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 almost half a year since the last update (Dec 2011) with a bit of activity in the leveraged portfolio. We have added to a couple of our existing positions, and added a couple more new positions. With the TSX in negative territory year to date, it’s a tough time to write this report as everything is down! But despite the market volatility, I’m happy to report that several of our picks have increased their dividend in the first half half of 2012.
So which dividend paying companies increased their distributions thus far in the year? In my portfolio, I have Royal Bank, Scotia Bank, TransCanada Corp, TD Bank, Canadian Utilities, Rogers Communications, Pason Systems, Corus Entertainment, Thompson Reuters, Canadian Pacific Railway, and Canadian Oil Sands.
What did I buy over the past few months? I added to a couple of my existing holdings, namely, Pason Systems and Leons Furniture. New positions include Encana and Transcontinental which has already increased their dividend since purchasing.
My dividend watch list remains similar where I am looking to increase my position in BMO, TD, ENB, FCR and possibly add new positions in TMX Group (X), Bonterra Energy (BNE), Canadian National Railway (CNR) and Bell Aliant (BA) when their valuations become attractive.
The Smith Manoeuvre Portfolio as of May 14, 2012 (prior to open):
|Stock||Symbol||Shares||Avg Buy Price||Total||Div/Share||Yield|
|AGF Management Limited||AGF.B.T||50||$22.71||$1,135.49||$1.08||4.76%|
|Bank of Montreal||BMO.T||25||$44.17||$1,104.24||$2.80||6.34%|
|First Capital Realty||FCR.T||160||$9.71||$1,555.20||$0.80||8.24%|
|Ensign Energy Services||ESI.T||200||$14.98||$2,995.98||$0.42||2.80%|
|George Westin Ltd||WN.T||50||$68.64||$3,441.99||$1.44||2.09%|
|Canadian Pacific Railway||CP.T||30||$53.90||$1,626.99||$1.40||2.58%|
|Canadian Oil Sands||COS.T||150||$19.14||$2,871.48||$1.25||6.53%|
- Total Cost Base of Equities (inc. fees): $73,865.15 (vs. $68,093.19)
- Market Value of Equities (Closing May 11, 2012 – not including dividends or cash): $81,099.70 (vs. $73,429.05)
- Total Dividends / Year: $3,195.23 (vs. $2,897.03)
- Portfolio Dividend Yield: 4.33% (vs. 4.25%)
Sector Allocation (based on market value)
- Financials: 30.48% (vs. 32.22%)
- Utilities: 11.73% (vs. 12.38%)
- Energy: 29.40% (vs. 28.01%)
- Resources: 0.00% (vs. 0.00%)
- Real Estate: 7.05% (vs. 7.12%)
- Consumer/Telecom: 13.99% (vs. 14.27%)
- Other: 7.36% (vs. 6.01%)
With regards to sector allocation, you may notice that this portfolio is fairly concentrated in financials and energy. 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 during 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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