. So far the dividend remains quite safe as Suncor has a very solid balance sheet still. And even at today's price of $36.21 the dividend yield is 3.04%. The main foreseeable issue with them is that if oil remains low for a sustained period of time, than they may not be able to, or unwilling to let go of more capital to continue raising the dividend as they have so consistently in the past.

    These three are the main holdings which I am leaning towards. Dream and RioCan represent my inclination towards income generating assets, whereas Suncor offers a history of long term dividend growth and the potential for a substantial gain in its share price if/when oil prices rise and stabilize. And since Suncor will most likely have its position 'moved' into a non-registered taxable account where I will collect dividends from in a tax efficient manner I may be able to see a considerable tax-free gain from it in the future.


  1. Hi DW,

    I'm in just about the EXACT same boat as you in where I have a couple low-yielding shares in my TFSA which I'd love to transition into my taxable account so that I can take full advantage of the tax free savings account. Also, other than those I have filled up my TFSA with nice yielding REITs - looking at it the same way as you.

    I'm a fan of D.UN and hold some myself, it had a nice run up the past month and fell back down recently so I've wanted to purchase some more, but I also realy like DRG.UN, their German based REIT - just for diversity's sake.

    Also, Suncor is a nice company... I've been wondering what energy company to invest in; I initially placed some funds into PGF, but am now looking at Canadian Resoruces (CNQ), and their dividend growth is in the 20%s so will have a very attractive YOC given some time... What do you think about this company?

    Best regards,

    1. Hey! Its not too bad of a boat to be in for sure! And I love the tax sheltering ability of the TFSA for certain securities. And I am pretty much always wanting to buy more when I can, although I do try and keep some balance. I do rather like Suncor, although I wish I had held off on buying it at $43, but I am fine with holding on to for the long run and perhaps if the cash comes around picking up some more at its current ~15% 'discount'.

      I am not overly familiar with CNQ, I know of it but have not looked into it really. They seem to have also been hit pretty hard from the drop in oil prices, and google finance shows they've dropped about 5% more than Suncor. So I would be curious to look into why that was. At a glance I think I would favour SU simply out of its slightly higher div yield, and google finance is showing 73% of its shares are owned by institutional owners.

      Thank you for stopping by! Sorry my responses took so long!

  2. I am new to your blog but I have nominated you for a Liebster award. See more at: http://mypathtoabetterme.blogspot.com/

    1. Thank you, I will have to look into what that is! :)
      Hope to see you again.

  3. Great list of stocks, we own all three in our portfolio. Suncor is a great pick for the dividend growth history. Dream and RioCan are great for the diversification in REITs space.

    1. Yup! I find its getting so hard to really choose who to go with. More income for the now to help pick up more stocks, or those long-term dividend growers!