What about the other questions, in particular #2?

http://www.milliondollarjourney.com/how-return-of-capital-works.htm
http://www.milliondollarjourney.com/key-tax-considerations-on-an-investment-loan.htm
http://www.milliondollarjourney.com/income-trust-distributions-and-taxation.htm
http://www.milliondollarjourney.com/tax-deductible-mortgage-plan-tdmp-worth-it.htm

Note that CDZ has a portion of their distribution as return of capital.

1) Why no income trusts? There are a few paying some pretty good distributions with strong balance sheets. From what I can gather, income trusts are going to be treated in the same manner as corporations – so why the fuss? If they convert back to a corporation they will be treated like all other corporations and if they stay as a trust they will be taxed like a corporation. If the trust is paying out a dividend that is 50% higher than a corporation and taxes of 30-34% are introduced upon it, I’m pretty sure you still come out ahead of “normal” corporations in the end. Would someone else care to elaborate as I feel I might have over simplified this.

2) Increasing dividends each year, having a high yield, and being a part of CDZ are certainly major criteria for selecting a dividend stock. However is there any consideration given to consistent earnings growth, future prospects/growth, or the ratios: debt/equity ratio, price/sales, price/equity TTM, forward price/equity, price/sales, price/cash flow?

3) Do most users of this investing strategy follow dollar cost averaging or do you wait for a strike point? As an aside to make my question, anyone who got in on BMO at $25 with a 10% dividend in would be sitting pretty right now.

4) How do you determine the weighting of each stock in your portfolio? My rule of thumb is each stock gets an equal dollar amount, for example in starting up my portfolio, each stock gets $2000 (or whatever) and each new addition would get the same.

Sorry, looks like I had more than a few questions.

What other picks do you have your eye on for your leveraged portfolio?

A Desjardins analyst just upped his 12 month price target for TCK.B to above $29 from around $27. This was based on their deal with a Chinese company on Friday.

You may want to keep TCK.B just for capital appreciation.

I’m keeping it in my SM portfolio. As things improve, I would expect TCK.B to reinstitute a dividend perhaps in 2011.

But you are right, I am still heavy in financials. I’m looking to purchase some railways, retail, and a telecom when the valuations are attractive.

You’re right about Canadian banks being relatively safe. However, do you not think it is still risky to have so much there?

We define diversification as investing so that no one idea can either make us a killing or kill us. We would consider it very risky to borrow to invest in a global financial services fund, because of the narrow focus. Focusing on Canadian banks is a a subsector of financial services plus a tiny country focus. It is a universe of less than 1% of the universe for a global financial services fund.

In short, it is a subsector (banks) within a tiny region (Canada) within one sector (financials).

It is not hard to come up with a scenario where this would backfire. If Canada opened up banking to international competetition (which is likely at some point), the Canadian banks are horribly noncompetitive and would get massacred. Warren Buffett won’t even buy banks, because they have potential for undisclosed risks with off-balance sheet investments. And any sector will have ups and downs over the years.

The perception of them being the safest banks in the world also makes them the most expensive banks in the world.

I realize you like the nice dividends and that your RRSPs are invested differently, but do you not think that more diversification would be safer and have more growth potential, especially since this is leverage investments?

Ed

Yep, since my port is mostly financials, it has gained proportionally with the financials rebound. As I mentioned before, I take all of my accounts into consideration, so my SM is basically my Canadian exposure where my RRSP covers my international and fixed income.

With regards to charting, I don’t let them influence my long term picks too much. With my long term div stocks, I pick based on yields compared to their historical yields. Charting is definitely not a sure thing, at least not for me. But I find that it does increase the odds of picking the right direction. I use charting for my play money.

Your results look good. Your were at $39,900 in the March portfolio. That is a 23% gain in 3 months. Is that right? That would be slightly more than the TSX Composite from March 31-June 16. Nice going!

Are you concerned about lack of diversification? Do you feel it is risky being 52% in one sector and I think that is 98% in Canada?

Do you find the charting helpful? I have to admit, I’m with Jay in classifying charting in the same category as astrology. Humans like to see patterns, even if they don’t exist.

For example, there is a sale of the century going on with many companies all over the world at extremely low prices compared to normalized earnings. Discounts from 50-80% are very common. Meanwhile, however, charting has you focused on whether or not there will be a small pullback. Do you not find that charting converts you to a short-term thinker, instead of an effective investor?

Ed

As well, using capital gains is an idea, but what if the stock doesn’t go up? At least dividends from strong dividend companies are a more reliable source of income.

Inorder to save on comissions, I am resorting to focusing on RBC Direct Investing IPO center. The come up with great offers there, you submit an interest in an offering and if you get lucky you get what you want or less shares than you requested, this does not incur any trading fees.

One thing for sure, you have to be very patient and always keep an eye out for new offerings by subscribing to noitfications on the IPO center.

technical analysis only gives you trends from the past.