The limit for TFSA contributions has once again been rolled back to $5,500
a year, but even at that level TFSAs can provide a valuable source of
tax-free income to investors who structure their portfolios properly.
At present, the maximum lifetime contribution for an individual who was 18
or older at the start of 2009, the year TFSAs were launched, is $52,000.
However, at the time this portfolio was created, the maximum was $41,000,
so that was the initial starting value.
This portfolio has a goal of generating cash flow of at least 5%. Income is
the key to its success; any capital gains are a bonus. Note that because
the securities chosen have above-average yields, risk is on the high side.
So this is not a good model for very conservative investors.
I selected 10 securities from the recommended list of my Income Investor
newsletter. All are traded on the TSX, so currency exchange is not a
factor, except for the distributions from the limited partnerships, which
are in U.S. dollars. I gave each security an initial weighting of
approximately 10% for diversification and balance. Here are the components
of the portfolio with a brief report on how they have performed since my
last update in December. Prices are as of the close of trading on May 19.
BCE Inc. (TSX: BCE). BCE shares have rallied since their winter lows, touching $63 last month
before pulling back to a recent price of $60.40. The dividend was increased
by 5.1% effective with the March payment. The stock yields 4.75% at the
Bank of Nova Scotia (TSX: BNS). After a great run last fall, Scotiabank shares are off $1.39 from the
last review. That was just about offset by dividends totalling $1.50 per
share during the period. The dividend was raised by $0.02, to $0.74 per
quarter in March. The stock yields 4.1%.
Brookfield Infrastructure Limited Partnership (TSX: BIP.UN).
This Bermuda-based limited partnership is a spin-off company from
Brookfield Asset Management, which owns a majority stake. The units split
three for two last September, which means you received an additional half
unit for every one you owned previously. The stock has been a strong
performer since the split and is up $10.50 per unit since the last review
in December. Due to timing, we received only one distribution during the
period of US$0.435 per unit. The payout was raised by 11.6% at the start of
the year. The current yield is 4.5%.
Brookfield Renewable Partners (TSX: BEP.UN). This is another Brookfield spin-off, but with a focus on renewable
energy, mainly hydro but also some wind projects. The units are up a
healthy $4.93 from the time of our last review. The quarterly distribution
was increased by 5.1%, to US$0.4675 per unit, effective with the February
payment. The units yield 5.6% at the current price.
Inter Pipeline (TSX: IPL). This stock pulled back by $1.22 in the latest period.
However, we received dividends of $0.675 per unit, which partially offset
that. With the price retreat, the yield is up to 6.2%.
North West Company (TSX: NWC). After a selloff last fall, the shares recovered well and
gained $5.56 during the latest review period. The quarterly dividend was
raised by a penny, to $0.32 per share, effective with the March payment.
The current yield is down to 4%, due to the rise in the share price.
Sienna Senior Living Inc. (TSX: SIA). Sienna’s share price rebounded by $1.48 per share during
the latest review period, and the monthly dividends of $0.075 per share
continued to roll in. The current yield is 5.2%.
TransAlta Renewables Inc. (TSX: RNW). The stock has recovered nicely since last fall’s slump
and is up $1.79 since the last review. The monthly dividend remains at
$0.0733 ($0.88 per year), for a yield of 5.7%.
Firm Capital MIC (TSX: FC). This mortgage investment corporation saw its share price
slide to as low as $12.29 in reaction to the problems at Home Capital
Group. However, it has since recovered to a recent $13.24 as investors
realized this small company is well capitalized and conservatively managed.
The stock offers a monthly payment of $0.078 ($0.936 per year), to yield
SmartREIT (TSX: SRU.UN). This is the only REIT in the portfolio. The shares are almost flat since
my last review, with a gain of just $0.05. The monthly distribution was
increased by 3% in October, to $0.1416 ($1.70 per year), to yield 5.4%.
We received interest of $14.71 during the latest period from our EQ Bank
Here is how the portfolio looked at the close of trading on May 19.
: The overall value of the portfolio increased to $52,586.48 from
$48,130.16 in December. That was a profit of 9.3% in the latest period.
Since inception two years ago, the portfolio has gained 28.3%, for an
average annual compound growth rate of 13.25%.
The yield in the last period was 2.1%, which is slightly below target.
However, this only covers a little over five months so the one-year
objective of 5% remains intact.
: I am not pleased with the performance of SmartREIT, and the fact it
operates in the shopping mall space is a concern given the growing trend
towards e-commerce. Therefore, I am selling our position in SRU.UN and
investing the proceeds in
Dream Global REIT (TSX: DRG.UN), which invests in office, industrial, and mixed-use properties in Europe.
Dream’s price has been trending higher recently, and it was trading at
$10.40 in mid-May. The units yield 7.5% at that price.
Selling SmartREIT will net us a total of $4,926.06, including retained
earnings. That will buy us 470 units of Dream, at a cost of $4,888. We will
add the remaining $38.06 to our cash account.
We will also make a few other small purchases, using retained income, as
– We will buy 10 shares at $27.01 for a cost of $270.10. That will reduce
our retained cash to $44.78 and bring our total position to 150 shares.
– We’ll add 10 more shares at $17.50, for an investment of $175. This
brings our position to 300 shares and reduces our retained income to
– We will buy another 10 shares at a price of $15.69 for an outlay of
$156.90. This brings our share count to 370 and reduces the cash to $42.72.
– Finally, we will invest another $132.40 to buy 10 more shares of Firm
Capital at $13.24 each. We now own 380 shares, with cash remaining of
Remember, don’t do small trades unless you have a fee-based account. Use
dividend reinvestment plans instead.
We will keep our cash of $1,552.48 in the EQ Bank savings account, which
now pays 2.3%. I’ll review the portfolio again in November in my Income Investor newsletter.
Here is the revised portfolio.
Gordon Pape is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletter, which are available through the Building Wealth website. This column originally appeared in The Toronto
For more information on subscriptions to Gordon Pape’s newsletters,
check the Building Wealth website.
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Notes and Disclaimer
© 2017 by The Fund Library. All rights reserved.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned carry risk of loss, and no guarantee of
performance is made or implied. This information is not intended to provide
specific personalized advice including, without limitation, investment,
financial, legal, accounting, or tax advice. Always seek advice from your
own financial advisor before making investment decisions.
BUILDING WEALTH WITH GORDON PAPE