The markets can have a mind of their own at times … The recent pull back is reminescent of 2009 when many financial stocks were discounted.
Corp Account Guidelines
A reminder on the account guidelines:
- Preserve capital by not taking unnecessary risks while not expecting growth per say.
- Earn income from the investment with a yield above 5% from dividends or distributions.
- Keeping up with inflation is not necessary as it’s not a retirement account.
- No re-investment of income. It will either be used to pay taxes, or withdrawn from the corporation as dividends to myself.
- Focus on Canadian currency.
The method I used to screen GWO during my first trade is still valid.
I did, however, double check for better options. Income trusts or ETFs were currently excluded in my filtering as I wanted to focus on a dividend stock due to the market drop.
The short list is the following with a yield close to 6%
At this point, I have 60% of my initial contribution in dividend stocks while 40% in an ETF which is more tax efficient for a similar yield.
The difference is that Great West Life will increase the dividend over time while the ETF will stay relatively fixed.
It’s a balance and not just a play on tax efficiency.
In a corporate account, capital gains are very efficient and many covered call ETFs pay a return of capital. You get money back without any taxes until you sell and trigger a capital gains.
See the ratios below to understand the actual tax rate of the ETF distribution.
Note that I am still learning about corporate tax for investing … While I have a good handle of personal taxes, it’s my first year doing corporate taxes with an accounting firm. Hopefully, I am not making too many inneficient decisions.
The markets can always make me adjust my plans but my next contribution of $5,000 will be earmarket for an income trust or ETF.