# Making own REIT etf



## Franky Jr (Oct 5, 2009)

Does anybody skip XRE(.61%MER) or VRE(.39%MER) and replace with your own home made ETF.

I looked at it and if you buy the top 8 holdings of either of these ETF's with 10K. You come out with a first year MER of .40% ($5/trade). You got 70% of all their holdings purchased and a yield near 5.50% which is better than both ETF's. Going forward you would have no MER except for additional money being added.
Seems like it should work to me.


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## Beaver101 (Nov 14, 2011)

^


> Seems like it should work to me.


... it should as that's what I do, a home-made REIT ETF. But not the top 8 holdings of either XRE/VRE/ZRE but a select group of smaller REITS (4 holdings:INN.UN, MRG.UN, RMM.UN, EXE) with DRIP turned on. Set and forget.


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## gibor365 (Apr 1, 2011)

> Seems like it should work to me.


 I hold ZRE (equal weight) in one TFSA.
On other accounts I have similar that you proposed: REI, HR, AX, CUF plus some smaller ones DRG, WIR.U and (unfortunately) TPH ... and DRIPing what I can


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## bettyboop (Dec 13, 2011)

I have small holdings in D.UN, KMP, HRR.UN, DRG.UN and HR.UN and plan on adding WB if it ever goes down in price. I originally wanted to have 10K in REITS so I try to pick up 2K of each one and I drip the ones in my TFSA.

I did the same with my US defense stocks and it's worked out great so far.


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## AltaRed (Jun 8, 2009)

Like others, I forego the expense of a REIT ETF and choose to 'roll my own'. I would suggest to the OP that 3-5 different REITs in different sectors would provide sufficient diversification to 'emulate' much of what the ETF offers. My suggestion would be to cover retail/commercial, office, industrial, and residential sectors. Sectors go up and down depending on the economy, e.g. office seems to be one of the most notorious based on economic swings.


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## My Own Advisor (Sep 24, 2012)

Yes, I have made my own REIT portfolio. I own 5 REITs and let them DRIP every month. No REIT ETF for me, the fees are too high.


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## Moneytoo (Mar 26, 2014)

I've been thinking about selling XRE in my husband's RRSP (he has 17K and change of it at current market price) and replacing it with individual REITs, but not sure if it's worth the hassle with this amount?..


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## londoncalling (Sep 17, 2011)

it's worth it for a long term hold


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## AltaRed (Jun 8, 2009)

Moneytoo said:


> I've been thinking about selling XRE in my husband's RRSP (he has 17K and change of it at current market price) and replacing it with individual REITs, but not sure if it's worth the hassle with this amount?..


The problem with XRE is it is cap weighted and therefore is heavily into RioCan. $17k is not much to start with for a diversified REIT portfolio, but start with 2 or 3 REITs at first and then add another one when another $7-10k becomes available.


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## Moneytoo (Mar 26, 2014)

Yeah, I remember last time I looked at XRE holdings, the only REIT I liked was Dream Global (DRG.UN), which is only 2.35% of XRE, so I thought I'll just buy 180 shares of it (enough for a DRIP) in my RRSP... Now XRE came down a bit, not a good time to sell... Will go over its holdings again to shortlist a few and start watching them - thanks!


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## none (Jan 15, 2013)

MER on VRE is .39. $39 on 10K. Add the cost of purchasing 5 REITS and it's about the same so why bother?


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## Moneytoo (Mar 26, 2014)

VRE's dividend yield is only 2.28%. 

If I were to unbundle my husband's XRE, I'd start with these 3 (enough shares to DRIP the highest 52 week price; would wait for RioCan to come down a bit more, the other two are near their EMA(200)s):

*REI.UN*: 260 x 28.70 = 7,462 (4.92% yield, 0.1175 monthly distribution)
- approximately 340 retail properties in Canada and the United States.

*HR.UN*: 220 x 22.50 = 4,950 (6% yield, 0.1125 monthly distribution)
- office, industrial and retail properties throughout Canada and the United States.

*NPR.UN*: 220 x 24.70 = 5,434 (6.59% yield, 0.1358 monthly distribution)
- a portfolio of mainly residential income-producing properties located in the British Columbia, the Northwest Territories, Alberta, Saskatchewan, Nunavut, Newfoundland and Labrador, and Quebec.


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## none (Jan 15, 2013)

I've never really understood the attraction to dividends. You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


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## Moneytoo (Mar 26, 2014)

Well, my husband loves dividends - and maybe he's right:

«Wondering about the role of dividends? The guidelines say that historically, 25 to 50 per cent of returns have come from dividends. A decision to split the difference was made so that dividends are projected to account for 33 per cent of stock market returns, with the rest coming from capital gains.»

http://www.theglobeandmail.com/glob...ealistic-return-expectations/article24574135/

And I just love buying stuff...


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## none (Jan 15, 2013)

Yeah, but it still doesn't matter.

http://www.forbes.com/sites/baldwin/2013/03/18/dumb-idea-dividends-are-good-for-you/


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## Moneytoo (Mar 26, 2014)

> And yet lots of otherwise intelligent investors are utterly persuaded that they are better off with dividends than with share buybacks.

He also has 150 shares of Apple lol Seriously though, I like dividend paying stocks (and ETFs - have DEM and RWX myself) because they make it easier to watch the prices go down. Especially when you have enough shares to DRIP - purely psychologically, knowing that you keep buying shares cheaper, makes it easier not to flinch during the correction (and we have some stocks that are down significantly - and until this week didn't have any bonds) 

As for REIT ETFs, now that I know much more than a year ago when we bought XRE, I think I can do better buying individual REITs based on their valuations. If not, it would still be a better learning experience than "set it and forget it" (and I love learning even more than buying )


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## My Own Advisor (Sep 24, 2012)

none said:


> I've never really understood the attraction to dividends. You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


True.

But one is more bird in hand/cash in hand vs. promise of growth (birds in bush). I have a bias for the former. 

For your job, would you rather be paid today or a promise you'll be paid eventually?


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## cannew (Jun 19, 2011)

none said:


> I've never really understood the attraction to dividends. You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


That's a BIG assumption that the stock continues to go up. What happen in 2009 to stock prices, while my dividends continued to grow (though at a slower rate).


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## Cal (Jun 17, 2009)

I kind of look at all of my holdings as part of a personal balanced etf......


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## Moneytoo (Mar 26, 2014)

FWIW: «“The fundamentals, like occupancy and rent increases, generally are still outstanding” in most real estate areas except for the office sector, where supply is expected to increase, said Andy Nasr, a portfolio manager at Middlefield Capital Corp. He is generally avoiding office, except those in extraordinary circumstances; he sees more upside in senior’s housing, apartment and industrial REITs.»

http://www.theglobeandmail.com/glob...eit-picks-from-fund-managers/article18131141/


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## Spidey (May 11, 2009)

There are so few REITs in the Canadian REIT indexes that it is worth building your own portfolio if you plan to hold for the long term. You can even start with one or two and add more as opportunities present themselves. I also threw FCR into the mix, even though it isn't classed as a REIT. The following is in no particular order. CWT.UN and CAR.UN are my biggest holdings. 

BEI.UN
AX.UN
MRG.UN 
MRT.UN
CWT.UN
CAR.UN
D.UN
FCR
HR.UN
REI.UN
CSH.UN

I do however hold small positions in 2 international REIT ETFs.


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## gibor365 (Apr 1, 2011)

none said:


> MER on VRE is .39. $39 on 10K. Add the cost of purchasing 5 REITS and it's about the same so why bother?


You purchase individual stock once, but paying MER every year



> Now XRE came down a bit, not a good time to sell...


 why not?! I can understand if you sell XRE and buy oil stocks...  , but if XRE is down a bit, most likely all XRE top holdings also down a bit ...

btw, imho 17K is enough to buy and DRIP 3-4 stocks...

I hold kinda enhanced XRE  . ZRE is equal weight + I have bunch of individual stocks I like


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## AltaRed (Jun 8, 2009)

Moneytoo said:


> FWIW: «“The fundamentals, like occupancy and rent increases, generally are still outstanding” in most real estate areas except for the office sector, where supply is expected to increase, said Andy Nasr, a portfolio manager at Middlefield Capital Corp. He is generally avoiding office, except those in extraordinary circumstances; he sees more upside in senior’s housing, apartment and industrial REITs.»


I happen to agree with Andy but different opinions are what makes the market. 

Also, for those who think REI.UN is strictly retail, RioCan is busy re-developing properties and developing new ones with a retail/commercial AND residential component. Their big open plazas are ripe for ground level retail with residential levela above it, highly common in Europe and finally finding favour here. So I kind of categorize REI.UN as perhaps 75/25 retail/residential. for my own purposes.

The only office exposure I have at the moment is in CREIT (REF.UN) and AAR.UN for industrial. I am now building my position in apartments (BEI.UN for now since it has been unduly beaten down compared to CAR.UN) and hope to add retirement residences soon (CSH.UN) but waiting for it to find a bottom.


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## none (Jan 15, 2013)

My Own Advisor said:


> True.
> 
> But one is more bird in hand/cash in hand vs. promise of growth (birds in bush). I have a bias for the former.
> 
> For your job, would you rather be paid today or a promise you'll be paid eventually?


If you are collecting income sure but if you're just dripping it's the same and therefore there is no point. Stocks go down the sane as the dividend anyway....

I don't understand your work pay analogy.


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## Moneytoo (Mar 26, 2014)

gibor said:


> why not?! I can understand if you sell XRE and buy oil stocks...  , but if XRE is down a bit, most likely all XRE top holdings also down a bit ...


Well, you know - buy low, sell high, time the market, repurchase lower, hold till death do you part or till the rates go up whichever comes first lol

WTF has happened to WIR.U btw? The movement I decided to buy it - it jumped up like crazy! :stupid:


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## Moneytoo (Mar 26, 2014)

AltaRed said:


> Also, for those who think REI.UN is strictly retail, RioCan is busy re-developing properties and developing new ones with a retail/commercial AND residential component. Their big open plazas are ripe for ground level retail with residential levela above it, highly common in Europe and finally finding favour here. So I kind of categorize REI.UN as perhaps 75/25 retail/residential. for my own purposes.


Cool, didn't know that, will like REI even more now (my husband rents a parking spot in their underground garage downtown across from his work ) - thank you for the info!


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## gibor365 (Apr 1, 2011)

Moneytoo said:


> Well, you know - buy low, sell high, time the market, repurchase lower, hold till death do you part or till the rates go up whichever comes first lol
> 
> WTF has happened to WIR.U btw? The movement I decided to buy it - it jumped up like crazy! :stupid:


Actually I was a bit down from initial purchase and wanted to buy more.... it jumped like 10% in a day....


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## janus10 (Nov 7, 2013)

For those constructing their own REIT ETF, do you annually rebalance? I.E. Buy more of the lowest performers to bring up their weighting (but not sell the winners unless holding them in a registered account so paying capital gains taxes is a non issue).


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## AltaRed (Jun 8, 2009)

janus10 said:


> For those constructing their own REIT ETF, do you annually rebalance? I.E. Buy more of the lowest performers to bring up their weighting (but not sell the winners unless holding them in a registered account so paying capital gains taxes is a non issue).


They ride on their own like any other stock. At some point, a laggard might have to be jettisoned if company fundamentals change, or a winner may need to be trimmed to avoid being way out of whack as a percentage of portfolio. IOW, they are treated no differently than any of my other stocks.


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## 1980z28 (Mar 4, 2010)

I did go the way of my own reit

I picked 4 reits and put 25k in each

Will put another 25k in each over the year

Dividend is 4.635


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## My Own Advisor (Sep 24, 2012)

Nice plan 1980  

@none, capital appreciation is the long-term future, promise of returns. Dividends is/are the short-term returns, today. 

If you are working at your job, would you rather the company you work at today promise to pay you more your salary a few years from now OR
would you rather get paid every couple of weeks instead?


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## gibor365 (Apr 1, 2011)

1980z28 said:


> I did go the way of my own reit
> 
> I picked 4 reits and put 25k in each
> 
> ...


Do you care to share what 4 REITs you hold? and what % of REIT you have/you want to have in your total portfolio?


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## gardner (Feb 13, 2014)

I have always found REITs a bit baffling, though I have an obligatory chunk -- for me 8% -- of my dividend portfolio in them. I'm looking to amp that up a bit and have some cash available to move this up to 10% or 12%. My REITs are just the ones that looked to be a good deal, in the weeks that I was looking to buy REIT. Current breakdown on REITs is:

FCR - 26.5%
HR.UN - 53.5%
NPR.UN - 19.9%

Though I'm not 100% sure FCR is technically a REIT, is it?
I will likely start a position in REI.UN since it's been pulling back the last few weeks, maybe try to catch it in the $28.00 range.

I have all this unregistered, which is one of the things that complicates the whole REIT picture vs. eligible divs.

I'm curious if others think 8% to 12% range is sensible for RE as part of a dividend stock portfolio. At the moment I am:

Energy/Oil&Gas -- 16%
Media/Telecom -- 17%
Financial -- 35%
RealEstate -- 8%
Utilities -- 14%
Resource/Material -- 10%
Other -- 1%

What are the best buys in RE this week?


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## Moneytoo (Mar 26, 2014)

gibor said:


> Do you care to share what 4 REITs you hold?


He did in "What are you buying?" thread:



1980z28 said:


> CSH.un
> BEI.un
> CAR.UN
> RUF.UN


(I didn't know that Leisureworld got renamed into Sienna Senior Living! Was looking for it the other day to add to the watchlist - and looks like I'm too late to the party with this one, too... sigh)


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## Moneytoo (Mar 26, 2014)

gardner said:


> I'm curious if others think 8% to 12% range is sensible for RE as part of a dividend stock portfolio.


I've allocated 10% of our overall portfolio to REITs like this:

5% Canadian
3% International
2% US

It's also about 8% currently (need to add more to the last two), and now that I realized that some Canadian REITs that are part of XRE have international and US exposure - maybe it wasn't a good idea to try to split them...


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## gibor365 (Apr 1, 2011)

Moneytoo said:


> I've allocated 10% of our overall portfolio to REITs like this:
> 
> 5% Canadian
> 3% International
> ...


When I've read your % I was curious how did you calclulate it and wanted to say exactly what you wrote in last sentense: 
3 out of 4 my biggest REITs:
AX.UN “Artis' real estate is diversified across five Canadian provinces and six United States states, and across the office, retail and industrial asset classes. The Company’s REIT’s portfolio includes Calgary office properties, Winnipeg office properties and Twin Cities Area industrial properties.”

REI.UN
RioCan's United States portfolio consists of around 48 shopping centers, principally grocery anchored and new format retail centers. The Company also has interests in around 46 income properties.

HR.UN
It invests in office, industrial and retail properties throughout Canada and the United States.

CUF.UN also diversified between QC and RoC 
WIR.U pure US exposure
DRG.UN pure Germany
and .... loser TPH ... wanted hotel exposure -> got hotel exposure 

My current total REIT allocation is 7.7% ... will be increasing to 8-9%


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## Moneytoo (Mar 26, 2014)

gibor said:


> When I've read your % I was curious how did you calclulate it and wanted to say exactly what you wrote in last sentense:


Well initially (last year) it was easy: 6% XRE in my husband's RRSP and 4% RWX in mine - but then portfolio grew and the actual allocation came down, I bought Slate (US groceries) and wanted to buy WIR.U and RUF.UN or MST.UN (as we discussed in Americal REITs thread), and add DRG.UN for international, so seemed like a good idea to separate them :biggrin:



gibor said:


> WIR.U pure US exposure
> DRG.UN pure Germany
> and .... loser TPH ... wanted hotel exposure -> got hotel exposure


Still planning to buy the first two, and TPH is the reason Im cautious about HOT.UN for my US REITs (maybe unjustly so )


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## scorpion_ca (Nov 3, 2014)

Is there any global REIT ETF that trade in the TSX?


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## gibor365 (Apr 1, 2011)

> What are the best buys in RE this week?


 Probably will be adding AX.UN
They had pretty good Q report this months, AFFO is up, Payout is down .... dividend looks very sustainable... 25% in US 
http://finance.yahoo.com/news/artis-releases-first-quarter-results-210000161.html



> Is there any global REIT ETF that trade in the TSX?


 No, as far as I know


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## Moneytoo (Mar 26, 2014)

scorpion_ca said:


> Is there any global REIT ETF that trade in the TSX?


I only know CGR: https://www.blackrock.com/ca/individual/en-ca/products/239558/ishares-global-real-estate-index-fund


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## scorpion_ca (Nov 3, 2014)

Thank you.


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## Moneytoo (Mar 26, 2014)

I'm still debating whether to try to sell XRE before interest rates go up and repurchase individual REITs after as these estimates make me feel uneasy:

«One other factor we investors need to keep in mind is that REIT prices will decline should interest rates rise. Last year, CIBC's REIT review estimated that REIT prices would fall about 12% for every 1% rise in GOC10 rates. Another review from Dundee Capital Markets in the Globe and Mail pegged the sensitivity at 13:1. In reality, after the approximate 1% rise in interest rates in 2013, REITs fell 16% on average.»

http://howtoinvestonline.blogspot.ca/2014/10/canadian-reits-which-look-good-which.html


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## gibor365 (Apr 1, 2011)

I think I'm stupid ... but what is GOC10 rates? 

$$$2 , check when last time interest went up and how reacted ZRE on it....
I hold REITs purely for income, so for me most important sustainable dividends...in this case if stock goes down, my income goes up as I will be able to DRIP more shares


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## Moneytoo (Mar 26, 2014)

Government of Canada 10 year maturity bond (as explained in the article )

Interesting blog by the way, and in the next post he doesn't recommend to go with individual REITs with less than 25K. So maybe I'll just chill with XRE for a couple of years, buying smaller REITs that are not part of it in the meantime...


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## humble_pie (Jun 7, 2009)

but let's not stop with the REITs. Next, let's break up the XFNs & the financial etfs.

soon, we'll come to Argonaut's 5-pack. Why own all the losers in an index, why not own just the winners, said Argo.

avoid the etf MERs, say others.

also gain more efficient tax reporting, say i. The stock investor gets to choose when & how much to crystallize capital gains. Avoid those pesky returns of capital & those taxable though unpaid special dividends.


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## gibor365 (Apr 1, 2011)

> he doesn't recommend to go with individual REITs with less than 25K


 Why not? If you have 20k, for example buy 4 biggest XRE holdings and performance will be pretty similar, but without MER and discounted DRIP ... no real need constantly to buy/sell .... you can always rebalance with additional money with 1-2 trades max ...


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## 1980z28 (Mar 4, 2010)

gibor said:


> Do you care to share what 4 REITs you hold? and what % of REIT you have/you want to have in your total portfolio?


CAR.UN
RUF.UN
BEI.UN
CSH.UN

I have invested equal amounts of 25k in each

I have not posted much lately,I am working two jobs 7 days a week


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## larry81 (Nov 22, 2010)

I would save about $$$ by unbunding my REIT but here is the downsides:
- Portfolio complexification (From 4-5 holding to 10+)
- More stocks to track in portfolioslicer
- More DIV/ROC to track in portfolioslicer

I prefer to keep things simple


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## gibor365 (Apr 1, 2011)

keep it in RRSP or TFSA


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## My Own Advisor (Sep 24, 2012)

Individual REITs go down in price with rates rising, good, I get paid via distributions every month still and I buy more units via DRIPs, at cheaper prices.

There are no tax headaches when all your REITs are in your TFSA.

Works for me


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## 1980z28 (Mar 4, 2010)

My Own Advisor said:


> Individual REITs go down in price with rates rising, good, I get paid via distributions every month still and I buy more units via DRIPs, at cheaper prices.
> 
> There are no tax headaches when all your REITs are in your TFSA.
> 
> Works for me


I guess you could max the TFSA with reits

Never consider that


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## larry81 (Nov 22, 2010)

gibor said:


> keep it in RRSP or TFSA


thats what i do, both my RRSP and TFSA are litterally filled 100% with ZRE.

Still need to track it to have pretty and up to date charts


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## Moneytoo (Mar 26, 2014)

Purchased 160 shares of Dream Global REIT (DRG.UN) for $9.75 this afternoon (just enough to DRIP one share a month - and it's all the free cash I had in my RRSP, so "fully invested" again )


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## Eclectic12 (Oct 20, 2010)

1980z28 said:


> My Own Advisor said:
> 
> 
> > ... There are no tax headaches when all your REITs are in your TFSA...
> ...


OTOH ... the flip side of the coin is there are no tax advantages either ....

... says the guy who loves that 90% to 100% of cash being paid is on a tax deferred basis ( or at capital gains tax rate when the ACB becomes negative). It spices up the cash flow available.


Bottom line is YMMV.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> ... says the guy who loves that 90% to 100% of cash being paid is on a tax deferred basis ( or at capital gains tax rate when the ACB becomes negative). It spices up the cash flow available.


Not sure I've ever seen a REIT that distributes 90-100% of its cash as ROC. Only the ROC is tax deferred (or is cap gains when ACB is zero).


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## humble_pie (Jun 7, 2009)

Moneytoo said:


> Purchased 160 shares of Dream Global REIT (DRG.UN) for $9.75 this afternoon (just enough to DRIP one share a month - and it's all the free cash I had in my RRSP, so "fully invested" again )



i've held drg.un in TFSA for a couple years & by coincidence early this am i was eyeing cash in the tax-free to see how many more shares i might be able to swing.

lo! i discovered that dream global now has options. I don't know how long they've been open, i believe i recall that 6 or 8 months ago there were no options.

this news makes the stock more attractive. A combination of high distribution plus options might push current yield towards 10%. I didn't get around to buying stock or selling any calls today, though, in fact i didn't even have time to pick up quotes in those options. Tentatively, i'm guessing that TV (theoretical value aka time value) will be low, which makes the options cheap to buy but not particularly profitable to sell.

still, assuming the bottom doesn't fall out of europe or real estate, a triple package consisting of high distribution, options plus decent opportunity for long-term capital growth looks OK to me.


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## Moneytoo (Mar 26, 2014)

humble_pie said:


> lo! i discovered that dream global now has options. I don't know how long they've been open, i believe i recall that 6 or 8 months ago there were no options.
> 
> this news makes the stock more attractive. A combination of high distribution plus options might push current yield towards 10%. I didn't get around to buying stock or selling any calls today, though, in fact i didn't even have time to pick up quotes in those options. Tentatively, i'm guessing that TV (theoretical value aka time value) will be low, which makes the options cheap to buy but not particularly profitable to sell.


I must admit, I'm still intimidated by options: I've read about them a few times (just out of curiosity ) - and just don't get them... Since I learn better from "trial and error", planning to just try them out one day - but Questrade commissions seem a bit steep for a lesson:

"One-leg and multi-leg option trades are charged a commission of $9.95 + $1 per contract.

For all multi-leg trades, a stock leg incurs your regular stock commission.

All options exercises and assignments are $24.95 flat."

Is it comparable with what your broker charges/how much should one risk to make it worthwhile? (I think I can play with up to 5K )


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## gibor365 (Apr 1, 2011)

> Since I learn better from "trial and error"


 you may pay large fees for "trial and error" exercise .. . I just don't really to compete with "professionals" writing calls etc....
Actually, if you want , you may have pretty cheap training on options trading over the weekend in Toronto... there was a thread about it and some guys, I think avrex and somebody else, attended...
you also need to pass some discount brokerage phone test in order to be able trade options


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## Moneytoo (Mar 26, 2014)

gibor said:


> Actually, if you want , you may have pretty cheap training on options trading over the weekend in Toronto...


I'll start with free tutorials: http://help.questrade.com/how-to/iq.../option-strategies/covered-call/#.VWaXJBj3aK0 :biggrin:


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## humble_pie (Jun 7, 2009)

Moneytoo said:


> I must admit, I'm still intimidated by options ... [are Questrade commissions] comparable with what your broker charges/how much should one risk to make it worthwhile? (I think I can play with up to 5K )




i believe that a year ago questrade was charging 6.95 as a base charge in an option spread plus $1 per contract? they might have since raised the base to 9.95, though.

it's still a competitive options price range, less than the big bank brokers charge.

$24.95 for assignments is reasonable, since a skilled trader doesn't allow assignments anyhow, except in rare carefully structured cases. Other brokers are charging flat assignment fees ranging from $43 at TD to full agent-handled commissions at other brokers. The latter would be robbery, of course.

back to questrade, this broker does have an ace up its sleeve for options traders. I'm almost hesitant to discuss, because i'd never want the questrade advantage to entice you prematurely into trading options before you might be ready.

the suggestion to attend a Montreal Exhange option saturday in toronto is a good suggestion. They port this conference around canada, probably hold it in toronto twice a year.

the MX has an excellent teaching website, one of the best imho. I'm always advocating for their nifty little options how-to primer, you'd think i was a montreal exchange foghorn!

http://m-x.ca/accueil_en.php

click education tab, then guides & strategies, guides, scroll down to equity derivatives, in 3rd section click the PDF entitled "equity options reference manual."

the beauty of this well-written little gem is that nearly everything you need to know for the first year or 2 of trading is set forth in the first 12 pages. That's it. Short pages, too.

the MX website also has a series of excellent webinars, there are webinars for beginners.

your prudence & caution in this area are excellent signs, imho. Also the idea that you would learn by doing a small live trade is good, i personally think the best learning pathway oscillates along one-small-trade-then-study-a-bit-then-make-another-move-then-study-some-more.

however might i caution you against buying long options in the hope they will go up. This is beginners suicide imho. The probability that your selection will perform positively for you in the short life of the option's existence is low. In addition, novices always seem to choose high OTM short-term options because these are the cheapest. They think to themselves, oh well, OK, it's only a little bit of money ...

but the probability is high that these novices are going to lose it all ... alas those high OTM options will most likely decay to zero.

there are starter option strategies that are far more successful.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Not sure I've ever seen a REIT that distributes 90-100% of its cash as ROC.
> Only the ROC is tax deferred (or is cap gains when ACB is zero).


 ... yes, I am talking about RoC and I have seen/owned it. :biggrin: 

Chartwell Retirement Residences has hit:
a) 100% in 2003, 2008 & 2009
b) 95% to 98% in 2007, 2010 & 2011 
c) 83% to 85% in 2005, 2006, & 2012
d) 78% in 2013 & 2014

NorthWest Healthcare Properties is between 94% to 100% from 2010 to 2014.


I probably should have expanded the range a bit but we all make mistakes, right? :frown: 


Where one is looking for better than half the payment as ROC, something as run of the mill as Canadian Apartment REIT from 2014 to 2014 works as it has paid from 64% to 86%, with four of five years being 70% or better.


If RioCan didn't pay so much of their distributions as the highly taxed "Other Income" or "Foreign Non-Business Income", their past ten year history of paying around 50% would attract my attention for a taxable account. (2013 was an exception at 0.53% as well as 2005 at 36%.) 


Cheers


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## Moneytoo (Mar 26, 2014)

humble_pie said:


> there are starter option strategies that are far more successful.


Thank you so much for a detailed reply, HP! If/when I'm ready, I'll open a separate thread to ask questions (from what I read last night, I'd start with writing covered calls on one of the stocks I don't mind selling at a strike, but would keep holding if it drops - for me it would be Cameco for example, now need to figure out how to read option prices as it sounds easy in theory, but looks confusing in reality )


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## damaaster (Mar 27, 2015)

Just started building my own REIT ETF via my TFSA.

So far my holdings are:
AX.UN (50% of portfolio)
RMM.UN (25% of Portfolio)
ED.UN (25% of portfolio)

Looking to add HR.UN and perhaps one or two more.

Though at the AX.UN prices right now I'm tempted to get more.


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## My Own Advisor (Sep 24, 2012)

The TFSA is a GREAT place to build your own REIT ETF! 

Anyone looking at BPY.UN, CSH.UN and SIA?


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## AltaRed (Jun 8, 2009)

My Own Advisor said:


> The TFSA is a GREAT place to build your own REIT ETF!
> 
> Anyone looking at BPY.UN, CSH.UN and SIA?


I have been buying BEI.UN on the premise the Alberta factor has it oversold. CSH.UN is on my Watch List as another niche (retirement residential) in the REIT space but cannot quite figure out the downdraft in recent months. I know CSH.UN has separated out the US assets in its latest quarterly to better compare YOY equivalents assuming the US sale does close this month, so that is relatively transparent. Are investors concerned the US sale won't actually close? We do know Chartwell will use the net proceeds to buy/develop Canadian properties, presumably in an accretive way... or is that the concern? Hard to discern investor reluctance.


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## Moneytoo (Mar 26, 2014)

Just heard the name on BNN, will add to my global REITs watchlist: Inovalis REIT


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## james4beach (Nov 15, 2012)

none said:


> I've never really understood the attraction to dividends. You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


Dividend paying stocks is an absolute mania these days, a consequence of zero interest rate policy by central banks. Basically, people love it because it gives them the feeling that an asset is generating money (paying out cashflow) without any kind of devaluation to core capital. Because the stock market has been rising for six years straight now, people really get the illusion that dividends are free money... because they see both capital appreciation and dividend payouts.

In reality dividend payouts come along with an equal amount of value loss from the company's stock. Of course there is no such thing as free money. The morning a stock goes ex dividend, the stock price drops by an identical amount. But because we're in a never-ending bull market, the _rising stock prices masks_ this part of the dividend story.

What you say is true. If the stock wasn't paying a dividend, the price would simply go higher. You would have the same total return; *dividends do not increase total return*. There's a great article on this, called The Income Illusion.

There are some good reasons to seek dividends, though. By paying out cash, they are automatically extracting cash from your investments, and that might be desirable for retirees. This is probably easier than the alternative, which is a bunch of capital gains that you have to periodically sell off to generate cash.

But for anyone younger who is not living off investments, I don't see any reason to chase after dividend stocks. What you really want is a solid total return and dividends do not enhance that. They just shift money from one bucket to another.

Similarly, if you are just DRIP'ing all your dividends, there is no point in high dividend stocks. The process of DRIP'ing is a zero-sum game; money first leaves the company, comes to you as cash, and then you buy more shares. The amount of equity you own does not change at all!

But none of this matters to people who have already been sold on the idea of dividend-heavy investments. There is heavy marketing from the financial industry about "dividend stocks". Like I said, it's a mania. Very popular. Personally I pursue a strategy specifically based on non-dividend-paying stocks.


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## OnlyMyOpinion (Sep 1, 2013)

As you point out, there are some good/valid reasons to favour dividend paying stocks - or not, depending on your individual plan. Similarly, DRIP'ing can be a valuable means of investing. I didn't read anything new, but thanks for the perspective.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> *dividends do not increase total return*. There's a great article on this, called The Income Illusion.


There's also a good book (one of the few that I actually finished - unlike The Intelligent Investor that bore me to death ): The Single Best Investment by Lowell Miller.

To me, dividend stocks are substitute for bonds, and REITs are a separate asset allocation class (because of their low correlation to both)

But I'm still in "experimentation phase" (as I tend to trust personal experience more than books and articles), and we have a bit of everything: index ETFs, individual stocks (both dividend and growth), gold bullion ETF and what not. So maybe in a few years I'll agree that you were right, but for now I just don't understand why do you like to suggest XIC in a preferred shares thread or a non-dividend strategy in the REITs one - there's a room for all in some portfolios, you know


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> There are some good reasons to seek dividends, though. By paying out cash, they are automatically extracting cash from your investments, and that might be desirable for retirees. This is probably easier than the alternative, which is a bunch of capital gains that you have to periodically sell off to generate cash.
> 
> But for anyone younger who is not living off investments, I don't see any reason to chase after dividend stocks. What you really want is a solid total return and dividends do not enhance that. They just shift money from one bucket to another.


1. Isn't cash flow largely desirable for anyone? Not just retirees? re: dividend payment. There is still some yield in indexed ETFs James, in the form of distributions. 

2. Total return is never guaranteed. _You have the promise of total returns _just like you have the promise of dividends. You make it seems like total returns are an absolute certainty. Capital gains are not simply the cards are in your favour if you own the whole market (index) and you stay in the market long enough.


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## humble_pie (Jun 7, 2009)

canadian dividends come with welcome dividend tax credits & these weight the argument slightly in favour of some eligible dividends to be paid on an ongoing basis.

furthermore, leaving the $$ inside the company, ie zero dividends, does not guarantee capital gains in the future, as Advisor has pointed out.

US dividends outside registered retirement plans are another story. US dividends are 100% taxable as other income or foreign non-business income, who needs that.

it's possible to work around US dividends by holding long-term option strategies in the underlying US stocks. Any dividends get roughly configured into option prices, although not on a dollar-for-dollar basis by any means. 

for parties who do windows but they don't do options, more & more canadian financial product engineers are coming out with vehicles that transform US dividend income into canadian ROC payments, which are taxable as capital gains in the end. Close by is a thread on a royal bank structured Note which does exactly that.

engineered products like the roybank Note will also escape the coming US estate taxation of canadian estates (what?? it's true, washington is looking to tax canadian estates!!) (i believe washington intends to include RRSPs & RRIFs in the taxable estate plate) so one might expect to see more & more such products being offered.


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## humble_pie (Jun 7, 2009)

Moneytoo said:


> Just heard the name on BNN, will add to my global REITs watchlist: Inovalis REIT




money2 i briefly toured inovalis onlne but stopped when i ran smack into the shadowy éminence grise, which is paris-based Inovalis SA. This well-established parent company was founded in 1998, controls several billion Euros worth of real estate in europe. Same chairman of the board, close legal links to canadian REIT although these links are not transparent enough for my taste.

the canadian REIT had an IPO in 2013, by which date the european parent was already 15 years old. Nearly all of the listed canadian reit executives appear to be working out of paris. Only the CFO is based in toronto.

i couldn't get a sense of the relationship between the 2. Totally hazarding a guess, i found myself wondering whether the canadian reit operation is merely a tap from which north american funding can be conveniently piped to inovalis société anonyme in paris, where the actual business is conducted.

my other reason for avoidance is that i'm not a fan of their buildings. The architectural language in every case is the faceless, spiritless, huge hulking office pile that was typical of the 1970s-1990s, when most of the inovalis buildings were erected. The buildings have no human scale, no environmental community, no holistic architecture, no green growing thing, certainly no trees, no wood, no natural materials, nothing but miles of cement, plastic & glass.

curiously, inovalis' real head office at 52 rue de bassano in paris, just off the champs elysée, is a classic example of an elegant 18th century private french *hotel* scaled to a lovely human size.


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## FrugalTrader (Oct 13, 2008)

none said:


> I've never really understood the attraction to dividends. You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


John Bogle would disagree with your statement.

"John Bogle, writing on the website IndexUniverse.com, writes the following: “An investment of $10,000 in the S&P 500 Index at its 1926 inception with all dividends reinvested would by the end of September 2007 have grown to approximately $33,100,000 (10.4% compounded). [Using the S&P 90 Stock Index before the 1957 debut of the S&P 500.] If dividends had not been reinvested, the value of that investment would have been just over $1,200,000 (6.1% compounded) – an amazing gap of $32 million. Over the past 81 years, then, reinvested dividend income accounted for approximately 95% of the compound long-term return earned by the companies in the S&P 500.” In other words, the reinvestment of dividends accounted for almost all of stocks’ long-term total return."


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## Eclectic12 (Oct 20, 2010)

none said:


> ... I've never really understood the attraction to dividends.
> 
> You can get dividends and DRIP to get more stock or no dividends and the stock price goes up. At the end of the day you end up with the same amount.


Where there is a choice ... there is a choice. OTOH, where one wants to buy one of the top banks in Canada - there is no choice.

I've never understood why those don't want dividends are apparently willing to skip in some markets the top companies.




james4beach said:


> ... What you say is true. If the stock wasn't paying a dividend, the price would simply go higher. You would have the same total return; *dividends do not increase total return* ... But for anyone younger who is not living off investments, I don't see any reason to chase after dividend stocks. What you really want is a solid total return and dividends do not enhance that. They just shift money from one bucket to another.


In a perfect world ... maybe. 

IAC - where one is determined to avoid dividends as the total return is perceived to be better without them, good luck investing in sectors that only pay dividends.




james4beach said:


> ... But none of this matters to people who have already been sold on the idea of dividend-heavy investments. There is heavy marketing from the financial industry about "dividend stocks". Like I said, it's a mania. Very popular. Personally I pursue a strategy specifically based on non-dividend-paying stocks.


 ... just as it apparently some have been sold on avoiding sectors of the market.


Cheers


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## Moneytoo (Mar 26, 2014)

humble_pie said:


> money2 i briefly toured inovalis onlne but stopped when i ran smack into the shadowy éminence grise, which is paris-based Inovalis SA.


Thank you for the warning, HP! From basic fundamentals, it looked very similar to Dream Global (with higher yield yet lower dividend payout ratio), and I never dig that deep... which would probably explain 1 year change difference *sigh*


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## humble_pie (Jun 7, 2009)

i believe Dream's structure is simpler, its parent is canada-based Dundee but dream international owns all of its holdings in germany afaik. It's not sharing ownership with or lending to a much bigger paris-based parent.


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## gibor365 (Apr 1, 2011)

> From basic fundamentals, it looked very similar to Dream Global


 I took a look at INO.UN ... market cap is too small , they own only 3 building in Paris and 1 in Bavaria ... I'd better to add to DRG.UN in future....


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## Moneytoo (Mar 26, 2014)

gibor said:


> I took a look at INO.UN ... market cap is too small , they own only 3 building in Paris and 1 in Bavaria ... I'd better to add to DRG.UN in future....


And yet it's up today while DRG is down (diversification, baby! lol)

When is WIR.U coming down?  Can't believe it jumped away from me... sigh


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## james4beach (Nov 15, 2012)

As alluded to above... yes dividends let you get some of the value out of a company NOW, instead of the "promise" of total return in the form of capital gains. Very true that those capital gains may not happen.

The dividend lets you walk away with some of the money, regularly, instead of banking it on all your future sell price.


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## Moneytoo (Mar 26, 2014)

James, could you please share your non-dividend strategy (or at least answer some questions about stock selection - like, do you consider low-dividend stocks - or is it strictly non-dividend?) in this designated thread: http://canadianmoneyforum.com/showthread.php/45682-Avoiding-Dividends-How-are-selections-made ? Thank you in advance!


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> As alluded to above... yes dividends let you get some of the value out of a company NOW, instead of the "promise" of total return in the form of capital gains. Very true that those capital gains may not happen.
> 
> The dividend lets you walk away with some of the money, regularly, instead of banking it on all your future sell price.


Correct, this is my thesis: dividends are "bird in hand". This is why I like them.

Capital gains are "birds in bush". This is why it is good to _expect_ it long-term as part of total return.

This is why I think a hybrid (dividends and indexing) approach would work well for many investors, certainly for those investors who cannot 100% index invest.


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## gibor365 (Apr 1, 2011)

imho Capital gain is "paper" money, Dividends is a "real" money.
During lasr recession everyone portfolio was sharply down, but if you were holding dividend champions, your income was still increasing


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## gibor365 (Apr 1, 2011)

I like individual REITs, for example i hold CUF.UN modest position, In 1 year my dividend income increased by 8.7% , even though they never increased dividends , increase coming from discount DRIPing... and I don't really care if i have CPG or CPL as far as they paying same dividends


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## AltaRed (Jun 8, 2009)

gibor said:


> imho Capital gain is "paper" money, Dividends is a "real" money.
> During lasr recession everyone portfolio was sharply down, but if you were holding dividend champions, your income was still increasing


I agree except for those that DRIP. Re-investing dividends IS betting on future capital appreciation within the company the day it is re-invested as the money has really only gone from one pocket to the other without the tax deferment (in taxable accounts).


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## gibor365 (Apr 1, 2011)

AltaRed said:


> Re-investing dividends IS betting on future capital appreciation.. .


 For me DRIPping IS more betting on dividend sustainability .... thus when I need income , I stop DRIPping and get cash. 
I have no slightest clue what will be JNJ, T, PG ... price in 1, 3, 5 years, but I'm pretty confident that dividends gonna increase (even by 1 cent like T does)

I'm not sure if we gonna achieve it ... but our goal , in retirement, live only on income w/o touching principal and leave to out kids 7 digits portfolio...


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## AltaRed (Jun 8, 2009)

gibor said:


> I'm not sure if we gonna achieve it ... but our goal , in retirement, live only on income w/o touching principal and leave to out kids 7 digits portfolio...


If you do, you will likely be in the 5-10% crowd (I've taken flak before calling it the 1% crowd....so I won't do that). Whether one wants to leave a significant legacy or not is a personal decision. However, if my plan works and I don't die significantly prematurely, I will be spending my portfolio and/or giving it away over time while I am alive so that the legacy would not be material. Given what I have seen amongst close friends and family, the gratitude of legacies wears off very quickly and the old fart is soon forgotten.

FWIW, I like dividends too.... to a degree. I have never DRIP'd except back in the '90s when I re-invested mutual fund distributions (before I got wise). I prefer my cash to go to the purpose to which I specifically direct it. I like to see capital appreciation in my portfolio the most... especially when I see things like 200% or 500% gains over a period of years.


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## gibor365 (Apr 1, 2011)

> Given what I have seen amongst close friends and family, the gratitude of legacies wears off very quickly and the old fart is soon forgotten.


 You know... more and more I tend to agree with this statement.... Also, I think that we reached what we reached, because we didn't have any other choice , as we started from 0, when I immigrated from CCCP age 24, my assets were = $160 and my wife's (age 17) = 0 ...besides, not only we got some legacies, we still support our moms...


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## My Own Advisor (Sep 24, 2012)

I like your thinking gibor:

"Capital gain is "paper" money, Dividends is a "real" money."

I prefer KNOWING I will get paid. Dividend are real. You can't fake them for long. Capital gains are a promise, long-term, a good promise but just that....a promise.

I had to smile with AR's comment:
"I will be spending my portfolio and/or giving it away over time while I am alive so that the legacy would not be material."

Life is for the living and while saving for the future is important, legacies do wear off very quickly so we don't have any plans to have one; except some small monies to a few charities of choice in our senior years TBD.

During lasr recession everyone portfolio was sharply down, but if you were holding dividend champions, your income was still increasing


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## andrewf (Mar 1, 2010)

If you reinvest the dividends, are they really a bird in the hand? It's a bird you caught then let go back into the bush.


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## gibor365 (Apr 1, 2011)

andrewf said:


> If you reinvest the dividends, are they really a bird in the hand? It's a bird you caught then let go back into the bush.



No, it's bird in the cage, I always can open the cage (or to stop DRIP) and take it into my hands


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## andrewf (Mar 1, 2010)

A reinvested dividend is the same as a getting the dividend in the form of shares. No cash flow.


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## cashinstinct (Apr 4, 2009)

not every investor will reinvest dividend, you buy the share of someone else and you increase % owned.

on the other hand, if every shareholder gets a share dividend, it's the equivalent of nothing (example owning 2/8 instead of 1/4 if every shareholder gets a 2nd share).

It's not the same.


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## AltaRed (Jun 8, 2009)

gibor said:


> No, it's bird in the cage, I always can open the cage (or to stop DRIP) and take it into my hands


It's nothing (there is no bird) until you actually stop the DRIP and collect cash. That cash could also be obtained at any time by selling shares for the same amount of cash OR if you are so inclined, by selling all shares of growth stocks and buying dividend paying stocks at going forward for dividend cash payments. It just feels different because of the ease and convenience with which one can do so with a DRIP.


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## bgc_fan (Apr 5, 2009)

andrewf said:


> A reinvested dividend is the same as a getting the dividend in the form of shares. No cash flow.


True, but what I find is that DRIPs helps increase the future cash flow. For example, I purchased a number of BMO shares about 15 years ago and made some small additional purchases since then, but it has grown to a fairly substantial amount of shares with a corresponding increase in total dividends.

The extreme example for the other side would be Berkshire shares which never split or pay dividends.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> andrewf said:
> 
> 
> > A reinvested dividend is the same as a getting the dividend in the form of shares.
> ...


This is 100% true for a true DRIP. 
For a synthetic DRIP it is anywhere from 98% to 0% true as there's usually a cash remainder or in rare cases, too small a dividend to buy one share.


I get the point though.


Cheers


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## damaaster (Mar 27, 2015)

For me personally - as a young investor I like the DRIP on my reits in my TFSA.

I can build up more and more shares over time - and once I'm ready to retire, I can stop Dripping and start earning some tax free income every month. Even if the capital growth is slower, minimal or non existant - they will supply me with a decent monthly income (tax free) in a few years.


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## 1980z28 (Mar 4, 2010)

about time for a pop


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## thepitchedlink (Feb 17, 2014)

1980z28 said:


> about time for a pop


Hey Z28, why do you suspect a pop? Because of the talk of interest rates staying low for a while?


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## My Own Advisor (Sep 24, 2012)

damaaster said:


> For me personally - as a young investor I like the DRIP on my reits in my TFSA.
> 
> I can build up more and more shares over time - and once I'm ready to retire, I can stop Dripping and start earning some tax free income every month. Even if the capital growth is slower, minimal or non existant - they will supply me with a decent monthly income (tax free) in a few years.


Correct


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## 1980z28 (Mar 4, 2010)

thepitchedlink said:


> Hey Z28, why do you suspect a pop? Because of the talk of interest rates staying low for a while?


Yes,you are correct


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## getliquid (Mar 2, 2014)

My Own Advisor said:


> Yes, I have made my own REIT portfolio. I own 5 REITs and let them DRIP every month. No REIT ETF for me, the fees are too high.


which 5 do you hold?


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## My Own Advisor (Sep 24, 2012)

getliquid said:


> which 5 do you hold?


All the top holdings in VRE.


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> All the top holdings in VRE.


I hold REI, HR, AX and CUF + 2 international (WIR.U and DRG)....
Also hold ZRE in one of the accounts.... The major reason i don't debunk it ..... all my REITs spread out among several account and rebalancing would be very complicated


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## My Own Advisor (Sep 24, 2012)

I hear you, but I treat all my holdings as part of one big portfolio. ZRE is at least cheap-er.


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