This past week I made a small portfolio move in my TFSA. Some time ago, I shared the state of my diversification through an asset allocation how-to post. The clear overweight was my energy sector. 32% of my dividend holdings were in the energy sector and held with Crescent Point Energy. Last week I had missed an opportunity to take some profits at $48.00 but this week it peak again and I took the opportunity to reduce my holdings. I sold 60% of my CPG and bought Rogers Communications.
|Company||Ticket||Stock Price (27/3/2011)||Dividend Yield||Payout Ratio||P/E||My Value Metric|
|Power Financial Corporation||PWF||$31.42||4.46%||66.67%||14.98||4.16|
|The KEG Income Fund||KEG.UN||$13.40||7.16%||77.42%||10.79||4.46|
I built the list to properly evaluate my choices between future growth and immediate dividend income. Since my yield on cost for CPG is 7.06%, any investments with a lower yield would reduce my dividend income. A reduction in dividend income is not a problem as long as there is growth potential for the long run. PWF and RCI.B were at the top of my list but I also included a couple of high dividend payers I am tracking to round up my list. Even at the current market price, CPG has a yield of 5.76%. Quite good for a dividend payer. Not too mention that it provides a discount of 5% on share purchase from dividends.
My value metric is a computed value that simply looks at the technicals and is a good indicator to look further into a stock. I intend to share my value metric in a future post. What it doesn’t do is take into account market sentiment or quarterly/annual reports from the companies.
- Rogers came on top and was my choice. Regardless of individual sentiment towards the telecom provider, it is quite a stable and profitable business. It has been in the dog house and there is no better time to pick.
- The KEG income trust offers the highest yield but limited growth opportunity. Basically, I expect the opportunity to be there for future investments.
- Power Financial was second on my list and I seriously considered taking a position in both RCI.B and PWF. I just could not make it work where I could buy a share of either with their dividends. Since I like to have my dividends work for me, I decided to focus on one business for now. I still have my 2011 TFSA contribution to make.
- Valener is one of the few utilities I do not own. It was previously Gaz Metro and is partially owned by Enbridge. It has a nice dividends of 5.89% but like KEG.UN, its growth potential is limited. A few years of dividend growth by Rogers and I can match this dividend yield while I leverage stock appreciation.
At this point, I was not looking for just a safe dividend player but a dividend player with growth potential. I feel that Rogers can deliver that. Note that telecoms are becoming utilities with the added benefit of growth similar to a bank.
Full Disclosure: Long RCI.B