Hello, Investors.
The following is a portfolio commentary on a recent change. In fact, it is a special announcement:
A major position was sold today. It was the largest position in the RTC portfolio.
As such, The RTC Board of Directors decided a portfolio commentary was necessary. Since this is not a small change, they believe it is our duty to report this to investors.
First of all, this sale was not based on the stock’s performance. We will still be investing in this position going forward. It pays a solid dividend, and the dividend tends to increase annually. We believe in the company.
The reason for the sale was to rebalance the portfolio, and to prepare for a potential change. Also, because it could be done. The shares were in a plan that vested after two years. The Portfolio Manager figured it was time to withdrawal and redistribute those funds.
What About Forward Dividend Income?
For the time being, dividend income is projected to be lower than what was recently projected.
After the funds are reinvested within a TFSA in the near future, though, we will disclose how much this impacted forward dividend income, if at all.
Ultimately, our goal is to maintain at least the same revenue or more. Of course, high quality stocks that increase their dividend annually will be prioritized.
What are the benefits of this change?
The primary reason for this change is to rebalance the portfolio.
Most of the money will be redistributed to a TFSA, which will lead to a higher TFSA balance.
The benefit is more money to invest because there’s more cashflow in one account. Essentially it is a mini-cashflow machine.
Furthermore, we wanted to trim down market exposure in this industry .
The RTC portfolio owned three businesses in this industry, before this trade, including the 1st and 3rd largest positions in the portfolio.
With that in mind, this decision was made to limit risk.
Downsides to this plan
Every choice comes with its share of trade-offs.
Since this stock was sold within a non-registered plan, there are tax implications on the dividends earned so far this year, as well as taxes on the capital gains, if any.
Based on the size of this position and based on the Portfolio Manager’s income level, though, a capital gain would not make much of an impact to taxes.
The biggest downside of this trade is that a DRIP position was lost. However, a new DRIP position will fill that gap soon. Only this time it will be in a TFSA.
Portfolio Commentary – Closing Remarks
As mentioned in the opening statement, the RTC Team thought it was appropriate to disclose this trade. We are a firm that aims to be as transparent and clear about portfolio changes as possible.
Although we have not yet indicated how much revenue will be impacted by this change, we plan to publish a dividend income projection within the next month to provide a clear picture.
For the record, at this time, the team is keeping the financial goals for 2019 as is.
Moreover, the RTC Portfolio Manager has personally assured me that this maneuverer will be in the best interests of RTC’s Investors.
Thank you for reading, Investors. We are available for comments below.
I am not a licensed investment or tax adviser. All opinions are my own. This post contains advertisements by Google Adsense and Amazon affiliate links. This post also contains internal links and links to RTC social media accounts.
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