6.9%
RRIF PORTFOLIO DOING WELL
By Gordon Pape
It’s time for our mid-year look at how our model RRIF portfolio is doing.
This portfolio differs from an RRSP in two fundamental ways. First, it is lower risk. RRIF investors are in their retirement years, and preservation of capital becomes more important as a result. There may not be time to recover from a major loss. Yes, this is a conservative approach in today’s markets, but the reality is that a major stock market crash would make life very difficult for those who rely on their RRIFs for income.
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.
Our RRIF portfolio was created in February 2013 with an initial value of $49,910.30. 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. 20.
iShares Core Balanced ETF Portfolio (TSX: XBAL). Last February we bought 200 units of this ETF at $26.10, for a cost of $5,220. This is a fund of funds, investing in eight basic iShares funds, with a mix of about 60% stocks, 40% bonds. So far, it has performed well. The units are up 5.7% since our purchase, and we received two quarterly distributions totaling $0.261 per unit.
iShares Core Canadian Universe Bond Index ETF (TSX: XBB). This bond fund seeks to replicate the performance of the broad Canadian bond market, including both government and corporate issues. In a bad market for bonds, the units held up well, losing only $0.05 in the latest period. That was more than offset by six monthly distributions totaling $0.41 per unit.
iShares Core U.S. Aggregate Bond ETF (NYSE: AGG). This is similar in concept to XBB except that it tracks the performance of the broad U.S. bond market. Surprisingly, the units have gained US$0.32 since the last review – not a lot, but any profit is welcome in this bond market. Plus, we received six monthly distributions for a total of US$1.025.
Brompton Flaherty and Crumrine Investment Grade Preferred ETF (TSX: BPRF, BPRF.U). This fund invests in US preferred shares and is run by a team of top experts in this area. We added it in February, and the units are up about 2% in the six months since. The real attraction is the monthly distribution of $0.104 per unit ($1.248 per year), which provides excellent cash flow.
Royal Bank of Canada Non-Cumulative 5-Year Rate Reset First Preferred Shares Series BO (TSX: RY.PR.S). This preferred was added one year ago and has performed amazingly well, with a one-year total return of 30%. It pays a quarterly dividend of $0.30 ($1.20 per year).
Granite REIT (TSX: GRT.UN). This REIT was spun out of Magna International in 2011 to take over the properties on which the company’s plants are built. It has since diversified its holdings and operates internationally. It was added to the portfolio last August but got off to a weak start. However, it turned around in the latest six months, gaining 18.3%. We received distributions of $1.50 per unit.
BCE Inc. (TSX, NYSE: BCE). BCE shares rebounded strongly, gaining 18.4% in the latest period. We received two dividends of $0.875 each.
Pembina Pipeline Corp. (TSX, NYSE: PPL). Pembina continued its rally, gaining 12% in the latest six-month period. The company kept its promise of maintaining the monthly $0.21 dividend. We received six payments totaling $1.26 per share in the latest period.
Brookfield Infrastructure LP (TSX: BIP.UN, NYSE: BIP). This limited partnership invests in infrastructure projects around the world. It continues to perform well for us, gaining 6.4% in the last period. We received two distributions of US$0.51 each.
Firm Capital Mortgage Investment Corp. (TSX: FC). We added Firm Capital in February. This company has been a recommendation of this newsletter since 2004 and has been a dependable performer. The shares are up 9.5% since we added Firm to the portfolio and pay a monthly dividend of $0.078 ($0.936 a year), with a year-end top-up in December.
iShares S&P/TSX Capped Utilities Index ETF (TSX: XUT). This ETF invests in a portfolio of utilities stocks traded on the TSX. It was up 5.3% in the latest period, and we received distributions totaling $0.451 per unit.
Innergex Renewable Energy Inc. (TSE: INE). We added this renewable energy stock last August at $22.59. It started off well but took a big hit in the latest period, losing 22.7%. It looks oversold at this price. The stock pays a quarterly dividend of $0.18 ($0.72 a year).
Cash. We moved the cash balance of $2,303.02 to Outlook Financial, which was paying 1.2% on a RRIF eligible account. We earned $13.82.
Here’s a look at the RRIF Portfolio as it stood at the close of trading on Aug. 20. Note that commissions are not deducted, and that US and Canadian currencies are treated at par. 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. 20/21)
| Security | Weight % |
Average Cost |
Shares/ Units |
Book Value |
Current Price |
Market Value |
Retained Earnings |
Gain/
Loss % |
| XBAL | 6.5 | $26.10 | 200 | $5,220.00 | $27.58 | $5,516.00 | $52.20 | + 6.7 |
| XBB | 7.7 | $32.52 | 200 | $6,504.00 | $32.24 | $6,448.00 | $340.80 | + 4.4 |
| AGG | 7.0 | $118.68 | 50 | $5,934.00 | $116.16 | $5,808.00 | $106.85 | -0.03 |
| BPRF | 6.4 | $26.65 | 200 | $5,330.00 | $27.15 | $5,430.00 | $124.80 | + 4.2 |
| RY.PR.S | 7.6 | $19.94 | 250 | $4,985.00 | $25.50 | $6,375.00 | $300.00 | +30.9 |
| GRT.UN | 6.4 | $78.22 | 60 | $4,693.20 | $89.45 | $5,367.00 | $178.08 | +18.2 |
| BCE | 11.6 | $47.89 | 150 | $7,183.05 | $65.11 | $9,766.50 | $788.01 | +46.9 |
| PPL | 7.3 | $47.13 | 160 | $7,540.50 | $38.49 | $6,158.40 | $292.00 | -14.5 |
| BIP.UN | 20.3 | $24,37 | 240 | $6,194.85 | $71.35 | $17,124.00 | $549.12 | +185.3 |
| FC | 8.0 | $13.75 | 450 | $6,187.50 | $15.06 | $6,777.00 | $210.60 | +12.9 |
| XUT | 5.9 | $25.27 | 160 | $4,043.20 | $31.10 | $4,976.00 | $353.92 | +31.8 |
| INE | 4.7 | $22.59 | 200 | $4,518.00 | $19.92 | $3,984.00 | $144.00 | – 8.6 |
| Cash | 0.6 | $476.55 | $490.37 | |||||
| Totals | 100.0 | $68,808.85 | $84,220.27 | $3,440.38 | +27.4 | |||
| Inception | $49,910.30 | +75.6 |
Comments: After some major changes last August, the RRIF portfolio rebounded with a gain of 7.64% in the latest six-month period. As of Aug. 20, the total value (market price plus retained earnings) was $87,660.65 compared with $81,441.12 in February.
Since inception eight and a half years ago, we now have a cumulative total return of 75.6%. That works out to an average annual compounded rate of return of 6.85%. Our target is in the 5% to 6% range, given that much of the portfolio is invested in bonds and preferred shares to limit downside risk. At this point, we are running ahead of that goal.
Changes: We will use retained earnings to add to these positions.
BCE – We will add 10 shares at $65.11 for a total outlay of $651.10. That will bring our total to 160 shares and reduce retained earnings to $136.91.
FC – We’ll buy another 10 shares for $15.06, for a total payout of $150.60. That will give us 460 shares, with $60 remaining in retained income.
XUT – We will add 10 units at a total cost of $311. That gives us 170 in total and leaves $42.92 in cash.
We now have $2,818.05 in cash and retained earnings. We will move that money to EQ Bank’s retirement account, which is paying 1.25%.
Here is the revised portfolio. I will review it again in February.
Income Investor RRIF Portfolio (revised Aug. 20/21)
| Security | Weight % |
Average Cost |
Shares/ Units |
Book Value |
Current Price |
Market Value |
Retained Earnings |
| XBAL | 6.5 | $26.10 | 200 | $5,220.00 | $27.58 | $5,516.00 | $52.20 |
| XBB | 7.6 | $32.52 | 200 | $6,504.00 | $32.24 | $6,448.00 | $340.80 |
| AGG | 6.8 | $118.68 | 50 | $5,934.00 | $116.16 | $5,808.00 | $106.85 |
| BPRF | 6.4 | $26.65 | 200 | $5,330.00 | $27.15 | $5,430.00 | $124.80 |
| RY.PR.S | 7.5 | $19.94 | 250 | $4,985.00 | $25.50 | $6,375.00 | $300.00 |
| GRT.UN | 6.3 | $78.22 | 60 | $4,693.20 | $89.45 | $5,367.00 | $178.08 |
| BCE | 12.2 | $48.96 | 160 | $7,834.15 | $65.11 | $10,417.60 | $136.91 |
| PPL | 7.2 | $47.13 | 160 | $7,540.50 | $38.49 | $6,158.40 | $292.00 |
| BIP.UN | 20.0 | $24,37 | 240 | $6,194.85 | $71.35 | $17,124.00 | $549.12 |
| FC | 8.1 | $13.78 | 460 | $6,338.10 | $15.06 | $6,927.60 | $60.00 |
| XUT | 6.2 | $25.61 | 170 | $4,354.20 | $31.10 | $5,287.00 | $42.92 |
| INE | 4.6 | $22.59 | 200 | $4,518.00 | $19.92 | $3,984.00 | $144.00 |
| Cash | 0.6 | $490.37 | $490.37 | ||||
| Totals | 100.0 | $69,934.37 | $85,332.97 | $2,327.68 | |||
| Inception | $49,910.30 |
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