Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
A high dividend yield is nice – but capital gains can be even nicer
A reader writes of having a yield minimum of 4.5 per cent on stocks in their registered retirement income fund: “I used to own Fortis, Algonquin Power & Utilities and Canadian National Railway but sold them because the yields were too low for my plan. Am I being too short-sighted in ignoring share price appreciation as a factor in my overall returns?”
John Heinzl responds: With such a high bar you are excluding a lot of great dividend-paying companies, including many banks, insurers, utilities, power producers, railways and real estate investment trusts. And, yes, share price appreciation often accounts for an even larger portion of a stock’s total return, so you might consider lowering your yield threshold to give yourself more flexibility in choosing stocks. Another option is to supplement your dividend stocks with exchange-traded funds that track the major Canadian and U.S. indexes. Read more here, including answers to other reader questions.
More from John Heinzl: Netflix, Kansas City Southern and more investing stars and dogs for the week
Rob Carrick’s 2021 ETF Buyer’s Guide: Best Balanced ETF
Balanced ETFs have aced the first serious test of their potential to bring smart, sensible investing to investors of all types, Rob Carrick writes. Through the sharp stock market downs and ups of the past 12 months, these easy-to-buy funds made a strong case for chucking individual stocks and ETFs and instead buying a fully diversified ETF portfolio in a single bundle.
Choose the mix of assets that suits your needs and keep adding money over the years through an account at an online broker or a trading app. Use this final instalment of the 2021 Globe and Mail ETF Buyer’s Guide to examine the different asset mixes used by various ETF companies and how they played out in both the good and bad periods of the past 12 months.
More from Rob Carrick: She sold her Toronto home to retire somewhere cheaper. It hasn’t worked
Gordon Pape: Three low-risk ways to tap into steady growth in water management industry
Water management is not a very exciting subject, Gordon Pape writes. Unless a toxic wastewater pond overflows or a city’s drinking water is contaminated, we don’t hear much about the business of getting potable water into our homes or taking it away. In fact, it’s a huge business and growing at a steady rate of 6.5 per cent annually, according to a report published last year by London-based Meticulous Research. Here are three ways you can invest in the water industry: Xylem, American Water Works and iShares S&P Global Water Index ETF. Read more about each here.
Everything’s going right for stocks. What could go wrong?
Lockdowns aside, there has been a deluge of good news for investors to celebrate in 2021, David Berman writes. Canadian and U.S. employment numbers are improving, factories are humming, commodity prices are rising and economic projections are growing rosier. Profits are soaring: For companies in the S&P 500 that have reported their first-quarter financial results so far, earnings have risen nearly 34 per cent from last year’s first quarter, according to Refinitiv. That’s the strongest growth in more than a decade.
So why is this a time to be cautious? Apart from record-high levels for the S&P 500 and the S&P/TSX Composite Index this month, it’s becoming hard to ignore signs of investor complacency. And if stocks looked like the only game in town when government bond yields were low and central banks were promising to keep their key interest rates at ultralow levels, that’s now changing. Read more here.
More from David Berman: U.S. bank earnings soared, but stocks slipped. Will Canadian banks follow suit?
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Rob Carrick: What are the best ETF alternatives to GICs?
GIC returns being what they are in spring 2021, it’s no wonder that investors are looking for better places to put their money, Rob Carrick writes. ‘What are the best ETF alternatives for secure fixed income investments to replace GICs?” a reader asked recently. The answer, sadly, is that there are no alternatives in the world of exchange-traded funds for investors who fit the profile of the typical investor in guaranteed investment certificates.
GICs are all about the guarantee, which covers principal and interest combined for $100,000 at institutions that are part of Canada Deposit Insurance Corp., and higher or even unlimited amounts at credit unions, depending on the province where they’re based. The price you pay for this security is a yield that tops out around 2 per cent for five years. And that’s only if you access alternative banks, not Big Six banks. Read more here.
What investors need to know for the week ahead
In the week ahead, major Canadian companies reporting earnings include BCE on Thursday and Canadian National Railway on Monday. Other companies also releasing their latest results include Tesla, Apple, Alphabet, Shopify, Amazon, Microsoft, Starbucks, McDonald’s, Alibaba, 3M, AstraZeneca, Eli Lilly, UPS, Visa, Mastercard, Boeing, Fairfax Financial, Ovintiv, Restaurant Brands, T-Mobile, Choice Properties REIT, Exxon Mobil, Imperial Oil and Hydro One.
On Wednesday, the U.S. Federal Reserve makes its rate announcement, followed by chairman Jerome Powell’s press conference. Economic data on tap for the week include: U.S. durable good orders for March (Monday); Canadian retail sales for February and U.S. goods trade deficit for March (Wednesday); U.S. real GDP for the first quarter and pending home sales for March (Thursday); Canada’s monthly real GDP for February as well as industrial product price index and raw material price index for March plus U.S. personal spending and income for March (Friday).