Investment Q&A

Q: What do you make of recent news about Transcanada offering lower rates to to companies wanting to transport natural gas in its pipelines? Do you know if this is for existing customers or new customers only? What does this mean for other pipeline companies? Is this an indication of a loss of pricing power? And lastly, what could it mean for the prospects for future dividend increases?

Thanks, and keep up the good work,

Q: Further to today's Q&A from Stephen R. re sector diversification and PPL / TRP, I too have a similar issue with TRP and ENB. I have been (arbitrarily) assigning both of these holdings as half Energy, and half Utility. Could you give me your opinion on this approach. Thanks kindly, T.

Q: Hi 5i Team:
I’m sold on the need to maintain sector diversification and use your suggested weightings for an income portfolio as my guide. It is how to classify pipelines that always gives me difficulty. I hold Algonquin, Fortis and Innergex to the tune of 10% classified as Utilities. I hold Canadian Natural Resources and Parkland Fuels which make up 7.0% as Energy. Now the problem, I also own Pembina and TransCanada to a total of another 6%. If I go against the TSX and say they are Utilities then I am pretty much in line with where I want to be. If I say they are Energy, suddenly I am overweight Energy and underweight Utilities. My question is do you have any data that would suggest which sector the pipelines are actually more strongly correlated to historically? My feeling is that they have probably moved down with Energy when the oil and gas sector gets beaten up, but also move down with Utilities when interest rates go up so not sure it really matters that much unless one has a crystal ball? But I try not to invest by feelings, would love to know if there is any hard data to support a decision? Alternatively, if you just look at the above and say “too much energy exposure for proper diversification” that’s good enough for me. Appreciate your guidance as always, thanks!

Q: I am looking to crystallize gains in PPL, and seeking an alternative in the pipeline/utility sector. I currently own ENB and TRP as well as FTS. What do you recommend for diversification in combination with those three?

Q: Peter; The Alberta government just announced they are going to challenge a agreement made by the previous PC government to basically allow power companies out of contracts if they proved to be unprofitable due to actions by the government. It's called the ENRON agreement.. Can you quantify which companies these would be, and the impact, if the challenge is upheld.? Thanks. Rod

Q: Thank you 5i for your excellent service!!!

I have divided up my portfolio into thirds.
One third is a diverse group of ETFs.
One third is cash and a group fluid group of stocks made up primarily from stocks you recommend. SJ, CCL, SIS, KXS... etc.
One third is made up of the seven stocks listed above. Do you have any concerns about any of these being a long term hold. I know Magna is cyclical but is that a concern?
Cheers,
Bryan

Q: Peter

I am working with a friend to restructure her portfolio It is criminal that the broker of a large bank investment division put all her accounts in high fee mutual funds The TFSA had 89 % in one mutual fund

My question is what is your opinion on holding short term ETF bond funds as opposed to holding interest sensitive stocks I do not see any reason to be in a bond fund

Could you recommend half a dozen Canadian stocks that would serve aws bond proxies

Could you also recommend some of the new rate reset preferreds with a floor on the rate reset

Thanks for your response and great service

Paul

Q: 9:53 AM 6/29/2016

Hello Peter:

Today you made this distinction between "Safe" and "Secure" dividends in your answer to Grant asking about Superior Plus : "We would consider the dividend 'secure'. 'Safe' is a different category completely".

1. I am looking to concentrate on companies whose dividends you consider to be in the "safe" category, and which yield over 3.5% as these should/must be at least the main core of any pensioner's holdings for reliable income. This can be confusing to sort out since I presume that you will not consider all banks, utilities, telcos, REITS, Pipelines, etc. qualify as "safe".

2. So if you could sort out a short list of the few that qualify for the "Safe Dividend" category it would be most appreciated. I do understand that disasters do occasionally happen, and any company no matter how safe can get into trouble.

2. This brings up the problem of portfolio concentration caused by owning only a few names or sectors. Is it better or "ok" to just own a portfolio of only "Safe" dividend stocks, or are we advised to dilute the quality of our portfolios and own some less safe dividend stocks to supposedly "diversify" risk? This harks back to the people whose portfolio consists of only the big five Canadian Banks and who have done brilliantly for the past 50 years!

Your considered opinion on this issue will be most appreciated........ Paul K.

Q: Hi guys, I'm wanting to start a position in pipelines, which of the three do you favor for growth.

Thanks as always
Rob

Q: Can you please discuss and rank these pipelines for a 3+ year hold from a growth perspective?

thanks

Q: I would like to add a pipeline to my portfolio. Which one (or two) would you recommend.

Ray

Q: Hello 5i Team,
Utilities and pipeline companies are counted as 'blue chips' in many retirees' portfolio due to 'safe' dividends and some growth opportunities.
With the current thesis of the decline of fossil fuel in the context of low carbon future, what are your thoughts on these companies? Would there be a change of guards with these industries being replaced by renewable energy and clean tech energy in the next decade?
I have the following names which I am concerned about where they will stand few years from now? Which are the weaker ones that I should sell?
PPL, KEY, AQN, TRP, FTS, ENB.
Are there Cdn or US companies that you can suggest as future 'blue chip' in the renewable energy and clean tech energy industries? I already owned BEP.UN. Thanks.

Q: If purchased in US $ on a US exchange, do these companies pay their dividends in US$ Take as many credits as necessary.

Q: What is your opinion of the new TRP preferred series 13 for part of an income portfolio.

TRP.PR.J

Many Thanks

Paul

Q: Any reason you know of why TRP is rising ( up 10% last few days) while ENB is dropping. I own TRP, is now a time to sell TRP and buy another pipeline such as ENB?

Q: I am a retired, conservative dividend-income investor looking to add to the stocks I hold in the telecom-pipeline-utility sector. My current holdings are ALA, AQN, BCE and those contained within ZLB.

The candidates include ENB, FTS, IPL, KEY, PPL, TRP. I then filtered these down by using the following criteria = Beta < 1.0, Dividend yield > 5.0%, P/CF < 10.0, P/BV < 2.0. The result is TRP.

I am looking for a blue-chip, stable, dividend-payer, dividend grower, with obviously some capital growth potential.

Do you agree with my methodology? Any other filters to use? For diversity within the sector, should I included other candidate stocks?

Thanks for your help,
Steve

Q: I am looking to both reduce both my exposure in the energy infrastructure portion of my portfolio and also materialize the capital loses. Holdings consist of ENB PPL and IPL with a total sector weight of 7.8%. Current thinking is to sell PPL and IPL purchasing either TRP of KEY with half of the proceeds. Assuming my thinging is sound would you concur with keeping ENB and which of TRP of KEY would you purchase.

Q: Looking to bolster my income names. The pipelines/util are languishing near there lows and the price targets on the names are much higher not to mention the juicy dividends. They look really good on the surface.I have modest positions in TRP,ALA,VNR. ENB, BEPand IPL are also on my watch list. VNR is the one that has held up the best. All solid companies, But are these names good value at these levels, some still trading at high teen p/e . Or do the banks offer better risk reward?

Q: Please comment on where 5i stands as a whole in regards to the needs for pipelines and on the Fed environment department giving a green light to build an LNG plant on Lelu island (Petronas). In regards to pipelines, specifically on ‘Energy East’ and ‘Trans Mountain’. There certainly is a lot of red tape with the Fed/Prov, Environmentalists, FN’s, etc; but isn’t it time Canada “became whole” on important infrastructure (ie. pipelines/LNG) issues to move our “trapped” resource to tide water/abroad? 5i has a very savvy investor base, a moderated forum would be a good thing to “open the floor” so to speak to hear all views on a variety of issues...

Thanks and regards,
Evan

Q: What is your opinion on TRP in the short term? Should I expect some Tax Loss selling before the end of the year? Jeff