Tag Archives: TSX:D.UN

Does High Yield Mean High Risk?

Why would some dividend stocks yield 8% while others yield 6%, 3%, or even 1%? Are higher yield stocks riskier? The answer is not as simple as a “yes” or “no”.

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The risk in investing in stocks

First, let’s define “risk”. Some define risk as “volatility” — the more ups and downs a stock experiences, the higher risk it’s perceived to have. Volatility is often associated with “beta”.

If a stock has a beta of 1 when the stock market goes up by 1%, the stock goes up by 1%, and if the market declines 1%, the stock also declines 1%. Oh, and the beta changes over time. (So, use that metric as a reference and don’t bet on it too much.)

I think the true risk of investing in stocks is selling at a loss. For some people, it’s difficult to hold on to volatile stocks because they can’t bear to see their investments going up or down too much. So, volatile stocks are risky for those people. (But stocks are inherently volatile because they trade on the market…but that’s a topic for another day.)

The risk in investing in dividend stocks

When you buy dividend stocks, you, of course, expect its dividend to be safe. But as we know, occasionally, stocks do cut their dividends. So, a dividend stock that’s risky would have signs indicating it might cut its dividend.

There are some things you can check to know if a dividend is safe — at least comparatively speaking. Read More

My Rental Income from 7 Canadian REITs

Many people like to receive rent from properties. On the other hand, I don’t want to manage properties or spend time keeping good relationships with tenants. Instead, I like to sit back and receive passive rental income from my Canadian REITs.

My Canadian REIT portfolio of 7 companies that make up roughly 12% of my dividend portfolio. Yet, they contribute close to 22% of my portfolio income.

I first go over my highest yielding Canadian REITs that offer income of 9% or higher. Then, I talk about the less risky REITs with yields of 4-6%.

By analyzing my Canadian REIT income portfolio, we can probably learn something. Here it goes!

REITs Provide Good Income

The first thing to note is that my Canadian REIT portfolio generates 22% of the income in my dividend portfolio even though it only makes up 12% of my portfolio value. That seems to indicate that distributions is a major part of REIT returns.

Well, it’s true that many REITs, including 4 of my REIT holdings yield 9% or higher right now.

Canadian REIT Portfolio Allocation

I analyzed my REIT portfolio in terms of their allocation according to market value, as well as income allocation. And I will talk about each Canadian REIT later on in the article as well.

My Canadian REIT allocation by value and by income

Source: Author

You’d notice that 28% of my Canadian REIT portfolio is Plaza Retail REIT (TSX:PLZ.UN), and it also contributes to 22% of my Canadian REIT income. I’m comfortable with the concentration in Plaza Retail REIT because of its track record and growth potential.

Northview Apartment also has a good track record of maintain distributions. However, its properties are mostly located in resource provinces. So, it is a good income play, but should only be bought when its yielding around 9% at historical highs.

The other Canadian REITs add diversification to the REIT income stream. Looking at the industry or asset class allocation, it looks pretty balanced with residential REITs making up almost one-third of the pie. That’s fine because everyone needs to live somewhere. If you’re not buying, you’re renting. Read More