Just another e-mail during these turbulent times. We will continue to provide more frequent updates rather than our normal twice a month newsletter while the markets are this shaky.
Once we transition to the new premium platform (sometime next week) we’ll be posting most of the content on the platform and simply e-mailing members to say it’s on the site. This is primarily to keep our e-mails out of your junk mail due to “too much” content within an e-mail.
Lets start with a general overview.
Market Overview
We are glad the month is over. I am sure you are as well. The recent volatility is unprecedented, and the best course of action is to remain calm. In March, the TSX Index lost 19.18% of its value. It has been a rough month, and investors should brace for continued volatility.
We have reached out several times over the past few weeks and our messaging has been consistent. It is however, worth repeating:
- Unless your investment thesis has changed – don’t sell;
- Shift your focus to high-quality companies;
- Slowly average into your positions;
- Above all else – remain calm and don’t make decisions based on emotions.
If you follow these principles, we have no doubt you will successfully navigate the current crisis. In such times it is critical to understand your risk tolerance. In our opinion, investors should stick to these principles until there are signs that the COVID-19 curve is flattening.
Dividend Screener
To shift focus, let’s talk about dividend-paying stocks. Most high-quality, defensive stocks pay a dividend, and these make for attractive investments in a bear market. Why? As the share price dips, investors can take solace in the fact that they are still generating a return from their investments in the form of a monthly or quarterly dividend.
It is important to note however, that not income stocks are created equal.
Last year, we introduced our Dividend Screener (view the screener here). In times like these, it provides an excellent starting point for subscribers.
The pitfalls of income investing are numerous. One of the most prevalent is falling into a high-yield trap. Who wouldn’t want a 20% yield that pays out monthly? It is certainly attractive.
However, a high yield can also be a warning sign. A sign that the dividend is not sustainable. The last thing you want is to buy a company for its dividend, only to see a cut to the dividend shortly after.
We have good news for subscribers – the Dividend Screener can be a great tool for you. Over the past month, there have been several income stocks which have cut the dividend. Of those that cut, there were five that were featured on our Dividend Screener.
Had investors had access to the Screener prior to purchasing these stocks, the warning signs were clear.
Here are the five stocks and their pre-cut ratings according to the Dividend Screener:
| Ticker | Company | Ratings |
| SES | Secure Energy Services | 2.0 |
| ARX | Arc Resources | 1.0 |
| NFI | NFI Group | 1.4 |
| TOT | Total Energy Services | 1.4 |
| BPF.UN | Boston Pizza | 1.1 |
Every single one of these stocks ranked in the bottom-half, most in the bottom fifth of the screener. We are not saying that the Dividend Screener is a predictor to future dividend cuts, but it makes an excellent tool for those researching dividend stocks.
In looking at these five stocks, we would have thought twice about buying them for their dividend given their poor rankings. Due diligence is of the utmost importance, and the Dividend Screener is an excellent tool available to subscribers.
It is always important however, to not rely on data alone. It is important to understand the current macro events that are currently impacting the markets.
Industry Outlooks?
For most members who’ve been with us a while, our premium newsletter tends to focus on a particular industry once a month and highlight some of our opinions and general outlook.
The problem is, most questions and general outlooks remain truly impossible to answer. Why?
Well, we’ve never been in a situation like this before. There has never been a surge in unemployment like this in history, and we’ve never faced a pandemic that is literally shutting the economy down.
When will oil and gas recover? When will worries about high profile growth stocks that rely on restaurants like Lightspeed (LSPD) subside? When will airlines get back to normal?
We simply don’t know. We don’t know the long term effects COVID-19 is going to have on the economy, and we don’t know when the pandemic will be declared over.
As such, it’s important to invest in industries right now that you do know the answers for.
- People still need electricity, so we can look to utilities.
- During times of physical distancing and isolation, people need telecom services.
- People will always need groceries.
- Liquor and tobacco use will remain relatively stable (convenience stores).
- Railways will need to continue to deliver crucial supplies across the country.
As such, during times like this, look no further than our Foundational Stocks for 2020.
Now is not the time to be investing the core of your portfolio in companies that might be a home run if the COVID-19 situation is resolved quickly. Unless you’ve got an extremely high risk tolerance, investments like this are best left to a small portion of your overall portfolio.
We’re here to answer your questions
As always, we are here to help investors through these turbulent times. Making use of the resources available to you can help you avoid making critical mistakes.
Our Q&A section is another tool at your disposal.
Be Calm. This too shall pass and we will all be better investors having lived through one of the craziest periods in market history.
Be Safe. Most importantly, we wish nothing but good health to all our members.
