Outlook for October 2014

The “…considerable time” remains in the Fed’s statement and interest rate outlook. Market and investors were looking for change in tune to the Fed speech, but its status quo for now. While the Fed indicated that the bond buying program will end in October, the indication of interest rate rise is still on hold – meaning that the party continues. However, the lack of bond buying will induce some volatility in the market, so having some cash on hand will be prudent of investors.

Outlook for October 2014

My Holdings

I am close to fully invested, with just a 3.4% cash position in my holdings. This is a bit lower than I like…so I will be concentrating on rebuilding my cash positions and waiting on the sidelines for better opportunities. While the number of opportunities are limited, there still exist a few. Provided the right conditions, I might add to my positions in some of the following holdings.

Chevron Corp (CVX) is a dividend champion having raised its dividends for 27 years consecutively. Under the current market conditions, where decently valued stocks are hard to find, CVX provides relatively good value. CVX has a 5-yr DGR of 9% and a 10-yr DGR of 10.6%.
Medtronic Inc (MDT) manufactures and sells device-based medical therapies worldwide. Medtronic is a dividend champion that has been raising dividends for 36 years; has a 5-yr DGR of 11.6% and 10-yr DGR of 14.9%. MDT has recently announced plans to takeover Covidien (COV) and is planning a tax inversion to Ireland.
RioCan REIT (REI.UN.TO) – is one of the largest REITs in Canada and owns a lot of retail real estate across Canada. Although not a dividend grower (5-yr DGR 0.50%), the stock is currently undervalued and I am considering adding to my position simply because there is plenty of value to be found at these levels.
Rogers Communications Inc (RCI.B.TO) is the largest wireless service provider in Canada and is growing its business segments in cable and media aggressively. Rogers has been growing dividends for 10 years and has a 5-yr DGR of 11.13%. Click here to read about my analysis of the telecom providers in Canada.
Wells Fargo & Co (WFC) is one of the largest financial institutions in the world and is a behemoth in the US mortgage. The company is also the largest portfolio holding in Berkshire Hathaway, where Warren Buffett has invested $23B in the company. WFC saw dividend cuts during the financial, but has started raising the dividends after with the 5-yr DGR of 10.76%.

Monthly Contributions: I add to my positions in the following stock and funds on a monthly basis:

  • Claymore S&P US Dividend Growers ETF (CUD.TO) is an ETF of 83 dividend growers and provides me with exposure to excellent corporations across all sectors. The ETF has a 1.8% yield and pays distributions monthly.
  • iShares Canadian Financial Monthly Income Fund (FIE.A.TO) is an ETF of 24 Canadian financial equities (70%) and bonds (30%). The fund yields 6.5% and pays distributions monthly.
  • The Bank of Nova Scotia (BNS.TO) is the third largest of the Canadian banks by deposits and market cap. BNS is also the most international of the Canadian banks with exposure in 55 countries outside Canada. BNS saw a pause in its dividend growth during the financial crisis. However, BNS has started raising dividends after the crisis with a 5-yr DGR of 5.15%. I have a DRIP plan in BNS and invest monthly to this holding.

Watchlist

While this was originally scheduled for September, a  busy scheduled around work and house have kept me away from writing more and evaluating this step. As part of re-structuring my wife’s portfolio, we will finally be starting to move her investments from expensive mutual funds to low cost ETFs. I will be putting together a balanced index fund portfolio this month. Look forward to reading my evaluations of various index funds in different categories over the coming days/weeks.

What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I deeply value reading your questions and comments.

Disclosure: My full list of holdings are available here.

Photo Credit: Tambako The Jaguar

21 thoughts on “Outlook for October 2014

    • Thats right, Lance. It sure will be interesting to see where things are headed. Although it appears that people have started pulling the money out of the market already. Whatever happens, once Oct is done, we will see more volatility in the market, so it’ll be interesting.

      Thanks for stopping by

    • I wish I had more cash. I cut down on my contributions over the spring/summer as I wanted to save more for the home downpayment. That is starting to see the cash position dwindle in my investment portfolio. Hoping to recouperate over the next couple of months.

      Best wishes

  1. Good watch list you put together. I just published mine on my site as well. I focused on higher yield plays this time with a few closed end funds I am considering. From you list I do like WFC, CVX and of course BNS. I may be averaging down my BNS position instead of initiate a new holding. Thanks for sharing.

    • I’ll have to take a look at your watchlist and see if I find something interesting. Theres of course a lot more on my watchlist, but these are the ones that I already own and find them attractive at current levels. Companies like WFC, CVX or REI.UN.TO are either fairly or undervalued. Its a tough decision whether to work more on building that cash position or keep investing.

      Best wishes

  2. R2R,

    Nice watch list there. I believe MDT might be facing some issues with the COV acquisition, last I read.

    I’m almost always fully invested, and quite like it that way. Every dollar is a little solider. Gotta keep the marching and making money for me. 🙂

    That being said, I’m looking at a few REITS, BAX, and BBL right now. I’m also interested in V, AMNF, and TIS to varying degrees. So many stocks, so little capital!

    Thanks for sharing your list.

    Best wishes!

    • Hi DM,
      Yes, I think there are some roadblocks for the MDT-COV deal…that has resulted in the stock to get attractive again. Hmm Im interested in both BAX and BBL as well….but not sure BAX overlaps with some of my other holdings – have to look into it.
      My mining exposure in IMG.TO has taking a huge hit after the dividend cut, but Ive been holding onto it hopign that things will turn around…meanwhile writing call options in order to sell it. I am considering BBL or ABX instead..so, thats somewhere on the horizon as well.

      Thanks for sharing.
      R2R

    • CVX and WFC are both great companies and teh current levels are attractive. I will be very tempted to add more if it falls 10%.

      BNS – I have a DRIP plan, so thats on cruise control for me. Thanks for stopping by

      cheers

  3. I am about the same with about 3.5% cash. I want to wait out a while because the month just started and we are all over the place. Hopefully, we can shake out the issues and find some bargains between now and November. I am close on a few. I am leaning toward T, but MCD and KMI if I see a nice dip soon. Good luck.

    Keep cranking,

    Robert the DividendDreamer

    • Yes, the increased volatility that comes with the end of QE should provide with some opportunities. Great stocks to own on your list too….just wish I had more capital ready for deployment.

      regards

  4. JC says:

    I’m trying to conserve capital as well to make some bigger moves in the stock market but who knows if I’ll be able to hold off. I added some UTX earlier this week but wouldn’t mind increasing my exposure to the financials, WFC in particular. I own CVX but I’ll probably hold off on adding more to try and get XOM more in line with them as far as weighting goes. Plus I’m heavily invested in the O&G field right now. Thanks for the update.

    • Good move on UTX, JC. I am tempted to add to my GE position again this week after it got in the low $25s. But I think I will wait it out to see where it goes. Broad market moves from the DJIA top should bring GE down (as a DJIA component) – and I guess its the same story with UTX.

      Thanks for stopping by and sharing your thoughts.
      Best wishes

  5. CVX was my first purchase for DivGro. I picked up shares at $109.68. With the recent downturn in oil prices, CVX is down about 14% from its 52-week high. I think its getting very attractive now!

    Cheers
    FerdiS

    • Thanks for sharing, FerdiS. I used to own CVX a long time ago, but held it in a TFSA account (so I was having the taxes withheld without the benefit of claiming it on my taxes), so eventually sold it…and later bought it in RRSP account (no withholding taxes). My cost basis is $118 and now that its back under that level, I am tempted to add to my position.

      Best wishes

  6. MDT is a great company, I can see healthcare companies doing very well over the next few decades. Don’t own it yet, but want to.

    Good on you to DRIP BNS.

    Are you going to put REI.UN in TFSA or RRSP? I like my CDN REITs in the TFSA personally.

    Keep up the good work with the investing plan!
    Mark

    • Thanks Mark.
      Yes, I picked up MDT last year and would love to add to the position. Wish I had more capital to invest right now.

      My REI.UN holding is in TFSA…a lot of my high income Canadian stocks are funds are in TFSA – I still have a lot of room left, so looking to adding more there.

      Thanks for stopping by and the comment
      cheers

Leave a Reply

Your email address will not be published. Required fields are marked *