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TD e-Series index funds and Claymore 1-5 Year Laddered Government Bond ETF, but mainly dividend stocks such as McDonald's Corp., Royal Bank of Canada, Shaw Communications Inc., Rogers Communications Corp., Rogers Sugar Inc., Pengrowth Energy Corp. and Liquor Stores N.A. Ltd.
Avrom Digance, now in his mid-40s, invested in mutual funds for years. He had a large percentage in bond funds, so the crash of 2008 and 2009 didn't "decimate" him as much as other investors. As the stock market climbed in 2009 and 2010, he moved out of mutual funds and began investing on his own, in stocks and index funds.
Blended investment approach
Mr. Digance now holds mostly large-capitalization dividend stocks. But part of his portfolio is also passively invested through the Claymore 1-5 Year Laddered Government ETF and TD e-Series index fund family.
"I also look for value opportunities, companies that get hit with bad news or lower-than-expected earnings," he adds. For example, he recently took advantage of the high Canadian dollar to buy undervalued large-cap stocks in the U.S., notably McDonald's Corp., at $75 (U.S.) a share.
"But everyone is on top of that now, so the stocks aren't cheap any more," he continues.
Currently, his plan is to start moving cash into stocks in the consumer staples and utility sectors. One thing he likes about these sectors is the protection they could provide against inflation.
"Getting out of mutual funds and buying dividend stocks in 2009 and 2010. Everything was on sale! It was like a shopping spree for investors. Shoppers Drug Mart Corp. for $34, AGF Management for $14 and Pengrowth Energy Corp. for $10 …."
"Buying George Weston shares for the special dividend. … I thought I was clever enough to get in early and get out quickly. It was only a small position, but a wakeup call that speculating is for speculators. We all have those small mistakes we learn from."
"Build a core of low-cost and no-fee index funds, and then start adding solid dividend-paying stocks."
"For dividend stocks, look at the dividend payout ratio. There's no point investing in a company that pays more in dividends than it earns. Be cautious with high-yield stocks, and stick with quality blue-chip dividend payers."
Mr. Digance offers more commentary and advice on dividend stocks in his blog, Dividend Ninja, at dividendninja.com.
Special to The Globe and Mail
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