Weekend Reading – Are pipeline stocks in trouble?
Welcome to some new Weekend Reading, asking: are our pipeline stocks in trouble?
Image Source: Pexels, Andrea Piacquadio
Some takes and a reference to an article on that but first, recent reads on my site:
Last weekend, I shared the data should you want to spend about $75,000 per year in retirement:
I also recently posted our monthly dividend income update, inching higher, doing next to nothing:
Weekend Reading – Are pipeline stocks in trouble?
Near-term, price-wise, if you need to sell these stocks?
Maybe, some concern there.
Long-term, as a buy-and-holder investor?
I doubt it.
On that theme, I enjoyed this update at Cut The Crap Investing with insights from the gents at Stocktrades.ca:
That article aligns with my thesis on these stocks/companies along with some other more fundamental reasons why I own Canadian pipeline stocks:
- Major pipelines like Enbridge (ENB), TC Energy (TRP) and Pembina (PPL) can be bond-like proxies in your portfolio – meaning these companies deliver real income via dividend payments without selling shares. Amongst a diversified DIY portfolio including sectors beyond Canadian energy, you can buy-and-hold your desired mix of pipeline stocks for income. Nothing new here really from my own approach although worth a mention. 🙂
- Now, should dividends be cut, if they happen (like TC Energy has done so in the past) it’s not like the dividend is likely to be eliminated permanently/forever. Dividend cuts can be buying opportunities by DIY investors to obtain decent companies in trouble, on sale. Remember AQN (Algonquin Power)? Yes, they cut their dividend and that impacted my portfolio too – only slightly – since I try to keep most stocks well below 5% of our total portfolio for that key reason. I wrote about that here.
Dividend cuts are never desired by shareholders but they can be the correct management decision for the long-term viability of the company to thrive once more. Just like share buybacks can be a good decision, just like acquisitions can be a good decision, just like paying down debt can be a great decision, and so on and so on.
Dividends are an important part of total return which means total return in your portfolio matters.
Source: Honest Math.
- Back to the article, I would agree:
“The pipelines will certainly look attractive to retirees and near retirees. We might think of utilities as bond proxies. Add in the fact that we can earn up to 5.5% with GICs and things are looking very good for retirees. We can build a very attractive income base.”
- And finally, I just don’t see how our country can operate, literally, without such pipelines running. Last time I checked, most Canadians enjoy heating, cooking, and so on thanks to pipelines for transportation. Like electricity and running water, have you ever considered what your day or week looks like without these companies providing these services? Just investing food for thought.
As a long-time owner of ENB, TRP and PPL, I will remain invested in each. If anything I will buy more of these companies with time since I already reinvest dividends paid by these companies.
My hybrid approach aside…
If you are in individual stock doubt: just index invest.
Low-cost ETF XIU continues to be my favourite in Canada to own the largest 60 stocks in Canada who make money year-after-year. You can fire your financial advisor, keep more money in your pocket/brokerage account in doing so, and ride market-like returns for decades to come without individual stock risk.
More Weekend Reading – beyond are pipeline stocks in trouble?
On Cashflows & Portfolios, we updated this post so you can find and own GICs now yielding 5.5% and MORE!
Interesting new service on my friend’s site Retire Before Dad.
Craig shared a guest post from a young entrepreneur named Preston Yadegar. Preston has built an online platform called the Shareholder Vote Exchange (SVE) “to empower individual investors to generate additional income from their existing stock holdings by selling their shareholder voting rights.”
From Craig’s site and article:
“When you own a stock, each share represents a vote during the annual shareholders meeting. Many individual investors never vote because they don’t care, are lazy, or ignore the email.
But other entities may see cash value in investor voting rights for specific corporate initiatives, especially when pooled with other investors. However, investors have never had a place to facilitate the sale of voting rights — until now.”
This service seems to be focused on U.S. investors and brokerages but I wonder if it might make the leap to Canada?
As a follow-up to my Fat FIRE post, whereby some investors claim to need or want closer to $3M (million!) to retire with…on the other end of the spending continuum is guest writer Alain Guillot on Financial Independence Hub this week.
“I was told on Twitter that living on less than $24k per year is very frugal. Maybe it is, but I would like to explain how I live on less than $24K and I feel that I live like a king.”
I could not live on $24k per year certainly where I live right now as a homeowner. Home maintenance, utilities (hydro, water, natural gas, internet, TV, cell phones), our City of Ottawa property taxes and our groceries combined consistently exceed $2,000 per month on average. I also have a paid off car to maintain although I do like Alain’s frugal cycling choice!
What say you? Could you live like a king on $24,000 per year?
If you did want a car, over a bike, I stumbled on a great auto loan payment calculator from Investopedia.
Finally, Tawcan has started a comprehensive view of his portfolio. I’ve slowly consolidated my portfolio over time (since 2015 really) to focus on “TULF” stocks and then indexed ETFs.
What is TULF?
- “T” for telecommunication companies (think Bell, Telus).
- “U” for utilities (think Fortis, Emera, Capital Power, Algonquin Power, Brookfield Renewable Partners, and others)
- “L” for low-yielding dividend growth stocks with growth potential (think Canadian National Railway, CP Rail, Waste Connections, Metro, Alimentation Couche-Tard, and others), and last but not least everyone’s sector favourite in Canada for dividends…
- “F” for financials (you know the names including life insurance companies).
Buy these companies over time and leave them alone for compounding power. XAW is a great ex-Canada ETF to cover the rest of your investing world, including the U.S. market, for cheap.
As always, there are Deals to be had on that page – always good to save, invest and earn more where you can, staying frugal or otherwise. 🙂
Need help with any retirement income drawdown order or projections for your retirement? Contact me here over the summer for some low-cost solutions.
Enjoy your weekend!