BCE CEO George Cope attends the company's AGM in Toronto on Thursday May 9, 2013.Chris Young/The Canadian Press
As part of some spring cleaning in our boys' RESP a few years ago, I cleared out most of the exposure to the stock market.
The last stock standing: BCE Inc. With its fat dividend yield, BCE is a keeper for now.
A heavy weighting of stocks in a registered education savings plan is appropriate when your kids are babies and in grade school. With one son in university and another finishing Grade 11, we can't afford much stock market risk. The BCE shares in the RESP have almost doubled from what I paid back in 2009, but I'm not fooling myself that they're in any way a safe thing to hold. If interest rates squirt higher, this slow-growing blue chip could fall in price.
I figure the dividend income will offset any declines. Based on the mid-April price of $49, BCE shares yield about 5 per cent. The yield we're getting in the RESP is quite a bit higher, though. When the shares were bought, they cost about $25.35 each. Today's quarterly dividend of 61.75 cents per quarter produces a yield of 9.7 per cent on that investment. BCE has boosted its dividend multiple times since I bought the shares, and further increases are possible. Even without them, the shares could stand still in price and nevertheless be an attractive source of income.
I'll probably sell the BCE shares when my youngest son heads to university or college. At that point, I'll look at dividing the assets in the RESP evenly into four buckets, one a high interest investment account (the smart investor's money market fund) and three into bonds or guaranteed investment certificates maturing in one through three years. As each matures, the cash will be withdrawn from the RESP and used to pay for a year's costs. The fourth and final year of school will be paid for with the money in the investment savings account, which will also be available for funding emergencies along the way.
Rob Carrick