Portfolio & Life Update: Buyin' and Retirin', Yo

I made it official this week, announcing to everyone at work it was time to hang up the proverbial skates.

This probably won’t come as much of a surprise to the people who regularly read this here Substack. I strongly alluded to it a couple months ago. I spoke to my boss a few weeks ago and then, after discussing a transition plan, we made it official.

It was a weird day. Many people were happy for me, but most were confused. Where I work definitely has high standards in the effort department (most managers work 50+ hours per week and come in on Saturday), so I had to answer a lot of questions like “what are you going to do all day?” and “how can someone leave to do nothing?” and “you’ll be back for the (next big project), right?”

I’m not retiring to just sit on my porch all day. I plan to fill my days with plenty of stock research, reading, video games, sports, travel, cooking, and plenty more. I’m also going to do a little something to make money, likely enough to cover the travel budget. I’ll let dividends and other forms of passive income take care of the rest. But it’s definitely nice to get away from the day after day grind of a day job, especially something with higher expectations than most comparable jobs.

I expected more people to scoff at my plans, loudly declaring there’s no way I have enough to actually retire. That didn’t happen — at least to my face — but I’m sure it’s happening behind the scenes. And that’s okay. One thing I’ve realized over the years is there are a LOT of people who don’t even consider the fact they can retire early.

The funny thing is nobody mentioned retiring when the market is at multi-year lows. It’s the number one thing I worry about. What if the upcoming recession gets so bad dividends start to get cut? What if we’re in for a late 1970s period of stagflation again? WHAT IF AN ASTEROID HITS THE EARTH AND WE’RE ALL DOOMED????

That’s the beauty of dividends. It doesn’t really matter what the market does. They just keep showing up. I see very little of my portfolio that’s in danger of dividend cuts, too. It was built to survive times like these.

I committed to staying at work until the end of the year, which in hindsight is looking like a bit of a mistake. The good news is until then I have a steady stream of cash to invest, some which I’ve been putting to work lately. Let’s take a closer look at a few of the stocks I’ve added to the ol’ portfolio since we talked last.

Dream Unlimited

Your author has been critical of sum of the parts investing before, mostly because the stuff you get for free is usually worth less than that. Good divisions are mixed with trash and management has no desire to get rid of the bad stuff.

Dream Unlimited (TSX:DRM) is different. There’s no trash. It’s all good stuff that’s been extra hammered in today’s market.

There are plenty of excellent Dream write-ups around the interwebz. Check out one of them for a much better look at this stock. Or maybe I’ll do a much more detailed post one day, because there are a lot of moving parts.

Instead, I’ll just share a slide from the company’s most recent investor presentation. It sums up the opportunity pretty nicely.

Net asset value is $60.22 per share. My average cost is in the $27 per share range. Yes, please.

This is a classic “heads I win, tails I don’t lose much” scenario. I just don’t see much downside from here.

TC Energy

I added to an already pretty large position in TC Energy (TSX:TRP) as the stock flirted with a 52-week low this week.

The main thing I can see impacting the company over the short-term is its Coastal Gaslink project. Costs have ballooned significantly, and TC was forced to issue $1.8B worth of equity to help pay for the project. That’s a big deal today. I doubt it’ll matter five years from now.

Earnings are still expected to be in the $4.15 to $4.25 per share range for the year. I paid roughly $57 for my latest shares, which translates into approximately 13.5x earnings. I think that’s a great value.

The days of huge dividend increases from the likes of Enbridge and TC Energy are behind us, IMO. But both should be able to deliver increases of 3-6% annually, which is just fine for me. TC currently yields 6.5%.

Fortis

Another year, another dividend increase for Fortis (TSX:FTS). The recent 6% increase marks the company’s 49th consecutive dividend raise.

I’m happy to ride on this train, and I strategically buy more when shares are cheap. With the company recently hitting a fresh 52-week low I added to my existing position.

The fear with Fortis has little to do with the economy. People need power and natural gas. That’s the beauty of utilities. It has everything to do with interest rates, which could hurt the company if they keep marching higher. Interest is a significant expense for utilities. It’s that simple.

But I’m not super concerned. Recent interest rate increases have already put the economy in a precarious spot. I don’t think they go much higher. Besides, Fortis locks in their debt. This is not a pressing problem. It might also be a good time for the company to start shopping for other acquisitions. Valuations are low, after all.

After the recent dividend hike, Fortis shares yield 4.3%.

RioCan

I also added a little to RioCan (TSX:REI.un).

The company has been transforming itself away from retail, using property acquired years ago as a springboard into sectors like residential and office space. The economy turned murky and immediately investors started thinking about everything that could go wrong with the plan.

But RioCan is strong enough to survive even the deepest of recessions. Its balance sheet is one of the most pristine in the entire REIT sector. Total debt is approximately 50% of assets, but more than half the debt is unsecured. It has $1.4B worth of liquidity, too.

The company’s major projects are in fine shape, too. The office space portion of The Well is 98% leased. The retail portion is 81% leased. And the company shouldn’t have many issues leasing new apartments if the condo market in Toronto continues to be weak. People will lease rather than buy.

RioCan projects FFO per share growth of 5-7% annually through 2026 as these new projects come online. Add in a 5.5% distribution yield and a cheap valuation (shares currently trade at about 11x 2022’s projected FFO) and I see 12-14% annual total return for RioCan between now and 2026. I’ll gladly take that.

The bottom line

It’s nasty out there, and if you go on Fintwit for any amount of time you’re likely to see a bunch of people who think we’re about to go much lower.

I’ve said it before and I’ll say it again. And again. I have no idea where the market will go short-term. And I think the average investor shouldn’t even try to interpret the latest macro trends. Just focus on buying excellent companies when they’re comparatively cheap.

I’ve highlighted just a few. There are loads more. Let me know what you’re buying today in the comments.

Disclosure: Author owns shares of all stocks mentioned in this piece