At the beginning of every year I like to rebalance my portfolio. I look at what I own and how big a position they have become relative to the rest of the stocks I own. I’ll say right off the bat that I don’t like to sell my stocks. The only time I really do is when the company announces a dividend cut. Many commodity stocks especially in the oil sector last year slashed their dividends and in a lot of cases eliminated them completely.
I only own one oil company at the moment and that is Granite Oil (GXO) which pays a hefty 7% monthly dividend. It’s pretty high and I’m watching it closely for any signs of trouble and any announcement to a cut in it’s high dividend payout.
Now that I’m retired I’m looking at only those stocks that are big, pay dividends and have a chance to grow that dividend.
I am confining my choices to what I consider my top ten safest dividend stocks for the year.
To narrow down my list I gather information from investment experts I follow and subscribe to. Those four main sources are:
Tom Connolly from dividendgrowth.ca , Norm Rothery of The Stingy Investor, Pat Keough of The Successful Investor and Beat the TSX authored by Ross Grant which is published in the Canadian Money Saver.
I gather up all those stock picks throughout the year and then place them on a watch list for when I’ve accumulated enough cash to buy more stocks. If possible I wait for a proper buying opportunity when the stocks go on sale relative to where they have gone in the past year.
The TURF method
TURF stands for telecomm, utilities, real estate and financials. Others will throw in another symbol like an ‘L’ for low yield stocks but for my tastes TURF will do.
I have to look inside to see what I already own so that I’m not buying too much of any one position at a time. I also want to make sure I’m properly diversified across these sectors in my income portfolio. Another area to look at is food and pipeline stocks. Right now I find it cheap to buy stuff in the grocery store which in turn equates to a lousy investment. This is because of food deflation. Grocery stores are getting squeezed at the margin because of increased competition and are forced to lower their prices.
I was in a store yesterday that was selling a 10 lb. bag of potatoes for $1.88.
How are you going to make money as a farmer or a merchant when prices are that low. Instead of buying anything in the food industry I would look to restaurants instead. They are able to raise prices while maintaining a profit.
At the moment here at the beginning of 2017, I find pipeline stocks to be very expensive and there is way too much turmoil in the whole sector to gauge whether this is a place for me to place my retirement money.
Think stocks like Pizza Pizza, A&W or The Keg. You can google those stock symbols if you like. I own The Keg because of it’s generous 5.3% dividend. Not to sound like a broken record here but I’m investing for income so my only concern is what does this investment pay me back throughout the year in yield. That’s it, I don’t care if it goes down in price, I’m not selling it because, I want the income. If it does cut the dividend ay anytime I immediately dump it. This is what I’m doing and not advice for you to do the same.
- Rogers Communication
- Bank of Montreal
- Royal Bank
- Bell Communication
- National Bank
- Canadian Apartment REIT
3 X Telecomms, 2 X Utilities, 1 X Real Estate and 4X Canadian Banks
This will equate to a yearly yield of 4%. Not bad considering all you would get in a high interest saving account would be 2% at best. Then you have to pay taxes on that money.
You have to pay taxes on your dividend income too but at a much lower rate.
All of the above mentioned stocks are relatively safe, been around for decades and are not going bankrupt anytime soon and with any luck will be increasing those dividends over time.
It’s all about increasing the monthly income you can draw on these stocks over time and in retirement. What you can’t do is sell when short term drops get you scared. If that happens to you then get out of the market because it’s no place for you to be.
Why Become an Income Investor?
To have extra income in retirement and to supplement my pension. Once your frugal days are behind you it’s time to invest that money. This is just my way of doing it based on the gurus I listen to and read on a daily basis.
Don’t go out and buy just because somebody recommended it on TV. Do your homework and find out what the company does and where they operate. Only buy what you know. I’m sure we can all agree that these companies are in our daily lives and we use the services they offer every day.
They are also easy to understand. If you don’t like the high price of your cable/internet bill, then buy the company stock. Tired of high bank fees and low rates on your savings account. BUY THE BANKS STOCK!
Just reap the dividends and use that money to offset those high monthly bills. I love this approach and use it often.
Try not to get to caught up in what’s expensive and what’s cheap in the beginning. You want to establish positions in big blue chip stocks to take advantage of that dividend. In 10 years time will it really matter what you paid for it today?
It is the time you hold the investment and the yield it delivers that will hopefully sustain you in retirement.
We’ll check in at this time next year to see how we did. I do this for entertainment purposes. I am not a qualified financial advisor and I don’t ever wish to become one. You may want to consult one before you purchase any investment.
Do you invest for income? What strategies do you use to create income and build your wealth. Feel free to drop me a comment below.
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