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 (June 2011) with quite a bit of activity in the leveraged portfolio for a change. We have added to a couple of our existing positions, added several new positions, and despite the market downturn, I’m happy to report that several of our picks have increased their dividend in the second half of 2011.
With the volatility and aggressive sell off of some strong dividend paying companies, I added to a couple of my existing holdings, namely, Royal Bank (RY) and Ensign Energy Services(ESI). New additions to the portfolio include: Pason Systems (PSI), Corus Entertainment (CJR.B), Thompson Reuters (TRI), Brookfield Properties (BPO), Canadian Pacific Railway (CP), Canadian Oil Sands (COS), and Leons Furniture (LNF).
Quite a number of companies stepped up to the plate and rewarded shareholders for investing in their companies with a dividend increase. From my portfolio, they include: CIBC (CM), Scotia Bank (BNS), Toronto Dominion Bank (TD), Fortis Properties (FTS), AGF Management (AGF), Enbridge (ENB), Canadian Utilities (CU), Pason Systems (PSI), Ensign Energy Services (ESI), Corus Entertainment (CJR), and Canadian Oil Sands (COS).
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 Canadian National Railway (CNR) and Bell Aliant (BA) when their valuations become attractive.
The Smith Manoeuvre Portfolio as of Dec 27, 2011:
|Stock||Symbol||Shares||Avg Buy Price||Total||Div/Share||Yield|
|AGF Management Limited||AGF.B.T||50||$22.71||$1,135.49||$1.08||4.40%|
|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||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||$1.20||2.21%|
|Canadian Oil Sands||COS.T||150||$19.14||$2,871.48||$1.10||5.75%|
- Total Cost Base of Equities (inc. fees): $68,093.19 (vs. $50,718.61)
- Market Value of Equities (Closing Dec 27, 2011 – not including dividends or cash): $73,429.05 (vs. $58,508.90)
- Total Dividends / Year: $2,897.03 (vs. $2,201.53)
- Portfolio Dividend Yield: 4.25% (vs. 4.34%)
Sector Allocation (based on market value)
- Financials: 32.22% (vs. 43.38%)
- Utilities: 12.38% (vs. 15.00%)
- Energy: 28.01% (vs. 24.82%)
- Resources: 0.00% (vs. 0.00%)
- Real Estate: 7.12% (vs. 4.57%)
- Consumer/Telecom: 14.27% (vs. 12.23%)
- Other: 6.01 (vs. 0%)
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.If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).