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Startup hedge funds, private equity funds and venture capital funds in Canada are struggling to raise money. (MARK BLINCH/Mark Blinch/Reuters)
Startup hedge funds, private equity funds and venture capital funds in Canada are struggling to raise money. (MARK BLINCH/Mark Blinch/Reuters)

Market Blog

How to reduce your bills Add to ...

Bills aren't pleasant. Some are necessary expenses related to heating your home or keeping your fridge humming. Others, like cable, are more annoying when you begin to conduct a cost-benefit analysis of watching, say, Jersey Shore.

But here's an investing idea that could offset some of the pain: Invest in companies that charge you for services that bring you no joy.

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When you think about it, these stocks are the ultimate defensive plays. Every month, that cable bill looks you in the eye and dares you to cancel the service or downgrade to a more basic plan. And every month, if you're like most people, you pay in full.

These stocks are clearly different from others that go into a tailspin at the slightest shift in consumer taste or financial health. And in a good way: They tend to be relatively sheltered from big swings in economic growth. Best of all, buying these stocks ensures that a portion of your monthly bills will be returned to you in the form of generous quarterly dividends.

What stocks make the list? Telecom companies are no-brainers, since they provide a number of increasingly indispensable services - such as cable, Internet, phone and wireless - for which their fees rise steadily. Some of the bigger Canadian names include BCE Inc., Shaw Communications Inc., Telus Corp. and Rogers Communications Inc.

Dividends, which also rise steadily, currently yield between 3.6 per cent and 5.5 per cent, which is attractive. Look at it this way: The higher the fees go, the higher the dividends go.

Next, consider any utility-like company that pipes some sort of energy into your home, making you a captive consumer if you want to take warm showers and heat your food. Here, the dividends are also tantalizing, reflecting the fact that these companies are money-spinning machines in good times and bad. TransAlta Corp. has a 5.6 per cent yield, Emera Inc. yields 4.3 per cent, Enbridge Inc. yields 3.4 per cent and Gaz Métro LP yields 7.6 per cent.

Although not as rock-steady, also consider Consumer' Waterheater Income Fund, which owns installed water heaters in Ontario homes. The units yield a startling 13.8 per cent, although the market is signalling that it has little confidence the trust's ability to sustain its cash payout.

For many people, banks are also naturals for the list (full disclosure: I own Royal Bank of Canada and Canadian Imperial Bank of Commerce). They charge fees on everything from bill payments to currency transactions to bounced cheques. And don't forget the interest you pay on your mortgage and the fees you pay (in the form of management expense ratios) on your mutual funds. Buy a bank stock - where yields range between 3.3 per cent and 5 per cent - and all those fees are redirected toward your pocket.

Here's a more contentious idea: Tobacco stocks. North America is becoming a giant no-smoking zone, but you still see a puzzlingly large number of people puffing away. Are smokers driving up your health-care costs? Probably, but tobacco companies are kind enough to offset some of these costs - again, in the form of dividends - if you're willing to become shareholders.

Altria Group Inc. (full disclosure: I own this stock) yields 6.4 per cent, Reynolds American Inc. yields 6.2 per cent and Lorillard Inc. yields 5.2 per cent. If you're a smoker, though, don't go near these stocks. After all, who want to be paid to smoke?

Follow on Twitter: @dberman_ROB

 

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