June is going to be an investing month for me. I have some capital coming in and I will be funding my TFSA and adding to my RRSP. I have been compiling a short list of stocks for each of the account to consider and research further. Looking into the Dividend Yield versus the Dividend Growth was a really good reminder to keep tomorrow in mind and not just focus on today’s yield. I do like a nice yield though but the markets have recovered since early 2009.
TFSA – Tax Free Saving Account
My short list of stocks for my tax free savings account need the meet the following criteria:
- Ability to DRIP shares from dividends
- Good price point for value growth
- Good yield – above 4%
PWF – Power Financial
It owns Great West-LifeCo and insurance companies were beaten harder than the financial sector in my opinion during the financial crisis. GWO is holding back PWF a little and I feel it can be a great moment to get into it. I have been debating between Power Corporation (POW), the parent company of PWF, but I would like to be just a little closer to the holdings PWF has in GWO and IGM.
COS – Canadian Oil Sands
Canadian Oil Sands is on my list to review to get a deeper look. Like some of my other holding in my TFSA, it used to be an income trust. It does have a good yield, payout ratio and is positioned in the mid-range of its 52-week high and lows. I want to look at some historical trends and where its going. At 14B$ in market capitalization, it is a good size oil producer for Canada.
PWF vs COS
Canadian Oil Sands is a very new listing as of January 1st, 2011. It previously was an income trust as COS.UN. From a movement perspective, COS was following the oil price roller coster while PWF with its life insurance, mutual funds and wealth management holdings was staying put due to lack of economic confidence.
PWF.TO Power Financial $30.05 61.24% 14.33 $0.35 4.66% 66.67% $2,580.01
COS.TO Canadian Oil Sand $29.95 58.87% 13.91 $0.30 4.01% 55.81% $2,990.01
RRSP – Registered Retirement Saving Plan
With the current value of the Canadian dollars, I am going to be focusing on getting some US holdings. From a tax perspective, it is best to hold my US dividend payers into my RRSP. I have been interested in taking a position in Coca-Cola (KO) and Johnson & Johnson (JNJ) for a while now but I ended up holding Kimberley-Clark (KMB) and AT&T (T) instead.
I can’t really follow the same rules as my Canadian investments here in terms of criteria. First of all, the price of the 2 stocks below requires a relatively large investment to DRIP a share per quarter. I’ll have to settle for cash
KO – Coca-Cola
The darling of many. It is a global conglomerate with a strong brand presence around the world. Dividend Monk just released a timely review of Coca-Cola highlighting the strong growth history, the global diversification, the potential currency exchange risk, as well as showing that its current P/E is not accurately reflecting its true value due to one time earnings. As mentioned in his review, finding a good entry point is the challenge. Patience and fund availability is required.
JNJ – Johnson & Johnson
JNJ is another conglomerate in the healthcare industry. Their products are part of our daily life and used regularly. It’s a healthy business to provide products needed on a regular basis. The closest investment near this segment I hold is Kimberley-Clark and there are very little options to invest in healthcare/drugs north of the 49th parallel.
KO vs JNJ
The 5 year track record seem to indicate that KO has more volatility than JNJ but also more growth it would seem. JNJ still has not gotten pass the high of its pre financial crisis time and it could highlight that investors have been conservative around it. Time to buy?
KO Coca-Cola $65.20 81.50% 12.61 $0.47 2.88% 36.36% $9044.76
JNJ Johnson & Johnson $65.50 82.21% 14.85 $0.57 3.48% 51.70% $7526.75
I am currently leaning towards Power Financial (PWF) and Johnson & Johnson (JNJ). Both of them have yields that are attractive at the current prices and they have shown healthy dividend growth historically. Aside from the dividends, the current price level leaves room for growth and appreciation.