# Ideas for new TFSA stock Investments



## warp (Sep 4, 2010)

We have just received some cash in several of our TFSA accounts from the recent buyout of CML Healthcare. I would appreciate any ideas out there about what might be a good investment for this cash.

Thanks for any thoughts and ideas.


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## james4beach (Nov 15, 2012)

Going to need more parameters than just that! Could you be more specific?

So you only want stock investment ideas? (going by your title)

What is your comfort level with risk? Are you willing to hold this investment for 10, 20 years or more?


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## My Own Advisor (Sep 24, 2012)

The money was nice to see eh warp? 

I'll probably buy some REITs.


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## warp (Sep 4, 2010)

Yes the money was nice to see,,,even if it arrived a day late.
We had owned CML for several years...bought at different prices,,,but having CML get bought out at that nice premium was good.,,,,and the divs over the years was nice....

So I am looking for similar type investments....Stable businesses,,(in fact boring businesses are always good), that pay a reasonable diividend. Riets are one idea.....any others out here?

Thanks for all ideas/suggestions


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## james4beach (Nov 15, 2012)

Answering based on your parameters: maybe some utilities stocks, ZUT or some of its holdings. ZUT yields 6.08 - 0.62 mer = 5.46% yield

My warnings however would be that ZUT (like REITs) will likely drop if interest rates rise. Also, some utilities have recently cut distributions so the rather high distribution yield on the sector ETF is an indication that some further distribution cuts are expected.

If buying this, I would not be counting on capital gains


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## My Own Advisor (Sep 24, 2012)

I like james4beach's call as well.

ZUT and some of its larger holdings are worthy of consideration, namely FTS, EMA, CU and PPL.


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## Sampson (Apr 3, 2009)

Round out your portfolio. Buy where you need to buy.

Interest rate movements will impact ETFs like ZUT enormously.


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## liquidfinance (Jan 28, 2011)

ZUT holds too many dogs. 

I'm with MOA. Just pick the best few form ZUT.


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## warp (Sep 4, 2010)

I have considered Fortis and Emera.....they have pulled back recently.
A rise in interest rates will probably affect them as well as the reits.

Any other suggestions? Perhaps I should be asking what others on the board have recently purchased in their TFSA's. ( or even in other accounts)....and why they felt they were good investments.

I wouldn't mind getting some bonds or debentures for the tax free income......but rates today are so low,,,and if you can get a good yield on a debenture,,,you may have to accept a less than perfect rating.


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## leeder (Jan 28, 2012)

Warp, what's your current objective with your investments? Are you looking for income or growth? Do you index? If you are looking for something that pays distributions, you should consider dividend ETFs such as ZDV. I have also noticed some of the pipeline stocks have pulled back a bit.


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## HaroldCrump (Jun 10, 2009)

warp, I for one, would not be buying anything high yield right now.
Certainly not utilities that are strongly based on bond yields.
In fact, a low yield or no yield growth company might be the best place to look right now.

How about some other sector, such as infrastructure, consumer discretionary, pharma, or energy services.
Such as Stantec, Aecon, ESI, FTT, TCW, just to name a few.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> warp, I for one, would not be buying anything high yield right now.
> .


But what is wrong with REITs? Regadless of interest rates, if REIT has sustainable dividends , it's not too bad if you are looking for income stream...
Other options, may be BBD.B or banks...

From Harolds' list I like FTT....


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## HaroldCrump (Jun 10, 2009)

gibor said:


> But what is wrong with REITs? Regadless of interest rates, if REIT has sustainable dividends , it's not too bad if you are looking for income stream...


gibor, you have to examine each REIT and look into the nature of its debt and leases.
What are the remaining terms of their debt notes? What is the current interest rate they are paying?
Also, what are the remaining terms on their leases? What kind of rent increase protection do they have in the event of rising financing costs?

Secondly, if long bond rates keep heading higher, slowly but surely, your REIT portfolio will experience capital losses.
Perhaps nothing drastic, but a slow and sustained loss of few cents every week.
After 6 mo. or so, you may find you are down a dollar or two on the price.

Yes, you will be getting a monthly income but the portfolio as a whole may be down or break even at best.

For someone who has no REITs in their portfolio, sure go in now, it could be a good time to buy some.
But don't go too crazy.


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## warp (Sep 4, 2010)

Thanks for the replies, and ideas.

For the past several years, I have noticed that I can find a whole lot of things to buy in the US, but having trouble finding things to invest in, here in Canada. I dont want to buy US in the TFSA'a because of the withholding taxes, which will be lost forever. 
I am thinking ob buying UK stocks, because there qwill be no taxes withheld on divs...but do not want to convert into any more $US , as we already have substantial $US holdings in cash account, and registered accounts.

We already have some ZDV , but am also considering just buying more, to make things simple. Still I would prefer to find individual stocks to buy here in Canada for the TFSA's. 

I always consider that while gains in the TFSA are wondersull...losses in the TFSA's are doubly worse because losses cannot be used to offset capital gains in a cash account.
Perhaps a stable bank , like BNS might be another option.


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Secondly, if long bond rates keep heading higher, slowly but surely, your REIT portfolio will experience capital losses.
> Perhaps nothing drastic, but a slow and sustained loss of few cents every week.
> After 6 mo. or so, you may find you are down a dollar or two on the price.
> 
> ...


This is what actually already happenning .... but it all depends on priorities, I care more about accummulating shares by DRIPing and have income flow ... anyway we're not planning to touch TFSA principal .
I found it more usefull than just to look at TFSA "paper" appreciation . For example, I had 2-3 years ago PALL in TFSA, I had very nice "paper" profit at some point , but here I needed to time market to get this profit by selling at very right time. OK, I sold not too bad and got some profit, on other hand I gor some losses on PPLT. So, I decided not to play "rouletta" and concentrate on dividend stream


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## liquidfinance (Jan 28, 2011)

warp said:


> Thanks for the replies, and ideas.
> 
> For the past several years, I have noticed that I can find a whole lot of things to buy in the US, but having trouble finding things to invest in, here in Canada. I dont want to buy US in the TFSA'a because of the withholding taxes, which will be lost forever.



If there is a good opportunity out there why pass on it because of 15% withholding tax?

Also If you hold the US$ ADR's the price is tied into the strength or lack of the GBP? Your currency risk is the GBP


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## andrewf (Mar 1, 2010)

Yes. Don't let the withholding tax dictate what you can invest in. For something that yields 2%, we're talking about 0.3% drag on returns per year.


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## My Own Advisor (Sep 24, 2012)

I think ZDV is a great product. Surprised more people don't invest in it.


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## james4beach (Nov 15, 2012)

REITs are generally leveraged businesses, right? I may be wrong but I thought most of them are leveraged.


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## liquidfinance (Jan 28, 2011)

My Own Advisor said:


> I think ZDV is a great product. Surprised more people don't invest in it.


I quite like it. As well as XDV although you have to consider the financial weighting of XDV.


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## james4beach (Nov 15, 2012)

I've also been interested in ZDV for some time, but last time I looked there were some pretty high risk names (very high payouts) among its top holdings.


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## warp (Sep 4, 2010)

liquidfinance said:


> If there is a good opportunity out there why pass on it because of 15% withholding tax?
> 
> Also If you hold the US$ ADR's the price is tied into the strength or lack of the GBP? Your currency risk is the GBP



As I have said, I already have a lot of US equities, in $US, and so I already pay quite a lot of withholding taxes to the USA. I can use these to offset Canadian taxes payable at tax time.
Therefore I do not want to pay any more tax dollars to the US, and also I do not want to increase my US holdings further by buying them in my TFSA.

I realize that by buying UK strocks as ADR's in New York, I have some exposure to the GBP..( UK Pound), and again I would have to convert more $Can into $US to do that, though I'd prefer not to.

I would rather buy Canadian....I'm having a hard time finding any real value here though...which is why I was asking for suggestions. Some of the banks look interesting...and stable.

All replies are appreciated.


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## warp (Sep 4, 2010)

james4beach said:


> I've also been interested in ZDV for some time, but last time I looked there were some pretty high risk names (very high payouts) among its top holdings.


OK James,,,which ZDV holdings do you consider high risk/high payouts?
Would you post them , please?


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## liquidfinance (Jan 28, 2011)

warp said:


> OK James,,,which ZDV holdings do you consider high risk/high payouts?
> Would you post them , please?



I had a look at the holdings a couple of weeks back I can post up my findings when I get home assuming you haven't had a response in the meantime.

As a side thought is it not better to hold US stocks within a TFSA than to offset your Canadian taxes aginst US tax paid. The end result is you are still paying over 15% tax.


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## My Own Advisor (Sep 24, 2012)

I don't see how many ZDV holdings are high risk payouts. Risky, yes, but all equities are.


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## My Own Advisor (Sep 24, 2012)

liquidfinance said:


> I quite like it. As well as XDV although you have to consider the financial weighting of XDV.


Might as well own 5 or 6 bank stocks vs. XDV. Which I do 

Own those stocks and some ZDV, more diversified in CDN stocks.


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## Butters (Apr 20, 2012)

Banks are solid
ENB looks okay too
REI.UN
could try CPT or IMG for a very long shot

I'm in this same debate, I think I'll go BNS

Sell next summer, pay off some of my mortgage, wait for the collapse(within 2 years im guessing/hoping).. then SM


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## liquidfinance (Jan 28, 2011)

My Own Advisor said:


> Might as well own 5 or 6 bank stocks vs. XDV. Which I do
> 
> Own those stocks and some ZDV, more diversified in CDN stocks.



Lack of funds. I want exposure to the banks. Haven't got a lump some readily available to invest in the ones I want. Nothing I want to sell either. Re invest some of my dividends to buy XDV sans commission. So yes I agree own the banks if you can but XDV works for me.


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## Sherlock (Apr 18, 2010)

I replaced my CLC with DR.to (Medical Facilities Corp), since I wanted something that paid a similar div and to retain a portion of my portfolio in the medical sector.


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## My Own Advisor (Sep 24, 2012)

Nothing wrong with XDV Liquidfinance. Still one of the best dividend ETFs out there.


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## liquidfinance (Jan 28, 2011)

ZDV Holdings and Payout 

The data was taken from Morningstar / Reuters. 

I want to look into the higher ratios in more details but I think it gives a good over view. 
I've also put in the 5 year dividend increase. Still meaning to add in the last increase so sorry it's a bit rough looking

https://docs.google.com/spreadsheet/ccc?key=0AqviP4_LqiqJdDFTNlVGa19xMzl6U1lZZk5rLXd2WXc&usp=sharing


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## wendi1 (Oct 2, 2013)

For a TFSA, I would not buy dividend stocks or dividend-spewing ETFs - you lose the dividend tax credit.

TFSA, for me, is strictly for Canadian growth stocks (although there is a case to be made for keeping HISA or other interest-bearing creatures in there, too). HISA if you will use the TFSA for an emergency fund.


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## Synergy (Mar 18, 2013)

wendi1 said:


> For a TFSA, I would not buy dividend stocks or dividend-spewing ETFs - you lose the dividend tax credit.
> 
> TFSA, for me, is strictly for Canadian growth stocks (although there is a case to be made for keeping HISA or other interest-bearing creatures in there, too). HISA if you will use the TFSA for an emergency fund.


The problem with pure growth stocks in a TFSA is that you can't claim a capital loss and you can't top up the balance of any of those loses. Additionally, capital gains on growth stocks are also pretty tax friendly in non-registered accounts - compared to HISA's, bonds, REIT's, etc.


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## wendi1 (Oct 2, 2013)

Agreed - I'm livin' that particular nightmare right now (LOL). But the dividend tax credit is significant (unlike the US withholding tax on dividends, which is tiny).


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## liquidfinance (Jan 28, 2011)

wendi1 said:


> Agreed - I'm livin' that particular nightmare right now (LOL). But the dividend tax credit is significant (unlike the US withholding tax on dividends, which is tiny).


But... Do you still owe tax on the dividends? If so TFSA still wins against the tax credit. Surely...


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## My Own Advisor (Sep 24, 2012)

Remember Wendi1, TFSA withdrawals are not subject to income tested government programs. Yes, you lose the tax credit but there is still no tax and it doesn't count against any earned income


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## leeder (Jan 28, 2012)

ZDV holds more energy stocks than other dividend ETFs, which makes it slightly riskier. That said, this product is diverse and has pretty decent MER. I'm terms of holdings, I would say that, aside from more dividend paying energy stocks, the holdings are pretty typical of what you see in other similar products.


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## OnlyMyOpinion (Sep 1, 2013)

Perhaps TSFA's as the 'emergency fund', fixed income part of the portfolio (we hold corp strip bonds in them that would otherwise be taxed as interest income). The RRSP for the longer term steady growth etf's, stocks (and some more fixed income), and the Trading Acc for DRIP'd dividends and capital gains?


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## james4beach (Nov 15, 2012)

leeder said:


> ZDV holds more energy stocks than other dividend ETFs, which makes it slightly riskier


Why does that make it riskier?

Most dividend funds are heavy in financial stocks, and with that high single sector exposure I feel that the usual funds (like XDV) are the riskier ones


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## warp (Sep 4, 2010)

If we could get the interest rates on cash or bonds, ( govt and corp) from a few years ago, it would be great to use TFSA'a as part of one's fixed income portion of a portfolio. These days with interest rates so low,,,returns are puny even as TFSA account balances grow.

OnlymyOpinion: You said "(we hold corp strip bonds in them that would otherwise be taxed as interest income)"'

I would be interested to know what corp strip bonds you are holding as the rates offered on them are so low right now that I can see none worth owning for the long term.

Oh to have the brilliance to buy piles of long term strip bonds back in the 80's that returned 12-18% componded!!


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## My Own Advisor (Sep 24, 2012)

I hold bonds since they prevent me from doing some stupid things to the portfolio. Otherwise, all equities, especially in TFSA.


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## Eclectic12 (Oct 20, 2010)

wendi1 said:


> For a TFSA, I would not buy dividend stocks or dividend-spewing ETFs - you lose the dividend tax credit.
> 
> TFSA, for me, is strictly for Canadian growth stocks (although there is a case to be made for keeping HISA or other interest-bearing creatures in there, too). HISA if you will use the TFSA for an emergency fund.


As with a lot of other things, YMMV depending on where one is in life ...

For a senior who is approaching an income threshold that could reduce gov't benefits, putting dividend stocks in a TFSA makes sense as the dividends received are multiplied by 38% (in 2012) to be included in the income that is used to figure out if a clawback will occur.

http://www.milliondollarjourney.com/old-age-security-and-the-oas-clawback.htm
http://www.milliondollarjourney.com/tfsa-vs-rrsp-clawbacks-income-tax-on-seniors.htm

So $1 made as a capital gain will show up as $0.50 while the same $1 as a dividend will show up as $1.38 from an income threshold perspective.


The DTC will even things out from a taxes charged perspective but the income test is on income, not the taxes owed.


Cheers


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## warp (Sep 4, 2010)

The gross up on dividends that produces an artificially high taxable income "number" is scandalous. Grossing up dividends by 138 % is causing a lot of greif, for no reason, and the govt knows it, but will not correct this unfairness. ( probably because they want to get their hands on as many tax dollars as they can......fair or not).

It hurts many seniors, including mid income seniors, because it forces them to lose some of their age deduction if over 65, due to the artificial income..... as well as being used for the old age pension clawback. which costs seniors who have saved and invested unfairly.

In Ontario the artificial income forces taxpayers to pay more Ont Health TAX than they should, bedause this tax is based right off the taxable incoem number which is made articiallly high due to dividend gross up.

It hurts students who have investment accounts producing dividends because if the grossed up dividends, ( added to other income like working part time and RESP withdrawls), puts them in a taxable situation, they are forced to use their education credits against this artificial never-actually-received income BEFORE they ever get to use the dividend tax credits, ( which now becomes useless to them). They will not allow you to carry forward education credits if using the dividend tax credits would eliminate your taxes owing.....this is very unfair.

The whole system is ludicrous...and can be very easily corrected by allowing taxpayers to deduct the gross-up amount of dividends, ( to reflect the ACTUAL amount of money earned)... before coming up with a figure for these other taxes, and clawbacks


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