My trades made March 2018

I had some unexpected time available today to make my first quarter trades (normally made on the 15th of the month, so a day early).

I previously posted some considerations I had in mind for this cycle, and received some helpful feedback in reply to that earlier post (thank you FletcherLynd!). I also posted a related question to 5i Research. (All the feedback and discussion is contained in the replies to my earlier post if you wish to follow along.)

So, in the end I did the following to take advantage of utility stocks for sale at a relative market discount and to address some major holes in our bond ladder:

  • Sold Valener (TSX:VNR) and bought, with the proceeds and a small top-up to a full position, Algonquin Power (TSX:AQN) – this trade is intended to improve the quality of my utility holdings (I still like VNR but I like the total return prospects of AQN better)*
  • Topped up Fortis (TSX:FTS) and Brookfield Renewables (TSX:BEP.UN) to bring them to full positions
  • Journalled the new BEP.UN shares from a Canadian dollar account to a US dollar acount (BEP) to capture dividends in US dollars without incurring currency conversion rates (this will occur on settlement March 16) – I bought in a Canadian dollar account because I didn’t have enough US cash in the account to make the purchase directly in the US account
  • Bought about 25% of my required bond purchases for the year, going short duration to fill holes in my investment grade ladder and in anticipation of higher rates later in the year (I will buy slightly longer duration bonds in June, September and December):
    • FORD CREDIT CANADA LTD SR UNSECURED Maturity Jun 22 2022 Coupon 2.766 for a yield-to-maturity of 2.9%
    • FAIRFAX FINL 6.4% 25MY21 for a yield-to-maturity of 2.84%

The net result is I’ve gone a bit overweight equities (I was slightly over-allocated already before trading). I sit at 49.5% versus 46% target, in part because equities, in spite of the correction last month, are still surging in my portfolio (tracking 17.3% on an annualized basis so far this year).

I’ll keep an eye on equity allocations as the year progresses and may trim a bit in technology if current trends persist. New cash should also help offset this imbalance a bit.

I will be doing my quarterly review at the end of the month and will post it along with my previous reviews here.

*Full disclosure – I’ve been a bit erratic with Valener. I bought it in September 2017 (just six months ago) as a long-term holding. At the time I wanted to buy Algonquin Power but thought it was too expensive. I have traded VNR for AQN opportunistically because of the sector rotation taking place in utilities that has made AQN’s price a more attractive entry point.

Author: Michael

staff@money4retirement.ca

3 thoughts on “My trades made March 2018”

    1. Hi Andre,

      Thanks for dropping by. I assume you mean Algonquin Power’s dividends. (BEP.UN pays in US dollars. Fortis pays in Canadian dollars.)

      Algonquin appears to pay dividends in US dollars (thanks for pointing that out – I hadn’t noticed yet). I found this article in the Globe and Mail that mentions it: https://www.theglobeandmail.com/globe-investor/investor-education/help-my-canadian-stock-pays-a-us-dividend/article29499346/.

      Having said that, the dividends are eligible for the Canadian dividend tax credit according to the company (good in my case since I hold these shares in a non-registered account): “For Canadian resident shareholders, dividends declared on both common shares and Preferred Shares, Series A are considered as “eligible dividends” for purposes of the dividend tax credit rules contained in the Income Tax Act (Canada).” Source: http://investors.algonquinpower.com/divs.aspx?iid=4142273

      I am really glad you brought this up as I likely wouldn’t have noticed until some dividends were paid in my Canadian dollar account. I will journal the shares over to my US account so I don’t incur any foreign exchange costs on the dividends. This may not be necessary depending on how AQN pays their US dividends in Canadian accounts according to the Globe and Mail article I referenced. But I don’t mind having more shares in US dollars.

      Note the Globe and Mail article seems to be outdated (even though it was updated March 24, 2017) as it says specifically that Algonquin does not trade on a US exchange. I found a press release that states AQN started trading on the NYSE November 29, 2016: https://www.prnewswire.com/news-releases/algonquin-power–utilities-corp-to-commence-trading-on-the-new-york-stock-exchange-602863306.html. YCharts shows it on both the TSX (AQN.TO) and the NYSE (AQN).

      When I call my discount broker to transfer the shares to my US account, I will confirm with them that the shares will be traded on the NYSE and the dividend will be paid in US dollars. I’ll also ask about how dividends are handled in a Canadian dollar account out of curiosity. I’ll let you know what I find out.

      Finally, here is a list (2014 vintage) of Canadian companies paying dividends in US dollars: http://www.financialwisdomforum.org/forum/viewtopic.php?t=117861. This page is more up to date (December 2017): https://www.dividendearner.com/get-us-dividends-from-canadian-stocks/

      Cheers,
      MP

      1. I contacted my discount broker this morning and confirmed AQN pays dividends in US dollars only. I had them journal the shares over to my US account so now track them on the NYSE.

        The agent said when it comes time to sell if the shareholder wants the proceeds in Canadian dollars to remember to journal the shares back to the Canadian dollar account first.

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