One step further away from Mutual Funds, come see what I bought!

Image via WikipediaI mentioned in some past posts that I was waiting for a mutual fund transfer to land in my account and I am please to announce that over the past weekend, the cash lump sum had landed. It took over 3 weeks for both companies to execute on this process. The funny thing is that they are both in the same building in Toronto … Process is process though and I am glad all is done.

The History

When I started working over a dozen years ago, I started investing small amounts with a financial advisor and over time I had an RRSP and RESP account with him. All the funds were invested in mutual funds. I did go through a few companies and my advisor was very nice to cover fees when I wasn’t happy with the mutual fund after a year or so. In the end, most of my RRSP and RESP are in the same mutual fund paying me 8% yield per year. The RRSP contributions stopped in favor of my employer RRSP defined contribution plan when it was introduced.

Impact of Transfer

The transfer of my mutual fund RRSP did cost me a fee of 4.44%. It was 400$ on a 9,000$ value. There goes a positive deposit in mutual fund company adding to their earning… However, with my dividend investing plan, the intention is to recover this relatively fast. I also will be taking a step back in my monthly/yearly dividend earnings in the short term since I was getting over 50$ a month from that investment. I am happy to take short term reduction in order to be positioned for a much better long term gain.

New Purchases

If you have been following my blog, I have shown interest in Coca-Cola (NYSE:KO) and Johnson & Johnson (NYSE:JNJ) for quite a while… and yet again I have not purchased them. When I research my investments, I also like to buy a company that is selling at a discount, especially if I can’t DRIP too many shares to average down the price in the event that it pulls back. Without further ado, the main company I purchased was Kimberly-Clark (NYSE:KMB) with a yield on cost of 4.21%. KMB is the maker of brands like Kleenex and Huggies if you are not familiar with them. It’s not a company as big as KO and JNJ but it’s still quite large at 28B$ with a P/E of 14. I personally give preference to companies with a P/E under 15. I had spent the last few weeks looking into all my options using my stock screening spreadsheet (see my stock screening post & share your thoughts!) and Kimberly-Clark was appearing like a good opportunity. They have increased their dividends every year for a long time now. Dividend Monk had a detailed analysis of the company as well.

As a Canadian, with the dollar at near parity, U.S. investments are very important to me as I doubt over time the Canadian dollars will ever stay above the U.S. dollars and it will probably pull back once the U.S. economy improves increasing the value of my investments.

The other small purchase I made was to take a position in a Canadian REIT – Cominar (CUF.UN). It provides some good and steady monthly dividend with a yield of 6.5%. I did look into White Rock Realestate Investment Trust (WRK.UN) with a yield of 8.56% but I just could not pull the trigger as the stock seem to be going up and down regularly. A little too much of roller coster ride for me. Even with that good yield. A drop in price would eliminate dividend earned in the short term … The price just wasn’t right. Anyone own WRK.UN?

Readers: Do you own KMB? Which REIT do you like and why?

Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 max
Enhanced by Zemanta

8 Responses to "One step further away from Mutual Funds, come see what I bought!"

  1. That seems like an expensive transfer, and hope you can recover it quickly!

    I am interested in going into some Vanguard ETFs, but without significant money to put into it I think the commissions will eat me alive (as well as those withholding taxes). Maybe it will be something to look at in more detail later on.

  2. The Passive Income Earner · Edit

    @Invest It Wisely
    Hi Kevin! I hope it will recover too. The transfer cost is fixed. No doubt. I believe over time the dividends will recover considering there is no hope of a div increase with the mutual fund. I should do a spreadsheet scenario to see how long the cross over will take from a div perspective. I also believe that my investment will appreciate faster than the mutual fund. I will measure performance though as I like to know if I made a good move or not.

    The mutual fund was providing a fix return with little hope of bigger earnings like a dividend aristocrat would. I think that with a 10, 15, 20 year view, the change is a big win.

  3. Hi, I'm just looking at starting my own dividend growth portfolio. I live in Canada too, and I wondered what you thought about holding U.S. stocks. I have a TFSA stock trading account that can purchase U.S. stocks, but I found out that they are not tax-sheltered. Do you have a strategy for dealing with this type of scenario? Or any other advice in general for a young investor just starting a dividend portfolio? Thanks.

  4. Excellent purchase! Hopefully you can now run a full synthetic DRIP with KMB and get that stock a-compounding-away for you!

    I don't own KMB because I don't have enough cash to make any worthwhile purchase in my RRSP.

  5. I've looked at WRK as well but I guess I looked at it too late. It had shot from 16 to 19, missed the gains!

    I am currently holding Artis REIT and would probably add to it if i free up some cash.

  6. The Passive Income Earner · Edit

    Investing in the US requires understanding the tax implications of dividends.
    1. There is no preferential tax treatment like in Canada for div. The Canadian government only give the tax break to Canadian dividend paying companies. So the dividends are taxed at your marginal tax rate.
    2. There is a withholding tax by the US government outside the RRSP account.
    For the reasons above, if I want to do synthetic DRIP, I buy them in my RRSP. The above purchase is in my RRSP. Your income earned in your TFSA will be tax sheltered and I believe you can claim the withholding tax from the US, but you will have less dividends in your TFSA than your RRSP for DRIP.

  7. The Passive Income Earner · Edit

    Thanks. Same conclusion as me for WRK.UN. I did not have Artis in my list. I am going to follow it now. It does have a really good yield.


Post Comment