Investment

Ways to make more income from your investments

Published

1 year ago

May 9, 2023

A monitor with stock market information on the floor of the New York Stock Exchange. Photo by Michael Nagle/Bloomberg files

There are some unique opportunities in every investment market, and we’re not talking about artificial intelligence and lithium mining here, but the joys of some sources of high income.

Some of these vehicles are better known than others, but each brings a different yield and has a different risk profile.

High-interest savings funds and ETFs

There’s no need to lock money in a guaranteed investment certificate when you can access funds daily and still earn around 4.5 per cent for Canadian cash and five per cent on U.S. cash. Purpose Investments Inc., Ninepoint Partners LP, CI Financial Corp., Horizons ETFs Management Inc. and others all offer this option as the modern equivalent to a money market fund.

This is a great option for corporate money that is often sitting in bank accounts earning zero, but also a good option for personal money as well. If interest rates fall, these returns will fall, but we don’t see that happening for several months.

Short-term bonds

Specifically, those that generate yields to maturity in the range of 4.5 per cent to 5.5 per cent.

One that we own is a Laurentian Bank of Canada bond that comes due June 3, 2024. It has an annualized yield to maturity in 13 months of 5.35 per cent. There are many others that will yield in this range from fairly solid companies with maturity dates in the six-to-24-month range.

High-yield bonds

Specifically, those that generate yields to maturity in the high six-per-cent range for reasonable risk.

The Canadian high-yield universe is small (43 bonds) and yields 7.47 per cent on average, but this is impacted by some larger distressed issuers.

A couple that are interesting and maybe a little lower risk are the Parkland Corp. 4.375-per-cent, March 26, 2029, bond that is yielding 6.78 per cent, and the Cascades Inc. 5.375-per-cent, Jan 15, 2028, bond that is yielding 6.75 per cent in U.S. dollars.

Preferred shares

These can generate dividend income with yields in the range of 5.75 per cent to 6.9 per cent. One that we use is a George Weston Ltd. straight preferred that pays 6.15 per cent. Straight preferred means it pays a fixed dividend that doesn’t move or get reset over time.

Another one is a BCE Inc. rate reset preferred share that has a current dividend yield of 6.86 per cent. A rate reset usually means the dividend will be adjusted every five years based on the five-year Bank of Canada rate plus a specific rate.

Beaten down REITs and MICs

Some real estate investment trusts and mortgage investment corporations are yielding nine per cent to 11 per cent. Some examples might be Timbercreek Capital Corp., a publicly traded MIC whose stock price is down almost 15 per cent over the past year and is currently yielding 8.94 per cent.

Northwest Healthcare Properties REIT’s stock price is down almost 39 over the past year and is now yielding 10.04 per cent. And Ares Capital Corp. is a U.S. business development company that focuses on private lending. Its stock price is down more than 12 per cent in the past year and is now yielding 10.64 per cent.

Structured products

Many capital market arms of the banks and insurers put together specialized structured products that yield 9.2 per cent to 13.2 per cent. These can cover off a wide range of investments.

For example, you can earn 9.2 per cent annually (interest paid monthly) as long as the S&P/TSX Capped Utilities index is trading no worse than negative 30 per cent. The utilities index mostly holds hydroelectric names such as Hydro One Ltd. and Fortis Inc., and has been among the more secure parts of the stock market.

Moving up the risk curve, you can buy a similar investment that pays 13.2 per cent annually (paid monthly) connected to the S&P/TSX Banks index. This yield will be paid out as long as the index is trading no worse than negative 20 per cent. It is quite rare for the utilities index to be down 30 per cent, but it is not so rare for the banking index to be down 20 per cent.

As you can see from this list, high yields are available. As the yields get higher, the risk level tends to increase, so it is important to truly understand the risks on these investments so that you are going in with your eyes open.

At the same time, high yield is sometimes more a function of buying in at the right time. There is another high-income investment that is a bit of a touchy memory for some.

In the fall of 2008, you could buy Bank of Montreal common stock with an 11-per-cent yield. It just so happened that the capital gains were great as well. The banks even offered bonds with 100-year terms to maturity that had a 10-per-cent coupon rate or more. The risk at the time was that fear levels were so high, most people wanted to simply hold cash. As it turns out, these were tremendous bargains with high yields.

At the moment, we don’t know exactly where we are in the market cycle. That can only be answered in a couple of years when looking back. But there are better yields out there today than there have been for a long time.

Will interest rates keep going higher or have we reached a peak? We think we are close to a peak. Have mortgage lenders and certain REITs been beaten down to where they are now a great value, or do they still have more pain ahead? If there is more pain ahead, we think the downside from here is much smaller than the upside.

Sometimes, you don’t have to time things perfectly; you just have to be directionally correct. It is starting to feel like this current investment market is providing us with a high-yield window that may be around for a period of months, but these don’t tend to last for too long.

Ted Rechtshaffen, MBA, CFP, CIM, is president and wealth adviser at TriDelta Financial, a boutique wealth management firm focusing on investment counselling and high-net-worth financial planning. You can contact him directly at tedr@tridelta.ca.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

1 week ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

3 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.