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.

TD, ETFs and US Stocks

 

With the Canadian banks, TD Bank has an ex-dividend date of July 10th and undervalued with a current dividend yield of 5.39% . TD has a dividend growth rate of 7+%. Numbers I like as the bank deals internally with compliance and training while it shakes up that department and has set aside millions for upcoming fines for breaches in some of their US branches. 

It is opposite to conventional thinking when it's about issues like higher unemployment rates. During elections, there's usually promises of more jobs to get politicians elected or re-elected in their riding or seeking leadership. Central Banks think of it as a positive when more people lose their jobs and more inclined to lower interest rates, perhaps again this fall. However, inflation seems to be ticking up again, although not surprising to me. 

It's in my best interest that rates come down eventually where it should favour the stocks while on the subject of banks in this post.

There are a lot of new bank and financial related ETFs being added in 2024. Curiosity gets the best of me so I look over a lot of these with a reasonable MER, management fees and yield while considering risk. Meanwhile I continue to buy the individual bank stocks with Bank of Montreal, BMO and Royal Bank, RY having ex-dividend dates later in this month of July with attractive yields.

BMO also has a couple of popular all Bank ETFs, ZWB paying a 7% yield with monthly distributions and ZEB ... equal weight Canadian banks ETF, also paying monthly with a 4+% yield to consider. 

On my radar these days, is adding some decent dividend paying US stocks of which there are many. I'll get into that deeper in my next post and seems to be a theme with the Bloggers and newsletters I read lately with the tech fuelled S&P 500 index down south. My interest is more about how the high dividend US stocks are doing minus the tech related 7 stocks that some say could be an AI bubble that will pop some day in the future. 

Lots to consider like currency exchange rates and fees and the foreign 15% deducted from dividends/distributions unless in an RRSP. Are CDRs a better option? ... Canadian Depository Receipts that pay proportional dividends to the amount invested.