2010 is fast approaching and with the New Year comes an extra $5000 of Tax Free Savings Account Room. The TFSA is a great way to employ any spare cash you have to work for you. There have been a number of articles written about the TFSA on this personal finance blog and this article is simple a precursor to my asset deployments for the coming year.
If you have kept up to date with our previous articles about TFSAs then you should be well aware of why Income Trusts have been the preferred asset type to include in your account. For those of you that have not had the opportunity to understand why Income Trusts were selected please have a glance at the following articles:
To date, the income trusts selected for the 2009 tax year have performed very well. There also seems to be a general consensus forming in the investment community that high dividend yield investments are the vehicle of choice looking forward thru 2010 and beyond.
This year, I am beginning my research early and have narrowed the field to 3 potential acquisition targets. Some of the candidates were on the list last year, but with $5000 of room you don’t have much ability to diversify. So without further a due, here is my current list of income trusts that I will be watching and considering to add to my TFSA Portfolio this year:
- Canfor Pulp Income Fund (CFX.UN): This was on the list last year and I still think it could be a great addition. If you had purchased this back when it was recommended on this blog you would have enjoyed a 75% return plus over 10% in dividend payments.
- Liquor Stores Income Fund (LIQ.UN): This was also on the list last year. The Fund Performed very well thru the recession; I guess everyone likes to drown there sorrows during a recession. LIQ.UN also has a lot of growth potential as the Canadian Government opens up the liquor distribution channels in Canada to allow more private liquor business. Further, with a dividend over 10% and growing it’s tough to go wrong.
- Superior Plus Corp (SPB): This is a new addition and although it is not an income trust it was last year. In 2009 Superior Propane Income Fund transformed back to a Common Shares bases and still operates much like an income trust. This is another cash cow that keeps paying a healthy dividend. The current yield is around 11% annually. This was a recommendation by an investment advisor at http://brucemcconnachie.com and performed very well over the past year.
At this point, I am just beginning my analysis of potential additions to my TFSA for 2010 and as a result I may very likely add more potential candidates or remove others as I go. My plan is to make my purchases some time in January depending on what the stock market mid term and long term trends look like at that point. I will post my purchases once completed and post any updates to other potential acquisitions.
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I like your idea of investing in liquor. I invest in tobacco. Vice normally pays. My concern is the decline in those two vices on the industrialized world, and the increase of now-illegal vice. It may be eating into the legal vice profits.
‘further a due’ I think it should be ‘further ado’.
I did not know about LIQ.UN, I bought BR.UN that at some point went down 70% from where I bought it.
I think there is an ETF for gaming that would be worth looking into.
There is. It’s called the iShares CDN Income Trust Sector Index Fund. The symbol is XTR.
Copied from the stock-encylopedia.com: The iShares CDN Income Trust Sector Index Fund seeks to provide long-term capital growth by generally replicating the performance of the S&P/TSX Capped Income Trust Index through investments in the constituent issuers of such index. The Index is comprised of the securities of Canadian income trust issuers listed on the TSX, selected by S&P using its industrial classifications and guidelines for evaluating capitalization, liquidity and fundamentals.
The ETF is great for diversification; however, there is always a cost. This ETF has a management fee like all ETF’s and the ETF buys Income Trusts a basket of all income trusts and this includes sub par performers. I prefer to pick income trusts for my TFSA that are well suited with my investment goals.
Other than an ETF you might also consider Enervest Diversified Income Trust (EIT.UN). This fund owns a basket of high yield dividend assets and pays around a 10% annual dividend.