Wednesday, July 9, 2014

Restructuring RRSP - Bought Telus

Over the next 18 - 24 months, I plan to sell my Canadian stocks currently sitting in my RRSP in order to create some room to invest in US and international stocks. Considering my investment portfolio currently consists of almost 75% Canadian companies, international diversification is a must for me. However, when I sell the Canadian stocks in my RRSP, unless I am terribly overweight in them, or that I think the security is overvalued, my plan is to buy the same amount of stock in my unregistered investment account (thus the process taking me 18-24 months). 

After Canada's Industry Minister let it be known that he planned on tilting the next spectrum auction in favor of new entrants and bit players, Mr. Market depressed the prices of the big three Canadian telecom companies yesterday. Knowing that the Government of Canada has been favoring smaller players and new entrants in spectrum auctions for the past 6 or 7 years, and that the strategy has been an absolute failure (the big three telecom companies control about 95% of Canada's wireless market), I saw this as a great opportunity to start my RRSP-to-non-investment account shift strategy. With my Q3 contribution to my non-investment account, I bought shares in Telus at $38.20. 

In order to be safe, comply with Canadian tax law, and not have to realize a capital gain on my Telus shares inside my RRSP, I'm planning to wait at least 30 days before I sell an equal number of shares of Telus inside my RRSP. Although this seems complex, Canadian tax law as it relates to capital gains is a bit of a challenge for my simple brain. I'm very happy to have bought the shares of Telus at what I consider to be a decent bargain in the current elevated market. Today, Telus has already bounced back about 1.5%, and is trading over $39.00. 

Even before this trade, Telus was my largest individual company holding across my investment portfolio. Since it accounted for less than 10% of my total portfolio, I'm likely going to maintain my current position in the company. Telus has a great record of announcing dividend increases in advance, fallowing through with previously announced regular dividend raises, and growing revenue/earnings in order to keep the dividend sustainable.  Telus is a pretty great company to buy when Mr Market gets depressed. 

(Full Disclosure: Long Telus, Bell, and Rogers)

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