Many thanks to Steven Bavaria on Seeking Alpha for outlining his approach. Steven's articles can be found here: Seeking Alpha Articles
Here are some quotes from some of Steven's articles which form the basis this portfolio:
Capital appreciation comes at a price for the income-focused investor.
Preference for cash-income over capital gains to both:
- Maximize the internal rate of compounding generally, and
- Minimize the prices paid for assets bought with re-invested funds
I think of my investment portfolio as essentially a "factory." Unlike a conventional factory, this one doesn't produce physical goods, but rather produces an income stream.
As long as my factory is growing each year and producing more income, I don't really care too much how the market values the factory.
Another author on Seeking Alpha using this approach is High Yield Investor:
With the DGI method the capital growth may actually obstruct income. This happens because shares become more expensive during reinvestment and wealth building is accomplished through share price appreciation. With a 4% yield and 6% growth rate the share price should appreciate 6% per year and new shares acquired at 4% yield will be fewer because price has increased.
The HYI method increases income because price remains low while reinvestment takes place. This time wealth building is accomplished through share count increases while price is relatively fixed. With a 10% yield and 0% growth rate the share price stays the same, and more shares are acquired over time.High Yield Investor has created a portfolio of BDCs and MREITs. His articles can be found here: High Yield Investor's articles on Seeking Alpha.
How will such a portfolio based on Canadian Split Share Corporations fare? How risky is high yield investing? One way to find out is to paper trade.
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