Club 1,000 - Concentrating Positions For More Dividends

Originally written: May 11, 2016.
Posting as is: October 9, 2016

Diversification is great to a certain extent. For a regular investor like myself holding maybe 20 or so stocks is more than enough to keep track. Over time adding little positions here and there makes the 20 grow into ever more positions and this becomes harder to track and manage. As well, commissions start to not make sense as they accumulate on almost inconsequential additions.

I decided to work on concentrating my portfolio through reducing the number positions. One of the reasons why I temporarily dropped INN.UN a few weeks ago and regretted it when a takeover was announced. Regardless, another other way to prevent further widening of the portfolio is to divert resources concentrate existing positions and gain greater dividends from them.

With this in mind I looked at my current non-registered account positions and noticed a few holdings that give me less than $100 per year. The bulk of holdings range between $200 and $700, which are along their way to becoming larger holdings. Then I've got my handful of $900 to +$1,000's, with the $900's within 30-50 shares away from tipping into the $1,000 mark.

Effectively, I now have four stocks in Club 1,000. Until May 10th, I only had 2 full unencumbered holding within Club 1,000: Bank of Nova Scotia and Bank of Montreal. Manulife Financial has been underwater for some time so I took the opportunity to increase my holdings and bump up the dividend returns. I also have Covered Call options on Sunlife Financial expiring in July, which at current price would have dropped my dividends below the $1,000 threshold. Today May 11th, I decided to purchase more shares of Sunlife Financial to firmly place this holding's dividends above $1,000.

The next largest dividend payer is Enbridge Preferred Shares Series R, giving me $978.00, but the dividend and share price upside potential are both currently limited. Within 2 years the preferred share's rate will reset based on the Government of Canada (GoC) 5 year rate +2.50%. If the yield of the GoC remains low then the existing payout may change and drop the holding outside of Club 1,000. Ex-dividend is May 15 (yippie!) with payment on June 1st. At current price of $15.61 and total quarterly pay out of $244.50; the Questrade Dividend Reinvestment could comfortably add another 15 shares. Calculating further, with the current $0.25/quarter dividend then I gain another $3.75 of income totalling $981.75. An incremental gain of 0.0383% or 1.533% annualized.

Further down the list of existing holdings that I wish to increase for greater sector diversification in Club 1,000 are my Telecom/Media stocks BCE and Telus. They are still far off from the $1,000 mark, paying $487.52 and $600.60 respectively. They have been raising their dividends yearly and consistently, which has helped boost their contribution to the goal. However, for significant increases in the dividend returned, I am waiting for the opportunity of a decline in the share prices to purchase more.

The goal is to continue increasing the Club 1,000's dividends; diversify the Club's sector holdings; maintain a higher average yield for the overall portfolio; and increase the dividends from up and coming stocks. The preference is to raise up investments with higher quality and upside potential and this means increasing holdings of those more likely to raise their dividends and continuing to use Dividend Reinvestment Plans to automatically accrue more shares.

It will take a lot of time and potential setbacks, but this is all to push towards the $50,000 distribution goal. Which reminds me; I haven't put together the 50K Report for some time...