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There are deep deals on Canadian dividend stocks, tech companies continue to wow, and could this be the bottom for oil and gas producers?
“‘We would never say that dividend cuts are done, but we do note that 70% of the dividends on the S&P/TSX Composite come from relatively “safer” sectors, specifically banks, insurers, pipelines, communications and utilities stocks.’”
iShares S&P/TSX Composite High Dividend Index ETF tracks that index, and the current 12-month trailing yield is an incredible 5.8%. If we look at some of the high-dividend individual stocks, we see some incredibly large dividends as well. Both Capital Power and Power Corporation of Canada have yields of 6.7%. BCE Inc. and Manulife Financial Corp. have yields of 6% each. Enbridge Inc.‘s dividend yield is 8.6%, while TC Energy (another pipeline) offers 6%. On the Canadian banking front, Scotiabank is yielding 6.6%, TD is at 5.4%, and CIBC will deliver a 6% annual yield. The Dividend Index, composed of 75 stocks selected because of their impressive dividend income, has fallen 12.9% including dividends. The S&P/TSX Composite Index has fallen just 2% over the same period; the juicy dividends are still out of favour. David Berman, the author of that Globe and Mail post, summarized with…“These are challenging times for dividend stocks. That’s what makes them appealing.”
I would have to agree. I am adding to my wife’s Vanguard High Dividend Yield ETF (VDY) when monies are available. The trailing yield for that ETF is just over 5%. Investors seeking big, juicy Canadian dividends might also explore BMO’s Canadian Dividend ETF (ZDV) and iShares Canadian Select Dividend Index ETF (XDV). I am eager to add to my Canadian bank, telco and pipeline stocks. But I maintain a modest position (15% to 25% of portfolio) in bond ETFs. While the yields are low, their job is to manage the stock market risk. I also hold gold and bitcoin. Keep in mind that dividend yields are elevated due to lower stock prices, and the market’s having priced in greater perceived risks.“Wealthsimple accounted for 18% of trading accounts opening in Canada in the second quarter. And they doubled the total Wealthsimple client base from 250,000 to 500,000 in the first six months of 2020.”
And now one of the big Canadian banks wants a piece of that action. On Tuesday, they launched TD GoalAssist, a new trading app (available for mobile devices only) that allows Canadians access to a very robust online educational platform. Investors can then complete an online questionnaire to help (make that “assist”) them in creating an appropriate investment portfolio. The app will continually monitor and track the user’s goals and progress, and it will prompt them to stay within the appropriate risk level.
On the app, investors can then trade TD exchange traded funds (ETFs) with zero commissions and have the ability to trade stocks listed on major North American exchanges. There are no investment minimums or monthly fees. Investors will pay $9.99 per trade for stocks.
Wealthsimple Trade was out first with free stock trades—a trend that took hold in the U.S. market but has been slow to catch on in Canada. Obviously, TD did not take that bait. It looks like there will be no discount brokerage price war, or rush to deliver free trades in Canada. (You can check out this post on the best online brokerages in Canada in 2020 for more on fees and minimums.)
TD GoalAssist is also taking on the accelerating Canadian robo-advisor trend. I’ve chatted with many of these investment firms and they tell me business has been very robust in 2020. Canadians are continually looking for simple and effective and low-fee digital investment solutions.
Investors who do not want to select their own stocks and ETFs can choose a robo-advisor-like option. They simply fill out a questionnaire that measures time horizon, goals and risk tolerance level to then suggest an all-in-one and comprehensive ETF portfolio. (TD recently released the TD One Click Portfolios.)
It’s ultimately up to the investor to press those buttons to purchase the appropriate TD One Click portfolio, which is different from what happens with a robo-advisor; in that case, purchases are executed by the robo-advisor.
The backbone of the TD GoalAssist program is that robust educational process featuring over 100 videos created specifically for the new app. Many online live learning sessions are also available on the TD learning centre.
What’s my take? (And, yes, full disclosure, I hold TD Bank shares in my personal RRSP account.) I like this as a shareholder and as a passionate proponent of low-fee investing for Canadians. While there are trading fees for stocks, a self-directed investor can invest in a low-fee manner with a combination of individual stocks and ETFs. The key is to limit the trading activity and keep track of the total trading costs.
“‘It will allow us to make better returns in a tougher environment, so that’s always always something we need to be looking to do,’ said Husky CEO Rob Peabody in an interview, adding it will also be easier to attract investment as a bigger company.”
Many companies are reducing their workforce to get lean. It’s likely fewer players will continue in the Canadian oil and gas space. An article in Advisor’s Edge suggests many more mergers are in the pipelines. And more on recent deals and trends in the Financial Post…“Like U.S. E&P [exploration and production companies], Canadian energy companies also need to come together, cut costs and become leaner to better adapt to lower energy demand in the post-pandemic world.”
They will need to be more efficient. Is this the beginning of the recovery for Canadian oil stocks? The bottom is in? There might be incredible value in the energy patch, and pessimism might be over extended. Of course, there is also incredible risk. I have avoided energy producers for quite some time. But I’ll admit that I am now more than interested.
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