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TFSA Portfolio Move – Allocation Update

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This past week I made a small portfolio move in my TFSA. Some time ago, I shared the state of my diversification through an asset allocation how-to post. The clear overweight was my energy sector. 32% of my dividend holdings were in the energy sector and held with Crescent Point Energy. Last week I had missed an opportunity to take some profits at $48.00 but this week it peak again and I took the opportunity to reduce my holdings. I sold 60% of my CPG and bought Rogers Communications.

I had short listed 4 stocks to pick from. As you may have read, I reviewed Rogers Communication and Power Financial these past weeks. Take a look if you missed them.

CompanyTicketStock Price (27/3/2011)Dividend YieldPayout RatioP/EMy Value Metric
Rogers CommunicationsRCI.B$35.844.02%53.58%13.355.09
Power Financial CorporationPWF$31.424.46%66.67%14.984.16
ValenerVNR$16.995.89%75.76%12.904.80
The KEG Income FundKEG.UN$13.407.16%77.42%10.794.46

I built the list to properly evaluate my choices between future growth and immediate dividend income. Since my yield on cost for CPG is 7.06%, any investments with a lower yield would reduce my dividend income. A reduction in dividend income is not a problem as long as there is growth potential for the long run. PWF and RCI.B were at the top of my list but I also included a couple of high dividend payers I am tracking to round up my list. Even at the current market price, CPG has a yield of 5.76%. Quite good for a dividend payer. Not too mention that it provides a discount of 5% on share purchase from dividends.

My value metric is a computed value that simply looks at the technicals and is a good indicator to look further into a stock. I intend to share my value metric in a future post. What it doesn’t do is take into account market sentiment or quarterly/annual reports from the companies.

  • Rogers came on top and was my choice. Regardless of individual sentiment towards the telecom provider, it is quite a stable and profitable business. It has been in the dog house and there is no better time to pick.
  • The KEG income trust offers the highest yield but limited growth opportunity. Basically, I expect the opportunity to be there for future investments.
  • Power Financial was second on my list and I seriously considered taking a position in both RCI.B and PWF. I just could not make it work where I could buy a share of either with their dividends. Since I like to have my dividends work for me, I decided to focus on one business for now. I still have my 2011 TFSA contribution to make.
  • Valener is one of the few utilities I do not own. It was previously Gaz Metro and is partially owned by Enbridge. It has a nice dividends of 5.89% but like KEG.UN, its growth potential is limited. A few years of dividend growth by Rogers and I can match this dividend yield while I leverage stock appreciation.

At this point, I was not looking for just a safe dividend player but a dividend player with growth potential. I feel that Rogers can deliver that. Note that telecoms are becoming utilities with the added benefit of growth similar to a bank.

Full Disclosure: Long RCI.B

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13 Responses to "TFSA Portfolio Move – Allocation Update"

  1. Echo says:

    Nice pick up! I feel like I own every telecom except for Rogers so I haven’t paid much attention to it, but it looks pretty good. Ironically, I have a Rogers cell phone plan though.

  2. gibor says:

    @PIE. what parameters/weights you include in My Value Metric calcs?
    Nice timing on CPG sell! Today dropped 3%…I still hold it… Also, I hold almost all big canadian telecoms :): RCI, BCE, SJR (the most disappointing so far)

  3. Gotta love those high dividend yields! Then, you could utilize the DRIP method to reinvest those dividend earning back into more shares of stock! Watching the exponential growth can really be a blast! :)

  4. Moneycone says:

    Though I’m not in Canada, I recently added Rogers to my pf. Good pe and a nice dividend to boot!

  5. Ruff says:

    Would you consider Power Corporation POW %4.063 yield instead of PWF for a dividend portfolio? I believe POW owns PWF. Look forward to your reply.

    • The Passive Income Earner says:

      POW is good too. I am going to review it next week. I have Shaw Communications queued up for Thursday. POW owns PWF and PWF owns part or all of IGM, GWO and others. Depending on the level of exposure you want, you can go full in with GWO and IGM or move back all the way up to POW :) It depends on the risk level I would say. By the way, 4% is a great yield when a company increases it year after year.

  6. gibor says:

    VNR is pretty cheap now and have a great dividends .. are you planning on buying?

    Do you have any US dividend stocks/ETFs?

    • The Passive Income Earner says:

      VNR looks attractive. I don’t have it right now. I am not sure it’s at the top of my list since I’d like to invest in companies with some growth potential and VNR has limited growth.

      I have US holdings. At the moment I have AT&T and Kimberley-Clark. I am eyeing JNJ for my RRSP.

  7. Great choice, I was SO close to buying Rogers but decided on PWF. I hope to eventually own RCI.B.

    I’m still not too fussy on the trusts/recent conversions like KEG.UN. I mean, are they making THAT much money to pay out all the time? I dunno, I guess I like dull and boring better (like Rogers :)

    I look forward to your calculations post. BTW – you’re in my roundup today.

    Cheers!

    • The Passive Income Earner says:

      The KEG.UN has not converted. It stayed as an income trust and have adjusted their distribution already to account for the SIFT tax. Interestingly enough, the restaurants have to pay a 4% royalty fee of gross sales. Not profits but sales.

      “This agreement obligates KRL to make a monthly royalty payment equal to 4% of the gross sales of Keg restaurants in Canada and the United States.”

      The setup of the fund is beneficial for investors in my view. In Vancouver, luxury restaurants have been closing with declining business while The KEG has continued to increase their sales.

  8. Nice coincidence. I was just looking at Valener this morning after stumbling across it in Google Finance. I put in on my dividend watch list. What do you like about it?

  9. Sammie says:

    Hello thanks for your informative blog post on TFSA, Portfolio, CPG, RCI.B, PWF, Dividend Stocks, Stock Analysis, Dividends. The article was very beneficial for a report I am finishing up for school.

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