September 2016 Investment Report

Only three months left in 2016.


September was our annual pilgrimage to Penticton to watch my son coach the Edmonton Oilers at the Young Stars Tournament.


September in British Columbia


September Results

Markets were mixed for the month of September with the Canadian market (TSX) up just under one percent for a YTD gain of over 13 % and the US markets down up to one half a percent for a YTD gain of between 5 and 6%.

My Canadian portfolio grew by a healthy 1.86% for a YTD gain of almost 14 1/2 percent.  My US portfolio was almost break even at a .08% loss for a YTD gain of over 12 1/2 percent.  My overall portfolio, including the exchange rate fluctuations (Canadian dollar has gained considerably this year) was up one and a quarter percent for the month with a YTD gain of over 11%.  Not counting exchange rate changes my YTD portfolio is up almost 14%.

Sept YTD
TSX 0.88% 13.19%
DJIA -0.50% 5.07%
S&P -0.12% 6.08%
BB CDN 1.86% 14.44%
BB US -0.08% 12.57%
BB Total (no FX) 1.26% 13.83%
BB Total (incl FX) 1.24% 11.30%

My overall net worth has now reached a record level, surpassing the previous peak in August 2014 just after our retirement.


The score after the third quarter

Here are my current holdings along with the YTD gains (losses) and dividend yield.

Canadian Holdings – Average dividend yield = 4.26%

symbol YTD gain % Div Yield %
BCE 7.21                4.50
BCE-D 2.86                4.69
BIP.UN 30.18                4.60
BMO 9.17                3.99
BNS 25.18                4.18
CM 12.82                4.78
ENB 14.66                3.66
ENB-B -6.13                6.73
FTS 7.90                3.81
GWO -6.34                4.26
MFC -6.37                4.02
NA 8.64                4.71
PPL 10.27                4.87
PWF -2.98                5.16
RUS 26.26                7.21
RY 8.19                4.08
SJR.B 13.11                4.50
SLF -1.07                3.83
SU 1.29                3.26
T 11.03                4.26
TD 6.31                3.77
TRP 30.01                3.62

US Holdings – Average dividend yield = 3.59%

symbol YTD gain % Div Yield %
CSCO 16.81                3.30
CVX 14.41                4.32
EMR 13.97                3.61
IBM 15.43                3.54
INTC 9.58                2.80
JNJ 15.00                2.68
KO -1.49                3.29
MRK 19.59                2.91
PEG 8.22                3.84
PEP 8.86                2.80
PFE 4.93                3.55
PG 13.02                3.03
RDS.A 9.35                7.51
T 18.02                4.63
TOT 6.12                5.99
VZ 12.46                4.44


Stock Buying


Click the above link for an Excel file containing my most recent purchase analysis.  I will be purchasing several stocks in the next couple of weeks (my annual October buying binge) and will pick from these lists.  I have accumulated considerable cash through a few strategic sales of stock (mentioned in prior months) and need to put it to work.

For Canadian stocks I am looking at BNS/TD/CM (one, two or all), T/BCE (one or both), TRP and FTS.  I would buy more RUS, but the account where I hold this does not have any more capacity.  BCE is actually at the bottom of the list, but I like its dividend and ValueLine considers the timeliness to be good.

For US I will be looking at QCOM, T/VZ (one or both), IBM, TOT (possibly selling my RDS), BA and PFE (good timing per ValueLine). Note, this is the second time that QCOM has appeared at the top of my buy list and both times the stock has taken a big jump right after my analysis, but before the purchase, which I haven’t yet done.  I guess that validates my analysis, but discredits my execution – so much for market timing.

Before the end of the year, I may do some more selling (and maybe buying) for tax purposes related to capital gains and losses.


Reader Questions

Regular reader, Dennis from Doha asked the following about alternative investments.

I have a quick question re – alternatives to bonds. 

I’d like to invest about $xx in something other than stocks. Conventional wisdom says that one should always hold bonds in one’s portfolio, but at the presentation you gave at CNAQ I remember your skepticism regarding bonds. What would you say is a better alternative to stocks than bonds, especially with the current unsteady post-Brexit market conditions?

My Response:

When you ask about an alternative to stocks you need to make sure what ever action you take is consistent with whatever strategy you have adopted (Growth, dividend, dividend growth, safety, etc.)

When you say “conventional wisdom”, most financial planners will push you to having a certain percentage of your investment in fixed income instruments. The logic behind this is that these instruments will be stable, and not subject to normal market volatility and will protect you on the downside. As sound as this seems, it really doesn’t work in practice the way the “conventional wisdomers” maintain.

Bonds are a debt issued by a government or company with a fixed interest rate and a promise to repay the principle upon maturity. If you keep your bond until maturity, you are virtually guaranteed of getting your principle back, but that could be 10, 20 or even 50 years later. Up until that time the value of your investment could go up or down depending on interest rate fluctuations. In the current low interest rate environment, you will get precious little in the way of annual income and if the interest rates do increase, you will see your principle erode rapidly and will only recover upon maturity.

Preferred shares are issued by companies with a “fixed” return. They are similar to bonds in structure but there is no promise of repayment. You will not share in the profits of the company, but the dividends are usually “guaranteed” and are often cumulative, meaning if they skip one year, they must catch up the next year. In my opinion these are worse than bonds. I got stuck with a couple of these when my previous financial advisors purchased them for my RRSP portfolio. Because of the way they were structured, when interest rates were cut, the value of these shares dropped in half and have never recovered. If the interest rates rise, these theoretically will rise as well, but when might that happen?

Money market funds are a mutual fund or ETF that just invest in short term securities such as US treasury bills and commercial paper. These are quite secure but will return only a fraction of a percent. I would rather just leave my money in cash and available for investing. Even a bank savings account is just as good.

As you can see, I am not too keen on any of these. If you are certain you want to get into something like this, then buy a laddered bond ETF so that the fund contains bonds with staggered maturity dates. This will protect the principle and your interest income, although small, will vary almost directly with bank interest rate fluctuations. One such instrument is CBO on the TSX (CBO.TO, if your using Yahoo). This ETF has had a stable price for the last year of around $19 and has had a yield of around 3%. This is about the best you can do to protect your principle and get some return. I did hold these in my RRSP portfolio when my financial advisor was managing it, but since taking it over myself, I have disposed of it and stuck with my dividend growth strategy. This is contrary to most “experts” but my long term returns have been far better than the “experts”.

Another question:

One of my considerations in building my portfolio has been trying to avoid capital gains taxes as much as I can. With this in mind, I’ve been looking at swap-based ETFs such as those offered by Horizon Canada. I believe that these would allow me to legally avoid capital gains and dividend withholding taxes as well as tax on bond interest.  

I realise that there might a risk with these in the unlikely event of the NB of C defaulting, but ETFs like HXT (Canada’s 60 biggest stocks) , HXS (US stocks), and HBB (select Canadian bonds) seem good options. What’s your take on them and on swap-based ETFs in general? I had considered opting for HBB, but after reading your well-reasoned contrarian view on bonds, I might opt for HXS. What do you think?

My Response:

Dividends on Canadian taxable corporations received very favourable treatment.  Capital gains also receive good tax treatment, so I wouldn’t worry too much about the tax implications.  I doubt there is any instrument that will protect you from taxes, you can only direct whether you get interest income, dividend income, or capital gains.  I am fully taxable now that I am in Canada and with a healthy income I have been able to keep my effective tax rate to below 17% – not too bad.  
ETF vs direct stock picks.  Warren Buffet maintains that he would advise any investor to go with ETFs rather than direct stocks – I wouldn’t bet against Warren Buffet.  However I am still biased for direct stocks for a few reasons. When you buy an ETF, it is usually tied to some index, meaning that you are effectively tied to all stocks in that index.  There are many stocks I don’t want to own.  Many ETFs provide dividends, but again, you can’t control which stocks are in there, so often the dividend yield is below what you might get with your own picks.  ETFs are pretty good at tracking the index, even with their modest fees in the fund.
For comparison, here are some ETFs compared to the market for the first 8 months of this year.
TSX – 12.09% – no dividends
HXT – 13.49% – no dividends
XIU – 12.56% plus 2.82% dividend for a total return of 15.38% (this is an ETF from IShares that tracks the TSX)
My Canadian portfolio – 12.58% plus 4% plus dividends for a total return of 16.58%
There are ETFs that only hold dividend stocks and pay a monthly dividend, but the yield is still lower than mine and the returns tend to be much lower than the market.
As for your question about HXS – tied to the S&P –  it has a YTD return of 1.6% with no dividend.  The S&P is actually up 6.21% for the same period.  That doesn’t mean that it isn’t tracking the index, this is function of exchange rates – you are subject to the US CDN fluctuations that have favoured the Canadian dollar this year.  I avoid getting into anything that involves currency speculation.  Use your Canadian dollars for Canadian investments and your US dollars for US stocks.  A few years ago I advised my son to buy some CIBC shares – they have done quite well along with a good dividend.  However he lives in the US and bought on the NYSE in US dollars when the currencies were about equal.  Now he is down because of exchange rates, even though it is  a good stock.
You also mentioned swap-based ETFs.  I am reluctant to go with any instrument that I couldn’t explain to my mother.  If it is to complex to explain, it is too complex for the average investor.  Swaps can refer to interest rate swaps, derivative swaps, exchange rate swaps, commodity timing swaps, etc.  I would stick with standard items that you can understand and explain – not as exciting, even rather boring, but effective.

Incidentally, Dennis has read my book “Simple and Successful Investing” and has written a comprehensive, and I think, complimentary review.

CLICK HERE to read review

If anyone would like a PDF proof copy of the book, let me know by email ( and I will send you one – hopefully, you too can write a review.


Words of Wisdom from Dilbert



Suggested Stocks

Note: CSCO doesn’t appear on here for some reason, but it belongs on the list.


Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3M Company MMM A++ 2.47 8.5 21.54
AT&T Inc. T A++ 4.74 3.5 14.27
Automatic Data Proc. ADP A++ 2.54 13 25.42
Boeing BA A++ 3.56 12.5 13.85
Bristol-Myers Squibb BMY A++ 2.69 2.5 22.21
Cardinal Health CAH A++ 2.4 26 17.67
Chevron Corp. CVX A++ 4.28 10 71.93
Coca-Cola KO A++ 3.35 9.5 21.81
Colgate-Palmolive CL A++ 2.2 11 26.36
Deere & Co. DE A++ 2.85 15.5 22.81
Dover Corp. DOV A++ 2.46 9.5 20.98
Du Pont DD A++ 2.42 2.5 19.78
Emerson Electric EMR A++ 3.6 8 17.14
Exxon Mobil Corp. XOM A++ 3.62 9.5 30.16
Franklin Resources BEN A++ 2.25 15.5 12.43
Grainger (W.W.) GWW A++ 2.21 17.5 18.98
Home Depot HD A++ 2.38 19.5 19.9
Honeywell Int’l HON A++ 2.04 9.5 17.21
Illinois Tool Works ITW A++ 2.17 12 20.78
Infosys Ltd. ADR INFY A++ 2.59 17.5 15.48
Int’l Business Mach. IBM A++ 3.65 20 12.68
Intel Corp. INTC A++ 2.77 17.5 14.44
Johnson & Johnson JNJ A++ 2.76 9.5 19.71
Kimberly-Clark KMB A++ 2.89 8 23.13
Lilly (Eli) LLY A++ 2.51 3.5 22.52
Lockheed Martin LMT A++ 2.86 20.5 20.27
McDonald’s Corp. MCD A++ 3.14 20 20.59
Merck & Co. MRK A++ 2.92 1.5 17.08
Microsoft Corp. MSFT A++ 2.7 19 20.08
Novartis AG ADR NVS A++ 3.37 13 21.53
Novo Nordisk ADR NVO A++ 2.41 26.5 18.38
PepsiCo, Inc. PEP A++ 2.8 11.5 22.19
Pfizer, Inc. PFE A++ 3.51 4.5 18.87
Procter & Gamble PG A++ 3.01 9.5 20.74
Public Serv. Enterprise PEG A++ 3.85 3 16.67
Qualcomm Inc. QCOM A++ 3.5 22.5 13.6
Raytheon Co. RTN A++ 2.1 11.5 18.07
Schlumberger Ltd. SLB A++ 2.6 15.5 70.01
Smucker (J.M.) SJM A++ 2.18 9.5 21.21
Texas Instruments TXN A++ 2.18 29.5 22.29
Total ADR TOT A++ 5.8 5.5 12.27
Travelers Cos. TRV A++ 2.3 8 12.16
Unilever PLC ADR UL A++ 3.08 6.5 23.73
Union Pacific UNP A++ 2.31 21 18.32
United Technologies UTX A++ 2.56 12.5 15.35
Verizon Communic. VZ A++ 4.41 3 13.25
Wal-Mart Stores WMT A++ 2.77 14.5 17.37


Company Ticker Domicile Code Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Agrium, Inc. AGU CA A 4.08 39 15.67
Bank of Montreal BMO.TO CA B++ 4.08 7 12.7
Bank of Nova Scotia BNS.TO CA A 4.22 9 11.91
BCE Inc. BCE CA B++ 4.49 8.5 20.59
Cameco Corp. CCO.TO CA B+ 3.42 14 16.7
Can. Imperial Bank CM.TO CA A+ 4.71 6.5 10.8
Can. Natural Res. CNQ.TO CA B++ 2.35 23.5
Emera Inc. EMA.TO CA B+ 4.36 5.5 15.97
Empire Company Ltd. EMP/A.TO CA B++ 2.2 10 10.8
Enbridge Inc. ENB.TO CA B++ 3.69 12.5 23.83
Finning Int’l FTT.TO CA B+ 2.9 13 27.64
Fortis Inc. FTS.TO CA B+ 3.52 9 19
Jean Coutu Group PJC/A.TO CA B++ 2.4 13 16.67
Magna Int’l ‘A’ MGA CA A 2.38 7.5 7.89
Manulife Fin’l MFC CA B++ 3.97 3.5 10.18
Methanex Corp. MEOH CA B+ 3.58 12
Nat’l Bank of Canada NA.TO CA B++ 4.85 10.5 10.21
Pembina Pipeline Corp. PPL.TO CA B++ 4.79 5 34.27
Potash Corp. POT CA B++ 2.45 37 25.91
Power Financial PWF.TO CA B+ 4.98 7 10.08
Rogers Communications RCIB.TO CA B+ 3.43 51.5 19.13
Royal Bank of Canada RY.TO CA A 4.18 10.5 12.08
Russel Metals RUS.TO CA B++ 7.28 10 18.65
Shaw Commun. ‘B’ SJRB.TO CA B+ 4.55 28.5 21.62
Suncor Energy SU.TO CA A 3.32 24
TELUS Corporation T.TO CA B++ 4.56 15.5 16.11
Thomson Reuters TRI.TO CA B++ 2.49 5.5 25.81
Toronto-Dominion TD.TO CA B++ 3.92 10.5 12.42
TransCanada Corp. TRP CA B++ 4.68 5.5 28.23


Company Ticker Domicile Code Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Novartis AG ADR NVS CH A++ 3.37 13 21.53
Daimler AG DDAIF DE B++ 5.16 5 7.29
Siemens AG (ADS) SIEGY DE A 3.18 11 13.3
Novo Nordisk ADR NVO DK A++ 2.41 26.5 18.38
Total ADR TOT FR A++ 5.8 5.5 12.27
AstraZeneca PLC (ADS) AZN GB B++ 4.08 12 23.01
Brit. Amer Tobac. ADR BTI GB B++ 3.34 14 20.53
BT Group ADR BT GB B++ 3.83 0.5 11.59
GlaxoSmithKline ADR GSK GB A+ 5.05 6 27.58
Rio Tinto plc RIO GB A 3.38 11 13.01
Vodafone Group ADR VOD GB B++ 4.39 8 34.86
WPP PLC ADR WPPGY GB A+ 2.63 17 19.01
Tenaris S.A. ADS TS LU B+ 3.39 10
Philips Electronics NV PHG NL B+ 3.15 8.5 45.2
Unilever PLC ADR UL NL A++ 3.08 6.5 23.73


Happy Investing!!




About borgford

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