5 stocks I’m considering for my TFSA in 2019
Happy New Year 2019 TFSA contribution room!
If you can, maxing out your contributions to the TFSA account this year is totally worth it.
Now a few days into 2019, and new TFSA contribution room now available, my attention has turned to what to buy inside this account for dividend income and longer-term growth.
As a dividend investor in Canadian and U.S. stocks, I focus on holding only Canadian stocks inside the TFSA – preferring to invest in U.S. stocks and U.S. low-cost ETFs for long-term growth inside my RRSP.
Why?
Based on what I hold where on this page:
- U.S. stocks and ETFs held within a TFSA are subject to 15% withholding taxes – the loss of dividend income you cannot recover when tax filing.
- U.S. stocks held within RRSP or LIRA or RRIF = no withholding taxes.
Interest Rate Concerns?
When the Bank of Canada finally declared a mini-war on interest rates over a year ago (meaning, interest rates finally started going up), some investors got spooked – some selloffs began.
Historically, financial gurus tell investors to be selective with utilities and Real Estate Investment Trusts (REITs) in a rising interest rate climate.
Conversely, experts also tout financials as a good place to invest because companies carrying debt are charged more; the cost to service debt for company growth increases.
Regardless of what the Bank of Canada does or doesn’t do – since I cannot control those decisions – here are 5 stocks I’m considering to invest in for my TFSA in 2019.
Fortis (FTS)
I actually bought more of this stock last year and I currently DRIP this stock in my discount brokerage account (reinvesting two (2) shares earned via dividends every quarter) but I’m looking for more.
While interest rates might climb again in 2019, Fortis stock price might drop as more investors get spooked. That will provide yet another buying opportunity for me.
Fortis is one of the largest utilities on our continent. Like most major utilities, Fortis generates most of its revenue via regulated contracts to the residents and businesses it serves. Regulated contracts are good for long-term revenues.
Fortis has an impressive dividend history. They’ve been increasing their dividends every year for decades.
Here are some friendly dividend histories for dozens of Canadian stocks.
Algonquin Power (AQN)
Based out of Oakville, Ontario, Canada, this company is a diversified power generation, transmission and distribution utility company with over $10 billion in assets across Canada and in the U.S.
I’m a fan because this company is focused on renewable energy sources, including wind, solar and hydroelectric power. As our population demands cleaner and more sustainable energy, Algonquin Power will be there to provide it. Last time I checked, the demand for energy (including cleaner energy) is not going anywhere.
As a shareholder, I’ve enjoyed the recent annual dividend growth rate of 10%. I predict there is more to come in early 2019.
Royal Bank (RY)
Market turbulence has driven many investors to re-evaluate their portfolios of late…and that’s good news for buyers of Canadian bank stocks. This fall, Royal Bank announced an increase to its quarterly dividend of 4% to $0.98 per share. RY has delivered eight consecutive years of dividend growth.
The P/E for this stock is now a measly 11.1 with earnings per share well over 8. A few days ago, with the stock price hovering around a 52-week low, I’m very tempted to buy some of this stock for my TFSA in the coming days.
TD Bank (TD)
This stock has been a dividend stalwart. With a growing customer base in the U.S., TD seems poised to grow dividends over time as well. With more market volatility expected in 2019, I believe the markets have already priced in a major market slowdown. This means opportunities to buy more TD bank are coming.
Historically, TD Bank’s 5-year average P/E is around 13. P/E for this stock is now around 11.3. The earnings per share are over 6. A few days ago, with TD being off about $14 per share from the September 2018 high, I’ll probably buy more of this stock in 2019.
Bank of Nova Scotia (BNS)
A year ago on this site I wrote that we didn’t own enough Bank of Nova Scotia (BNS) stock to reinvest dividends paid inside our TFSAs – so compounding power was limited. Well, not anymore. And for 2019, I might buy even more.
Long before I established my TFSA as a dividend-income machine for retirement, I started buying BNS stock via a full dividend reinvestment plan in late-2009 and into early-2010, in the aftermath of the financial crisis. I’ve been buying this stock periodically ever since.
Why?
I like the diversification that comes from owning BNS – they own branches far beyond Canadian borders into Latin America and South America and that’s good for long-term growth. BNS has a client base that’s approaching 200 million people!
A year ago, BNS was trading over $80 per share. At the time of this post, the price is under $69. Owning another 90-100 shares inside my TFSA for 2019 would be a nice fit to yield almost 5% and get some dividend increases along the way.
Summary
There are many other companies to consider for my TFSA in 2019 but these companies are at the top of my investing list. These companies are increasing their cash flow over time; they are passing along some of their earnings back to shareholders via dividend increases. I expect more dividend increases for each of these companies in 2019. As a shareholder, you should too.
Want more reading about some of my favorite Canadian stocks; how to invest inside your TFSA – check out these important posts below.
These are some of my favourite Canadian dividend paying stocks to buy and hold. With a post that has well over 100 comments many other investors seem to agree!
Can you transfer stocks into your TFSA? Yes you can although there might be tax implications you can read about in that link.
What should you put inside your TFSA for income and growth?
Don’t want to invest in individual stocks? No problem – diversify away which is smart. How can you diversify your TFSA using low-cost Exchange Traded Funds (ETFs)?
What stocks, ETFs, or funds are you buying for your TFSA in 2019? Are you simply using your TFSA as an emergency fund? Don’t have a TFSA yet – consider using my promo code with Bank of Montreal to earn cash back when you invest.
As always, let me know your comments about this article or any other article. Always happy to read them.
Happy investing,
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
This is just another blog, like thousands of others, which is designed to make Mark Seed “wealthy” and designed to have “investors” buy what he promotes because it will increase his wealth. Here is the strategy that Mark Seed uses: Create a blog and purchase stocks.
Then list the stocks on your blog and the naive investors buy the stock, the price of the stock escalates, Mark Seeds sells and hauls in the money.
Thanks for your comment but for the record, I run the site because I enjoy it. Given the time I put into it, I don’t even make minimum wage. You’re welcome to call that “wealthy” if you like.
Furthermore, just because I write about a stock, that is hardly the only reason to buy it (or not), let alone will the stock escalate, let alone I sell it. Good theory though, but totally wrong.
All the best.
I’ve followed My Own Advisor on and off for years now and I can assure you that Mark stands for integrity and has been passionate about personal finance since you were in diapers. I’m just surprised he permitted your lame comment to be posted here because this should not be an avenue for you to preach negativity. You need to be better educated.
Thanks for your comment. I try to be open to all critics even when I don’t agree. But I certainly don’t like negativity.
No doubt there are lots of blogs out there with ulterior motives but if Mark just wanted to get wealthy with one, he’d be better off shorting and trashing stocks. It’s much easier to cause a stampede for the exits than extolling the virtues of any particular stock and hope people buy into it. Having said that, can we safely put you into the “not a fan” category? 😉
Great article Mark!! I have 4 of them already in different accounts and want to add Fortis at some point.
Honourable mention to Canadian Utilities.
No one has mentioned real estate so far. How about Brookfield Property Partners currently paying 6%? How do you feel about Big Oil or Pipelines? I think Keyara is an interesting play and paying over 6%.
ShawnNotSean
KEY is a very interesting play if you believe in an oil and other gas liquids rebound. It should happen – I just don’t know when 🙂 5-ear low isn’t it?
Yeah, FTS is a stud. I hope to own more this year.
CU I own as well and it has been severely beaten up in recent years. That’s good. I’m buying it cheaper via my brokerage DRIP!
BPY I own as well. I few hundred shares.
Thanks for being a fan!
Mark
I cautiously bought some KEY a few weeks ago in the $25 range and it’s had a nice little pop since. I also have some VET (to which I’m down on ~20%) but I’m otherwise very leery on putting too much in the Oil & Gas space because I’ve gotten third degree burns from being into it too heavily years ago in the past. IMO it’s a very volatile place to park money and the availability of long-term dividend consistency is virtually non-existent aside from a few key players. Just my thoughts!
Nice post Mark, and great selections IMO. Banks have been inexpensive since Q4 and FTS is always one of those steady defensive plays that you end up winning with long-term, regardless of entry point. This year my wife and I went with $6k in CNR and $6k in BMO at the beginning of the New Year. A nice pop for both of them already which is nice to see. I don’t usually go for “low-yielders” like CNR but inside a TFSA the prospect of tax-free future capital gains made it hard for me to look the other way this time. I like their US exposure vs say CP and with more crude being shipped because our CDN gov’t can’t get their shit together re: pipelines & energy, I think it has a strong 5-7 year horizon. I also like what BMO is doing south of the border. Great job!
Great to hear from you Jason. I hope all is well for you.
We decided to buy a bunch of RY, TD, some BNS and AQN in the end. I’m pretty happy with that. All these stocks, among others, are now DRIPping / reinvesting at least one share every quarter. As you know, money that makes money can make more money over time.
I too like CNR and I intend to buy more in my RRSP. I have some contribution room there, although not very much and I’m trying to buy more U.S. ETFs and/or keep my U.S. stocks there anyhow.
I could invest in my non-reg. account but that is growing too and I will end up paying more taxes this way.
BMO is doing a great job state-side.
Any big investing plans for 2019?
Mark
Hey Mark,
Nice hearing back from you. Some very nice selections that you went with IMO. Add the DRIP and you’re sitting back, collecting as you should be! As for 2019 investment plans, I prioritized by TFSAs fresh off the new year, as well as my RESP plan…other than that, I topped up a bit on EIF yesterday on the non-reg side. Seems like a lot of CDN stock have rebounded over the last few weeks since Q4 and good deals are looking scarcer. Would be nice if the CDN dollar was a bit stronger so it would be easier to invest more into the US equity part of my portfolio but it’s all we can do. Cheers
I would absolutely love to see lower CDN prices for longer (helps my DRIPs!) but alas, not much I can do but stay invested like you and watch for any deals if and when they come. I really want to invest in more U.S. assets in my RRSP in particular but such is life – you deal with the highs and lows of currency exchange.
BTW – just posted a new article on that 🙂 Enjoy.
Hi Mark,
Happy new year. I just started following your post. They are incredibly informative and educating to me. Thank you very much. I am a beginner and am venturing into doing my own financial investing. Currently invested in mutual funds in registered accounts. But am not happy with the returns year after year. I had a few beginner questions if you are able to help.
1. Between registered and non-registered accounts how is the revenue generated calculated for tax purposes? Is one better than the other?
2. In your opinion which ETF is better suited for an RRSP/TFSA – ZDB or VGRO
Thanks much in advance.
Sunil
Wow, thanks Sunil 🙂
Nice words.
I can’t offer direct investing advice for many reasons but I can offer a take/perspective:
1. I would definitely recommend maxing out/investing in any TFSA (tax free) and RRSP (tax deferred) account before any non-registered account. In general, non-registered investments are taxed for capital gains = 50% of the gains are taxable at the account holder’s marginal tax rate. There are exceptions to this of course. A few Google searches and you’ll see how non-reg investments are taxed vs. registered (TFSA, RRSP, RESP for kids, etc.).
2. I can’t offer advice on the ETFs – but I can say that maxing out your RRSP or TFSA or both with a low-cost ETF like VGRO or ZDB is a great choice.
VGRO = MER 0.22%; very diversified all-in-one fund! Remember that VGRO has 20% bonds and 80% equities.
https://www.myownadvisor.ca/simple-low-cost-all-in-one-vanguard-etfs/
ZDB = bond fund only; MER 0.01% which is great. You won’t get as much growth with bonds vs. equities over time but bonds do help stabilize a portfolio when equities tank in price.
Basically, RRSP and TFSAs could be considered mirror images. RRSP = don’t pay taxes when money goes in/contributed; pay taxes when money goes out. TFSA = pay taxes on your money before it goes in/contributed; tax free when money comes out. Generally speaking, either one is a good home for low-cost ETFs.
Cheers,
Mark
Also depends on your income bracket and age – because after the TFSA is full a non-reg could be better than an RRSP. (in some cases)
It could be…for CDN non-dividend paying stocks and non-dividend paying U.S. stocks. We’ll see!
If your investment horizon is long, I’m wondering about a little different strategy : focus on high growth over the long term in your TFSA. For example, perhaps an emerging market and/or small cap ETF. This would add a little diversification away from the dividend stocks. And of course more risk ! But over the long term, investment advisors tell you such investments grow more. So, if you do have a long term horizon, your TFSA seems like a good place to diversify in this way, as then the presumably larger gains would be tax free. Thoughts on that ?
I don’t think there is anything wrong with that Alfred, you just have to expect more risk for more potential reward. Small cap stocks/small cap stocks bundled in an ETF/fund have traditionally provided some good long-term returns given the growth potential you speak of.
Are you leaning on a particular ETF or set of stocks?
Haven’t really settled on this approach – was just looking to bounce it around for comments. But if I were to do this, I would look for high quality, low fee, small cap and emerging market ETFs that follow some sort of index – like maybe IJR or a Canadian hedged version like VBR, which have fees around 0.07-0.10% and seem to have outperformed the Dow and TSE considerably in the last 20 year or so. I realize the fees would cut away at some of the returns, but I’m much more comfortable just allowing an index to do the pruning of bad stocks for me, than doing that myself. Simply have no time to do that well myself !
No need to stock pick if a) you’re not comfortable, b) you’re worried about potential market under-performance, and c) you don’t have time nor energy to devote to research. Buy some broad market low-cost ETFs instead and simply ride the market wave to 7-8% over the next 20-30 years.
Alfred,
how do you define a long investment horizon? i.e. 15 years out from retirement? less or more? good comments
At least 20 years, but probably more. I think small caps have more volatility than the overall market, so there would be high risk that short horizons could result in poor returns.
@Alfred: Whether one is investing for long or short term, I don’t believe any etf will provide the high growth that quality individual stocks can. As Mark suggests there are risks with small caps, for example how did they do in 2018? As for providing diversification, the majority of etf holdings are low quality.
I always wondered about the fees some of these ETFS have – buying 250- 1000 stocks to fill the ETF up and then topping them up here and there. Eats into the returns. Then the investor also gets a fee to own the ETF on top of the trading fees inside the ETFs.
There is only one fee for the ETF- the Management Expense Ratio-(MER). The internal adjustments do not eat into the returns. As an example for broad market index etfs such as VTI for the US, and VCN for Canada the MER’s are .04% and .06% or $40 per 100K and $60 per 100K annually, respectively. Some MERs can be much higher depending on the fund content and geography. Broker purchase/sell charges may apply as for a stock. Drips are available for most large broad index funds.
Here is a link to help, if you’re so inclined: https://www.finiki.org/wiki/Exchange-traded_fund
Agreed, re: MER but there are fees within MER that add up to the MER.
https://www.myownadvisor.ca/mer-ter-money-management-fees-fwiw/
Thanks for sharing RBull!
Thanks Mark.
Perhaps I didn’t explain carefully enough. I didn’t mean to suggest the cost of operating an ETF is free. I am clarifying the investor pays only one “fee”- the MER. There are “expenses” or “costs” of operating the fund including trading and a management “fee”, included in the MER.
Yes, of course, the investor sees MER which has other stuff buried in it that the investor doesn’t always see/know of.
Those trailing commissions when they apply – ouch – harsh!
I think we totally agree on this but it was just the word “fee” that I was concentrating on. IMHO, “fee” especially for professional services implies a charge to the customer (investor), as in how the OP suggested is an extra charge in an ETF.
ie My lawyer charges me one fee for preparing a will including all internal costs etc. There is an extra separate fee if I want a codicile prepared. For a mutual fund there is a fee expressed as an MER (%) like an ETF. There might be an addtional fee if it is a back end load fund early redemption. The internal operational costs of the mutual fund aren’t extra fees, they’re expenses calculated into the MER that doesn’t change regardless of # of internal adjustments. Unless of course the fund company purposely changes the MER re costs or competitive reasons etc.
Trailing commission = bad. That’s a whole other thread for you!
Sorry to beat it to death. I’ll drop it!!
Definitely agree that individual stocks will do better – if you know how to pick them ! I just would not trust myself to do that well, and, more importantly, to keep it up over the long term. Requires too much time and effort – which I just don’t have. And also agree small caps have more risk and volatility especially for short time horizons.
Alfred: ” if you know how to pick them ! I just would not trust myself to do that well, and, more importantly, to keep it up over the long term.”
I just wrote an Income Investing book which addresses exactly that statement. Hopefully Mark will review it.
I will absolutely review it and put a review up on my site cannew. Is it ready for mass distribution yet? 🙂
Thanks Mark. I added a change after the closing market headlines of 2018. Nice of the market to confirm my conclusions and updated it to Amazon. I’ll be sending you two a copies soon.
Great stuff.
This is an interesting topic Alfred. Certainly one can use a growth strategy to build up assets. One can even use a hybrid strategy by investing in good companies that have low dividends (BAM.A which I hold).
I like to think back when I was twenty and day dream about what if I had invested my first $2K in something like TD (that’s where I bank) instead of a GIC at 14%.. Turns out they have a calculator for that. I am astounded at the number. I’ll bet I’d be just as astounded by the number derived for a more growth oriented stock or index. The conclusion I’ve come to is to let time be your best friend no matter the strategy (especially for the TFSA).
https://www.td.com/investor-relations/ir-homepage/share-information/share-price-tools/investment-calculator.jsp
Not that I want to get into an argument. But why did you go back into GICs then?
I was twenty then, I’m 58 now (can see 59) so time to recover from major market correction is decreasing. I have dependent now who is disabled, I didn’t then. The $400K I took out and put in GICs, combined with DB pensions, will sustain us even if market goes in the dumps. I don’t have dependable work income anymore to help with any recovery. And last, as Mr Buffet said, “it’s insane to risk something you have for something you don’t need”. Barring a global catastrophe (got a bin full of wheat for that contingency), I think I’ve got the bases covered.
I see your point! But – I am not so sure we are going to see another 2008 in our life-time. But – i guess it could happen again. I like that Buffet quote!
Wise. I think you do too.
Some pretty crazy numbers for TD stock over the last 30 years. Wow.
I am keeping it simple. Buying $6,000 in TD and $6,000 in RY. Kaching!
Cash cows!
I would have done the same as Lloyd (who would have thought – we think alike?). But – my largest holding is ENB and so I did not want to add more to it. I went with BNS & LB. (I am already loaded up with utilities – so did not need any more).
Though – If I was starting out today (as a new investor) with a new tfsa – I would buy TD, ENB & FTS. (how can you beat that?)
Big fan of TD, ENB and FTS – given they cover different major CDN industries. That’s just me.
Comments by May and Lloyd are similar to the sentiments my advisor shared with me.
I posed this question to my advisor regarding Canadian bank stocks and he is of the opinion that many borrowers have over extended their loans making it a precarious position should they be unable to service their loans. This will inevitably affect the bank stocks.
They are still paying out healthy dividends and my view is that for long term should be sustainable.
Agreed Sam. I believe CDN bank stocks should be sustainable long-term but the personal debt loads of many Canadians in very troubling. I can’t see rates going up too fast – otherwise – many folks will be become bankrupt.
How about NA? NA has been always quite expensive. Only recently becomes cheaper.
So nobody thinks Canadian house market will have USA 2008 style crash and the banks should be safe?
NA is in the top five of my holdings and largest bank holding based on $$. It’s also one of my longest held positions. If Canadian housing crashes, it likely won’t be because of sub-prime mortgages like the States was. I’m comfortable with holding Canadian banks. I do have concerns with the debt people are carrying and more specifically how they will react to higher interest rates and their debt. Having said that I have concerns about people that are in stocks that have not yet seen a major rout. How they could react concerns me.
The personal debt loads of some Canadians are outrageous. I’ve seen/heard of 30-somethings carrying mortgages > $400K. I couldn’t sleep at night if that was me.
Nothing wrong with NA. I hold some shares of it. I just felt with the size and scale of these CDN multinationals per se (given RY, TD, and BNS have huge operations abroad) the recent prices were decent for very long-term investing.
It’s a fair question with the amount of leverage out there and arguably over valued real estate. While there is risk IMO its doubtful large Canadian banks will see a US 2008 type crash. Many of these mortgages were granted with false information, and/or without proper due dilligence on applicants. These bad mortgages were packaged into MBS’s and resold as good debt in huge volumes. The rest is history.
Banks are now higher capitalized with the Basel tier 3 regulations and all our Canadian banks already exceed this. I keep my overall portfolio exposure to Canadian banks at ~10%.
Look like some good choices Mark. I drip RY, TD, FTS now. Next year I expect to get some BNS dripping somehow. I don’t own AQN and not sure I will.
More RY & TD are contenders. I was also considering some BIP.un and I’m toying with opening a small position in KMP.un
KMP.UN is on my list still for CDN RRSP. I might buy some/start a position because people have to live somewhere!
It’s not as cheap as I’d like but we’ll see.
Great list Mark. Solid to own Canadian Banks.
great list there Mark. Own them all but rbc.. keep thinking of adding more to bmo at these levels
fortis is a new holding I want to start in our resp soon. Got to love their dividend history.
cheers
Mark
As long as these companies dominate the major ETFs like ZCN, VCN, VCE, VDY, XIU, etc. – I will own what they own!
Hi Mark,
With $12,000 that you have to add to your TFSA with both your amount and that of your spouse, what is your usual strategy about how much to buy? Ie are you going to limit the amount you spend to buy any one stock ie buy 4 stocks @3K each or are you going to look at what you have and determine if you would be adding to a stock or more than 1 based on it maybe being a lower % of your overall investment portfolio that you now can add on with the new contribution?
Sue
Great question Sue. I covered that a bit here:
https://www.myownadvisor.ca/how-i-manage-my-diy-stock-portfolio/
Essentially I try and buy stocks to remain inline with the sectors of the broader TSX Composite Index; roughly 35-40% financials; 20% energy; etc.
I do however now have far more utilities than the TSX – approaching 15%.
I try not to buy too much of any one stock so I’m tempted to buy some RY, TD, AQN and FTS in equal amounts so yes, about $3K each.
I will admit, it’s not easy to re-balance a portfolio of stocks as a DIY investor. You can easily go “over” or “under” your desired sector asset location quickly so it’s something I need to watch out for. I wouldn’t want to be all CDN banks and no utilities, no telcos, no energy, no REITs for example.
This is why I’m also investing more via U.S. stocks and ETFs in my RRSP – to offset CDN content in my TFSA. It wasn’t always that way but I’m learning!
I hope that helps,
Mark
thanks Mark, this is really helpful.
I think for some people who want DRIPS, they have to also keep in mind to buy enough the first time around or keep it on their radar to buy more the second time around to be eligible for a DRIP share.
Do you have similar holdings in your wife’s TFSA or are you splitting all your holdings up between the 2 TFSA’s?
Correct Sue on the DRIPs. Full DRIPs with SPPs (Share Purchase Plans with transfer agents) can be done with fractional or partial shares.
“Synthetic” DRIPs if you will with discount brokerages – well – you need enough in dividend income to buy 1 whole (or more) shares. Any dividends paid out above or below that are returned to investors as cash.
Yes, we hold similar assets but I try and offset them. I.e., if I own 100+ shares of BMO or BNS then my wife tends to own 100+ shares of RY or TD. Over time though our TFSAs are starting to mirror each other – hence the need to continue to diversify using U.S. ETFs in my RRSP to offset any Canadian bias.
Happy to answer questions.
Cheers,
Mark
I’ve never looked but I am assuming a registered DRIP plan with one of the appropriate companies would not be able to DRIP a stock that has no DRIP plan? I’m thinking something like REI.UN that suspended their DRIP. TDDI still synthetically DRIPs this for us.
Correct. You can still run a synthetic DRIP with your discount brokerage even if the full DRIP and SPP with the stock’s transfer agent is suspended or killed off. ENB is a recent example of that. There are others as well.
Not every synthetic DRIP is treated equally though – meaning, some discount brokerages will or will not honour the stock DRIP.
Mark: If you are going to draw down your RRSP first – then there goes your “diversify using U.S. ETFs in my RRSP to offset any Canadian bias.”
Not sure yet Mike. The thinking is to own U.S. ETFs and stocks inside the RRSP for the next 20-25 years. If I draw down those accounts by age 70, surely I can find some U.S. assets to invest in, inside my TFSA potentially – since my marginal tax rate in retirement might be higher than 15%.
I’ll tell you when I get there but until I start selling RRSP assets, at least 10+ years away, I’m not worried.
You’ve got some time Mark. Something I’ll be dealing with here within the next few years, and I’ve begun to think of. All US assets are in my RRSP that I am drawing down and I would like to maintain some geographic diversity.
I’ll have to refresh myself on tax implications. I believe unregistered accounts qualify for the foreign tax credit to get back the 15% withholding on dividends? I didn’t think this applied to TFSA as I read somewhere they don’t recognize this as retirement acct.
A number of moving parts here in a balanced portfolio and will need some more thought. The real trick is doing it and keeping costs & taxes down.
You’re right, re: TFSA but thinking 15% tax hit on dividends is still lower than what might be my marginal tax rate in retirement. What is yours if you don’t mind me asking?
Yes, costs low, taxes down = a good plan for sure.
I will consider putting U.S. stocks in non-reg. that pay little to no dividends at some point but that’s decades down the road for me.
I’m struggling of late how to invest in the U.S. market with our CDN $$ so low. Maybe VFV in RRSP? It’s unhedged (good) and low-cost and mirrors U.S. ETF VOO which is more costly now. Thoughts? I mind need to write a post and share my thoughts.
VOO & VFV = same outcome.
Maybe I’m extra thick today but not following your comment on marginal tax rate vs tfsa. re US investments. Not sure just what you’re speaking about.
I was just thinking that I would be ahead a bit if I kept U.S. dividend paying stocks inside my TFSA vs. non-reg. since U.S. stocks don’t get any preferential tax treatment like CDN stocks do and my tax rate in retirement is likely to be > 15%, so I’m saving money on taxes if I would put such U.S. stocks in non-reg. account.
Again, I should have to worry about this for decades. I think I will go with my plan to continue to hold VYM or HDV or other in my RRSP. Forget the CDN ETFs that hold U.S. stocks for now.
re: withholding tax…..I hold BIP.UN in my TFSA and just got the distribution this afternoon. On a $220(ish) payment, they withheld $0.19. I think the way the payment is broken down into different segments makes the withholding tax negligible. I can live with this to be able to hold BIP.UN in my TFSA.
Correct, the payment is broken down in a number of ways I recall from Brookfield – not just dividends straight up, some interest in there as well.
Nothing wrong with tax-free income from a Brookfield company 🙂
Okay, now I understand Mark. Yes, I think you’re right on just continuing to hold/buy your same US ETFS inside your RRSP.
One thing I’ve thought about is doing a swap when the time comes.
example: remove CDN assets from TFSAs into unregistered and replace with US assets from RRSP withdrawals. You’re right about the different tax treatments. I expect to need to start some kind of process with US assets in 2020.
This all needs some tax modeling to review options.
I received my BIP.un drip shares on Dec 31. You seem to get more info from TD. There is nothing on withholding from RBC.
However on the Brookfield site I scanned near the bottom 2018 info is available.
https://bip.brookfield.com/en/stock-and-distribution/tax-information
It’s all in USD; essentially withholding for Canadians is all interest 1.29 cents per share (US) for the year so a few bucks for me., if I did this stuff right. = I can live with it too regardless.
Sounds great!
Hi Mark !
I just opened my TFSA yesterday with the intention to buy FTS in it, yes a single stock for now , this is all new for me coming from a ccp investing will etfs of thousands of stocks globally but i’m planning on building a portion of my portfolio for individual blue chip stocks .
as for purpose of TFSA my dream like i mentioned before is to save enough money in RRSP/TFSA in order to retire 6 months of the year in a warm place , not that i’m complaining about the cold in vancouver but i won’t mind taking a break from the grey skies in here 🙂
so yeah i’m hoping that income from renting two properties plus cpp/oas and investment in rrsp and now tfsa will do it but hey no one knows what tomorrow will hold for us but we’ll try anyways to enjoy today and dream of that beer on the beach 🙂
Mark there is something i always wanted to ask you , i’ve noticed that you never mentioned anything about international stocks or etfs so i take it you don’t invest in there but is there any particular reason for that ?
Nicely done Gus! I think you’ll be happy long-term you opened a self-directed TFSA to own stocks or low-cost ETFs in it. Just don’t trade much it at all!
Geez….wouldn’t that be nice… “…purpose of TFSA my dream like i mentioned before is to save enough money in RRSP/TFSA in order to retire 6 months of the year in a warm place , not that i’m complaining about the cold in vancouver but i won’t mind taking a break from the grey skies in here ?”
Rental income + CPP + OAS + RRSP assets + TFSA income = well, you have a great shot at your goal it sounds like!!
You are correct, I don’t invest too much into international stocks (none), let alone international ETFs because historically, if you own an S&P 500 ETF or an all U.S. market ETF like VTI, you’re basically investing internationally by proxy. Sure, you’re missing out on companies like Toyota, Nestle, Royal Dutch Shell, etc. and thousands more…but then again, there are sooooo many U.S. stocks that have international operations and earnings from their international operations – I personally don’t feel I need that diversification too much; not yet.
Maybe someday I will change my mind!
That said, there is absolutely nothing wrong with investing in an international low-cost fund like XAW, VXC, VXUS, etc. In fact, I probably should be doing more in the coming years since I know diversification at a low-cost is great for my portfolio long-term.
Now may be a good time vs values and run up in US.
Global stocks way cheaper.
I read somewhere CPP has 17% in emerging markets and planning to increase this. 15% is Canada, 85% global including about 40% US. I see their 2018 return was 11.6% For those on here regularly concerned with the future of the fund I wonder how your portfolio compared. I know mine was slightly negative.
My CDN portion of the portfolio was down almost 8% – in line with XIU since I own half of those stocks anyhow 🙂
The US portion of my RRSP was also down about 7%. In comparison, VTI was down 6%; as was the S&P 500. I hold a few CDN stocks in my RRSP so it was down as well, the CDN portion.
I’m not really worried about one year. In fact, I’m happy my stocks are down since I’ll get to reinvest dividends at cheaper prices in the coming months. Examples include beaten up JNJ. My goal is to continue to own the U.S. stocks I do; DRIP them (e.g., JNJ, PG, T, VZ) and simply buy more VYM later this year. With the terrible dollar, I’m debating of doing my modified gambit in NTR <> NTR:US or BIP.UN <> BIP:US.
For Canada Pension Plan to have a year of +11.6% that is outstanding.
I am down about 3% overall and income up approx 4%.
I’ve raised my Canadian weighting because of better values and as per my plan. I will be leaving rest as is until there is more drop and then likely first priority is international for better values and to raise slight imbalance vs. US. I sold a bunch of US back last summer when it was getting toppy, and imbalanced in my portfolio.
Yes, currency is a detractor now going from cdn.
Outstanding indeed. It’s incredible.
Yes, that is my main drawback now…CDN vs. USD $$ currency. Not great.
My RRSP -4.93%, my TFSA -3.49%
Wife RRSP -0.70% wife TFSA -6.23%
RRSPs both have large GIC holdings. TFSAs 100% equity.
Generated income is up but I don’t know by how much as I never kept that data (grrrrr).
I calculate my returns in total using modified Dietz (money weighted) to account for my rrsp/LIF & unregistered withdrawals and any reinvestments. Income is a manual process that takes more time with such a mix of assets.
Can you now get income information from TD that started sometime last year, and use this going forward? I’d like to have this myself if it gave everything including FI and was accurate!!
I should add I can also get these total returns overall or by account from RBC. They also use Modified Dietz giving money/time weighting, but it doesn’t include my outside HISA of course. It compares very close to my own recordings.
RBC gives me overall returns or by acct for the past 10 years by individual year or 1, 3, 5, 7, 10 years. Charts/graphs for Calendar view/returns, annualized view/returns, cummulative returns, compared to many selectable market benchmarks, portfolio types and goals. You may have the same thing at TDDI or better.
FWIW my overall annual averages from RBC below. My own tracking is slightly lower. Not sure if they are before or net of fees such as internal ETF MERs. I think net but might check on this.
1 yr -2.82%
5 yr 5.97% (retirement period 40-50%FI – 50-60%EQ)
10 yr 8.45% 1st 5 yrs ~10%FI – 90%EQ, retirement 5 yrs as above)
I suppose I *could* go back into the records to get actual annual payouts and earnings. Might be a lot of work though. It’s probably just easier/lazier to sit here and admonish myself for not being smart enough to have figured it out til now. I’ll go look at a December statement from one of the accounts to see what’s on it. I never kept the GIC statements but they are a relatively new holding.
The annual earnings are there for the past 12 months on each Dec statement so I technically could recover that data. It won’t do much to compare to my spreadsheet though as I have it designed to calculate the earnings for the next 12 months based on current dividend/interest rate. Each time a DRIP takes place or a dividend changes or the $C changes (my spreadsheet calculates the exchange on $US dividends) or a GIC compounds, the number adjusts. More work than what it gains me. I have recorded the Jan 1 2018 number so I can start record keeping going forward.
Sounds like you’re set now Lloyd.
Miles ahead of me as my spreadsheet skills are weak. I beg borrow and steal on that.
I wish I could take credit for the spreadsheet. We had a guy at work who was a guru on excel. I had a basic spreadsheet I ran and on a couple of midnight shifts he helped me tweak it a bit. It’s no where near what a professional would have but it is simple enough that I can use. It does have some quirks though. Any fixed income product is calculated for *now* time. So a GIC has its value adjusted every time “enter” is hit. Now that I’m retired I should be revamping it but I’ve gotten so accustomed to its foibles I just can’t be bothered.
Gotcha. Whatever works though foibles or not.
I heard jack bogle talking about that, how investing in us market is almost equal to total market and in a way I guess it makes sense.
One question I have for you guys regarding tfsa , say i held the money in cash in my tfsa but then few months later bought a stock with that money , would this effect my contribution room ? Or is it like rrsp you can go in cash and buy as much as you want? I’m not planning on day trading whatsoever but I was thinking of accumulating cash in tfsa then buy whatever I wanted to .
Thanks guys in advance.
That’s the theory I subscribe to Gus, rightly or wrongly, there are so many U.S. multinationals that you get a good portion of “international diversification” with S&P 500 top companies.
As for the TFSA – you need to be careful of moving money in and out. If you contribute $6,000 this year, say this week, but take the $6,000 out later this year, you cannot put any money back into it this 2019 calendar year without getting nailed with over-contribution penalties.
https://www.myownadvisor.ca/heres-why-the-new-6000-tfsa-limit-for-2019-is-totally-worth-it/
Check out the comments, there was a discussion about over-contribution I recall.
Nothing wrong with contributing, keeping the cash there for days, or weeks or months or more, and then deciding when and what to buy.
Cheers!
Mark
Sorry Mark I guess my question wasn’t clear regarding tfsa .
Sorry but if I transfer today 6k in cash into the account and in March for example bought 6k worth of stock x would that count as 12k contribution or 6k still ?
Thanks
Nope, just $6K. In that example, $6K into the account today is just $6K contributed – regardless what you buy inside the account once money is contributed. Think of the TFSA as a container. You contribute to the container and you can buy whatever you want (stocks, bonds, mutual funds, GICs, etc.) inside the container for tax-free growth and eventual tax-free withdrawals.
Cheers!
sorry for the poor post above. my brain was working faster than my finger and i missed a few words. me bad. ):
No worries ever!
ok mark i agree with your list except for aqn. how can company continually pay out more in dividends more than they earn. eps .53 div. .70. we held a large chunk of aqn for a long time (and did quite well) but sold it in late 2018. i hope you make me eat my words.
I just see upside Gary. AQN is a major utility and while current EPS is not good/ideal, I believe there is long-term growth. Do I know that for sure?
Heck no! But…they are growing/acquiring and diversifying over time.
….they have the Liberty Power subsidiary, with assets of $3 B; produces power from wind (68 per cent), thermal (22 per cent), hydro (8 per cent) and solar (2 per cent) plants in Canada and the United States. They also have a Liberty Utilities division, with > $7 B in assets, has about 760,000 natural gas, electricity and water customers across 12 U.S. states….
So, unless people don’t want heat, hydro, etc. then I can’t see this being a bad long-term play. Worse case, they get bought out eventually many, many years down the road for a premium. Again, not advice, just want I think about.
People are, generally speaking over time, consuming more and more energy.
I funded the wife’s TFSA and put some bids in on BNS (70) and ENB (92) the other day. I thought I was bidding low but they managed to get filled nonetheless. So that’s done. These were both additions to positions she already held. I couldn’t decide which I wanted more so I split. Be nice to say I did extensive analysis but I’d be fibbing.
My TFSA is not funded yet. Haven’t decided yet whether to pull cash from the HISA or just wait til I build up some cash. If the market goes down substantially in the short term, I’ll transfer and buy (likely MFC). With the ex-dividend date in mid-February I’m not in a rush.
We own all of the stocks you mentioned with a couple of them probably overweight for the overall portfolio. The stocks we went with this year were underrepresented with MFC sitting at a mere 7 orphaned shares (long time ago DRIP).
Nice – great to have one TFSA full – no?
We own MFC but in non-reg. Financials have been hit hard in Canada. They might go even lower by the end of 2019? We’ll see?!
Whilst being glad to have one of the accounts done, it’s kind of a let down as it gets boring. I’m in no rush to finish off mine and who knows, I might change my mind on what to acquire. Plus, with all the Brookfield et al DRIPs showing up in the next few days there will be residual dollars laying around so waiting will also take advantage of that cash.
On a separate note, I can feel the February dividend announcement cycle excitement building. Will they or won’t they? (rub hands gleefully).
I need to get a life.
LOL. I like my dividend cycles too 🙂
lol….BEP.UN DRIP showed up today and the cash residual in the LIRRSP was $.37. That ain’t gonna go far.
I’ll have to see if I got mine.