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.
• Rob Carrick: ‘Can you recommend an ETF of companies that will survive and thrive in the pandemic?'
Dividend stocks are rallying, beating indexes at last
Dividend stocks have been roaring back to life in August, outgunning major indexes and giving some hope to income-loving investors that the upbeat trend is just beginning, David Berman writes. The FTSE Canada High Dividend Yield Index, which is heavily focused on the big banks, telecom companies and pipelines, has risen 7 per cent since the end of July. The S&P/TSX Composite Index lags with a gain of just 2.6 per cent over the same period. The U.S. picture looks almost as bright.
Is the recent strong performance by dividend-paying stocks just a blip? Peter Vanderlee, a portfolio manager at New York’s ClearBridge Investments, says he believes that a few factors now working in favour of dividend stocks could have lasting power. Read more here.
Rob Carrick: ‘Can you recommend an ETF of companies that will survive and thrive in the pandemic?’
A novel twist on thematic ETF investing arrived recently in the form of this reader question, Rob Carrick writes. At first, I thought to punt on this one. It’s guesswork to find sectors that will thrive as a result of the pandemic and, even if I could identify one, there’s the problem of getting in too late. And then I thought of an old-school ETF in the Canadian market that holds big blue-chip companies - those with established franchises that should be able to survive the economic ups and downs ahead.
iShares S&P/TSX 60 Index ETF has been around since September, 1999, and has roughly one-third of its assets in Shopify, Royal Bank of Canada, Toronto-Dominion Bank, Canadian National Railway and Enbridge. An alternative to XIU is the Vanguard FTSE Canada Index, with a portfolio of 56 large companies and a low management expense ratio of 0.06 per cent. Read more here.
More from Rob Carrick: TFSAs, RRSPs and the tax hikes to come
Read more: A senior looks ahead to his ‘second retirement’ – giving up DIY investing. Where does he go next?
Gordon Pape: Why gold’s record run isn’t over yet
The pandemic has created a perfect situation set of conditions for gold prices to rise, Gordon Pape writes. At the start of the outbreak, I recommended that all portfolios hold 5 to 10 per cent of their assets in gold, and continue to maintain that advice. Gold recently moved through the US$2,000 level, then retreated amid a rise in U.S. bond yields. But the question for gold remains: how high will it go?
Given the historic volatility of gold, any price target is a guesstimate at best. We could easily see a short-term pullback as profit-taking sets in. But the long-term fundamentals suggest gold is going to trend higher over the next few years. Here are some reasons why, including low interest rates, massive government stimulus and inflation risk. If you don’t have some gold stocks or funds in your portfolio, it’s time to act.
More from Gordon Pape: How to put together a gold ‘mini-portfolio’
Related: Barrick Gold raised its quarterly dividend this week by a penny to 8 cents a share. Read about the company and its second-quarter results here.
Read more: Warren Buffett’s Berkshire Hathaway adds Barrick Gold stake
For investors sidelined with cash, market surge presents painful dilemma
When it feels like the world is ending, the allure of cash can be difficult to resist, Tim Shufelt writes. While it earns next to nothing, cash is safe and liquid, and most importantly, it won’t go to zero. This was the trade-off many investors made earlier this year, when financial markets were convulsing with panic over the global pandemic and the economic lockdown needed to fight the coronavirus.
As stock indexes have since ascended toward their prepandemic levels, overall cash weightings have remained relatively high, leaving many investors with a dilemma – how and when to get that money back into the market. Even investors who maintained some stock market exposure but built up excess cash reserves strategically may now also face the challenge of picking an entry point in a hot market. Read more here.
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Trading in securities could jeopardize your CERB benefits
It won’t be long before the Canada Emergency Response Benefit (CERB) ends, tax expert Tim Cestnick writes, and then the Canada Revenue Agency’s review of who received the benefit will move into high gear. Some recipients may mistakenly think they’re entitled to CERB, but the taxman might disagree and ask for repayment. Frequent traders in securities may be seen as making business income from these activities.
It’s not always clear when an individual’s profits from trading in securities will be considered by the CRA to be a business – or what is referred to in our tax law as an “adventure in the nature of trade.” Typically, the courts have looked to an investor’s intent and conduct to determine whether profits should be “on account of capital” (taxed as capital gains) or “on account of income” (taxed as business, or self-employment, income). Some of the factors that could cause the CRA to conclude you’ve earned business income include frequency of transactions, period of ownership and the nature of the securities. Read more here.
What investors need to know for the week ahead
In the coming week, Canada’s inflation figures for July will be released on Wednesday. Other economic data on tap include Canadian existing home sales, average prices and MLS Home Price Index for July, as well as new motor vehicle sales for June (Monday); U.S. housing starts and building permits for July (Tuesday); Canada’s wholesale trade for June (Wednesday); Canadian retail sales for June, plus Canad’s new housing price index and U.S. existing home sales for July (Friday).
Companies releasing their latest earnings this week include Walmart, Home Depot, Lowe’s, Target, TJX Cos., Alibaba, Dollar Tree and Deere & Co.
Read more: World market themes for the week ahead
Looking for more investing ideas and opinions?
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- The highest yielding stocks on the TSX, plus risk data
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- Tesla sets 5-1 stock split and its high-flying stock soars again
- Stay patient if the pandemic’s get-rich-quick phase has you feeling left out