Wednesday, December 10, 2014

Brief Update As Year End Approaches

It's an interesting time to be a dividend growth investor in Canada. Looking at the TSX plunge day-after-day on lower oil prices makes it depressing to see the value of my holdings decrease. However, I'm ecstatic that a bunch of my holdings have recently announced dividend increases (i.e. ENB, NA, LB, IPL, etc.), thus boosting my passive income. Given the goal of my portfolio is to generate increasing amounts of passive income over time, and lower stock prices make it more affordable to increase passive income at lower prices, ultimately I'm quite happy.

As oil prices have plunged, I've taken the opportunity to invest in Suncor, Canada's largest integrated energy company. This might seem counter-intuitive to some, but Suncor was always too expensive for my liking, as it traditionally yielded under 3%. I took some of my short-term profits from trading Alaris in my TFSA this year and invested in Suncor at a yield of 3.2%. Then when it went on sale earlier this week, I was able to buy more shares with cash in my RRSP at a 3.4% yield. I'm ultra-comfortable investing with Suncor as I see high gas prices as sticky. As disfunctional as OPEC has proven themselves to be recently, I can't imagine cheap gas/heating oil as a long lasting phenomenon. When oil prices inevitably rebound, Suncor stands to benefit handsomely. In the mean-time, I see the 5% of my portfolio that I've allocated to Suncor as a life expense hedge.

The other material purchase I made in recent months was shares of Omega Healthcare Investors ("OHI") in my RRSP. I sold some of my beloved shares of Telus, as I was far over-weighted in that position, and put the money towards OHI, which is a healthcare REIT based in the US. The yield was over 5%, they have a super impressive record of distribution growth, and I was looking to add a play in the healthcare field in the US. With aging boomers accounting for a higher percentage of the population, I think OHI will benefit in the long-term.

I'm paying close attention to TransCanada Pipelines lately, as I'd like to add to my position given they recently announced plans to increase their dividend payout ratio. Plus, a couple activist investors are pressing them to up their yield materially and/or split apart their business. The oil price plunge is pulling down TRP's share price, making it seem like a good time to increase my bet on this Canadian dividend growth darling.

That about covers my big moves in recent months. I'm not necessarily looking to add to any positions this year, but, if Mr Market gets even more depressed, I might as well take advantage of it.

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