Wednesday, July 1, 2015

Recent Sell – BMO Utilities ETF

A sector that has been under-represented in my portfolio has been the Utilities sector. The only exposure I had to the sector was via an ETF – BMO Equal Weight Utilities Index ETF (ZUT.TO). Even though the exposure has been small and the only one, I decided to liquidate my holdings in the ETF and will be looking to purchase some stocks in the sector instead. The ETF provided good stability and regular monthly income. However, there were a few things that bothered me that caused me to sell the position.

  • After owning the fund for close to 3 years, the fund price has remained flat – although I was earning 4% on the investment. While I dont really look for capital gains per se, I know that the income isnt being compounded as is achievable via dividend growing companies.
  • A thin exposure of just 12 companies – all in the Canadian sector, although some companies have operations in the US.
  • An expense ratio of 0.55% for owning just 12 companies! I dont really gain much of a diversification and dont see the value of paying 0.55% for such a thin ETF.
  • In addition, more than 10% of the exposure to one company – Just Energy Group Inc (JE.TO), which last time I checked had some horrible financial figures. I do not want any exposure to this company – let alone a 10% exposure while paying that damn fee for the privilege of investing.
  • No dividend growth.
With this sale, I lose $90.48 in forward annual dividends.
What’s next for those funds from the sale? I am looking to pick up some shares in individual utility companies. Some of the companies on my shortlist are:
  • Diversified Utilities
    • Algonquin Power & Utilities Corp (AQN.TO)
    • Atco Ltd (ACO.X.TO) / Canadian Utilities (CU.TO)
    • Brookfield Infrastructure Partners LP (BIP.UN.TO)
    • Brookfield Renewable Energy Partners LP (BEP.UN.TO)
    • Duke Energy Corp (DUK)
  • Electric Utilities
    • Consolidated Edison Inc (ED)
    • Fortis Inc (FTS.TO)
    • The Southern Company (SO)
  • Water Utilities
  • Natural Gas Utilities
    • ONEOK Inc (OKE)
What are your thoughts on these companies mentioned? Are there any other companies that I should be looking at?

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