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 has been about six months since the last update (August 2012) with a bit of activity in the leveraged portfolio. I didn’t add to any existing positions, but added a few new positions. I started new positions in SNC Lavalin Group, Crescent Point Energy, Bird Construction, and Calian Technologies.
Since this portfolio is focused on dividend growth stocks, which dividend paying companies increased their distributions since the last update? I’m happy to report that several companies did, particularly the bank stocks. In my portfolio, dividend increases came from:
- Royal Bank, CIBC, Scotia Bank, Fortis, TransCanada Corp, Bank of Montreal, TD Bank, Enbridge, Canadian Utilities, Ensign Energy, Mullen Group, Rogers Communications, George Westin, Pason Systems, Thompson Reuters, and Canadian Oil Sands.
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), Bell Aliant (BA), Potash Corp (POT), Shoppers Drug Mart (SC) and Indigo (IDG) when/if their valuations become attractive.
The Smith Manoeuvre Portfolio as of February 18, 2013 (prior to open) – note that any changes to the portfolio are indicated in bold.
|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||$2.88||6.52%|
|First Capital Realty||FCR.T||160||$9.71||$1,555.20||$0.84||8.65%|
|Ensign Energy Services||ESI.T||200||$14.98||$2,995.98||$0.44||2.94%|
|George Westin Ltd||WN.T||50||$68.64||$3,441.99||$1.52||2.21%|
|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||$1.40||7.31%|
|Calfrac Well Services||CFW.T||50||$23.00||$1,149.99||$1.00||4.35%|
|Baytex Energy Corp||BTE.T||35||$42.98||$1,504.14||$2.64||6.14%|
|SNC Lavalin Group||SNC.T||50||$38.55||$1,927.49||$0.88||2.28%|
|Crescent Point Energy||CPG.T||50||$37.13||$1,856.49||$2.76||7.43%|
- Total Cost Base of Equities (inc. fees): $91,652.20 (vs. $79,921.26)
- Market Value of Equities (not including dividends or cash): $109,586.40 (vs. $87,749.55)
- Total Dividends / Year: $4,212.34 (vs. $3,499.04)
- Portfolio Dividend Yield: 4.60% (vs. 4.38%)
Sector Allocation (based on market value)
- Financials: 26.42% (vs. 30.96%)
- Utilities: 8.58% (vs. 8.43%)
- Energy: 31.28% (vs. 29.89%)
- Resources: 0.00% (vs. 0.00%)
- Real Estate: 5.14% (vs. 4.95%)
- Consumer/Telecom: 14.12% (vs. 14.13%)
- Other: 14.45% (vs. 11.65%)
Why the high concentration in financials and energy?
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.
Why don’t you use a dividend ETF instead?
Couple of reasons, first, most Canadian dividend ETFs hold stocks that distribute return of capital which can affect the tax deductibility of the investment loan. Second, the MER eats into the dividend. I keep the expenses in this portfolio very low through buying but rarely selling.
Should I start the Smith Manoeuvre?
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?”
Disclaimer: The securities mentioned in this post are not recommendations to buy or sell and should be used for informational purposes only.-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).