Portfolio Cleanup - Cuts And Additions; 2 Less Holdings

Summary

• This month, I decided to do a little bit of housekeeping and clean up the portfolio a bit.
• I think we will be lucky in Canada if things go back to normal by the end of the fall.
• After the portfolio cleanup and all these moves, our portfolio will generate $114.92 more than it would before.

Hey.

This month, I decided to do a little bit of housekeeping and clean up the portfolio a bit. There were certain holdings I have had for a long time that I have always thought of tossing but didn't want to book a loss. This month, I decided to take the loss and just move forward. Short term, it's unfortunate, but I feel in the long term, it's going to a better move/Portfolio.

Sales

EXTENDICARE (OTCPK:EXETF)

First on the sale list is Extendicare. This was one of our original holdings from way back, and just like most of those, it needed to be cut. I think I bought it because of its monthly high yield and lack of healthcare stocks in Canada. I liked the idea of long-term care, retirement living, and home healthcare.

Then covid hit…. Outbreaks at homes like theirs blew up (Extendicare did pretty good in this regard though) and then things started getting political… Why did Extendicare get government funds for covid while it continued to pay dividends to its shareholders? At that time, I was worried of a dividend cut but it didn't happen. Once covid has come to pass, maybe we will be looking at these homes differently and question the systems in place..

I decided to take roughly a 20% loss (minus like 4 years of dividends) and move that cash into something else.

• Sold 488 shares of Extendicare & lost $232.00 in forward dividends from this sale.

RIOCAN (OTCPK:RIOCF)

RioCan - yup, I did it. I sold our position in RioCan. I have said how much I like this company and how retail will be fine, as well as how they are diversifying into residential.. I drove through the outskirts of Toronto one day last week and saw a tonne of for-lease signs on both retail and office.

Covid has been devastating to businesses, and unfortunately, Trudeau screwed our vaccinations big time! I think we will be lucky in Canada if things go back to normal by the end of the fall. You hear of companies just hanging on, how long can they last? I feel for them… It's sad to say but I think there will be a lot of bankruptcies coming up.

There will be a lot of places for lease and the avg sq ft landlords will be able to get for office/retail may drop due to lack of demand and increase of available properties to rent. You could even question if there will be less people starting their own businesses after this. We now know the govt can just shut the small businesses down while letting the large corporations get all the business. It's an added risk that people will probably think of moving forward.

I do think RioCan is a great business and love their recent moves into residential. At the same time though, Ed said the dividend was safe and then cut the dividend at the end of the year. There also is the fact that Ed has been the CEO of RioCan since the start and will be now retiring in March 2021 (he will still be a board member). How will Gitlin do taking the reins while in this environment?

At the end of the day, I wanted to lower our office/retail exposure. We hold both RioCan and smart centers, but I feel the Walmart (WMT) anchor is just huge! Companies will always want to be around Walmart, they just bring in so much traffic. So, RioCan got the cut.

We locked in a 25% loss (minus all the dividends over the years).

• Sold 267 shares of RioCan, losing $256.30 in dividend income.

BMO

BMO? Didn't they just have that great earnings report? Yup! All the Canadian banks did and their stocks shot way up, setting 52-week highs. Sweet! sell, sell, sell. Nothing against BMO, but I simply don't need 4 different Canadian Bank holdings in the account. Both our BMO and National bank holdings are small. If you know me by now, it's all about getting those Drips!

I have been thinking about selling BMO for a while, simply to focus on growing that national bank position and cutting one of our banks. This was the time.

Locked in a 30% gain plus all the years of dividends.

• sold 31 shares of BMO & lost $135.68 in forward income.

Sales Summary

In total, we cut 3 positions from our portfolio and lost $623.98 in forward income. Obviously, I put that cash right back to work for us though!

Purchases

RIT ETF

Since both Extendicare and RioCan paid monthly, I wanted to reinvest in a monthly paying stock/ETF. RioCan sale was a big blow to our REIT sector, so I wanted to allocate that money into that sector. I recently started a position in RIT ETF and think that's a great spot to deploy the capital. I really like a REIT ETF as it's so diversified and pays a solid yield.

While they hold some RioCan, it's minor. The top 10 holdings are industrial and residential REITs. So, we moved the Extendicare and RioCan funds here. While I sold both stocks at a loss, RIT ETF itself is down 17.16% from its 52-week high, so it makes the loss feel less drastic.

• Bought 481 units of RIT ETF. This adds $390.94 to those forward dividends.

TC ENERGY (TRP)

Recently, I did a post on the top 3 stocks I want to add to our portfolio at current prices. TC Energy was one of them and was in the same account as BMO. So, I just decided to move that money into TRP. Like I said before, we will still need traditional energy for a while, and with a cold winter like the one we are having, this should bode well for natural gas pipelines. Plus, that 7.5% dividend raise the other week continues to make me smile.

• Purchased 57 shares of TRP around 55$, adding $198.36 in forward income.

LOCKHEED MARTIN (LMT)

As I said in the post above, Lockheed was my top target for February. It was tax time and I always try to maximize those contributions right before we file. This stock is cheap, offers a great starting yield, has good dividend growth, and has over 100 billion dollars worth of backlog projects.

People think Democrats will reduce govt spending on military. I think the opposite, I actually said they will be more active than Trump was with the military. Here we are just over a month after Biden took office and missiles are getting fired in Syria. Not to mention the growing worldwide tension with China accusing them of Genocide. You never want to see war or anything, but countries will keep spending money on "defence".

• We started a new position & bought 14 shares at around $338 per share. Adding $145.60 USD to those forward dividends.

XAW ETF

• We continued our monthly purchase of XAW ETF; 9 shares add roughly 4 bucks.

Purchase Summary

We added 3 positions and started a new one with LMT. Altogether, these purchases added $738.90.

Conclusion

After the portfolio cleanup and all these moves, our portfolio will generate $114.92 more than it would before. I'm happy to cut our total positions down by 2 and beef up those existing ones. Something I have started to ask myself over the years is if any stock in the portfolio is down, let's say more than 10%, why would I not want to add to that position? If I don't want to add when it's in the red, why do I own that stock?

BMO and Extendicare have always been on my mental chopping block for reasons I stated above. RioCan was just one I started questioning, wanted to lower our retail exposure, and honestly, enjoy the simplicity of RIT ETF for most of our real estate exposure.

I love the look of our portfolio now but still question IBM, I'm asking the question I said above. I'm down on it and yet don't want to add to them. (I'm hoping the new CEO can turn things around).

Who knows, things are always changing, and I'm trying to improve and grow the portfolio as we go. What are your thoughts on these moves? Have you been buying anything these days? Finally seeing some red days again.

Cheers!

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Comments

[Mr. Value]

Well said re: LMT. I've been saying this for months that people's concerns about a D in the White House and military spending are overblown and misplaced. You're already seeing the proof.

[seavulture]

As a Canadian investor, what is your feeling about about SJR (Shaw Communications), a monthly dividend payer?

[PassiveCanadianIncome]

@seavulture hey Sea I had them before but didnt see the growth on wireless that I was hoping for.

I think their 5 yr chart paints the picture. I prefer telus and bce in that space. While they dont pay monthly the dividend raises are nice and telus has both growth in dividends and capital appreciation.

[Universal Huckleberry]

"Something I have started to ask myself over the years is if any stock in the portfolio is down, let's say more than 10%, why would I not want to add to that position? If I don't want to add when it's in the red, why do I own that stock?"

Best bit of the whole article.

[Universal Huckleberry]

"You could even question if there will be less people starting their own businesses after this. We now know the govt can just shut the small businesses down while letting the large corporations get all the business. It's an added risk that people will probably think of moving forward."

Not probably, but a risk you MUST think of before starting a business.

[Signup22]

I don't have any overly strong thoughts on your sales or adds but agree with your decision to consolidate positions.

It's so easy to keep adding stocks with the new commission free environment but do those tiny positions do much? Not really, I've been trying to focus on adding to positions I feel very confident in and getting rid of the so so ones. With a huge chunk of my portfolio being workplace accounts invested in ETFs, I feel adequately diversified too.

[Kontrary]

Jettisoning Extendicare is a bad idea. They've definitely had some tough quarters, but they were in the middle of a major health situation. Meanwhile, the population continues to age and we will all need progressively more help. Provinces may layer on more regulation, but they also pay most of the cost of that regulation.
Basically, the company rents out beds and rooms to people who need those beds and rooms. They then layer on additional medical services needed by the elderly. That's not a business I want to bet against.

[PassiveCanadianIncome]

@Kontrary You may be right, that was my thesis as well.

Obviously right now isnt ideal timing but the stock has had no dividend growth and not much capital appreciation in the years before covid as well.

I just rather put my capital elsewhere

[Rod Willmot]

"Trudeau screwed our vaccinations big time!"

The only thing he screwed up was his image, making super-optimistic firm promises that a well-informed person would never have made. Vaccine production is not simple, and scaling up massively can and did lead to unpredictable complications.

Canada's slow start was the result of us voters allowing our government, over decades, to let the country become dependent on foreign multinationals. There is now a project underway to build our own vaccine production facility. I fully expect it to be cut, as soon as we get yet another government that is blind to all concerns except cutting costs. Thus we have shot ourselves in the foot many times, and likely will again!

[PassiveCanadianIncome]

@Rod Willmot

Hopefully this is something we learn from and start the planning of producing alot more Items right here in Canada.

[bryan555]

@PassiveCanadianIncome Also, considering the vast difference in per capita cases and deaths -- comparing Canada to the US, Britain, etc -- seems pretty churlish to blame Trudeau. We've done very well. But we can't magically acquire vaccines which are produced elsewhere, and in high, high demand everywhere.

[brianradant]

@Rod Willmot there have been reports that the liberal government was approached by domestic manufacturers about making vaccines in Canada. They could have produced 1 million doses by December. The government never took them up on it. We would have been dependent on imported vaccines, regardless, but it’s definitely slowed our return to normal.
I think the liberals have been wise to buy as many doses as they did. I suspect that, as a small market, it was a necessary cost to ensure reasonable timelines for deliveries.
Overall, I’d give the liberals a C. They were right to spend as much as they did, but their failure to manufacture any vaccines domestically is unforgivable.

[User 47803322]

TRP seems to be ignored with the seeming addiction to ENB people have but they have a great business and are well positioned.

[PassiveCanadianIncome]

@User 47803322 for sure. For the record though I do have a larger holding of Enbridge =)

[FMS Investments]

Interesting moves. I've thought about taking some bank profits as well but haven't pulled the trigger.