Jan 1st is an exciting day for the TFSA

So here we are, the start of a new year! Symbolically, we get a fresh start. We get to set some new goals and resolutions. I’m not really into all that jazz, but I do look forward to Jan 1st so I can dump another wheelbarrow of cash into the ole Tax Free Savings Account. Even more exciting, we all got a raise this year!! $6000 will be the allowable contribution for 2019. That brings the total up to $63,500 of fantastic tax free investable Canuck bucks. I’ve been using this account to build up my Canadian dividend paying equities. My goal is to get this account to throw off $15,000 of cash flow annually when I get to financial independence.

Anyway, now I have to figure out what to do with that $6k?? They say that the best time to invest was 20 years ago, and the second best time is today. Or maybe that was planting trees. Regardless, I’m not going to sit around and see how the market moves in the New Year. We don’t try and time the market do we?! I think there are some pretty good companies on sale right now anyway. But which ones are going to be worth adding? Here’s what I’m considering, and my thoughts on the equities.

First off, I should decide if I want to ‘top up’ some of my existing holdings. Telus, Sunlife?? I’ve got most of them DRIPing so there’s no real urgency to do so. But could I get any of them into double DRIP status? That might be worthwhile. I use some really simple math to figure out how many shares I’ll need. You’ll see, don’t be afraid of the math!

I won’t go into any great deep dives on the equities, there’s lots of resources out there that do that way better than me. So without further ado……here’s a couple i’ve been looking at.

Brookfield Property Partners – BPY.UNActualTarget
Price
$21.38$30
Dividend per distribution (quarterly)
$0.42$0.42
Minimum shares to DRIP
5172
Required investment$1090.38$1539.36
First National – FNActualTarget
Price$27.41$35.00
Dividend (monthly)$0.1583$0.1583
Minimum shares to DRIP174222
Required investment$4769.34$6085.02

See how easy that math was?? Divide the share price by the dividend and multiply that number by the share price. It’s okay I used a calculator too. The column titled Actual is the numbers I used from yahoo finance that represent today’s value. I usually like to ensure I will continue to DRIP up to a higher price, therefore I’ve put in my Target numbers. These are representative of how much I would actually buy.

So, which to choose? Brookfield’s dividend yield is a juicy 8.16% but First National isn’t to shabby at 6.93%. They’re both sitting at nice P/E levels too. One is into property management and the other is into mortgage lending. Pretty similar sectors there. I think the selling point for me is that BPY is trading at a 50% discount to it’s NAV and it has a low payout ratio of 65% to maintain that giant yield. I like the company too, I’m quite happy owning a well managed company with diversified real estate holdings.

I’d be happy to hear of any other options out there…

Disclosure, I already own a position in BPY and the content of this post is my personal opinion.

You May Also Like

3 Comments

  1. I’m new to this whole FI thing about a month since hearing the term FI/RE, and with two young kids I trying to learn as much as efficiently as possible, free time is hard to come by. I’ve been bumbling along making hopefully smart money choices as I’ve gone along, I opened a TFSA in 2013 but only just realized that it can be more than just a saving account. I had 14,000 Cash in there that we have drained to pay off my wife’s line of Credit, and now have only our mortgage, We own our car outright, (I shook my head at myself the whole episode on transportation) we bought new in 2016, but rushed to pay it off. Both my wife and I have RRSP’s with our respective banks but they’re both in managed mutual funds, and to be honest don’t know the fee structures just know that there moderate risk… anyhow I’m trying to get up to speed and more financially literate since I know that I’m in a much better spot than most Canadians my age. I think (and maybe I’ve just missed it or not found the episode yet) there would be some benefit to your listeners if you talked about the different types of accounts Canadians can hold, RRSP, TFSA, RIF, high interest* (average interest) saving account, etc…and what the contributions limits are, how there calculated (I think next year I’ll be able to put 20,000 into the TFSA since I withdrew the 14000 this year??) and how they can act as a tax arbitrage. (also defining that since I heard it a dozen times while driving with no cell reception before being able to look it up). like I said I’m super new to this but a super basic episode, perhaps with some strong beer would help those of us, that are arriving at the party late.

  2. Hi Matthew, Welcome to the party, good to hear you are drinking the FI/RE cool-aid!! LOL Thanks for your comment, and you’re probably right we should do a super basic episode. Too often we get complicated and forget that we all started at the beginning trying to figure all this financial stuff out for ourselves. Sounds like you have already made some sound financial decisions and armed with knowledge you’re going to do great in the future. I’m excited to hear that you will be investing in your TFSA, WAY to many people think this is just a savings account!! Feel free to reach out over email if you want to bounce specific questions off us. We’re happy to give you some coaching and an ‘opinion’. What’s your strong beer suggestion? Cheers, MM

  3. I grew up in southern Ontario and have always loved Creemore Springs, they are affiliated with the MAD & Noisy brewery, which makes a delicious Coconut porter… Sadly I cant get it where I live now, but when I’m home visiting its a favorite for sure.

Leave a Reply