MARCH/APRIL 2018 Top Five Canadian And International MONEY · Leif R. Montin Montreal...

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Readers Write:

DON MACKENZIE

The Learning Curve And Surprises

Top Five Canadian And InternationalIncome Tax Stories Of 2017 David J Rotfleisch Page 8

Five Market Adages That Can Help Your Portfolio Andrew Hepburn Page 27

Why I Am Rethinking My

Matt Poyner Page 6

RETIREMENT PLAN

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THE FAMILY GUIDE

TO DISABILITY AND PERSONAL FINANCES

The book is directed at helping individuals with disabilities and their families find financial solutions to the financial challenges of disability. Very common concern of families is the difficulty in getting information that makes sense and lets them move on. Search for answers is filled with complexity and while perhaps not a Rubik's Cube, it certainly is a jigsaw puzzle with more than a few pieces.

The book is intended to be a guide for planning. Planning will be better if it is based on structures for such things as family wealth transfers, good tax and estate planning and the use of proper legal agreements. The book will give readers a road map as well as understandable information that can be used to take their own situation to a higher level of resolution - with more confidence and less heartache.

Whatever you may learn from the book, remember that everyone with a disability is a person first And shouldn't be defined by their disability. See you then as they live their own lives every day - going to a hockey game, attending school, or being with family.


MARCH/APRIL 2018

EDITOR-IN-CHIEF: Lana SanicharEDITOR: Peter HodsonCONTRIBUTING EDITORS:Ed Arbuckle, Margot Bai, Robert Barney, Dan Bortolotti, Ian Burns, Bruce Cappon, John De Goey, Donald Dony, David Ensor, Ken Finkelstein, Derek Foster, Benj Gallander, Robert Gibb, Andrew Hepburn, Shelley Johnston, Robert Keats, Cynthia Kett, Ken Kivenko, Camillo Lento, Marie-Josée Loiselle, Alan MacDonald, Brenda MacDonald, Gina Macdonald, Robert MacKenzie, Ross McShane, Ryan Modesto, Caroline Nalbantoglu, Tim Parris, Peter Premachuk, John Prescott, Kyle Prevost, Brian Quinlan, Wynn Quon, Rino Racanelli, Colin Ritchie, Scott Ronalds, Norm Rothery, Stephane Ruah, Allan SmallDavid Stanley, John Stephenson, Brian Tang, Angelo Vicere, Becky Wong.

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MARCH/APRIL 2018 Volume 37, Number 6

REGULAR FEATURES Shareclubs 4

Sharing With You 4

Dividend & Company News 5

Model ETF Portfolio 5

Annuities Offer Income For Life 9

Ask The Experts 33

Money Digest 34

Canadian DRIPs with SPPs 35

Top Funds 36

Canadian ETFs 38

SPECIAL FEATURES

Why I Am Rethinking My Retirement Plan Matt Poyner 6

Top Five Canadian And International Income Tax Stories Of 2017 David J Rotfleisch 8

You Gotta Know When To Hold ‘Em,And Know When To Fold ‘Em Keith Richards 10

Another Bullish Year For US Stocks Matt McCall 13

Biotechnology Michael Patenaude 15

Treat High Dividend Yields As A Danger Sign If It Seems Too Good To Be True, It Probably Is Richard Morrison 19

The Learning Curve And Surprises Don Mackenzie 24

Five Market Adages That Can Help Your Portfolio Andrew Hepburn 27

Why Dividend Growth Investing Stands The Test of Time Nick McCullum 29

Should You Buy Permanent Insurance? David Townsend 31

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Sharing With You

Ilearned about the wisdom and benefits of age in early February. I had decided to take my nephews

Sam and Luke (29 and 30) to Tokyo for an adventure with their uncle. They call me their ‘cool’ uncle and I am not going to argue with that.

As is the habit with the young crowd, we found ourselves in a very interesting night spot on February 6th, which, due to the time difference, was February 5th back home. That’s the day the Dow Jones fell 1,175 points, the worst point drop, ever.

Now, the ‘younger’ me would have, for lack of a better phrase, ‘freaked out’. There I was out partying while the financial world was melting back home. We were crashing, we were going to have panicked customers, I was going to lose tons of money, and the world was going to enter a steep recession, because (sometimes) the stock market is a good barometer of what’s to come in the economy.

But the older me—today’s version—just carried on. I explained to my nephews that I might be looking at my phone data a bit more, out of curiosity, but that’s about it. We continued to have a few beers, and I achieved my goal of buying an entire, packed bar a round of drinks (it really helps that the bars are very small in Tokyo!).

You see, I have, at my age, seen it all before. The point drop in the US markets, while the worst ever, was only the 25th worst day in terms of percentage points. The financial media went into a frenzy, because bad news is far more interesting than good news. I didn’t sell a single stock, and even managed to buy a couple of cheap stocks remotely while my nephews carried on (being the wise uncle I also know when to stop!).

I have seen so many ‘panic’ events in the market over the past 35 years that, frankly, this big market event wasn’t even that interesting to me. Markets had gone on a tear for years without a 1% correction, and a drop was far overdue. Nothing really changes in the economy. Long term investors do not need to ‘react’.

The right call in the panic was to buy, or at least, do nothing. If you listened to the media, though, you might have wanted to get out of the market completely. Some did, and then of course missed a giant market recovery less than two weeks later.

Maybe, instead, at the next market panic just crack open a beer, and relax. It seemed to work this time, and frankly staying calm has always been the right move for investors.

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MoneySaver DIVIDEND& COMPANY NEWSIn this column we list recent news, events, dividend income news and any other relevant information for

MoneySavers. News items are those received after our last publication date.

Canadian MoneySaver MODEL ETF PORTFOLIOETF SYMBOL CATEGORY PRICE # OF

UNITS TOTAL % OF PORTFOLIO

iShares 1-5 Year Laddered Corporate Bond CBO Fixed Income 18.45 506 9,335.70 6.7%

iShares DEX Universe Bond XBB Fixed Income 30.64 166 5,086.24 3.7%

iShares S&P/TSX Canadian Preferreds CPD Fixed Income 14.55 460 6,693.00 4.8%

iShares S&P/TSX Capped Composite XIC Equity: Canada 25.38 980 24,872.40 17.9%

iShares S&P/TSX Cdn. Div Aristocrats CDZ Equity: Canada Div. 26.25 613 16,091.25 11.6%

iShares U.S. High Yield Bond Index ETF XHY Fixed Income 19.59 350 6,856.50 4.9%

Vanguard FTSE Emerging Markets Index VEE Equity: Emerging 36.94 194 7,166.36 5.1%

Vanguard FTSE Developed Europe All Cap VE Equity: Interntional 30.26 304 9,199.04 6.6%

SPDR S&P 500 SPY Equity: U.S. 281.90 29 10,066.00 7.2%

Vanguard Div. Appreciation Index VIG Equity: U.S. Div. 107.15 74 9,763.10 7.0%

iShares Russell 2000 Growth IWO Equity: U.S. Growth 193.75 45 10,735.40 7.7%

BMO Covered Call Utilities ZWU Equity: N.A. Div 13.12 437 5,733.44 4.1%

Vanguard Information Technology Index VGT Equity: U.S 177.17 27 5,890.03 4.2%

Consumer Discretionary Select Sector SPDR XLY Equity: U.S 107.81 43 5,708.10 4.1%

Cash Cash Cash 6,034.24 4.3%

Total Portfolio 139,230.80

Exchange Rate 1.23 $ Gain/(Loss): 39,230.80

Inception value: 100,000.00 % Gain/(Loss): 39.23%

Inception date: October 18, 2013 % Annualized: 8.19%

Prices are at market close on Jan 31, 2018. Individual prices are in USD$. Portfolio values, $Gain/(Loss), % Gain/(Loss), % Annualized all reflect USD$ values are converted to CAD$

CURRENT NOTES: none

OTHER NOTES: Keep in mind all investors are different. This portfolio is designed as a guide in setting up your own personal portfolio. Unique considerations and adjustments need to be made to reflect your personal situation. Please perform your own due diligence before making investment decisions. For use by Canadian MoneySaver subscribers only. Not for redistribution.

Please direct portfolio questions to [email protected]

• Sunco (SU) raises dividend by 12.5%.

• Intact Financial (IFC) raises dividend by 9.4%.

• Avigilon (AVO) gets takeover offer for $27 per share.

• Exco Technologies (XTC) increases dividend by 6%.

• Methanex (MX) increases dividend by10%.

• Nevsun (NSU) to suspend dividend.

• TransCanada (TRP) raises dividend by 10.4%




Readers Write

Why I Am Rethinking My Retirement Plan

Dave is a young, bright, hard-working guy who just finished high school. He has all the tools for success. But what does success mean? The standard model of

“success” looks something like:

• graduate from post-secondary education

• get a good job

• get married and have kids

• save enough for retirement – as early as possible

• retire and enjoy the good life

So, Dave does well in school, earning himself an MBA and lands a “good job” – i.e. stable with good pay, but not particularly interesting.

Dave gets married, buys a house, has a few kids. The best years of his life are spent working long hours. But life is good, and he enjoys a bunch of nice stuff: a series of nice cars, a home theatre in his man-cave, trips to Disneyland every few years for some much-needed “family time”.

All the while, Dave is responsible and saves 10% of his paycheck for retirement, just like he knows he should.

Dave grows older and by the time he retires at age 60, his kids have left home to start lives of their own. Even though he knew it was coming – even looked forward to it – he’s a little uncomfortable with all the free time he has, the empty house, the lack of productive work.

To fill the void, Dave books a few cruises even buys a new sports car. He dabbles in a few hobbies he used to think were ridiculous. Weeks and months go by, and sadness overcomes Dave that the retirement he looked forward to feels empty and pointless.

Matt Poyner

Finally, on a whim, Old Dave gets a job at the local hardware store stocking shelves and helping customers. He can’t believe how happy he is. Even though it is completely different from the retirement he envisioned, Dave knows he will keep this job for as long as his health allows.

This is success. Dave did it right. No unemployment, no devastating illness, no crushing divorce.

But also, no passion, no risk, no adventure.

It’s like Dave followed the path of “success” that our society had already defined – and he did it well – but he never made it his own. Dave did a great job of maintaining the status quo.

What Did Dave Miss?

It is so easy to get comfortable, to ask no questions, especially when we are “doing well” by most standards and “busy” all the time. But our time on this planet is short. If we want to make the most of it, we must ask ourselves the tough questions, and we need to be okay with the trade-offs that are built-in to our choices. In Dave’s case:

• he spent the best/healthiest years of his life in school or working

• he worked to retire, not because the work was rewarding in and of itself

• he sacrificed time with his family and pursuit of other passions for work and money

• he worked more to accumulate “things” – none of which contribute to fulfillment

• when he reached his goal of “retirement”, it turned out to be the wrong goal all along



In spite of having all the appearance of success, in some ways, Dave’s life was a failure. He based it on the wrong premise. Stuff does not make us happy. Even leisure does not make us happy.

What makes us happy is shared experiences with people we care about; creative pursuits; doing good things for other people, not ourselves.

I think it is about time we question our definition of “success”. The life path of education – work – retirement is pretty restrictive.

What Could Dave Have Done Differently?

We all make choices that determine our life’s path. Sometimes those choices are nearly unconscious - we just follow the norms that have been established. That might work for some people but I wonder how many of us really consider our options. There are trade-offs, as always, but we could:

• Find a job that is inspiring, that doesn’t feel like work. When work is fulfilling for its own sake, why would you even want to retire? It might not pay as well, but you will want to do it for longer. People who are inspired by their work are instantly recognizable - and the inspiration is contagious.

• Keep the “good but uninspiring” job, but work less. Trade money for time. Then use that time wisely to pursue relationships and experiences, not stuff.

• Take mini-retirements. Save 25% of your pay so that you can take a year off every 4 years. Many employers have programs like this, or create your own.

The implicit contract of the standard model of retirement is that we forego doing what we really want to now so that we can do it later. Delayed gratification. But there are a few major problems with this.

First of all, we can’t get now back. The years when your kids are at home, loving every minute they have with you, hanging on your every word. Years when you have the health and vitality to pursue a big business idea. Years when your relationships could be growing stronger – or weaker. We must realize the incredibly high price we are paying for the gift we are giving our future self: retirement.

Second, as Dave found out, we may not enjoy that gift nearly as much as we thought we would. I know many people who wish they’d pursued a risky entrepreneurial venture they were passionate about, or gone on some crazy travel adventure while they were young and healthy. There are countless more who would trade anything for more time with their kids when they were young.

Third, stuff happens. Take it from an ER doctor - we might not even make it to retirement.

And so, at 41 years old I am questioning my own life path. I am Dave. I have been responsible and “successful”. But that is not enough. I want more.

I don’t regret being Dave up until now, but I don’t want to die like Dave. There are other options.

I realize that I am happy to trade money for time.

I finally understand that “nice stuff ” has nothing whatsoever to do with happiness.

I also realize that trading a cushy retirement for amazing experiences with the most important people in my life now is a good trade.

So, I have decided with my wife and our four young boys to take a detour from the “responsible and successful” life path that we were on. Even though it doesn’t fit with the retirement savings plan, a few months ago we decided it’s time for a mini-retirement. We are going to take the kids out of school for a year and backpack around the world.

Do we know what we’re doing? Not really. Will it be hard work? Yes. Will it be an adventure of a lifetime? Hell yeah.

So, think hard. What is really important to you? What do you want your legacy to be? Financial success is making sure your money support those values.

Matt Poyner is a DIY investor based in Whitby, [email protected]



Taxation

Top Five Canadian And International Income Tax Stories Of 2017

The past year has seen more tax stories hit the front pages of newspapers than in most years; here are our “Top 5” picks for 2017 income tax stories.

1. Paradise Papers Tax LeaksThe top international tax story is the Paradise Papers

tax leak. The leak was from the Appleby law firm of Bermuda, which revealed a plethora of high profile names who made use of their offshore services, including the names of more than 3,000 Canadians, more than five times the 625 Canadian companies and individuals released in last year's Panama Papers leak.

The leak consisted of more than 13 million documents comprising about 1.4 TB of data and secret papers. As in last year’s Paradise Papers leak from Mossack Fonseca, a law firm based in Panama, the Appleby law firm was at the centre of this leak, documents otherwise subject to solicitor-client privilege have been released. Documents also came from two offshore service providers and corporate registries of 19 tax havens.

2. Changes To The Taxation Of Small Business

The most intriguing tax development in Canada was the fate of the small business changes quietly proposed in the dog days of summer which made headlines for a day or two in July and then disappeared from the public radar until after Labour Day, when an unprecedented level of public backlash began.

The proposal that was probably least sensible was making retained income in a Canadian Controlled Private Corporation subject to an additional level of tax. The changes that probably garnered the most condemnation were to income sprinkling as well as the curtailment of

David J Rotfleisch

the lifetime capitals gains exemption. The icing on the cake was rules to prevent the conversion of income into capital gains.

The public outrage was so loud that the government orchestrated a campaign of backtracking over the course of a week.

The first announcement was that the anti-income sprinkling proposals would not affect the lifetime capital gains exemption. Then Finance Minister Morneau announced a “tweak” to the suggested passive income tax changes by allowing a reinvestment of income earned from an active business without an increase to corporate tax up to a limit of $50,000 per year. Finally, he announced that the Department of Finance will not pursue proposed measures targeting transactions which are intended to convert income into capital gains.

So, what was left at the end of the day? Some form of attack against income splitting or sprinkling that will be introduced in the future, probably in the federal next budget.

3. Proposed Changes To The Voluntary Disclosure Program Rules

In June, Canada Revenue Agency (CRA) announced proposed amendments and a 60-day public consultation period for proposed changes to the Voluntary Disclosure Program (VDP).

The proposals reduce eligibility for the VDP in some cases including large dollar amounts and multiple years of non-compliance. Voluntary Disclosure Program relief will be completely unavailable in some cases, including the reporting of proceeds of crime.



While numerous submissions were received from the public, CRA has not responded to any of them.

The proposed implementation date is January 1, 2018 and despite the lack of response by CRA, our tax lawyers have been advised by the CRA VDP employees with whom they deal that the CRA systems are being updated for the proposed changes, with an expected January 1 start date.

4. PayPal Releasing Client Data To CRA

PayPal was served with a Federal Court of Canada order in November requiring them to release to CRA details about PayPal Business accountholders who sent or received a payment between January 1, 2014, and November 10, 2017.

PayPal had 45 days in which to comply with this order and have indicated that they intend to do so. HST/GST may also be payable on undeclared business transactions that use PayPal as the method of payment.

5. CRA Now Fingerprinting Tax Evasion Suspects

A policy that was introduced early in the year with no formal announcement or other fanfare that CRA would begin to collect the fingerprints of Canadians who are accused of tax evasion before any conviction and knowing that they may never be convicted.

The fingerprints are transferred to the Canadian Police Information Centre (CPIC) database, accessible by Canadian police departments as well as foreign law enforcement services such as the U.S. Department of Homeland Security, which has implications for travelers to the US.

David J Rotfleisch, CPA, CA, JD is the founding tax lawyer of Rotfleisch & Samulovitch P.C., a Toronto-based boutique tax law firm. With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax litigation. www.Taxpage.com and [email protected]

Annuities Offer Income For Life

Prescribed Annuity Rates: $250,000 10-year Guarantee

1. Male Single Life Prescribed Annuity ages 65, 70, 75 and 80

2. Female Single Life Prescribed Annuity ages 65, 70, 75 and 80

3. Joint Life Prescribed Annuity Male/Female ages 65, 70, 75 and 80.

Annuity income values were obtained from highly rated Canadian insurers and are for illustration purposes only.

Annuity rates change daily. Income and tax rate will depend when the annuity contract is issued.

Rino Racanelli, independent annuity [email protected]

Male age at purchase

Annual income

Annual Taxable Amount

65 $15,449 $3,123

70 $17,661 $2,956

75 $19,917 $2,414

80 $22,410 $2,126

Female age at purchase

Annual income


65 $14,276 $3,227

70 $16,090 $2,776

75 $18,318 $2,136

80 $21,189 $1,812

Joint age at purchase

Annual income


65 $12,906 $3,364

70 $14,505 $3,037

75 $16,372 $2,327

80 $19,198 $1,967


http://www.Taxpage.com




Investor Awareness

You Gotta Know When To Hold ‘Em, And Know When To Fold ‘Em

K enny Rogers once sang “You got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run.”

The hardest question I’m asked on BNN and at my speaking engagements is “How do you know when to sell?” The answer is hard to give because of the many different circumstances that might merit selling a position. Stocks tend to fall much quicker than when they are climbing in an uptrend. The Wall Street adage “Stocks take the stairs up, and the elevator down” illustrates this tendency to decline at a faster pace than they ascend.

Here’s how ValueTrend utilizes a sell discipline to limit risk. Below, I use specific examples that were triggered in the ValueTrend Equity Model to illustrate six scenarios.

Situation #1: Selling When The Trend Changes

The ideal scenario to sell a stock is when we can identify the end of a trend. There are often signs that a trend has changed from “up” to “down” on a stock, sector

Keith Richards

or even the broader market. As a stock or sector moves from a series of higher highs and higher lows to lower highs and lows, we will sell that position. We look for a few confirmations of this trend change before acting – lest we experience a “whipsaw” and watch the stock rally right back up again. For example, in addition to a lower low, we look to see if the 200-day moving average has been penetrated by the stock price. Good recent examples of selling into a trend reversal are our exits from General Electric, Johnson Controls and AltaGas.

Situation #2: Reducing Exposure To An Overbought Market Despite A Rising Trend

Sometimes the market, or individual stocks become overbought. Despite their uptrends, they illustrate a parabolic (rapidly rising) price pattern that suggests a significant potential for a rapid decline. Recently, the extreme advances of the FANG (Facebook, Amazon, Netflix and Google (now Alphabet) & technology stocks inspired us to reduce our exposure to the sector from three stocks to one stock (Microsoft). In hindsight, the two stocks

we sold (AMZN a n d G O O G L ) went higher after we sold. Despite that move, it was the prudent thing to do. Historically, Investors have lost more money by sharp reversals in t e chno logy and b i o t e c h n o l o g y stocks than in any other sectors. Think of the 2001 tech



bubble. Stocks like Nortel or even high quality stocks like Intel or Motorola rapidly imploded. Think of the implosion by Valeant pharmaceuticals and the entire biotech index in 2015. We felt our exposure was too high to this risky group of stocks that was (and is) aggressively overbought.

Situation #3: Selling To Reduce Exposure

The ValueTrend system dictates a price position between 2% to 7% per stock, and a maximum position of 10% in an index or sector ETF. It is rare to see us hold 7% of our models in one stock. In fact, we typically peel back (sell) some of a stock if it has risen enough to reach 7%. MasterCard is a recent example of a stock that started at a 5% weighting. It outperformed in such a rapid manner that it began to approach our 7% ceiling. We sold enough to bring the stock back to 5%. Another example of selling to reduce exposure was our decision to sell about half of our U.S. stock holdings in the spring of 2017. While our remaining U.S. stocks were negatively affected by

the rise of the loonie, our exposure to this currency drawdown was reduced.

Situation #4: Greener Grass

There may be nothing wrong with a stock. We may simply foresee less upside going forward on than we have experienced until now. Sometimes we

will continue to hold a high dividend stock in the Income Model but sell it in the Equity Model. We’d rather put the capital to work in higher growth stocks within the Equity Model, or hold the cash if markets appear risky. Good examples of sold stocks that looked less growth orientated than the Equity Model demands include past sells of CP Rail, and JetBlue. These are good companies that we made a bit of money on—and we would indeed re-enter the positions within the Equity Model should their growth outlook improve. The chart of JetBlue below illustrates a wandering sideways pattern that has offered little capital gains to investors.

Situation #5: Cyclical Or Trading Range Patterns

Sometimes we buy stocks or sector ETF’s that trade in a range. For example, BCE has recently been moving between $57 to $62, and we have traded it twice within that range (bought near the bottom, sold near the top). Take note that we have not reentered BCE lately despite its move to the bottom of its trading channel. We are

less convinced of its ability to move quickly back to the $62 top given t h e c h a l l e n g e s all telecoms will face in a rising rate environment. M o n d e l e z i s another stock that seems to be stuck in a range. It’s been floating between $40 – $46 since 2015. We owned



it and recently sold it as it moved above $46. We would consider rebuying it if it reaches the bottom of its trading range — again around $40.

Sometimes, seasonal tendencies tend to dictate that certain sectors do better at one point of the year than others. For example, consumer staples tend to be stronger over the summer months. Consumer discretionary stocks tend to be stronger during the winter. While this rotation in strength isn’t always the case, it happens often enough to inspire us to seasonally trade the respective sector ETF’s that represent those sectors. Same goes with energy stocks, which tend to have their greatest strength from early in the New Year until the spring.

Scenario # 6: Yikes away!

There are times where a company will issue a surprise financial report or negative news of some sort. Traders react quickly and aggressively to dump the stock, which in turn causes a landslide stock price movement. A recent example of this is Cineplex – a stock where we had initiated a smaller 3% position in the ValueTrend Equity Model. T h e c o m p a n y announced lower-t h a n - e x p e c t e d e a r n i n g s a n d guidance in the late summer, and traders punished the stock by marking the share price down by 20% within a few days, breaking well below technical support. After such a selloff, one has to decide

whether the market has over reacted and an oversold rebound is likely – or if it is best just to sell with the crowd. In such situations, there are no hard and fast rules. In Cineplex’s case, we held out with the expectation that the winter’s movie lineup (including the new Star Wars,

and others) might rally the stock. This has not taken place in the manner we anticipated. The company continues to be a well-run business however, the stock is trading with significant skepticism surrounding future box office revenue. By the time you read this, we won’t have a position in the stock.

Keith Richards, Portfolio Manager, can be contacted at [email protected].

Keith Richards may hold positions in the securities mentioned. Worldsource Securities Inc., sponsoring investment dealer of Keith Richards and member of the Canadian Investor Protection Fund and of the Investment Industry Regulatory Organization of Canada. The information provided is general in nature and does not represent investment, accounting, or tax advice. It is subject to change without notice and is based on the perspectives and opinions of the writer only and not necessarily those of Worldsource Securities Inc. It may also contain projections or other “forward-looking statements.” There is significant risk that forward-looking statements will not prove to be accurate and actual results, performance, or achievements could differ materially from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements and you will not unduly rely on such forward-looking statements. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. As we are not engaged in rendering tax or accounting services please consult an appropriate professional regarding your particular circumstances before acting on any of the above.




US Markets

Another Bullish Year For US Stocks

Matt McCall

A fter an impressive return for U.S. stocks in 2017, this year has started out just as strong with the S&P 500 logging it best January in decades. In just the first month

alone the index gained 5.6%. The bulls are dancing in the streets as the bears continue to hibernate for what could be another rough year. As the bull market gets ready to celebrate it’s 9th anniversary in March, the overdue correction finally hit stocks and it did so in a matter of days. After closing at a new all-time high on January 26, the S&P 500 fell by as much as 11.8% in the next two weeks. This was the first correction for the index in nearly two years and the first pullback of any significance in the same time frame. Recently the corrections have averaged 13% from top to bottom and the stock market is back to the high within three months of the low. This time around I believe the bounce back will be much quicker and investors need to be prepared.

The numbers speak for themselves when looking back on history. In the previous 15 times the index has gained at least 2% in the first five trading days of the year the S&P 500 finished the full year higher every time. What is even more astounding is that the average gain during said year is 18.6%. A move of that magnitude would send the S&P 500 to 3,170 by the end of the year. There is a good chance the index does hit that level at some point in 2018, but attempting to predict where it will end the year is just educated guessing.

If you have not yet been convinced that 2018 has history on its side, there is another interesting statistic. For the eleventh time since 1950, the Dow finished a year with a gain of at least 25%. History suggests that 2018 could be another strong one for the index of 30 large-cap stocks. Of the 10 instances the Dow closed up at least 25% for the year, the next year has been positive

eight times. Even more impressive is that the average gain during that following year is 12.6% - well ahead of the average 8.5% gain for all years.

Because of my love for numbers and it is only fair to serve up some not so great numbers, here you go. The bullish tone around stocks is at a level not seen very often according to the Intelligence Sentiment Survey. The survey measures the view of investors as either bullish or bearish and 2017 was a banner year. The bulls averaged 77% over the last 12 months, the 2nd highest reading over that time frame ever and only the 10th above 70%. The overwhelming bullish tone may not be the best thing for stocks in the year ahead according to history. The market has averaged a loss of 0.2% in the year following readings above 70%.

History is meant to be broken and that is my view heading into 2018. The reason for that is based on my three main NexGen criteria – fundamentals, technicals, and intangibles. The fundamentals indicate solid underlying growth in the U.S. as well as around the globe. Earnings per share for the S&P 500 are set to increase by nearly 10% in 2017 when the final numbers are calculated. Looking ahead to 2018, we believe the earnings growth will be even more impressive as they approach 20%. For the first time since 2007, all 45 countries tracked by the Organization of Economic Cooperation and Development (OECD) are expected to show growth in 2017. This is the first time that has occurred since 2007.

The technicals are strong as evidenced by stocks of all shapes and sizes breaking out to new highs on the back of strong volume. The intangibles take into consideration everything else and with tax reform set to take effect this year and the high probability of an infrastructure bill getting passed, they are in the favor of the bulls.



The financial stocks had a solid 2017, gaining 20% based on the SPDR Financial Sector ETF (XLF). As great as the year was, it just barely enough to outpace the 19.4% return of the S&P 500. This year the financial stocks are being dealt a hand that could put them in the winner’s circle again. For starters, higher interest rates help the financials, especially the banks that loan money to their customers. As the Fed continues to increase interest rates it allows the banks to charge a higher interest rate on their loans. At the same time the amount of interest paid on the deposits on the banks will not increase incrementally. This results in a higher margin for the banks in the lending business and an immediate boost to the bottom line (profits). The tax reform plan that was passed in December is another positive catalyst for the sector that will use the new laws in their favor. The tax reform will also have a positive effect on small businesses that will rely on the financials to bankroll their growth. Then there is the consumer that will also benefit from the tax reform and with the unemployment rate low it will all end up flowing back to the financials. Finally there is the overall global economy that is strong and will add to the bullish case for all stocks and the financials in particular.

If you have not heard of bitcoin or blockchain you are either living under a rock or on the moon and even then it would be hard to fathom. The bitcoin and cryptocurrency craze was the biggest story of 2017 as average folks were overnight millionaires (at least on paper). Without getting too deep into the inner workings of blockchain, there is a reason to have it on your radar. Think of the blockchain technology as the internet in the 1980’s and bitcoin as

email. Sure, email was great and we thought that was all the internet was made for. In the last few decades we have realized that there is much more to the internet than email. The blockchain is so much more than just bitcoin and the largest companies around the world are already investing billions into the technology. According to Gartner Group, the blockchain technology delivered $4 billion in business value-add or technology innovation in 2017 and the estimate is for that number to increase to $3.1 trillion by 2030. Another study by IBM showed that 80% of executives actively engaged in blockchain or are considering it to develop new businesses.

Investors have several options of how to play the biggest technology since the Internet. There are large companies that are the leaders in the technology as well as smaller names that have big upside as well as big risk. In January there were three ETFs launched in the U.S. that track the blockchain sector. Investors that have a long-term outlook could start considering building a portfolio positioned towards blockchain.

Matt McCall, founder of Penn Financial Group, an investment advisory group serving individual and institutional clients from coast to coast. Author of two best selling books, “The Next Great Bull Market” and “The Swing Trader’s Bible”. Regular guest on Fox News Channel, Fox Business Network, CNN, and GBTV with over 1000 TV segments in the last 5 years. Writing contributor for the International Business Times, The Blaze, Benzinga, and Index Universe.

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Secular Trends and Investing

Biotechnology

Michael Patenaude

The Trend

Biotechnology has been around for thousands of years and has its beginnings in the domestication and selective breeding of plants and animals by humans. Of course,

now biotech also permeates many other fields of endeavour as research has expanded its horizons.

If you’ve ever wondered about how far-reaching biotech’s impact could be, consider the following:

We'll continue to heal human bodies through biotechnology, but we'll also increasingly feed, clothe and house the world through bioengineered systems. Ultimately, there's no reason why live animals should be used in any part of our food or goods chain, and we're working to make that a reality.

-Ryan Bethencourt, American Scientist

This represents one of many perspectives on the potential implications of biotechnology. More generally, biotechnology can be defined as:

"…any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use.1

➥ Note: The field has many ethical implications2 which are worth considering but are beyond the scope of this article.

Some FactsBiotechnology is a disruptive field of endeavour.

Like other fast-moving technological advances, biotech has begun making an impact in society and likely will make much more in the future. As the application of biotechnology has become more widespread, it has grown in interest to investors.

The human genome project is perhaps the most widely recognized activity in the biotech space. Its purpose is to unlock the secrets of human DNA and is the world’s largest collaborative biological project.3 Understanding the human genome has many implications for disease eradication and genetic engineering.

But biotechnology has made many more contributions than that. Some of the major discoveries in the biotech field with far-reaching impact include: insecticides, vaccines (e.g., smallpox), antibiotics (e.g., penicillin), high-yield food hybrids, pest and virus-resistant crops, growth hormones (human and animal), environmental protection (e.g., oil-eating micro-organisms), disease treatment (e.g., diabetes, cancers, multiple sclerosis), animal cloning, stem-cell research, textiles, detergents, chemicals and energy production (e.g., bioethanol).4

Investment in the biotech field has been influenced greatly by a decision of the Supreme Court of the United States in the 1980s that allows companies to patent genetically-modified life forms. This controversial decision has helped create a market for investment due to the benefits patents confer on companies that hold them.

The global biotechnology market (broadly defined, including healthcare companies that conduct biotech activities) can be characterized as having $328B (USD) in annual revenues, 5.3% annual growth, 1.0M employees and nearly 9,000 businesses.5

RisksBiotechnology requires large amounts of research and

development and has uncertain outcomes. Revenues do not follow unless the R&D is both successful and resulting products are commercially viable. This means there is a considerable risk for investors. Often companies form joint ventures or other partnerships to share the burden of these costs.



Table 1 profiles the three largest biotechnology funds traded in North America, all in U.S. funds on U.S. exchanges.7 iShares NASDAQ Biotechnology ETF (IBB) tends to be weighted towards large caps, SPDR S&P BIOTECH ETF (XBI) towards small and micro caps, and First Trust NYSE Arca Biotechnology Index Fund (FBT) towards medium caps. Note these ETFs are overwhelmingly U.S.-focused.

Table 2 presents a small sampling of Canadian and American biotechnology companies (as classified by TMX Money). There are relatively few in Canada, and many are quite small and have limited earnings (Table 2 excludes any under $100M in market cap). U.S. biotech firms are plentiful, and the largest exceed $100B (USD) in market capitalization.

How To Invest In The Biotech TrendGiven how many competing companies are involved

in the biotech industry, and the risks involved in bringing products to market, there is a strong argument for investing in an ETF. ETFs spread risk across numerous companies, market capitalizations and areas of focus and eliminate the need to try to pick the winners. Biotech ETFs are largely US-centric. Investors must also consider the fees when buying an ETF.

Alternatively, if one has a higher risk tolerance and preference for a specific company and its prospects, a direct ownership stake allows for a focused investment based on company fundamentals and potential. Fees in the form of commissions are also generally low.

The business of biotechnology is highly competitive and is characterized by several smaller R&D firms combined with a small number of large biotech behemoths. There are reportedly over 1,000 biotech firms operating in North America alone, but the top one percent make up the majority of revenues. For food and drug approvals in the United States, it can take anywhere from four to seven years to obtain regulatory approvals, with perhaps a five to ten percent success rate.6

Biotech investing is not for the faint of heart but may have a specialized role in a well-diversified portfolio.

Ideas For Further ResearchFor most investors interested in biotechnology, there

are two main choices: buy shares in single companies with above average prospects (e.g., with more than one product in the pipeline and plenty of cash or a very promising product about to hit the market) or buy a specialized fund with holdings in numerous companies (e.g., a biotech Exchange Traded Fund(ETF)). The former approach can lead to considerable gains if successful and the latter can help to offset some of the risks with single-company picks.

Both investment approaches can provide significant, or even stellar, total returns but predominantly in the form of capital gains. Volatility, as might be expected, tends to be considerably lower in ETFs and large capitalization companies. Overall volatility in the segment, as measured by five-year beta, is fairly high, especially for the smaller Canadian companies.

Table 1 – Largest Biotech-themed Exchange Traded Funds

Security Assets Under

Management

Top Geographic

Regions

No. of

Holdings

Benchmark

Index

1 Year Total

Return

5 Year Total

Return

Expense

Ratio

Beta

(5 Year)

iShares NASDAQ

Biotechnology ETF

(NASDAQ:IBB)

$9.25B (US) North America

(98%) Greater

Europe (2%)

199 NASDAQ

Biotechnology

TR USD

12.54% 117.3% 0.47% 1.325

SPDR S&P BIOTECH

ETF (NYSE:XBI)

4.459B (US) North America

(100%)

110 S&P

Biotechnology

Select

Industry TR

USD

32.27% 178.7% 0.35% 1.569

First Trust NYSE Arca

Biotechnology Index

Fund (NYSE:FBT)

1.323B (US) North America

(97%)

Greater Europe

(3%)

31 NYSE Arca

Biotechnology

TR USD

34.55% 160.6% 0.56% 1.319

Sources: YCharts, ETF.com as of February 9, 2018.



Table 2 –Canadian and American Biotech Companies

Company Main Focus Market Cap

P/E Ratio (TTM)

Debt / Equity Ratio

(Quarterly)

Return on Equity

(TTM)

1 Year Total

Return

3 Year Total

Return

5 Year Total

Return

Dividend Yield (TTM)

Beta (5

Year)

Canadian Biotech Companies

Prometic Life Sciences (TSX:PLI)

Plasma-derived Therapeutics

$1.08B

(CDN)

-- 0.4348 -85.56% -30.0% -20.0% 270.7% -- 2.485

Theratechnologies (TSX:TH)

HIV-related $524.73M

(CDN)

8.571 -- -45.96 104.1% 1.15K% 1.17K% -- 1.276

Resverlogix (TSX:RVX) Cardiovascular $297.57M

(CDN)

-- -- -- -13.7% 150.0% -40.4% -- 2.619

Trillium Therapeutics (TSX:TRIL)

Immu-Oncology $119.77M

(CDN)

-- -- -- 21.47% -47.6% n/a -- 2.390

Covalon Technologies (TSXV:COV)

Medical Technologies

$153.54M

(CDN)

-- -- 29.19% 214.4% 380.0% 1.5K% -- 2.013

Medicure (TSXV:MPH) Human Therapeutics

$114.96M

(CDN)

4.652 2.759 62.11% -23.8% 440.4% 2.43K% -- 3.723

American Biotech Companies(selected biotech industry holdings from the ETFs listed in Table 1)

Amgen (NASDAQ:AMGN)

Human Therapeutics

$124.96B

(US)

16.05 1.4 6.61% 5.83% 23.04% 122.9% 2.66% 1.423

Gilead Sciences (NASDAQ:GILD)

Infectious Diseases

$103.74B

(US)

12.07 1.178 21.56% 22.13% -13.3% 106.6% 2.62% 1.223

Celgene (NASDAQ:CELG)

Cancer & Immunological

Diseases

$69.76B

(US)

9.039 2.288 36.86% -19.6% -21.9% 85.24% -- 1.493

Biogen (NASDAQ:BIIB)

Multiple Sclerosis &

Cancer

$66.93B

(US)

12.00 0.4708 20.92% 17.72% -14.6% 108.9% -- 0.7533

Regeneron Pharmaceuticals (NASDAQ:REGN)

Eye & Cardiovascular Disease, Cancer & Inflammation

$36.13B

(US)

16.05 -- 22.17% -4.81% -17.4% 102.7% -- 1.468

Bioverativ (NASDAQ:BIVV)

Hemophilia & Other Blood

Disorders

$11.15B

(US)

22.33 -- 74.37% 139.8% 116.9% -- -- --

Juno Therapeutics (NASDAQ:JUNO)

Cancer Treatment

$9.882B

(US)

-- 0.0087 -33.41% 321.7% 117.2% 144.8% -- 3.423

FibroGen (NASDAQ:FGEN)

Unmet Medical Needs

$4.172B

(US)

30.03 0.00 -54.47% 117.3% 61.68% 130.7% -- 1.736

ACADIA Pharmaceuticals (NASDAQ:ACAD)

Nervous System Disorders

$3.536B

(US)

-- 0.4375 -122.2% 59.16% 127.4% 351.7% -- 2.033

Immunomedics (NASDAQ:IMMU)

Cancer, Autoimmune & Other Diseases

$3.509B

(US)

-- -- -63.76% -26.7% -13.0% 370.8% -- 3.481

Array BioPharma (NASDAQ:ARRY)

Cancer Treatment

$2.433B

(US)

-- 1.142 372.7% 262.2% 279.4% 415.0% -- 1.502

Ultragenyx Pharmaceutical (NASDAQ:RARE)

Rare Genetic Diseases

$1.896B

(US)

-- -- -65.89% -37.6% -16.6% 5.37% -- 1.890

Sources: Cantech Letter, YCharts, TMX Money and 5i Research as of February 9, 2018.



MoneyTip

Concluding RemarksBiotechnology is a still-burgeoning field that offers

opportunities for investors (and indeed society at large). As a specialized industry segment, it looks likely there will be continued long-term growth, with the potential for high returns accompanied by high risk. Investors should consider how much volatility they can handle and determine security type and asset allocations accordingly.

Michael Patenaude, BA, MA, is an avid personal finance enthusiast living in Ottawa. He publishes his blog and portfolio along with content from the Ottawa Share Club at money4retirement.ca. He is a co-founder of the

McMurtryInvestmentReport.ca. Email: [email protected]. This article is not intended as investment advice nor is it a solicitation to hold or trade securities. Michael owns shares in IBB.

1 https://www.cbd.int/convention/articles/default.shtml?a=cbd-022 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3570985/3 https://en.wikipedia.org/wiki/Human_Genome_Project4 https://www.bio.org/articles/history-biotechnology5 https://www.ibisworld.com/industry-trends/global-industry-

reports/business-activities/biotechnology.html6 https://www.investopedia.com/features/industryhandbook/

biotech.asp7 http://www.etf.com/channels/biotech-etfs

Volatility Is Back - But That's Not Necessarily A Bad ThingFeb. 14 (National Post) - It's been a scary couple of weeks. Headlines have been blaring about the stock selloff, which has seen the S&P 500 fall back to levels not seen since - egad! - December 2017. Even worse, the big bad wolf that seemed to have been forever banished has now come back with a vengeance: volatility. It has wiped out (a handful of pretty small inverse) exchange-traded securities and investors (who were short volatility through complex options strategies).

Even for the rest of us, it can be pretty unsettling to watch your portfolio go up and down like the proverbial toiletseat every day. But how unsettled should we be?

Technically, volatility is a measure of the dispersion of returns over a given period. In practice, it reflects the degree of certainty among market participants on the "right" price for an asset. Low volatility suggests investors are in high-certainty mode; high volatility suggests they don't know what the hell is going on.

At least compared with earlier selloffs, it looks like markets have earned the don't-know-what-the-hell-is-going-on tag in spades.

"MANIC MONDAY"

On Feb. 5 - let's call it "Manic Monday" - the S 500 stumbled towards a five-per-cent decline. But the CBOE Volatility Index - aka the VIX, or "the fear index," but more accurately "the uncertainty index" -

surged more than 115 percent. That was the biggest rise in the VIX in decades.

As Richard Turnill, global chief investment strategist for asset manager BlackRock, has pointed out, the one-day change in volatility relative to the actual change in the S 500 was unprecedented - a much bigger move, relatively speaking, than occurred during the 2016 Brexit vote or the 2008 financial crisis.

So, yeah, volatility is a thing again. But some perspective might help. One point is that volatility is the norm, not the exception, and the noise around its recent return at least in part reflects how weird things were before. Before this month, the VIX had been hovering at, or surpassing all-time lows as stock markets hit new records - a state of being that was lucrative, unusual and boring all at the same time. In some ways, the February spike in volatility is a measure of how complacent the faith in ever-rising indexes had become. Now, that faith is being tested - but how sorely, really?

Since its Feb. 5 spike to above 50 (briefly), the VIX has settled down into the mid-20s. The historical average is around 20. So maybe this isn't the new normal. Maybe it's just the same old normal we've collectively forgotten.

BENEFICIARIES

It's probably also worth remembering that volatility isn't bad for everybody. Some players will benefit -

Continued on page 23


https://www.cbd.int/convention/articles/default.shtml?a=cbd-02

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3570985/

https://en.wikipedia.org/wiki/Human_Genome_Project

https://www.bio.org/articles/history-biotechnology

https://www.ibisworld.com/industry-trends/global-industry-reports/business-activities/biotechnology.html



https://www.investopedia.com/features/industryhandbook/

http://www.etf.com/channels/biotech-etfs


Sector Focus

Treat High Dividend Yields As A Danger Sign If It Seems Too Good To Be True, It Probably Is

Richard Morrison

The Oxford English Dictionary cites the phrase “too good to be true” as first being used in 1580. Apparently, even during the Elizabethan Era, there must have been

gullible retirees who invested in high-yield stocks, only to discover the dividends were not sustainable. “The company's dividend wast gen'rous yet the company doth goest bankrupt, so I hath fewer shillings than wenst I started,” wrote one disgruntled investor in 1580.

All right, I made that up. But you get the point.

Since there is no such thing as an investment without risk, the closest an investor can get to a “risk-free” rate of return today is via high-interest savings accounts and Government of Canada treasury bills, where one-year rates sit at about 1%. For conservative investors seeking relatively high yields from common shares, the upper limit is about 5%. Companies that pay in that range include BCE Inc, Power Financial Corp., Power Corp. of Canada, IGM Financial, CI Financial and Emera Inc. Once you reach for yields that are higher than that, however, you’re taking on added risk, whether you realize it.

Extremely high-yielding investments often have a high dividend payout ratio, which means they’re paying shareholders more than what they’re generating in cash flow or earnings. Some companies maintain their dividends by issuing debt or new shares. Others have what looks like a generous yield thanks to a plunge in their share price and may be selling off assets to maintain the dividend.

As Warren Buffett famously said, “Don’t worry about the income, worry about the outcome.”

Here are some income-generating investments with relatively high yields. All have a long track record of consistent payouts and sustainable dividends in relation to

cash flow. As far as growth prospects go, income-seeking investors should be more concerned about share price volatility than growth. This is by no means a complete list, and the descriptions are merely starting points for further research, not buy recommendations.

Disclosure: Both my wife and I hold positions in Pembina Pipeline in our Locked-in Retirement Accounts (LIRAs).

Enbridge Income Fund Holdings Inc. (ENF/TSX)

Enbridge Income Fund Holdings Inc., sponsored by Enbridge Inc., gets most of its earnings from Canadian pipelines and “green power” projects such as solar and wind farms, and waste heat recovery.

Revenue, earnings and Earnings per Share have all climbed steadily every year. Most importantly, ENF has steadily increased its dividend, to 17.1c per month.

Like Enbridge itself, the shares of ENF and other energy transporters have been in a slump thanks to the oil price dip and opposition from anti-pipeline groups, and both energy prices and environmental concerns are perennial risk factors for pipeline companies. In this case, however, ENF’s affiliation with Enbridge helps mitigate the risk.

Enbridge Income Fund’s stock traded in the $35 range in early 2017, but has recently slipped to about $30, which means the annual dividend of $2.05 yields about 7.3%. ENF offers a Dividend Reinvestment Plan (DRIP) at a 2% discount to the current share price.




Financial AdvisorsName Fee Type Service Area Licensed

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CMS Contributor

Credentials Contact

Ed Arbuckle Fee for Service N/A No Yes CPA, TEP, FCA 519-884-7087

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Fee-only (percentage of AUM, no commissions from investment products)

Licensed in all provinces except Quebec and PEI

Yes Yes Investment Advisor

Investment Advisor

Website: https://www.pwlcapital.com/en/Advisor/Toronto-Landing

Peter Brieger Asset BasedON, QC, NS, MB, SK, AB and BC

Yes Yes CFA 1-416-591-7100 1-800-387-0784

Website: http://www.globe-invest.com/

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Website: http://www.cibcwg.com/graham-byron

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Licenced in 7 Provinces (all except SK, PEI and NFD)

Yes YesCIM, CFP, Fellow of FPSC

416-216-65881-844-777-5551

Website: http://www.burgeonvestbick.com/johndegoey/

Alan MacDonald Asset Based ON, AB, QC, BC, NS, USA Yes Yes CFA, CFP 613-788-8010

Website: http://dir.richardsongmp.com/web/alan.macdonald/

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http://www.personalwealthstrategies.net

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Registered Portfolio Manager

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Fee only, based on asset

allocation breakdown

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Continued from page 19

Pembina Pipeline Corp. (PPL/TSX)

Pembina, first set up in Alberta in 1954 to transport crude oil from the Pembina field near Drayton Valley to Edmonton, became an income trust in 1997 and converted to a corporation in 2010. Today Pembina’s midstream pipelines transport oil and gas produced in western Canada and ethane produced in North Dakota, mostly under relatively safe long-term contracts. The company also owns and operates gas gathering and processing facilities and an oil and NGL infrastructure and logistics business. Last year Pembina paid $9.4-billion for Veresen Corp., creating a giant with an enterprise value of $33-billion.

Although revenue slipped in 2016, Pembina’s cash flow and profits have grown steadily every year. Like many high-yielding stocks, Pembina’s dividend payout looks excessive when compared to earnings and free cash flow (operating cash flow less capital expenditures) but modest in relation to operating cash flow.

Pembina’s shares fell below $30 in late 2015 and early 2016 but have since recovered and have managed to stay above $38 for the last couple of years. Pembina raised its monthly dividend to 18c from 17c last fall, and at a current price of about $40, the stock is not cheap. The dividend yields 5.4%.

Pembina suspended its DRIP indefinitely last year but said shareholders in the DRIP would automatically be re-enrolled when it resumes.

First National Financial Corp.

First National originates, underwrites and services mostly prime residential and commercial mortgages, with more than $100-billion in mortgages under administration.

Like real estate investment trusts, First National’s share price fluctuates with the outlook for interest rates and real estate in general. While its single-family residential mortgages have slipped, its commercial originations increased last year, along with revenue and net income.

In December the company paid out a special one-time dividend of $1.25 after First National said it had “generated excess capital in the past several years and that the capital needed for near-term growth can be generated from current operations.”

Early last year First National raised its monthly dividend

to 15.4c from 14.2c, and at a current share price of about $28, the dividend yields about 6.7%. The company does not have a dividend reinvestment plan (DRIP).

Brookfield Real Estate Services (BRE/TSX)

BRE provides services to a network of about 18,000 residential real estate brokers and agents operating under 294 franchise agreements from 662 locations, representing about 20% of the Canadian residential market. The company’s brands include Royal LePage, Johnston & Daniel and Via Capitale Real Estate Network. Although the real estate industry is cyclical, BRE gets most of its revenue from royalties, fixed fees and long-term franchise agreements. The company was an income trust until the end of 2010.

As BRE’s network has grown, its annual revenue has been climbing over the past three years. While the company’s net income and earnings per share have fluctuated widely, its share price and dividend have been relatively steady.

BRE raised its monthly dividend four times over the past five years. The payout climbed to 10¢ from 0.92¢ at the end of 2014, to 10.4¢ in mid-2015 and to 10.8¢ at the end of that year, and finally to 11.25¢ last year. At a price of about $17, the current monthly payout of $1.35 per year yields 8%, and if past practice is any indication, the dividend could rise again.

Despite the steady share price and dividend increases, with a market capitalization of just $160-million, investors considering BRE must view it as only a small component of a diversified portfolio.

Northland Power Inc. (NPI/TSX)

Northland Power, established in 1987, went public as an income trust in 1997 and converted to a corporation in 2011. Northland has 25 operating solar, wind and thermal power facilities in Canada, mainly in rural Ontario that generate about 2,000 megawatts of electricity. Its major installations include the Thorold Cogeneration Station in Thorold, Ont., a 260MW natural gas-fired generating station in North Battleford, Sask. and the Jardin d’Eole Wind Farm in the Gaspesie region of Quebec, together with dozen 10MW solar energy facilities in Ontario.

Northland also has an 85% interest in the giant 1.2-billion Euro, 332MW Nordsee One offshore wind farm nearing completion in Germany.



MoneyTip

Late last year the company increased its monthly dividend to 10¢ a share, up from 9¢ a share, where it had been since 2008.

A long-term chart of Northland’s share price shows slow, steady growth. The price rose 50% between mid-2015 and mid-2016; since then Northland’s shares have held steady between $23 and $24. At a current share price of about $22, the company has a substantial market capitalization of more than $4-billion, while its dividend yields 5.5%. The company offers a dividend reinvestment plan (DRIP).

Extendicare Inc. (EXE/TSX)

The aging of Canadian Baby Boomers bodes well for the future growth of nursing home chains Extendicare and Sienna Senior Living, although both are subject to regulatory risk.

Founded in 1968, Extendicare has a network of 101 owned or managed long-term care centres, 15 retirement living centres and 36 home health care branches, with most facilities located in Ontario. The company sold its U.S. business in 2015. Extendicare is trying to shift its revenue stream to include more private-pay versus government-funded facilities. Retirement communities under its Esprit Lifestyle Communities brand.

Revenue has grown every year. However, earnings have fluctuated. The company reported $132-million in cash and $539-million in total long-term debt as of September 2017.

Extendicare’s dividend was cut to 4¢ from 7¢ in 2013 and has held at that level ever since. The dividends paid to represent about 75% of the company’s Adjusted Funds from Operations (AFFO).

Extendicare’s shares have been in a slump, falling from a high of more than $10 in the first half of 2017. At a current price of $8.40, the 48¢ annual dividend yields about 5.7%.

Whether they’re looking for long-term growth or income conservative investors can always hold blue-chip stocks. Growth seekers can subscribe to DRIPs, while income seekers can take the dividends as tax-favoured income. If you are interested in a company whose shares yield more than 5%, look to its dividend and share price history, along with its balance sheet, but always remember that if the yield seems unsustainably high, it probably is.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. [email protected]


the big financial institutions, for instance, could see a pickup in their trading businesses, which make money off markets on the way up and the way down.

Stock-pickers tend to do well during higher-volatility periods even as indexes tend to move sideways, which must be something of a relief after they've suffered through years of a rising tide lifting all boats.

But for those of us who aren't Goldman Sachs or Warren Buffett, maybe there's comfort in thinking about it this way: markets should be volatile right now, because some uncertainty is absolutely required.

Look at the big picture: stock investors have enjoyed nearly a decade of incredibly low interest rates and monetary stimulus, but now policymakers are whittling away at the crutches. By most measures, the global economy is strong, corporate earnings are solid, and maybe both can at long last stand on their own. Or maybe they can't.

That's just one uncertainty. Another is policy in the world's largest economy, which may (or may not)

disrupt global trade, enlarge U.S. government debt by trillions of dollars, spark rampant inflation, spur the Federal Reserve to hike interest rates faster than anyone expects, and hasten the onset of recession.

Who knows? Thanks to President Donald Trump, who fired Janet Yellen, there's uncertainty over the new Fed chair, Jerome Powell. So far, he's been singing from Yellen's songsheet on the steady pace of rate hikes, but markets will likely be jittery over his coming-out party - the next Fed meeting, at which he's expected to raise rates. (Volatility- watchers should circle March 21 on their calendars.)

In short, the world is more uncertain than it used to be, and so is the stock market, and so volatility is back. What else is new?

Source: Joe Chidley

http://business.financialpost.com/investing/volatility-is-back-but-thats-not-necessarily-a-bad-thing







Readers Write

The Learning Curve And Surprises

Don Mackenzie

The complexity of the market is sufficient to confuse anyone. A complex portfolio management process is not going to overcome that. You don't get to manage

the market, but you do get to control your portfolio. Simplicity, transparency, and low activity levels should be the backbone of your management process. Only a simple, transparent process can be tracked and adjusted over time. One way to simplify your system is to eliminate large swaths of the investment world from study. In truth, if you hope to be able to make effective investment decisions you have to ignore almost all of the available information on the market. The first job of a portfolio management system is to reject all of the information, and investment ideas you don't have to pay attention to. Works for me (14.5% 2002 - Oct. 2017).

In my first article, I noted that my chief investment activity was paying attention to the market and daily news. [Yup, we have a contradiction here.] Justification: I enjoy doing that, always have. I feel it keeps me grounded and the reading often suggests investment ideas - which, of course, I quickly reject. Look at it all, focus on a bit.

I am a stock picker, and rather proud to be able to say that. I am not a buy and hold guy, nor a day trader. I buy a stock assuming that it will continue to show the strength that it has already demonstrated. Typically, I hold a stock for about three years, though I have one item, a mutual fund, which I have held continuously since 2002 and I most recently sold a stock which I held for only 31 days. Currently, I have 16 items in my portfolio. That is 'the bit' which I feel comfortable focusing on.

What is my stock picking record then? I am embarrassed to admit that my winning record is about 50%. My portfolio tracker reveals that I have traded in about 120 stocks over the years; half were winners and

half losers. I also track several other model portfolios to allow for easy comparisons. The most important of these is the portfolio made up of all my stocks sold. I not only know how well these stocks did when I held them, but how they performed after I sold. My picking record is not impressive, but a closer look turns up a few surprises. My five best all-time winners have gained $800,000 and my five worst all-time stock picks lost $60,000. Clearly, my frequency of correctness is not nearly as important as the sizing of my positions. The figures show I have let winning stocks run, and even added to their positions, while I have been quick to cut losers before they could do much damage.

The figures reveal another surprise; 45% of my lifetime profits still reside within my portfolio as unrealized gains. I love that the untaxed portion of these profits continue to work on my behalf. The fellow who claimed you could never lose money taking a profit did not understand the costs of a missed opportunity, nor our tax laws.

Reviewing long-term data has an important calming effect and encourages me to hold my positions during market volatility. The figures above show that selling is absolutely critical to good portfolio performance. I always consider selling when facing negative surprises, but volatility is not a surprise. I may sell a good performing stock when it appears to be drifting negatively away from its expected performance. With a particular stock it can be very difficult to tell if you are dealing with volatility, a cyclical variance, drift, or actual deterioration. The future is murky.

Recent headlines caught my attention. “Japan’s Nikkei stock index logged its longest winning streak in more than half a century” and “Japan’s main stock index rose to its highest level in almost 21 years”. I held the iShares Japan Fundamental Fund (CJP) (purchased in late 2012 and liquidated in early in 2014). Trading in Japan's index



was pretty heady stuff for a Canadian equities investor in 2012. During my brief holding period [less than two years] my annualized gain was over 80%. My initial purchase was prompted by an article by Larry Macdonald, an investment writer I have come to trust. His enthusiasm and common sense encouraged me to step outside my comfort zone. Digging into the headlines shows I missed out on a healthy total gain of 45% since I sold all shares in March of 2014. However, additional calculations reveal that my total portfolio has advanced 60% in that time.

Selling in 2014 was a good move.

➥ Lesson: Headlines, (or any current news) must be put in perspective to determine its actual significance. Despite the striking headline, I am much better off for having sold my Japanese holdings three-and-a half-years ago. Only consistent record-keeping saved me from a moment of regret and perhaps an error of comprehension. Additionally, because I was out of my comfort zone and lacked confidence, it is extremely unlikely that I would have held the index fund long enough to realize that 45% gain.

For comparison I turn to Norbord, a stock I also first purchased in 2012. This is my favourite type of holding, a Canadian company with a long history, strong management, and a large international exposure. My timing (luck) was exquisite and in a short 8 months I liquidated my total position and made a 75% profit. I continued following the stock and as it fell below my previous selling price, I became convinced that it was again a good buy. Things did not go particularly well. At the end of two years, buying on the dips, I had accumulated the exact number of shares I had previously sold at a profit. By April 2015 I had all my shares back but had lost 30% of my original profit. The difference was that I was much more comfortable with Norbord than I had ever been with the Japanese index. I was quite prepared to wait for good management to exert its positive influence. I also understood that Norbord was a cyclical stock stretching its high and low spikes out over a very long time frame. This month (Oct. 2017) I completed selling 90% of those shares. My new holding period had stretched out over four years but eventually managed to almost exactly duplicate the gains of my original position. As a result, Norbord earned a 33% annual gain during the five years I held it. I have kept a small 1% position in my portfolio for educational reasons. Experience is an excellent teacher and holding a small position is an effective way to sharpen your skills.

➥ Lesson: A well defined selection process and transparent management system will minimize anxiety, discourage selling, and promote long-term gains. I would add that you should be very clear about why you are selling. Get the reason into your investing diary. If the stock you sold goes on to seriously outperform, your notes should provide consolation, or lead you to modify your process.

A comment here on performance is in order, specifically what you personally are going to consider acceptable performance. In the beginning I was ready to accept performance which approached what the TSX and SPX did. I still regularly compare to those indexes. Short-term differences are useful for identifying how my portfolio's emphasis differs from the main markets. Over the long-term, I have been able to exceed 14%, even when limiting choices to Canadian products. My benchmark has become 14%. If I can't reasonably expect a stock to perform at that level I will not pick it. If a stock in my portfolio falls below that, I want to have solid reasons for keeping it. An all equities portfolio offers the best chance of profit and is high risk only over the short term.1

For investors who want to set up a more balanced portfolio, including bonds, cash, etc., your benchmark will necessarily be lower than mine. Since I can tolerate high risk, I choose an equities-only portfolio and select only those companies which generate cash. I basically ignore all the information about bonds, interest rate projections, and gold. I also avoid commodities, reasoning that good management doesn't have sufficient impact on stock prices and that their cycles are too long for my comfort. My chosen investing universe will be smaller, simpler, and likely more profitable than yours.

Until the third article then: a couple more tidbits and a diary entry to assist you in refining and sticking to your process.

Achieving Superior Returns

To achieve superior returns, you have to do something most people are not willing to do. If it were easy, everyone would do it, and the profits would be small. Ivanhoff says, "The only way to make big money is to be right about something about which almost everyone else is wrong." I would add that, in the case of picking stocks, you not only have to be right when others are wrong, but they have to later discover that you are right. Otherwise, your investment remains static, even though you are on the side of right.



MoneyTip

Undiscovered Value

Purchasing undervalued stocks is a key winning strategy. However, it is not reasonable to expect that the value will be discovered by others immediately following your own purchase. Time will reveal whether your evaluation is correct.

Diary Entry Jan. 20, 2017

The trend continues. I am down 3.1% year-to-date while the TSX is up 1.7% and the SPX up 2.5%. This is very disappointing and a reflection of last year, though not yet as severe. Should I be doing something different? It certainly feels like I should, but it is quite silly to wish that my portfolio performed more like the TSX. [I could easily buy the index.] Had that been the case since first establishing my portfolio in 2002, my lifetime earnings would be cut in half. Therefore, it becomes a question of timing. When should I shift strategies? When should I move into cash? The recent study referenced below, shows the answer to be, “Never, in response to market turmoil.”

A great study by the London Business School, academics Elroy Dimson, Paul Marsh and Mike Staunton showed in 2013 that market timing using valuation did not work.

The academics tested a strategy, in 20 countries, that sold stocks and went into cash every time price-to-dividend multiples went clearly above their historic mean at the time, and re-entered when they had become cheap. In every single country, this strategy fared worse than simply buying and holding stocks.2

Diary Update Oct. 31, 2017

I am up 16.9% year-to-date while the TSX is up 4.8% and the SPX is up 15%. Stay the course works! It is just very difficult to do.

Suggested Reading:

Ten Tips For Successful Long-Term Investing, in Canadian MoneySaver, October 2017 page 23. (Especially #6, but all are correct.)

Don Mackenzie, Retired teacher (1998), Landlord (1993-2017). Set up investment portfolio in 2002; lifetime gains 14.5%/yr. to Dec. 2017. Resides in St. Catharines, Ontario. Email: [email protected]

1 Kalos in Canadian MoneySaver Oct. 2017 page 19.2 Time In The Market — Not Market Timing — Is The Secret To

Investment Success. by Jill Schlesinger.

that your children now own (at fair market value), and you would pay the tax on that now...

Gift It NowAnother option is giving the cottage to your kids right now. That would trigger a capital gain and you would have to pay the capital gains tax up until the time you gave it to them. “You’ll still pay some of the tax,” says Lebane, “but if the property values are going up, you’ll be arresting the growth for capital gains....

Spread it Out

By selling the cottage to your children and receiving a promissory note (or an I.O.U. in simpler terms) from them for the price of the cottage, you may be allowed to spread your payable capital gains tax over 5 years. If the note is worded in such a way that says you will


Can Your Kids Afford To Inherit The Family Cottage?Always want the family cottage to stay in the family? Without some planning, leaving the cottage to your kids could mean leaving them with a giant capital gains tax bill.--

“A lot of people bought cottages in the 50s and 60s for low amounts, and they’ve really appreciated. If you’re in one of the hot cottage areas, you could be looking at appreciation in the millions of dollars.” So if you are a cottage owner, here are a few things you can talk to an advisor about in planning your cottage legacy so that your kids can afford it.

Co-own the Cottage with your KidsTo save and defer capital gains tax, you could add your children to the deed, making them co-owners of the property. If the property value has gone up, it would trigger a capital gain on the portion of the cottage




Investment Strategies

Five Market Adages That Can Help Your Portfolio

Andrew Hepburn

There are stock quotes and then there are quotes about stocks. Or, to be a bit more precise in the latter case, there are quotes about the world of investing. These sayings

have accumulated over the years, and while some are devoid of much insight, others offer real pearls of wisdom for investors.

A quote by itself won’t make you money, but taking the lesson to heart can serve you well when it comes to managing your investments. With that said, here are five well-known market adages investors should know.

The Four Most Dangerous Words In Investing Are "This Time it’s Different"

This observation, made by legendary investor Sir John Templeton, teaches us to be wary of claims that a particular stock or asset class has miraculously entered a “new era” where the old rules of valuation don’t apply. “This time it’s different” tends to be uttered when prices have become detached from reality. Market players come up with all sorts of rationalizations to justify why a bubble is, in fact, not a bubble at all. This saying, or a close variation (e.g. “We’re seeing a paradigm shift”) was heard during the 1990s internet stock bubble and the 2008 commodity bubble, to pick two noteworthy instances. If you see an asset described in these terms, odds are that its bull run is late in the game.

Markets Can Stay Irrational Longer Than You Can Remain Solvent

The first quote is essentially a warning about markets that are unsustainably pricey. By contrast, this saying by John Maynard Keynes reminds investors that prices and reality can take a long time to converge. More to the point, Keynes’ words caution people about assuming that

market rationality will return in short order. Why this quote matters: anyone considering betting against what they see as a bubble, or borrowing to buy a seemingly undervalued asset should recognize that if their timing is off, it can wreak havoc on a portfolio. Going back to the internet bubble, there were well-known money managers who correctly saw that tech stocks would crash, but were too early in placing their bearish bets and suffered huge losses as a result.

There’s Never Just One Cockroach In The Kitchen

Hopefully you don’t have any cockroaches in your kitchen. Unfortunately, however, if you’ve seen one, chances are there are others. The same is true for companies on the stock market. This adage, which has been repeated by, among others, Warren Buffet and newsletter writer Dennis Gartman, implores investors not to ignore the early signs of trouble in an investment. Maybe a Chief Financial Officer unexpectedly resigns without much explanation. Or perhaps a company reports that they are under investigation for fraud. Never may be a strong word, but odds are very good that this kind of bad news is not isolated. In fact, it may be the sign of even worse news to come.

Don’t Catch A Falling Knife

If an asset is crashing, it can be tempting for an investor to buy, believing they are smart enough to call the exact bottom. This saying, with its gory visual, warns investors about the risks of bravery during a price collapse. We saw a good example of this when oil started to plummet in late 2014 — as the price kept falling, pundits fell over themselves trying to pinpoint the exact low. Oil did finally recover, but it did so only after reaching levels few expected.



MoneyTip

Investing Should Be More Like Watching Paint Dry Or Watching Grass Grow. If You Want Excitement, Take $800 And Go To Las Vegas.

For the majority of individual investors, I think this may be the most important quote of the five. Attributed to economist Paul Samuelson and cited by the website Investopedia, it’s a great reminder that long-term investing may not be exciting but it works. It means, for most people, having a diversified portfolio that is re-balanced as appropriate every now and then and not trying to predict short-term market movements. Over the years, your portfolio should grow and experience the benefits of compounded gains.

Interestingly, even those these are pretty well-known adages, many professional market players ignore them

time and again. Analysts who know better than to say “This time it’s different” still say it and traders who know not to catch a falling knife still stick out their hand. What’s important, rather than just knowing a quote, is to really internalize it, so you’re inoculated from certain harmful investment tendencies. These lessons won’t make you rich, but they can stop you from making poor decisions with your money.

Andrew Hepburn is a freelance writer based in Toronto. He specializes in economic and financial issues. From 2006 to 2009 Andrew was a Research Associate with Sprott Asset Management in Toronto focusing on commodity markets. He is a graduate of Queen's University. [email protected]


collect on the mortgage over a 5-year span, then the CRA will allow you to spread out the tax payable over that time. Your children don’t actually need to pay you for the cottage, and you can forgive the debt in the will, meaning that the cottage will be owned by your children with no further taxes owing...

Trust the TrustsIf you are concerned about what might happen if your kids own the cottage while you’re alive, you may want to look at implementing a trust. A trust is a vehicle which allows a trustee to manage the property and use of it by the beneficiaries. There are trusts that you can use for the cottage while you are alive, or that will go into effect when you die. Whenever transferring the property to a trust, you would still pay capital gains tax as if you sold it at fair market value. But once in a trust, your children could still use the cottage as you see fit....

A Slice of Life (Insurance) Can HelpWhile buying life insurance won’t eliminate the tax bill upon death, it can provide needed cash to pay those taxes where the plan is to keep the cottage in the family and not sell it after you’re gone. “If you are a couple looking to pass the cottage down, you can purchase life insurance called ‘joint last to die’ on the second death,” divulges Lebane....

Make it a Primary ResidenceWith the increase in the demand for cottage properties, in some cases your cottage might be worth more than your family home. If that’s the case, you may wish to switch your primary residence to your cottage. Don’t worry, you don’t actually have to move to the cottage; as long as you reside in it for a part of the year, CRA will allow you to use it as your principal residence for tax purposes. ..

Do They Even Want It?“After all this,” Pat laughs, “the kids might sell the cottage anyway.” And sure enough, that’s a possibility for many families trying to pass down the cottage. Property taxes, maintenance fees, and the time commitment may deter those with an inherited property from keeping it. “We’re going to do what we can,” says Pat. “In the long run, it’s not going to be our decision.”...

Source: TD and BNN

https://www.bnn.ca/can-your-kids-afford-to-inherit-the-family-cottage-1.997414






Investing Strategies

Why Dividend Growth Investing Stands The Test of Time Nick McCullum

Dividend investing is a suitable investing strategy for anyone who wants to generate income from their investment portfolio. Unfortunately, there is a widespread

belief that dividend investing sacrifices growth. In other words, many investors believe that dividend investing and growth investing have no point of intersection.

We believe that this isn’t the case. In fact, there are plenty of merits to investing in dividend growth stocks – companies that pay dividends, and have a strong track record of consistently increasing these dividends over time. This article will describe the merits of implementing a dividend growth investing strategy and why we believe this strategy will stand the test of time.

The first, and perhaps most important, reason why investors should consider investing in dividend growth stocks is there is empirical evidence that shows dividend growth stocks tend to outperform the broader stock market over time. There is no better example of this than the Dividend Aristocrats – an exclusive group of dividend stocks with 25+ years of consecutive dividend increases. The performance of the Dividend Aristocrats is compared to the broader stock market in the following chart:

As of October 31, 2017, the S&P 500 Dividend Aristocrats Index – which is an equal weight index of all 51 S&P 500 stocks with 25+ years of consecutive dividend increases – has delivered annualized returns of 10.85% over the trailing 10-year period. For context, the broader S&P 500 Index has returned 7.51% during the same time period. The Dividend Aristocrats have outperformed the world’s most important stock market index by more than 3% per year for ten years.

This outperformance is even more remarkable when you consider the risk profile of the Dividend Aristocrats. Conventional academic finance suggests more returns can only be generated by incurring additional volatility. The Dividend Aristocrats show that this isn’t always the case in practice, as they’ve outperformed the market while generating considerably less volatility.

Here’s what the numbers look like. Over the 10-year period discussed previously, the Dividend Aristocrats Index had a price standard deviation of 14.06% while the S&P 500 Index had a price standard deviation of 15.15%. This combination of higher returns and lower volatility make for excellent risk-adjusted returns when measured by financial metrics like the Sharpe Ratio or

the Sortino Ratio.

T h i s i s n o f l u k e . There are fundamental, common-sense reasons why dividend growth stocks have outperformed the market over time (and should continue to do so). We believe these appealing qualitative characteristics can be broadly divided into three categories.

Source: S&P 500 Dividend Aristocrats Index Fact Sheet



First, companies that pay rising dividends need to be generating actual earnings and cash flow to support said dividend. This is particularly true for companies that have very long dividend histories. For investors, the unintended benefit of this is it eliminates pre-earnings startups and companies that are experiencing financial difficulties or bankruptcies – in other words, the riskiest investments in the stock market. Over a large enough time period, dividend growth stocks need to actually experience growth in their underlying businesses.

The second reason why dividend growth stocks outperform is because of the lesser amount of retained earnings available to the corporate managers of these companies. This means that the company’s capital allocators must be extremely selective in the growth opportunities that it takes on, which likely enhances the quality of a company’s capital allocation decision-making in the long run.

Lastly, steadily rising dividend payments are indicative of a shareholder-friendly management culture. This likely extends to other areas of the company, including insider ownership and stock dilution policies. Indeed, we’ve studied the insider ownership tendencies of Dividend Kings (an even more exclusive group of dividend growth stocks with 50+ years of consecutive dividend increases) and their insider ownership is well above average, with most corporate executives owning millions of dollars of company stock.

The title of this article suggests that dividend growth investing will stand the test of time. Indeed, there are many characteristics of dividend growth investing that suggest it’s a worthwhile strategy for the conservative, long-term investor.

The first reason why dividend growth investing is here to stay is related to the fundamental, business-level characteristics of dividend growth stocks. Many of the most well-known and successful dividend growth stocks are market leaders in slow-changing industries with considerable barriers to entry. Unsurprisingly, the Dividend Aristocrats are very underweight sectors that are prone to disruption (like information technology) and highly overweight sectors that remain relatively unchanged over time (like healthcare, consumer staples, and industrials).

Two prime examples of the slow-changing nature of dividend growth stocks are Coca-Cola (KO) and Pepsi (PEP). These companies, which are both Dividend Aristocrats, were founded in 1892 and 1898, respectively, and are the undisputed market leaders in the beverage

industry. Pepsi also has a large market share of packaged foods thanks to its acquisition of Frito-Lay. It is unlikely that a small startup will create a beverage that is more popular than Coca-Cola or Pepsi, and the sheer scale required to compete with these heavyweights make this even less likely. This makes the competitive positioning of these Dividend Aristocrats extremely powerful.

For investors, the security level implication of this is dividend growth stocks with long histories of dividend increases have a much higher probability of continuing to increase their dividends than dividend growth stocks with shorter dividend increases. In the past, we’ve analyzed the probability of a dividend cut for Dividend Aristocrats (stocks with 25+ years of consecutive increases) when compared to dividend stocks with shorter (10-24 year) dividend increase streaks. Unsurprisingly, the companies with longer histories of steadily rising dividends had a far lower chance of reducing their dividends in the sample period we analyzed.

Another piece of evidence to suggest dividend growth investing will stand the test of time is the successful practice of this investing strategy for decades by highly influential and prominent investors. While Benjamin Graham is most well-known as the father of value investing, he was also discussing dividend growth investing at least as early as 1934, when the original edition of his seminal book Security Analysis was published. In the book, he wrote: “The prime purpose of a business corporation is to pay dividends regularly and, presumably, to increase the rate as time goes on.” Warren Buffett’s investment portfolio is also full of high-quality dividend growth stocks. Dividend growth investing worked in 1934, and it still works today. We remain convinced that this strategy will continue generating market-beating returns for the foreseeable future.

For self-directed investors, the actionable way to apply the knowledge this article has shared about dividend growth investing is by buying high-quality dividend growth stocks trading at fair or better prices and holding them for the long run. For investors that are averse to buying individual stocks, you can also participate in the benefits of dividend growth investing through passive investing products like the Dividend Aristocrats ETF (NOBL).

This article was contributed by Nick McCullum of Sure Dividend, an investment newsletter provider aimed at helping people invest better through taking low-cost, long-term positions in individual stocks.



Tax Strategies

Should You Buy Permanent Insurance?

David Townsend

One savvy insurance professional put it like this: “consumers do not buy permanent life insurance; they are sold it.” That has been my experience also. First, permanent

life insurance is expensive. Although commissions are certainly not transparent, my research indicated that about 100% of the first-year premium (and sometimes more) will go to the selling agent. In my view, the large commissions have resulted in permanent insurance being oversold. As a result, many consumers and independent financial advisors are skeptical about the product.

The skepticism is understandable when you hear stories from policy holders in the U.S. who are suing major insurance companies for 200% premium increases on universal life policies that go back decades. The lesson to be learned is that consumers better understand what they are getting into when they buy permanent insurance. I have found that many do not.

Permanent insurance includes many complex products and some equally complicated strategies. Terms like permanent insurance, whole life, universal life and term to 100 are often used without any background information; as if everyone is familiar with the benefits and limitations of different types of policies.

In my research for this article, I found much conflicting information and many radically different opinions on the value of permanent insurance. Granted, much of it was American based and the Canadian rules are different, but the concepts are similar. I also came across several celebrity financial planners who were over the top (in my view anyway) that whole life insurance is a “rip-off ”. On the other side, insurance providers are equally adamant about the effectiveness of permanent insurance to do everything but cure cancer. The debates were, well, not very polite at times.

On the positive side, I found some of the best unbiased information came from a fellow Moneysaver contributor.

As I write this, Colin Ritchie has contributed some new articles on this topic. He also wrote a series of articles on permanent and term insurance several years ago. For anyone wanting details on the different types of insurance, I recommend going to his website or previous Moneysaver issues.

In my experience, clients do not always hear the “permanent” part when they commit to this type of insurance. This type of policy is designed to be in place for life! Needs and/or income levels sometimes change and winding up or adjusting the policy is expensive. Many do not adequately consider this.

Mr. Ritchie often refers to the “need for permanent insurance”. To follow up on that, when is there a need for permanent insurance?

For those who have significant capital and will not spend it all, it is a useful way to accumulate funds tax efficiently and leave a legacy. At some point, everyone becomes uninsurable. If you qualify for the insurance, are comfortable you can afford the premiums, and want to pass something on to the next generation, permanent insurance works. However, you still should be careful of the level of coverage. Some overestimate their ability to pay the premiums, resulting in additional expenses and stress.

Cash, GICs, principal residences and Tax-Free Savings Accounts (TFSAs) are other assets that can be passed on to the next generation tax-effectively. Granted, they do not have tax advantages of permanent insurance, but simplicity has advantages too. Permanent insurance seems to get very complicated very fast. Often the client does not fully understand all the implications and I suspect that some agents do not either. And a complete analysis is only done if there are misunderstandings

I have also seen permanent insurance sold as a retirement vehicle. The most common example is when a company buys a permanent insurance policy


32 z Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017

MoneyTip

and the insured shareholders borrow against it. The funds accumulate tax-free within the company policy as opposed to the company paying high-rate tax on investment income. The shareholders then draw loans that are essentially tax-free and repaid out of the insurance proceeds when they pass.

However, the company can also reduce its high-rate tax by paying out dividends. The permanent insurance plan works in the right circumstances, but it is important that the client understands the ramifications and alternatives. There may be simpler ways to achieve the same result.

To quote Colin Ritchie: “What’s the difference between term and perm coverage? Insurance advisors often describe it as the difference between renting and owning.”

That’s a good analogy to a point. With term insurance, the premiums are basically paid and gone, like rent expense. On the other hand, with a permanent life

insurance policy, you can build up equity and borrow against it. However, permanent insurance is not a property that can be easily liquidated.

“Owning” permanent insurance for a lifetime is a big commitment. Any reader of this article would not consider a major property purchase without investigating and comparing alternatives. They would not talk to one realtor and buy the first property they saw.

Buying a permanent life insurance policy requires the same level of due diligence. Be open-minded but skeptical. Evaluate pros and cons, discuss alternatives, get second opinions, consider “worst case scenarios”, and only then make an informed decision.

David A. Townsend, C.A., C.F.P. has been providing accounting and tax services in Calgary since 1990. Clients include a wide variety of individuals, trusts, estates and private companies. For further information, check out www.datownsend.com

The CRA issued a letter in 2013 that stated that bitcoin and other digital currencies were not considered to be legal tender. Instead, the government agency said, cryptocurrencies are viewed as a commodity. As such, any resulting gains or losses could be taxable income.

But until the gains on that virtual currency are realized—whether that is by selling the digital currency or using it to make a purchase—those gains are not subject to tax.

“The act of buying bitcoin or receiving bitcoin should not be taxable,” said Paton. “The act of using bitcoin will be taxable.”

For example, if you purchased one bitcoin for US$10,000 but sold it last year for $19,000, you will need to declare $9,000 in capital gains.

When cryptocurrencies are used to pay for goods or services, the rules for barter transactions apply.

For example, if a merchant accepted bitcoin in exchange for a desk, a pair of glasses or jewelry—all items that can currently be bought using bitcoin—the seller will need to include the fair market value of the good or service sold in their income for tax purposes.

Source: Armina Ligaya

The Taxman Comes For Bitcoin UsersIt may seem early to start thinking about filing taxes, but this year’s return could be particularly time-consuming for Canadians who have flocked to bitcoin and other cryptocurrencies, especially those who don’t realize they owe the government money.

No need to worry if you’ve purchased bitcoin but haven’t touched it since. But once that cryptocurrency is translated into a real-world dollar amount—such as when you sell it or use it to buy something—you are on the so-called taxman’s radar.

The price of bitcoin shot above US$19,000 in mid-December, prompting a surge of interest, along with some cautionary advice from officials. Bank of Canada governor Stephen Poloz warned about cryptocurrencies’ risks and tax implications the same month.

“Characteristics vary widely, but, generally speaking, they can be thought of as securities. The Canada Revenue Agency agrees,” Poloz said during a Toronto speech. “That means if you buy and sell them at a profit, you have income that needs to be reported for tax purposes.”

But working out what to declare to the taxman is not that straightforward, experts say. “There is no exact framework within the income tax act that tells us exactly how bitcoin is taxable,” said Lana Paton, managing partner of PwC Canada’s Tax Services.


http://www.datownsend.com

Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017 z 33

Q My wife and I are in our mid-70s and living on income from Old Age Security (OAS), Canada Pension Plan (CPP), my defined-benefit pension plan, Registered Retirement Income Fund (RRIF) withdrawals, and qualified dividend income derived from equity investments in our Tax-Free Savings Accounts (TFSA) and non-registered accounts. Pension income-splitting allows us to keep each of our annual taxable incomes comfortably below the OAS clawback threshold. However, we are anticipating a one-time capital gain from the sale of shares in one company that I anticipate will occur this year or next. The total capital gain—proceeds less the adjusted cost base, which, split evenly between us (the shares are held in a joint brokerage account), will mean the full clawback of our OAS and propel each of us into a higher tax bracket for that single tax year. Is there any way the capital gain can be spread over multiple years to minimize the OAS clawback and keep us in our existing tax bracket? I don't think it will be possible to spread the sale of the shares over more than one year; all the shares will likely have to be sold at the same time.CMS Reader

A First, you are managing well to minimize your combined personal taxes within the tax laws available by making use of pension income-splitting and structuring your incomes to avoid the OAS clawback.Assuming all of the proceeds on the sale of stock will be received at once, there is no opportunity to spread the reporting of the capital gain beyond the year of sale. A capital gains reserve is only available if proceeds are received over a period of years. However, you could analyze your non-registered portfolio and consider disposing of shares with accrued losses to offset the anticipated capital gain so that the net gain is lessened. Wait at least 30 days before re-purchasing the same “loss shares” to avoid having the losses denied as “superficial losses”.Keep in mind that net capital losses available from a prior year, or any of the three subsequent years, from the year of your stock sale may be available to be carried over and applied to help offset the taxable capital gain you will realize.

CHAD SAIKALEY, CPA, CA, TEP, TAX PARTNER

You must accompany your inquiry with your Membership Number (ID) and telephone number or e-mail to have your question reviewed. Inquiries are responded to directly and the Q&A may be published here later. Hundreds of Q&As are found on www.CanadianMoneySaver.ca

Q With regard to income splitting for a RRIF & the $2K pension deduction, can the income splitting be done with a spouse under 65 years of age? Following on this, if income splitting is possible, can the $2K pension income deduction be claimed by the younger spouse. CMS Reader

A Although you can income-split your RRIF when you are 65, regardless of spouse’s age, your spouse can only get the pension income credit when s/he is also 65 unless she is getting the credit from a work pension, in which case the age restriction doesn’t qualify. Likewise, someone getting a work pension under age 65 can income-split with their spouse prior to age 65 (except according to the Quebec government), while those of us who don’t get a work pension and have to go the RRIF or annuity route to get the credit need to hang on and wait until we’re that much older. This is something that I hope gets addressed by the federal government at some point, particularly in light of the numerous complaints this year that arose in response to the small business tax change proposals about general unfairness in our tax system. Many business owners and tax professionals noted that it’s pretty hard for most people to put enough money into their RRSPs to be able to build up enough money to buy the sort of pension that public servants like the minister of finance or the prime minister would generate over the same time period, particularly since individual investors have to take on investment risk while, unless the company funding the pension can’t make up the losses (which I don’t see happening with civil servant pensions), DB pensioners do not. The fact that the holders of defined benefit pension plans both get to earn the pension income credit sooner and get to income-split it with their spouses prior to age 65 seems hard to justify and just adds to the perspective that there isn’t a level playing field between those with DB pensions and those without.

COLIN RITCHIE, BA.H. LL.B., CFP, CLU, TEP AND FMA


http://www.CanadianMoneySaver.ca


This column offers excerpts from published and online sources to provide other viewpoints.

National Bank analysts collectively cover 300+ TSX-listed equities, of which roughlyhalf offer investors income in the form of dividends or distributions. To help navigate this universe we assemble a portfolio that contains 25 of NBF’s favourite yield ideas, the basket spanning a variety of industries, sizes and liquidity, but sharing three investment criteria:

1. Dividend/distribution yield of 4% or greater;

2. Extremely low risk of the current payout proving unsustainable; and

3. Positive analyst bias regarding the prospects for share/unit price.

TAKEAWAYS• NBF’s 2017 Dividend All-Stars portfolio introduced January 31, 2017 returned income of 5.9% and realized an average price return of 6.2% over the last 12 months,

this 12.1% total return above the S&P/TSX Composite’s 6.7% for the same period (2.9% income and 3.8% price return for the index).

• The average annual total return of NBF’s Dividend All-Stars over its six-year history is 11.9% compared with 7.3% from the S&P/TSX. 19 of the 32 names highlighted as 2017 All-Stars (~59%) outpaced the market, compared with 64% (28/44) in 2016, 52% in 2015 (16/31), 38% in 2014 (16/42), 71% in 2013 (27/38) and 85% in 2012 (28/33).

• 14 All-Stars increased dividends in 2017 (Brookfield Infrastructure Partners, Capital Power Corporation, Crius Energy Trust, Enercare, First National, Innergex Renewable Energy, Keyera, Killam, MCAN Mortgage Corp., Pattern Energy, SmartCentres REIT, Timbercreek Financial (Restricted), CIBC and Pembina Pipeline). To date there have been 94 dividend/distribution increases versus five cuts from this portfolio.

• The average yield of an All-Star is elevated at 6.1%, but payout is easily funded for each, with most equities having the capacity to grow dividends/distributions over time.

• For investors seeking stable, predictable, elevated income and exposure to high quality companies, the following basket reflects NBF’s favourite ideas for 2018.

NATIONAL BANK’S 2018 DIVIDEND ALL-STARS

NBF DIVIDEND ALL-STARS 2018 PORTFOLIO

Equity Ticker Share/Unit Price

Dividend/Distribution

Yield Analyst

AG Growth International AFN-T $54.61 $2.40 4.4% Colman

Algonquin Power & Utilities AQN-T $12.87 US$0.47 4.5% Merer

BCE Inc. BCE-T $56.12 $2.87 5.1% Shine

Bird Construction BDT-T $8.89 $0.39 4.4% Sytchev

Brookfield Infrastructure Partners BIP.un-T $51.85 US$1.74 4.1% Merer

CanWel Building Materials CWX-T $6.35 $0.56 8.8% Aghazarian

Capital Power CPX-T $22.56 $1.67 7.4% Kenny

CIBC CM-T $115.82 $5.20 4.5% Dechaine

Chorus Aviation CHR-T $8.90 $0.48 5.4% Doerksen

Crius Energy Trust KWH.un-T $8.69 $0.84 9.6% Leno

Dream Industrial REIT DIR.un-T $9.03 $0.70 7.8% Kornack

Enbridge ENB-T $43.06 $2.68 6.2% Kenny

Exchange Income Corporation EIF-T $32.30 $2.10 6.5% Johnson

Fiera Capital Corporation FSZ-T $12.13 $0.72 5.9% Gloyn

Student Transportation STB-T $7.17 US$0.44 7.6% Colman

H&R REIT HR.un-T $20.49 $1.38 6.7% Kornack

High Arctic Energy Services HWO-T $3.77 $0.20 5.3% Colman

Horizon North Logistics HNL-T $1.66 $0.08 4.8% Colman

Keyera Corp. KEY-T $32.98 $1.68 5.1% Kenny

Pattern Energy Group PEGI-T $24.42 US$1.69 8.5% Merer

Pembina Pipeline PPL-T $40.30 $2.16 5.4% Kenny

RioCan REIT REI.un-T $23.61 $1.44 6.1% Kornack

SmartCentres REIT SRU.un-T $29.05 $1.75 6.0% Johnson

Timbercreek Financial Corp. TF-T $9.05 $0.69 7.6% Gloyn

WPT Industrial REIT WIR.u-T US$13.14 US$0.76 5.8% Johnson

Average 6.1%

Source: NBF, Bloomberg, priced Feb 5th close



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5, 2

018

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

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nd)

6 M

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turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

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Yea

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turn

(m

th-e

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15 Y

ear

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rn

(mth

-end

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Yiel

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M

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l Ass

ets

($M

il)

CAN

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Scot

ia C

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4112

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me

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572.

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Cana

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ity

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91.

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6810

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iden

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end

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15.6

71.

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Nor

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est

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plar

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all B

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1115

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Chou

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P Cl

ass

F-1

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9.74

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22.5

60.

547.

176.

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3.88

1.38

1.00

78.6

1M

cElv

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Inv

estm

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2.41

11.7

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Nor

th A

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ican

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all-

Cap

Equi

ty-A

0.10

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6-

0.10

--

--

--

-1.

807.

56



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF F

EBRU

ARY

5, 2

018

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

(m

th-e

nd)

6 M

onth

Re

turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

-end

)10

Yea

r Re

turn

(m

th-e

nd)

15 Y

ear

Retu

rn

(mth

-end

)

Yiel

d 12

M

oM

ERM

gmt

Fee

Tota

l Ass

ets

($M

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GLO

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L EQ

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Glo

bal G

row

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11.5

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23.2

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63.6

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1478

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TD E

nter

tain

men

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Com

m -

F7.

776.

6813

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29.6

319

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24.3

116

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70.

001.

381.

2562

4.44

DMP

Pow

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loba

l Gro

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s F

11.4

412

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919

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001.

691.

0027

.19

Rena

issa

nce

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al S

cien

ce &

Tec

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F7.

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4118

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218

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815

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10.6

00.

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0040

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CIBC

Glo

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1318

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23.0

614

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110.

97Ed

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t (n

on-H

ST)

Sr F

(N)

4.23

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24.

2321

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721

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--

0.00

0.92

0.80

8831

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4.21

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4.58

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5832

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Scot

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3.76

5.00

13.6

23.

7625

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5.84

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8429

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RBC

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2.72

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Fier

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1125

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--

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310.

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n Li

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FS G

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11.9

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--

61.7

4

CH

ART

NO

TES

For

info

rmat

ion

on t

he c

ateg

ory

defi

niti

ons,

ple

ase

visi

t ht

tp:/

/ww

w.c

ifsc

.org

/en/

inde

x.ph

p. F

ront

loa

d fu

nds

(Frn

t) c

harg

e a

fee

to i

nves

tors

whe

n un

its

are

purc

hase

d; d

efer

red

load

fund

s (D

ef)

char

ge a

fee

whe

n un

its

are

rede

emed

. Fro

nt lo

ads

may

be

redu

ced

(in

per c

ent

term

s) a

s th

e si

ze o

f the

inve

stm

ent

incr

ease

s;

defe

rred

load

s m

ay d

ecre

ase

as t

he t

ime

elap

sed

betw

een

purc

hase

and

rede

mpt

ion

leng

then

s. S

ome

fund

s ha

ve e

ithe

r a fr

ont

load

or a

def

erre

d lo

ad (

FnDf

). O

ther

s

have

no

load

fee

(Non

e). D

efer

red

sale

s ch

arge

s al

so k

now

n as

a b

ack-

end

load

, the

se d

efer

red

char

ges

typi

cally

go

dow

n ea

ch y

ear y

ou h

old

the

fund

, unt

il ev

entu

ally

they

reac

h ze

ro. D

efer

red

sale

s ch

arge

s gi

ve in

vest

ors

an in

cent

ive

to b

uy a

nd h

old,

as

wel

l as

a w

ay t

o av

oid

som

e sa

les

char

ges.

n Y

ear R

etur

n -

The

aver

age

annu

al

com

poun

d (a

nnua

lized

) ra

te o

f ret

urn

the

fund

has

per

form

ed o

ver t

he la

st “

n” y

ears

. It

assu

mes

rein

vest

men

t of

any

div

iden

d or

inte

rest

inco

me.

1 Y

ear R

etur

n (Y

r

endi

ng D

ecYY

) -

An a

nnua

l ret

urn

is t

he fu

nd o

r por

tfol

io re

turn

, for

any

12-

mon

th p

erio

d, in

clud

ing

rein

vest

ed d

istr

ibut

ions

. Tax

Eff

icie

ncy

- Ca

lcul

ated

by

divi

ding

the

fund

’s t

ax-a

djus

ted

retu

rn (

pre-

liqui

dati

on)

by it

s pr

e-ta

x re

turn

, and

can

onl

y be

cal

cula

ted

whe

n bo

th p

re-t

ax r

etur

ns a

nd t

ax-a

djus

ted

retu

rns

are

posi

tive

.

Dist

ribu

tion

Fre

quen

cy -

The

inte

rval

at w

hich

regu

lar c

apit

al o

r inc

ome

divi

dend

s ar

e di

stri

bute

d to

fund

uni

thol

ders

. Yea

r end

Qua

rtile

s - T

he q

uart

iles

(1 to

4)

give

the

indi

vidu

al fu

nd it

s po

siti

on re

lati

ve t

o al

l oth

ers

in t

he fu

nd t

ype

cate

gory

. For

exa

mpl

e, if

the

fund

’s q

uart

ile v

alue

is “

1” fo

r the

Dec

201

0 ye

aren

d, t

his

mea

ns

the

fund

’s ra

te o

f ret

urn

for t

he 1

2 m

onth

s en

ding

Dec

31,

201

0 is

in t

he t

op 2

5% o

f all

fund

s in

its

fund

typ

e ca

tego

ry.

Sour

ce -

Mor

ning

star

Pal

Trak

, Mor

ning

star

Can

ada,

(80

0) 5

31-4

725,

htt

p://

ww

w.m

orni

ngst

ar.c

a.


http://www.cifsc.org/en/index.php








Specialty ETFsTOP EXCHANGE TRADED FUNDS RANKED BY FIVE-YEAR RETURNS AS OF FEBRUARY 5, 2018 Fund Name Ticker Mkt Tot Return

YTD(Current)

Mkt Tot Ret 1 Mo

(Current)

Mkt Tot Ret 3 Mo (Current)

Mkt Tot Ret 12 Mo

(Current)

Mkt Tot Ret 3 Yr

(Current)

Mkt Tot Ret 5 Yr

(Current)

Mkt Tot Ret urn Since Incept

(Current)

PowerShares QQQ ETF QQC.F 8.12 8.12 10.88 36.02 18.94 21.18 19.48

Vanguard S&P 500 ETF VFV 3.38 3.38 4.95 19.10 13.00 20.35 21.11

BMO S&P 500 ETF (CAD) ZSP 3.38 3.38 4.93 18.97 12.96 20.34 21.05

BMO Eq Wght US HlthCare Hdgd to CAD ETF ZUH 7.44 7.44 10.34 29.66 10.75 19.49 -

First Asset TecGntsCovCallETF Comm(CADH) TXF 5.02 5.02 4.76 34.96 20.50 19.17 16.86

iShares Edge MSCI Min Vol USA ETF XMU 1.20 1.20 1.88 14.38 11.26 18.99 17.83

BMO China Equity ETF ZCH 8.23 8.23 8.04 43.72 14.30 18.87 10.18

iShares US Fundamental ETF Comm CLU.C 1.99 1.99 4.54 12.55 10.41 18.44 17.31

BMO Eq Weight US Banks Hedged to CAD ETF ZUB 7.82 7.82 13.86 25.28 21.02 17.80 -

iShares MSCI World ETF XWD 2.95 2.95 3.67 18.46 10.39 16.04 12.94

BMO India Equity ETF ZID 4.06 4.06 7.00 38.59 8.29 15.53 8.40

iShares Global Water ETF Comm CWW -1.42 -1.42 -1.83 15.69 8.96 15.23 6.62

iShares Japan Fundamental ETF CADH Comm CJP 0.97 0.97 3.78 21.37 9.74 15.19 -0.66

Vanguard US Total Market ETF CAD-H VUS 5.15 5.15 9.26 24.19 13.08 14.90 15.46

iShares Edge MSCI Min Vol Global ETF XMW 0.98 0.98 1.33 12.96 8.07 14.88 14.45

iShares Global Water ETF Adv CWW.A -2.92 -2.92 -0.56 16.10 8.91 14.85 5.82

First Asset Mstar NatlBk Québec ETF Comm QXM -1.47 -1.47 1.44 14.03 8.05 14.79 14.31

Horizons Active Global Dividend ETF Comm HAZ 1.13 1.13 2.10 15.92 8.80 14.62 -

iShares Japan Fundamental ETF CADH Adv CJP.A 0.74 0.74 3.93 16.85 8.66 14.56 -1.38

iShares Global Healthcare ETF CADH XHC 4.28 4.28 5.54 20.37 6.77 14.21 15.01

BMO Low Volatility Canadian Equity ETF ZLB -1.27 -1.27 -0.95 9.30 6.92 14.04 14.31

iShares Equal Weight Banc&Lfco ETF Comm CEW 0.97 0.97 2.71 10.41 15.01 14.03 8.98

PowerShares FTSE RAFI US Fundamental ETF PXU.F 3.56 3.56 8.79 18.72 11.24 13.68 14.38

BMO Equal Weight Banks ETF ZEB 1.54 1.54 3.53 12.82 16.36 13.67 12.72

iShares US Fundamental ETF (CAD-H) Comm CLU 4.00 4.00 9.30 19.02 11.33 13.50 6.68

iShares India ETF XID 2.26 2.26 2.68 25.82 5.50 13.31 -

First Asset CanBanc Income Class ETF CIC 1.62 1.62 3.15 10.71 14.04 12.41 -

iShares Global Agriculture ETF Comm COW -0.22 -0.22 2.23 16.97 8.01 12.19 8.34

iShares International Fdmtl ETF Comm CIE 2.62 2.62 2.27 19.33 8.41 12.18 2.84

iShares China ETF XCH 11.43 11.43 11.24 38.61 9.63 11.85 -

BMO Global Infrastructure ETF ZGI -3.74 -3.74 -6.36 0.75 1.06 11.48 13.40

BMO Covered Call Canadian Banks ETF ZWB 1.48 1.48 3.33 10.24 14.10 11.45 10.04

BMO Equal Weight Industrials ETF ZIN 0.41 0.41 1.05 17.19 12.73 11.35 13.34

iShares US High Dividend Equity ETF CADH XHD 2.24 2.24 8.09 15.57 9.61 11.15 10.88

First Asset MstarUSDivTgt50 ETF CADHComm UXM 1.39 1.39 6.99 19.71 8.01 11.13 10.58

iShares Global Agriculture ETF Adv COW.A -1.46 -1.46 1.62 16.07 7.11 11.01 7.44

BMO MSCI EAFE Hdgd to CAD ETF ZDM 1.47 1.47 1.93 17.63 8.53 10.67 7.53

Vanguard FTSE Dev All Cap ex US ETF CADH VEF 1.35 1.35 1.86 17.54 8.51 10.47 11.83

First Asset Canadian REIT ETF Comm RIT -0.02 -0.02 2.56 10.05 11.70 10.23 -

iShares MSCI EAFE ETF (CAD-Hedged) XIN 1.43 1.43 1.66 16.93 7.99 10.10 3.91

©2018 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed,(4) do not constitute investment advice offered by Morningstar, (5)are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supple-mental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent,and disclosure statement.


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