Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Gordon Pape: With low rates here to stay, it’s time to rethink a balanced strategy and invest in these dividend stocks
If you’re hanging on waiting for GIC rates to get back to “normal” levels, get ready for the long haul, Gordon Pape writes. At current rates, you’d be lucky to break even after taking into account inflation (which will almost certainly rise) and taxes. Based on the rates offered on recent issues, bonds don’t look like a good option for income-oriented investors.
That leaves the stock market. Dividend-paying issues have tended to underperform in recent months, but high-quality companies have maintained their payouts and, in some cases, even raised them. I suggest it is time to reconsider the traditional 60-40 stocks/bonds split and move a higher percentage of assets into low-risk, dividend-paying stocks. Some of the Canadian stocks that should be in every dividend portfolio include Fortis, BCE, Bank of Nova Scotia, Bank of Montreal and Brookfield Renewable Partners. Here’s why.
From Rob Carrick: The cost of playing it safe as an investor is plain as day
The five most important numbers for checking the health of your finances
A health check for your finances is a must in this year of the pandemic, Rob Carrick writes. He recommends apply the five most important numbers in personal finance to your situation and make notes on how you could do better and when you’ll be in a position to make that happen.
They include net worth, the total dollar amount of your assets – home value, investments, cash in savings – minus the amount you owe on your mortgage and other debts. If you’re a homeowner, consider yourself on the right track if your net worth turns positive by your early 40s. This signifies you have paid off a serious chunk of your mortgage and built savings and investments. From there, aim to boost net worth steadily by saving, investing and keeping debt in check. Here are the other four.
More from Rob Carrick: This is why your bond ETF is doing great, even while everyone hates bonds
Why investors were quick to dump shares in the Canadian railways this week
Canada’s two big railways reported quarterly profits this past week that were slightly below analysts' expectations, and the selloff that followed suggests that high stock prices – and hefty valuations – could be challenging in the months ahead, David Berman writes. The shares of Canadian Pacific Railway and Canadian National Railway had been on a tear since March, but the gains raised their respective price-to-earnings ratios to puzzling levels that were well above their long-term averages.
The stocks are pricey, but why? The Canadian railways have good company; U.S. railroads, too, have been performing well. Part of the attraction: Railways have bounced back from the pandemic selloff in February and March relatively quickly, underscoring their durability. But railways are operating other levers that are exciting investors. Read more here.
More from David Berman: Fertilizer stocks are up on good news. Here’s what they need now
Should you buy a currency-hedged ETF? It’s complicated
A reader wants to buy an exchanged-traded fund in Canadian dollars that invests in the S&P 500, and asks whether to choose one that is currency-hedged. John Heinzl responds: The purpose of currency hedging is to neutralize the impact that exchange-rate fluctuations have on your returns. In theory, if your ETF is perfectly hedged, it should achieve the same return – before taxes and fees – of the underlying S&P 500 index, regardless of whether the Canadian dollar rises, falls, or holds steady against the U.S. dollar.
But in practice, hedging doesn’t deliver perfect results. That’s because hedging – which involves buying currency forward contracts to lock in an exchange rate, typically for a month at a time – isn’t exact, and also because it adds to an ETF’s costs. Read more here.
More from John Heinzl: Netflix, Rogers and more investing stars and dogs for the week
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Gordon Pape: In a bad year for REITs, this one is worth a look
It’s been a terrible year for real estate investment trusts. The S&P/TSX Capped REIT Index is down 26.1 per cent year-to-date. By comparison, the S&P/TSX Composite Index is off only 4.9 per cent, not including dividends.
But not all REITs have been hammered. Those that focus on sectors that have thrived during this recession (data centres, for example) have done well. NorthWest Healthcare Properties REIT is one that I like. It’s trading at about the same price at which it began the year and offers a yield of 6.9 per cent. Read more here.
More from Gordon Pape: Brookfield Renewable Corp. has been a big hit, but is it worth a buy?
What investors need to know for the week ahead
In the week ahead, the Bank of Canada makes its next rate announcement on Wednesday and releases its monetary policy report. While no change in interest rates is expected, financial markets will be looking for hints on where the central bank will take its simulative policy from here. Economic data on tap include: U.S. new home sales for September (Monday); U.S. durable goods orders for September (Tuesday); U.S. goods trade deficit plus wholesale and retail inventories for September (Wednesday); Canada’s survey of employment, payrolls and hours for August, U.S. real GDP for the third quarter and U.S. pending home sales for September (Thursday); Canada’s real GDP for August, plus industrial product index and raw materials price index for September, as well as U.S. personal income and spending for September (Friday).
Companies releasing their latest financial results this week include Alphabet, Amazon, Apple, Facebook, Starbucks, Shopify, Microsoft, Altria, Cenovus Energy, Husky Energy, TC Energy, TransAlta Renewables, Fortis, Cogeco, Cogeco Communications, Shaw Communications Fairfax Holdings, Comcast, Eli Lilly, Pfizer, Novartis, GlaxoSmithKline, Chevron, Exxon Mobil, Riocan REIT, Lundin Mining, MEG Energy, Suncor, West Fraser Timber, AMD, coEcolab, Caterpillar, Merck, Maple Leaf Foods, 3M, Boeing, Ford, UPS, eBay, Kellogg, Kraft Heinz, General Electric and Bombardier.