How To Get High Yield in Savings Account

       In this current interest rate environment, the interest rate on high interest savings accounts are laughable.  With inflation, a saver is losing money as the interest rate is lower that the rate of inflation. The rate of inflation in Canada, as per www.tradingeconomics.com is approximately 1.6%.  As of Feb 12, the highest interest rate is 2.00 at EQ Bank as per www.ratehub.ca, which surpasses this by a small amount.

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   I went hunting to look for a higher yield that is greater than inflation.  I had previously purchased units in an ETF that had a high yield. The Horizon Natural Gas Yield ETF was trading below $16 a unit, so I decided to take a closer look.  Below is a chart of  HNY over the past 365 days.

     From the chart, we see the price of the ETF is highly volatile.  This high volatility is justified by the investment  objective of the fund which is:

The investment objectives of Horizon's HNY are to provide unit holders with : (I) exposure to the price of  natural gas futures hedged to the Canadian Dollar less the ETF's fees and expensens, (II) tax-efficient monthly distributions, (III) in order to mitigate downside risk and generate income, exposure to a cover call writing strategy. (Source : http://www.horizonsetfs.com/ETF/HNY )

    In general, a savings account is not suppose to decrease in value unless you take money out.  I put some savings into my margin account to purchase high yield assets. On of these purchases involved purchasing units of HNY.  On Nov 8 of 2016 I purchased 14 units of HNY at $13.64 per unit. My brokerage has a commission free ETFs, so the overall commission was $0.05 due to ECN fees.  Therefore the total cost of my units is $191.01. 

    The distribution varies month to month.  The last distribution payment was $0.11363 per unit. So if this yield was paid each month, an investor (in this case: a saver) could annual yield of 8.64%.  This yield of 8.64% represents a percentage of net asset value the day before the ex-dividend corresponding to the last distribution of the fund. 

I received 3 distributions so far from this position which are  $1.59, $1.38 and $1.59 for the last 3 months.

     Currently, the annual interest rate on my high interest savings account is 0.80%.  So for a balance of $191.01, I would roughly have made $0.42 total in interest. I used 100 days which is slightly above the actual amount of days from Nov 8 to Feb 12.

      With the high volality of this ETF, as indicated in the chart above, the majority of my savings are in high interest savings accounts that pay little interest.  With the high volality of this position,  I purchased my units when the price of the ETF was below $14 per unit.  I do not count the distributions from these HNY units in my monthly dividend income totals.

Do you use strategies like this, to boost your savings?

Disclosure:  I own 39 units of this position inside my TFSA at a cost of $13.60 per unit.

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Dividend Income Update - January 2017

      The month of January is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.

       The markets continue to go higher in the month of January.  The price of barrel of crude oil continues to trade over $50.00 per barrel and is currently around $53.00 per barrel.  With the price of oil seeming to remain above $50.00,  the drilling activity in western Canada has begun to pick up. It is no where near it was about 3 years ago, but certainly a big increase in activity over the last year and a half.

      One thing for sure, is that I was paid dividends and distributions for being a shareholder or unit holder in  various companies or funds. In  Sept 2016, the Dream Office REIT in the margin account will be counted as dividend income  for the first time.

 Non-registered Account

• Bank of Nova Scotia (BNS)  - $24.07   (Transfer Agent)
• Bank of Nova Scotia (BNS)  - $14.80
• Bell Canada Enterprises (BCE) - $68.25
• Canadian Imperial Bank of Commerce (CM) - $34.72
• Enerplus (ERF)  -$ 5.58
• Dream Office REIT   (D.UN)  - $ 76.00
• Shaw Communications (SJR.B)    - $19.75
• Rogers Communications Class B (RCI.B) - $96.00

TFSA

• Boston Pizza  Royalties Fund (BPF.UN)   - $26.91
• iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $1.28
• Dream Office REIT   (D.UN)  - $ 17.63
• Horizons Natural Gas Yield ETF (HNY)  - $3.85
• Killam Properties REIT (KMP.UN) - $  15.10
• TransForce International (TFII) - $9.50

Total = $413.44

        The bond ETF , iShares 1-5 yr Laddered Canada Corporate Bond ETF, paid 2 distributions this month for a total of  $1.28.  Cominar REIT did not pay a distribution as they paid on December 30 in addition to the middle of December.

        As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 3 months or from 12 months ago.  Therefore, I will not compare November 2016 dividend income with that of 3 months and 12 months ago.

 Dream REIT has reduced the amount of distribution they pay monthly which was announced in February 2016.  Recently, I wrote about purchasing more units of D.UN inside a margin account.  Starting in September, the distribution from this D.UN inside the margin account will be included in my dividend income.

    I received $64.10 in options premiums in January.

     I will update my dividend income tab with the new amount I will include my option premium income also.  It is great to see money from passive income sources deposited into my brokerage account every single month.

How was your dividend income for January 2017?

Disclosure : Long all securities above.

Photo Credit: www.mipaq,co.za

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Portfolio Update - January 2017

       The month of January  2017 is now behind us. The price of a barrel of crude oil trades between $53 to $54 a barrel for WTI crude oil. On January 20, Donald Trump started his job as President of the United States. He has companies and investors on edge right now as they are not sure what he will do.  Trump vows to "make America great again".  Trump wants to create jobs and one way of doing this is to get companies to operate plants or factories within the United States instead of outside. 

     I had 3 dividend raises since last Portfolio update.  Enbridge (ENB) raised there dividend by 10% and may raise it again if the Spectra Energy deal passes all the hurdles.  Canadian National Railway (CNR) increased and Bell Canada Enterprises (BCE).  Shaw Communications (SJR.B) and Rogers Communications (RCI.B) reported dividends by did not raise its dividend. SJR,B and RCI.B did not raise their dividend most likely due to lack luster revenue from their internet streaming service, Shomi.  RCI.B and SJR.B teamed up to run Shomi to complete with Netflix, which you can read about here. Shomi was shut down on November 30, 2016.  Netflix can allow 5 profiles on one account, so you can share your account with another member of household or a friend at a different location. As RCI.B and SJR.B have not raised their dividends in about 2 years, investors are hoping for a dividend raise soon now the Shomi has been shut down.

   On January 5, I wrote about my first option trade for the 2017 calendar year, which you can read about here.  This option contracts ended up being assigned on expiration day as the price of Potash Corporation of Saskatchewan was trading higher than the strike price of $25.00 at expiration.  My 900 shares of IAMGOLD (IMG.TO) ended up behind assigned at expiration as well.  You can read about POT and IMG assignments here.

   I sold a put option contract in TD Bank (TD) with a strike price of $65.50 with a February 17 expiration day.  I collected a premium of $24.05 after commissions.  I previously owned TD in the past, but is was called away.

Shares Acquired Through DRIP


3 Unit of D.UN.TO @ $19.5535 for a total cost of $58.66 (Margin Account)

0.308128 shares of BNS @ $78.1688 for a total cost of $24.07 (Transfer agent )

Cominar REIT did not pay a distribution this month as it paid a distribution at the end December besides it usual middle of the month. Enerplus dividend is not large enough to purchase 1 whole share.  The distribution of D.UN.TO inside the TFSA is not large enough to purchase a unit of D.UN as the unit price as rising in value during the last couple of months.

As of February 2, the value of the portfolio is $102753.21. This is a 1.686%  increase over last month's total.  The spreadsheet in the investment tab above has been updated.

 Disclosure:   Long D.UN, CUF.UN, RCI.B, SJR.B, ERF, BNS, ENB, CNR

Please Note:  All stocks are from the Toronto Stock Exchange.

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.