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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hi team, I presently hold ZWA @t 8.63%, ZWE @ 4.74% and ZDI@ 2.89% of my portfolio. I am very happy with ZWA (up 46%), happy with ZWE (up 5%), and not impressed with ZDI (under water about 5%).
I'm thinking of selling ZDI and either redistributing funds into ZWA or ZWE or into something better at your recommendation. Conversely, would like your thoughts on ZDI? is better performance just waiting for the international economies to rebound after COVID? I'm looking for distribution with growth. As well, I fully understand that portfolio % holdings are individual risks. Convoluted question here but would appreciate your thoughts and suggestions. Cheers, Bill
Read Answer Asked by William on November 15, 2021
Q: My wife and I are retired and rely on dividend income. In the event of a recession, including rising inflation and interest rates and a 20%+ decline in equity markets, how safe/sustainable does 5i view dividends from the named companies? With unrealized gains on all of these, are there any that 5i would suggest selling, accepting the taxable gain, and holding the cash for a rainy day? Thank you. Edward
Read Answer Asked by Edward on November 15, 2021
Q: Given the recent run up in certain semi conductor and chip stocks, would it be prudent to use an ETF such as SMH to better diversify risk right now if only one position available in a portfolio? Or, going the individual stock route, how would you rank the following in a moderate risk portfolio QCom, AVGO, TXN, NVID, AMD, SWKS, INTC?
Read Answer Asked by Gerry on November 15, 2021
Q: I'm thinking of investing in an ETF of Canadian Banks, more for the dividends than the appreciation of share price. I was thinking of holding for a long term, say 5 - 10 yrs. It seems the Banks are more dependent on revenues from investments than the old traditional loans and other lending products. Recently it seems the banks (at least some of them ) have fallen out of favour with the Oil industry and interest rate hikes could place a lot of their mortgages in peril. So how do you feel banks will do over the next 5 - 10 yrs in terms of dividend payments (increases) and their share price?
Read Answer Asked by Phil on November 15, 2021
Q: Hi Peter,

Maybe we are wrong but it seems that investment sites are approaching the end of the year and 2022 with caution. The topics of correction and reduce risk are common themes mixed in with inflation and interest rates.

If you were a medium risk - just retired person, which 15 stocks and/or ETF's would you hold right now (no bonds)? How much, if any cash would you sit on to buy dips or on corrections.

Cheers,
Debbie and Jerry
Read Answer Asked by Jerry on November 15, 2021
Q: Hi Peter and staff,
Can you please comment on the above companies and can you please rank them in terms of growth as well as volatility.

Thanks and have a great day.

Joe
Read Answer Asked by Joe on November 15, 2021
Q: I have been following MMM for quite some time but have always been wary of the plethora of legal issues outlined in the financial statements. Nevertheless, the technicals look interesting to me. Your thoughts on the current prospects for this company would be appreciated.
Many thanks.
Ian
Read Answer Asked by Ian on November 15, 2021
Q: Can you comment on their recent acquisition? What’s your Updated view since your last comments and does this follow along with the theme that with housing becoming more unaffordable for some does this “trailer park/mobile home” space make sense for investment. It seems to according to Financial Post article

https://www.google.ca/amp/s/financialpost.com/real-estate/trailer-parks-could-hold-the-answer-to-canadas-national-housing-crisis/wcm/757f8662-6526-490c-bca4-d962c6e6c8b1/amp/

Your thoughts?

Read Answer Asked by James on November 15, 2021
Q: Hi Peter & 5i,

Just a comment. I always find your answers to ROC (Return of Capital) perplexing to me. 5i seems to view ROC as almost a completely negative situation and that you are almost always receiving your own money back. That is just not the case. Today's response to a question from Albert regarding the ROC with regards to CAR.UN and REIT'S highlighted this situation even more. I like a stock (CAR.UN) that has went from $30 in 2016 and is $60 in 2021 and that 63.8% of the distribution during those 5 years has been ROC. Multiple great things to like in a non-registered account from a total return basis and a tax scenario.

The technical details for ROC and REIT's can be highlighted in this response from John Heinzl of the Globe and Mail. It is one of the best answers that I've seen.

Please post as Public if you think it can help with the ROC understanding.

This is the question posed to John Heinzl - I have a question about calculating the yields of real estate investment trusts. Many REITs distribute significant amounts of return of capital. It has never made sense to me to include getting my own money back when calculating my yield. Do posted yields need to be adjusted by deducting the ROC to get a more realistic idea of what one is receiving?

Answer - Return of capital doesn’t necessarily mean you are “getting your own money back.” In general, ROC is defined as the portion of a distribution that does not consist of dividends, interest, realized capital gains or other income. In some cases – for example, a high-yielding mutual fund that distributes so much ROC that its net asset value erodes over time – you are indeed getting paid with a portion of your original capital.

But with REITs, it’s not that simple. ROC typically arises when a REIT’s distributions exceed its taxable income. This isn’t necessarily a problem, however, because income is affected by accounting items, such as depreciation, that don’t reduce cash available for distributions. In other words, when you receive ROC, you are getting cash generated by the business, not some sleight-of-hand trick by the REIT.

For investors, ROC has one big advantage: It is not taxed immediately. Rather, ROC is subtracted from the investor’s adjusted cost base, which gives rise to a larger capital gain – or smaller capital loss – when the units are eventually sold. For REITs that distribute large amounts of ROC, it can significantly reduce the tax burden in non-registered accounts.

Interested in a particular REIT? Most REIT websites provide a detailed annual breakdown of the tax characteristics of their distributions. In addition to distributing ROC, REITs typically pay out capital gains (50 per cent of which is taxable), other income (which is fully taxable) and in some cases, dividends (which benefit from the dividend tax credit).

One final note: When assessing their operating performance, many REITs focus on real estate cash-flow measures, such as funds from operations (FFO) and the more stringent adjusted funds from operations (AFFO). These measures are also useful for determining a REIT’s payout ratio and assessing the sustainability of its distributions.
Read Answer Asked by Dennis on November 15, 2021
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