Rate of Return: 5.5%
Initial Value $49910.30
February 20, 2013
Update Value $92354.64
August 29, 2024
BIG GAIN FOR RRIF PORTFOLIO
By Gordon Pape, Editor and Publisher
We have finally seen a sharp turnaround in the fortunes of our Income Investor RRIF Portfolio. The two rates cuts by the Bank of Canada and the expected easing by the US Federal Reserve Board in September have changed the investing dynamic. If present trends continue, we should expect to see stronger growth going forward.
This model portfolio was created in February 2013 with an initial value of $49,910.30. So, we now have 11 1/2 years of experience with it. It’s been a bumpy ride, especially in the past two years, but the portfolio is performing as we originally expected.
This portfolio differs from an RRSP in two fundamental ways. First, it is designed to be lower risk. RRIF investors are in their retirement years, and preservation of capital becomes more important as a result.
Second, the portfolio should generate income to provide cash for the annual withdrawals. That means focusing on securities with good yields as opposed to those that depend on capital gains for investor returns. These securities tend to be interest sensitive.
Here are the current positions with a commentary on how they have fared since the last review in February. Prices are as of the close on Aug. 23.
CI High Interest Saving ETF (TSX: CSAV). This low-risk ETF holds high-interest deposit accounts in Canada’s major banks. Returns are low but dependable. We received five distributions for a total of $0.997 per unit.
iShares Core Balanced ETF Portfolio (TSX: XBAL). This is a fund of funds that invests in eight basic iShares ETFs. The current mix of about 60% stocks, 39% bonds, and a small amount of cash. The units posted a gain of $1.82 in the latest period. We received two quarterly distributions totaling $0.345 per unit.
Royal Bank of Canada Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BO (TSX: RY.PR.S). This preferred was reset earlier this year. The quarterly dividend was raised to $0.3678 ($1.4712 a year) and the shares gained $3.14. We received two quarterly dividends.
Minto Apartment REIT (TSX: MI.UN). We added this REIT at the time of our February update. It has been a disappointment so far, losing $0.64 in the intervening six months. However, it offers dependable distributions of $0.042 a month.
BCE Inc. (TSX, NYSE: BCE). BCE shares continue to slump, despite improved financial results. The stock fell $3.50 in the latest period. We received two dividend distributions for a total of $1.995.
Pembina Pipeline Corp. (TSX, NYSE: PPL). Pipeline stocks are on a roll, and Pembina shares gained $6.96 in the latest six-month period. We received two dividend payments totaling $1.3575 per share.
Brookfield Infrastructure LP (TSX: BIP.UN, NYSE: BIP). This limited partnership invests in infrastructure projects around the world. The units were up $2.94 in the latest period. We received two distributions totaling US$0.81.
Firm Capital Mortgage Investment Corp. (TSX: FC). Like most of the holdings in this portfolio, the shares were hit by rising interest rates. However, that cycle appears to be over. The stock price lost only $0.02 in the latest period, and we continue to collect a steady monthly dividend of $0.078. The yield is 8.1% at the current price.
iShares S&P/TSX Capped Utilities Index ETF (TSX: XUT). This ETF invests in a portfolio of utilities stocks traded on the TSX. The units gained $2.09 in the latest six months, aided by falling interest rates. We received distributions totaling $0.449 per unit.
Royal Bank of Canada (TSX, NYSE: RY). We replaced TD Bank with Royal Bank common stock at our last review. It turned out to be a timely move. RY’s shares gained $22.87 during the period, and we received two dividends totaling $2.80.
Manulife Financial (TSX, NYSE: MFC). We added Manulife to the portfolio in February, and it’s off to a good start. The stock price is up $3.87, and because of timing, we received three quarterly dividends for a total of $1.20 per share.
Cash. We deposited our cash and retained earnings of $2,104.50 with EQ Bank, which was paying 3% on retirement accounts. We received $31.57 in interest.
Here’s a look at the RRIF Portfolio as it stood at the close of trading on Aug. 23. Note that commissions are not deducted. Although this is a RRIF portfolio, withdrawals are not factored in, as this would make it impossible to track performance accurately.
Income Investor RRIF Portfolio (a/o Aug. 23/24)
| Security | Weight % |
Average Cost |
Shares/ Units |
Book Value |
Current Price |
Market Value |
Retained
Income |
Gain/
Loss % |
| CSAV | 23.3 | $50.04 | 410 | $20,516.40 | $50.19 | $20,577.90 | $842.55 | +4.4 |
| XBAL | 6.6 | $26.10 | 200 | $5,220.00 | $29.28 | $5,858.00 | $302.00 | +18.0 |
| RY.PR.S | 8.6 | $20.34 | 300 | $6,102.00 | $25.45 | $7,635.00 | $259.58 | +29.4 |
| MI.UN | 5.3 | $17.07 | 285 | $4,864.95 | $16.43 | $4,682.55 | $71.82 | -2.2 |
| BCE | 9.6 | $49.16 | 180 | $8,849.35 | $47.26 | $8,506.80 | $555.51 | +2.4 |
| PPL | 11.0 | $46.84 | 180 | $8,431.20 | $53.80 | $9,684.00 | $662.50 | +22.7 |
| BIP.UN | 7.5 | $19.73 | 150 | $2,959.50 | $44.25 | $6,637.90 | $550.00 | +142.9 |
| FC | 7.3 | $13.49 | 565 | $7,623.29 | $11.53 | $6,514.45 | $276.67 | -11.7 |
| XUT | 5.5 | $25.64 | 180 | $4,614.90 | $27.16 | $4,888.80 | $186.84 | +10.0 |
| RY | 12.4 | $133.22 | 70 | $9,325.40 | $133.22 | $10,926.30 | $196.00 | +19.3 |
| MFC | 2.5 | $32.81 | 60 | $1,968.60 | $36.68 | $2,200.80 | $72.00 | +15.4 |
| Cash | 0.4 | $235.10 | $266.67 | |||||
| Totals | 100.0 | $80,710.69 | $88,379.17 | $3,975.47 | +14.4 | |||
| Inception | $49,910.30 | +85.9 |
Comments: The change in the direction of interest rates has invigorated this portfolio. We gained 7.7% in the latest six-month period. It’s been a long time since we’ve had an advance of that magnitude.
As of Aug. 23, the total portfolio value (market price plus retained earnings) was $92,354.64 compared with $85,779.90 in February. Since inception 11 1/2 years ago, we have a cumulative total return of 85.9%. That works out to an average annual compound rate of return of 5.5%. Our target is 5% to 6%, so we are at the middle of that range.
Changes: A couple of our positions are underperforming, such as BCE, but I expect them to recover. So, we will not make any changes to the portfolio except to reinvest some of our retained earnings, as follows.
CSAV – We will buy 10 units for a cost of $501.90. We now own 420 units and have $340.69 in cash.
XBAL – We’ll add 10 units for an expense of $292.80. Retained earnings drop to $9.20.
RY.PR.S – We’ll buy another 10 shares for $254.50. We now own 310 shares, with $5.08 remaining in the retained earnings column.
BCE – We will buy another 10 shares for a cost of $472.60. We now own 190 shares and have $82.87 in retained earnings.
PPL – We’ll buy 10 shares at $53.80 for a cost of $538. We now have 190 shares and $124.50 in retained earnings.
BIP.UN – Here again we’ll add 10 units for an outlay of $442.50. We now own 160 units, with $107.50 in retained earnings.
FC – Finally, we will add another 20 shares of Firm Capital at $11.53, for a total payout of $230.60. That will give us 585 shares. Our retained earnings will fall to $46.07.
We have cash and retained earnings of $1,511.64, which we will keep with EQ Bank, which is paying 3% on retirement accounts.
Here is the revised portfolio. I will revisit it in February.
Income Investor RRIF Portfolio (Revised Aug. 23/24)
| Security | Weight % |
Average Cost |
Shares/ Units |
Book Value |
Current Price |
Market Value |
Retained
Income |
| CSAV | 23.1 | $50.05 | 420 | $21,020.30 | $50.19 | $21,079.80 | $340.69 |
| XBAL | 6.7 | $26.25 | 210 | $5,512.80 | $29.28 | $6,148.80 | $9.20 |
| RY.PR.S | 8.7 | $20.50 | 310 | $6,356.50 | $25.45 | $7,889.50 | $5.08 |
| MI.UN | 5.1 | $17.07 | 285 | $4,864.95 | $16.43 | $4,682.55 | $71.82 |
| BCE | 9.9 | $49.06 | 190 | $9,321.95 | $47.26 | $8,979.40 | $82.91 |
| PPL | 11.2 | $47.21 | 190 | $8,969.20 | $53.80 | $10,222.00 | $124.50 |
| BIP.UN | 7.8 | $21.26 | 160 | $3,402.50 | $44.25 | $7,080.00 | $107.50 |
| FC | 7.4 | $13.41 | 585 | $7,843.89 | $11.53 | $6,745.05 | $46.07 |
| XUT | 5.4 | $25.64 | 180 | $4,614.90 | $27.16 | $4,888.80 | $186.84 |
| RY | 12.0 | $133.22 | 70 | $9,325.40 | $133.22 | $10,926.30 | $196.00 |
| MFC | 2.4 | $32.81 | 60 | $1,968.60 | $36.68 | $2,200.80 | $72.00 |
| Cash | 0.3 | $269.03 | $269.03 | ||||
| Totals | 100.0 | $83,470.02 | $91,112.03 | $1,242.61 | |||
| Inception | $49,910.30 |
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