For those of you just joining us, below is my portfolio that is leveraged with money borrowed from my home equity line of credit (HELOC). As the money borrowed is used to invest, the interest charged is tax deductible. I write an update every so often to show new positions added along with any market gains/losses. For more details on the strategy and procedure, check out my modified smith manoeuvre strategy and my comparison of online stock brokers.
It’s been half a year since the last update (Dec 2010) but despite the lengthy period between updates, there has been very little activity in the account. However, there have been a couple of highlights in the dividend income. As I’ve picked stocks that have a history of increasing their dividend, there have been numerous dividend increases since the last update. In addition, we crossed the threshold of $2,000 per year in dividend income, $2,200 to be more accurate.
As well, there were two additions to the portfolio, Rogers Communications (T.RCI.B) and George Westin Ltd (T.WN). I bought Rogers in March 2011 when it was pulling back to an attractive price/earnings and yield where other Canadian telecoms were taking off. In addition to telecom, I added George Westin Ltd for exposure to the consumer market. T.WN owns Loblaws (on my watch list during last update) as well as the bakery that sells their goods to the popular grocery chain.
My dividend watch list remains similar and not much has moved due to high prices. I am looking to increase my position in T.BMO, T.TD, T.ENB, T.FCR and add new positions in T.CNR, T.BPO, and T.PSI (new on the list) when their valuations become attractive.
The Smith Manoeuvre Portfolio as of June 2011:
|Stock||Symbol||Shares||Avg Buy Price||Total||Div/Share||Yield|
|AGF Management Limited||AGF.B.T||50||$22.71||$1,135.49||$1.00||4.40%|
|Bank of Montreal||BMO.T||25||$44.17||$1,104.24||$2.80||6.34%|
|First Capital Realty||FCR.T||160||$9.72||$1,574.99||$0.80||8.23%|
|Ensign Energy Services||ESI.T||100||$13.81||$1,380.99||$0.38||2.75%|
|George Westin Ltd||WN.T||50||$68.64||$3,441.99||$1.44||2.09%|
- Total Cost Base of Equities (inc. fees): $50,718.61 (vs. $43,837.14)
- Market Value of Equities (June 6, 2010 – not including dividends): $58,508.90 (vs. $48,143.90)
- Total Dividends / Year: $2,201.53 (vs. $1,859.23)
- Portfolio Dividend Yield: 4.34% (vs. 4.24%)
Sector Allocation (based on market value)
- Financials: 43.38% (vs. 51.51%)
- Utilities: 15.00% (vs. 17.87%)
- Energy: 24.82% (vs. 25.58%)
- Resources: 0.00% (vs. 0%)
- Real Estate: 4.57% (vs. 5.03%)
- Consumer/Telecom: 12.23% (vs. 0%)
With regards to sector allocation, you may notice that this portfolio is fairly concentrated in financials. Note though that this is one of my accounts where I treat all of my accounts as one big portfolio. In other words, my international and other sector equity exposure are in other accounts.
Disclaimer: There have been a lot of readers who have mentioned that they are interested in a leveraged portfolio. Over the long term it may be lucrative. However, over the short term, equities are volatile and can put the portfolio deep in the red. My portfolio over 2008 is a prime example of what can happen. If you can’t stomach losing 20-30% in the portfolio in any given year, then your risk tolerance isn’t suited for leveraged investing. Here is an article I wrote answering a reader question “Should I Start the Smith Manoeuvre?” Finally, the securities mentioned in this post are not recommendations to buy or sell.
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