Why wealth really matters. Plus, the surprising performance of stocks cutting dividends, and the 60-40 portfolio lives on

The Highest Forms of Wealth from the Collaborative Fund investing site is notable in that it describes financial goals in terms of how they should make us feel, rather than how much it can purchase. There will always be something else to buy, so this framework helps investors decide when they are finally comfortable, when enough is enough.

The article emphasizes that the ability to control time is the most important feature of wealth. Financial stability that allows someone to wake up with the freedom to do whatever they want – work or not work, travel or stay home – is a hugely rewarding experience. “Even if you’re doing the same work, the independence of doing it on your own terms changes everything,” author Morgan Housel writes, “in the same way that sleeping in a tent is fun when you’re camping but miserable when you’re homeless.”

The freedom to not have to think about money is second on the list of highest forms of wealth. Critically, “desiring money beyond what you need to be happy is just an accounting hobby” and “how much money people need to be happy is driven more by expectations than income.” These sentiments underscore the danger of feeling that no amount of wealth is enough.

The third variety of wealth – the freedom to be honest at work - was a surprise but makes perfect sense. The sense that our labour is worthwhile and helpful, the ability to criticize internal norms, to not have to look busy to please a manager, are very conducive to happiness. A truly wealthy person can leave their unfulfilling job and this too is an important form of wealth.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Corus Entertainment Inc. (CJR-B-T) Month-to-date, the share price of this media firm has declined 11 per cent, but analysts are bullish. The stock has seven buy recommendations out of the eight analysts who cover the company, and the average one-year target price implies the share price has 43-per-cent upside potential over the next year. Yet, this dividend stock may not be right for many conservative investors. Jennifer Dowty tells us why in this stock profile.

TVA Group Inc. (TVA-B-T) In the brave new digital entertainment universe, is there still value to be found in a thinly traded stock in the traditional broadcasting space? The students of value professor Dr. George Athanassakos seem to think so. He explains why.

The Rundown

Bond yields have staged a surprising retreat. How low can they go?

This summer’s surprising plunge in the payoff from safe government bonds is raising questions about just how far interest rates may fall over the next few months and how long they may stay there. As Ian McGugan tells us, the recent fall in bond yields demonstrates that investors should be wary of assuming how this very unusual recovery will proceed.

Dividend revival: Canadian companies that cut payouts last year have staged a remarkable rebound

When a company slashes its dividend amid gloomy operating conditions, investors are rarely delighted. Perhaps they should be: Companies that cut their payouts in 2020 are enjoying a remarkable comeback this year. David Berman looks at this unusual development.

Don’t write the obit for the 60-40 portfolio just yet

The Vanguard Balanced ETF Portfolio was the 20th bestselling exchange-traded fund in the first half of 2021, which seems a middling achievement. Actually, though, it’s notable if you recall the narrative that emerged more than a year ago about how the 60-40 portfolio was dead. Rob Carrick explains.

Robinhood’s meme stock status fuels IPO uncertainty

Robinhood Markets Inc thrived thanks to the popularity of so-called meme stocks such as GameStop Corp with retail investors. Becoming a meme stock itself comes with trading volatility that is giving pause to some potential investors in its initial public offering. Krystal Hu and Echo Wang of Reuters report.

Also see: How Robinhood’s public listing ups the regulatory stakes

Others

Number Cruncher: These six U.S.-listed automaker stocks look undervalued

Number Cruncher: As restaurants begin to reopen, how are their stocks doing?

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Markets tire of anti-greenback bet as central banks diverge

International investor concerns mount over China’s tech rout

Global ETFs draw record inflows in first half of 2021

Globe Advisor

Will ‘pandemic stocks’ remain attractive for investors’ portfolios?

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Ask Globe Investor

Question: In The Single Best Investment, Lowell Miller writes that a company’s bonds should have a Standard & Poor’s credit rating of BBB+ or better – considered “investment grade” – to qualify as a suitable stock. Is the bond rating something you consider when buying a stock for your model portfolio? Is there an easy way to check this for individual companies in Canada? I have tried scrolling through lists of bonds in my brokerage account but I can’t seem to find bond ratings for individual companies.

Answer: Yes, I consider the credit rating when buying stocks personally and in my model Yield Hog Dividend Growth Portfolio (tgam.ca/dividendportfolio). A lousy credit rating indicates that a company could have trouble meeting its obligations, and in such cases the dividend is often the first casualty. For that reason, I usually stay away from companies whose bonds are rated as “speculative,” or below investment grade.

Mr. Miller’s minimum credit rating is slightly more stringent than the common definition of investment grade, which includes anything rated BBB- or higher by Standard & Poor’s. According to S&P, companies in the BBB family generally have “adequate capacity to meet financial commitments, but [are] more subject to adverse economic conditions” than those rated A, AA or AAA. (Fitch and DBRS use a similar letter rating system as S&P, while Moody’s defines investment grade as anything rated Baa3 or higher on its scale.)

(One exception to the investment grade rule in my model portfolio is Restaurant Brands International Inc., whose debt is rated BB by S&P. However, the agency recently upgraded the owner of Tim Hortons, Burger King and Popeyes to “stable” from “negative,” saying it expects a continued rebound in sales and profitability as the pandemic recedes and the company opens more franchised restaurants. So I’m comfortable giving Restaurant Brands some slack on its credit rating.)

There are several ways to find a company’s credit ratings. One is to check the investor relations section of its website. A Google search of “BCE credit rating,” for example, brought up a company web page with all of BCE Inc.’s bond, commercial paper and preferred share credit ratings from S&P, Moody’s and DBRS. BCE and other companies typically provide additional credit rating information and analysis in their annual reports.

Another option is to go directly to the credit rating agencies themselves. For example, the DBRS website – dbrsmorningstar.com – lets you search for a company and read detailed reports about its recent credit rating changes or confirmations. This will give you an even deeper understanding of the company’s financial position and outlook. S&P and Moody’s also make credit reports available, but you’ll need to register to get access.

--John Heinzl

What’s up in the days ahead

The Contra Guys aren’t giving up on a tiny stock operating in the oil patch. They’ll explain why they continue to bet on McCoy Global.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff