The Cost of Staying Cool in August, 2024

 

It's August, 2024 and the month is starting out with high humidity levels and heat warnings where I live. I'm definitely not a "fan" of heat and the AC is cranked more than usual these days. A higher power bill to come as the local power utility rakes in more money from me.

Enbridge (ENB.TO), known for being a major pipeline in Canada and the US released it's 2nd quarter report plus updated about it's finalising buying more utilities in the US in several States with that side of their company growing.

All looks positive to me and ENB has an ex-dividend date for August 15th with a 7% yield. I'll add more although the lower Graham Number indicates overvalued and at a year high so far. I prefer buying a stock that is undervalued with room to move up in price but building dividend income is on my agenda 

Continuing with the "Utility Sector" theme, Fortis (FTS.TO) out of St. John's, Newfoundland is spread out through North America and beyond. With an ex-dividend date of August 20th, it's 2nd quarter report was also upbeat as I expected and I will continue to buy that stock with a 4% yield, also near it's yearly high.

I assume the Bank of Canada lowering interest rates and decent half year reports from companies like Enbridge and Fortis are what interested investors like to see and driving the stock prices up for now. Emphasis on "for now" where the Market is always churning with what's going from day to day but to stay on track with a plan, I ignore the short term daily moves.

Later in August, there are ex-dividend dates for insurance companies or the Lifeco sector I'm fond of such as Manulife Financial and Great-West Life with yields in the 4 to 5% range plus more companies to add to like Algoma Central (ALC.TO), the Great Lakes shipping company I currently hold. More on that in my next article.

  

The Canadian Stock Bias and an Eagles View of the US Market

 

I'm a fan of the top twenty by yield in the TSX 60 with a monthly plan to buy the individual stocks I prefer to hold for the long term but I hold companies and banks down the list as well.  

In 2024, there's more focus in the articles and Blogs I read about diversifying into the US instead of a 100% Canadian stock bias. Seems that topic got more interesting with the top tech companies down south driving the S&P 500 index higher with what they call the Magnificent 7 and the AI craze for now.

Keeping in mind that many a Canadian company has assets down into the US like banks, utilities and pipelines for example. TD and Fortis comes to mind. Emera (EMA) is also more focused on Florida natural gas these days, which as an ex-dividend date of August 1st/2024 with a current yield of 6.14%

I'm interested in companies with a decent yield that will compound into retirement and overall the US market is more growth orientated while companies pay lower cash dividends although they raise their dividends on a steady basis with the stocks I have looked at. 

An investor can't go wrong with holding household US names like Johnson and Johnson and Coke or Cola-Cola Company increasing dividends for 61 years each. These two companies are in a list of two hundred+ stocks with decades of dividend increases but also compounded returns.

An alternative to US individual stocks is going the ETF route. 

Once I started reading up on the US market, it made my head spin with the opportunities and what is the best plan for me going forward? Thinking back home here in Canada, it took me awhile before I got where I wanted to be ... building dividends with decent companies and banks.

To keep this short and simple for now, An ETF with growth and low yield is Vanguard's VOO: Vanguard S&P 500 ETF. An expensive fund with a low MER of 0.03% and gains of 16% so far to date in 2024. The quarterly yield is around 1.28%. Distributions fluctuate which is normal for Vanguard and Blackrock ETFs.

Investors can now buy partial stock and ETFs with companies like Interactive Brokers, Wealthsimple and others.

SCHD: Schwab US Dividend Equity ETF with a low MER of 0.06% and a current yield of 3.44% with quarterly distributions. A popular fund up around 10% in performance, year to date.

I prefer monthly distributions and that led me to these two ETFs from a top US bank, JP Morgan. JEPI: JPMorgan Equity Premium Income ETF with an MER of 0.35% and a yield of 7%. Performance to date in 2024 is 6%  

JEPQ: JPMorgan Nasdaq Equity Premium Income ETF which holds the top tech holdings in the US and a high yield hovering around 9% with year to date returns of near 14%.

The above ETFs have billions in assets. A lot of research to be done into the US market but JEPI or JEPQ or both are interesting keeping risk in mind while I look over the dividend paying companies I'd like to hold in the near future. 

One has to remember the 15% withholding tax on US dividends/distributions so best to hold the stocks/ETFs in an RRSP as an option to avoid the tax claw back.

Meanwhile, it's continue the plan of building my Canadian portfolio while the US is in a current and what seems to be a traditional market sell off time of year which started on July 17th as predicted by the US giant, Goldman Sachs. 

I can't time the market but I prefer buying at lower prices when possible.