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.

As a common theme among my portfolios across all accounts, there has been very little buying as of late as most strong dividend stocks seem fully valued and in some cases over valued. I typically only buy when I notice that a security is selling at prices that are attractive (when to buy dividend stocks).  Even with current valuations, I noticed that some of the oil and gas operators were being sold off and potentially etching out a bottoming formation.  I’m a long term oil bull, so I picked up some more Husky Energy (HSE) for this portfolio and some Exxon Mobil (XOM) for another.

My dividend watch list hasn’t changed since my last report.  I am looking to increase my position in T.BMO, T.TD, T.ENB, T.FCR and new positions in T.CNR and T.L when their valuations become attractive.

The Portfolio as of April 2010:

Stock Symbol Shares Avg Buy Price Total Div/Share Yield
Royal Bank RY.T 75 $47.62 $3,571.25 $2 4.20%
CIBC CM.T 45 $67.14 $3,021.25 $3.48 5.18%
Power Financial PWF.T 105 $35.14 $3,689.65 $1.40 3.98%
Scotia Bank BNS.T 105 $41.91 $4,400.52 $1.96 4.68%
Manulife Financial MFC.T 125 $33.12 $4,139.48 $0.52 1.57%
Fortis Properties FTS.T 150 $25.63 $3,843.98 $1.04 4.06%
TransCanada Corp TRP.T 100 $33.50 $3,349.74 $1.52 4.52%
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%
Husky Energy HSE.T 135 $32.53 $4,391.27 $1.20 3.69%
TD Bank TD.T 50 $48.24 $2,412.23 $2.44 5.06%
Enbridge ENB.T 40 $37.36 $1494.39 $1.48 3.96%
TransAlta TA.T 50 $21.47 $1073.49 $1.16 5.40%
First Capital Realty FCR.T 100 $15.75 $1,574.99 $1.28 8.13%
Canadian Utilities CU.T 50 $36.40 $1,819.99 $1.41 3.87%

More Stats

  • Total Cost Base of Equities (inc. fees): $41,161.94
  • Market Value of Equities (April 1, 2010): $45,414
  • Total Dividends / Year: $1,774.10
  • Portfolio Dividend Yield: 4.31%

Sector Allocation (based on market value)

  • Financials:    56.05%
  • Utilities:    17.46%
  • Energy:    21.62%
  • Resources:    0.00%
  • Real Estate:    4.87%
  • Other:     0.00%

In my last SM portfolio update in late 2009, the portfolio just about broke even. With the market rally continuing its upward trend, my portfolio is finally showing a profit.

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.

Leveraged Investing 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.


  1. DogsFan on April 7, 2010 at 12:26 pm

    Very nice portfolio FT, and I love your blog. Just a couple of questions for you.

    With so much of your cash sitting on the sidelines are you concerned that there won’t be the short term pull back that you so patiently waiting for? For someone who entered into the Smith Manoeuvre at the height of the market (Summer 2008), don’t you think you are being ultra conservative waiting for some of these valuations to improve? Isn’t the point to get into the market early so that you can deduct the interest, pick up the dividends, and let the gains compound over time? In 15 years it won’t really matter if you picked up FTS at $25 or $28. Just that they increased their dividend every year. And, most of these dividend stocks are still yielding above their 5 year average.

    Or, with your mortgage within striking distance now, are you considering abondoning this leveraged portfolio…since you haven’t really jumped in with both feet?

  2. FrugalTrader on April 7, 2010 at 1:39 pm

    Dogsfan, some great question you pose, some of those I ask myself everyday! By nature, I am fairly conservative and I tend to only buy things when they are a deal. I know what you’re saying though, in the long run, it will seem like a deal, but I like to get a good price now. In hindsight, I should have bought more during the down turn, but emotions had a big factor in that one.

    When the mortgage is paid off in a year or so, I havne’t planned out what I’m going to do with the SM portfolio. It will really depend on what will give me greater return at the time. If paying down the investment loan is best, then that’s what I’ll probably do with my cash.

  3. DogsFan on April 7, 2010 at 2:12 pm

    Thanks FT, I hear what you are saying. I just get the feeling that the SM doesn’t really have “Frugal Trader” written all over it. I think it’s more of the end result when you have a huge HELOC to contend with…what do you do with it? You already do such a great job of saving cash and paying down your mortgage, this strategy doesn’t seem like the right fit for you.

    Do you look for single digit P/E’s in your valuations? If so, I agree there isn’t much out there. What are your thoughts on Telus? P/E of 12, yield of 4.9% (a full percentage over their 5 year average), and 5 years of dividend increases (most likely one coming up shortly).

  4. cannon_fodder on April 7, 2010 at 4:55 pm


    Congratulations on sticking to the plan and going positive. When you factor in the tax refunds you are even more ahead than at first glance.

    My worst performer in my SM portfolio continues to be Manulife. It is still down 36% from where I purchased AND it slashed its dividend. I have been tempted to sell it at a loss to offset capital gains. My only other holding underwater is AGF which has shown strength in line with the market and is down almost 12%.

    My best performer by a long shot is TCK.B. It is up 322% and I’m hopeful an announcement in 2011 of dividend payments to resume will only help the stock.

    My portfolio is up 34% on capital appreciation with another 6%+ for dividends for around 40% improvement (not annualized).

    When our mortgage is retired at the end of this year, we will start paying down the HELOC aggressively.

  5. MS Save Money on April 7, 2010 at 6:00 pm

    I might have to consider buying the investments in your portfolio! I would totally stick it out for a long time if it has a promising future.

  6. FrugalTrader on April 7, 2010 at 9:40 pm

    DogsFan, Telus is one of my favorite telecom stocks right now, however, I’m a bit hesitant to buy telecoms right now with new wireless competition entering Canadian space. Do you own them?

    Cannon – wow, the numbers you report always impress me! Will you pay down your HELOC completely?

  7. DogsFan on April 8, 2010 at 2:55 am

    I own 100 shares of Telus and 100 shares of BCE (purchased last July). Both are up about 30% since then, however the new competition may be an issue longer term.

    Telus should be the more resiliant of the two, especially with the addition of TELUS TV, which should have decent market penetration in the West. Still more growth potential for them…maybe not so much for BCE and RCI.

    It’s interesting to see some of the disparity between portfolios from western and eastern Canadians. We don’t hear much about FTS, EMA, or PWF out west. Probably the same for you with regards to Telus, Shaw, or TransAlta. I guess it’s different when the companies are doing business in your backyard…you know them a bit better than just reading the fundamentals.

  8. Rob on April 8, 2010 at 2:35 pm

    Hi FT, I’m a big fan of your blog.

    I’m considering the SM for my first property. Although it will be another year before I’m in a position to buy. In the mean time I would like to do a ‘trial run’ – (in a sense).

    I opened up an unsecured line of credit in order to purchase shares of my employer’s company. Roughly 2/3 of the LOC still remains, and I would like to invest it into a portfolio of blue chips with good dividends.

    My question is: If I were to hold these investments in a TFSA account, would the LOC interest still be tax deductable? Or would I be better holding it in an unregistered account?

  9. FrugalTrader on April 8, 2010 at 3:33 pm

    Rob, the interest on the investment loan would no longer be deductible if it was invested within a tax sheltered account (TFSA/RRSP/RESP).

  10. Al on April 9, 2010 at 7:39 pm

    Did you ever consider using HBP alongside borrowing to invest to get little extra back? If this is your first property why not take 25k out of your RRSP to add to the down payment of house thus reducing your mortgage amount and then borrow 25k right back on LOC for investing purposes. This way you don’t lose any growth on the 25k you took from your RRSP. In my view you get 25k no interest loan over 15 years (from RRSP), which reduces your mortgage (non deductible) while you invest borrowed 25k (deductible interest) into equities of your liking. It is like supercharged SM :). I don’t see drawbacks to this even if you don’t like being leveraged.

    As for current market, I found maybe 2 “bargains” in Canada currently that are paying dividends. Whoever commented above that you can buy & hold long term and you will eventually come out ahead i disagree. You should revise your thinking and buy when equities are cheap and hold :).
    If you bought tech just before the crash, you will hold another 150 years before you get your money back :)



  11. cannon_fodder on April 23, 2010 at 3:11 am

    FT – Sorry for the delay in responding. I have crafted a “4 year plan” at the end of which our HELOC will still be very significant – probably close to 50% of the estimated projected value of the house.

    We would sell our house and pay off the HELOC completely because our working premise is to leave Canada and retire in Central or South America.

  12. cannon_fodder on April 23, 2010 at 2:51 pm

    FT – Just saw that Teck announced reinstitution of a dividend. It isn’t much (less than 1%) but its certainly a little ahead of when I thought it would happen. I’m sure as things continue on a solid footing they can increase it to something around 4%.

  13. Kevin on December 2, 2011 at 6:40 am

    FT- thanks for your sharing. I have just started using the similar strategy. However, my portfolio is mainly consisted of US stocks with reasonable dividends payouts. I also write the covered call on my portfolio to provide extra income monthly. I wonder if the option premium that I am collecting is considered to be regular income?

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