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In September 2011, I created a balanced model portfolio designed for investors who wanted to own securities that combined reasonable risk with above-average cash flow. The objective was to generate a return that would be at least two percentage points more than that offered by the highest-paying GIC. At the time, the best five-year rate was 3.5 per cent so we set a target for at least 5.5 per cent per year, including distributions and capital gains.

All the securities were chosen from among my newsletter recommendations at that time, although I have made some changes in the 2-1/2 years since. The initial portfolio valuation was $25,027.75.

I made no distinction between registered and non-registered accounts, so keep in mind that the tax advantages of dividend-paying securities will be lost if they are held in an RRSP, RRIF, TFSA, RESP, etc.

Here's a summary of how the securities we currently hold performed over the six months since I last reviewed this portfolio in late September.

iShares 1-5 Year Laddered Corporate Bond Fund (TSX: CBO). This defensive short-term ETF is a low-risk way to own bonds but it won't provide much of a return in the current environment. But it performed better than expected over the past six months, generating a total return of 4.5 per cent since my last update in late September 2013. The unit price is up by $0.10 plus we are receiving regular monthly distributions of about $0.07 per share.

Cineplex Inc. (TSX: CGX, OTC: CPXGF). Cineplex is the dominant movie theatre company in Canada. I added it to this portfolio last September at $39 and it was trading at $41.25 at the time of writing. The shares pay a monthly dividend of $0.12 ($1.44 a year) to yield 3.5 per cent so this stock combines both cash flow and capital gains potential. We have a total return of 7.6 per cent in the six months since CGX was added.

Freehold Royalties (TSX: FRU, OTC: FRHLF). Freehold gives us some exposure to the oil and gas industry. The share price is down slightly from last September when we added this stock to the portfolio but the monthly dividend of $0.14 a share ($1.68 annually) has just about offset that and we effectively broke even on this one over the past six months.

H&R REIT (TSX: HR.UN, OTC: HRUFF). I added this real estate investment trust to the mix one year ago in the hope it would provide some growth to go along with the high yield (5.9 per cent at the time). Unfortunately, the REIT sector was hit when interest rates rose in mid-year and H&R suffered a loss. It bounced back in the latest six-month period, however, with the net result being a total return of 5.2 per cent in our first year of holding these units.

Inter Pipeline (TSX: IPL, OTC: IPPLF). This is the gift that keeps on giving. Including dividends, we have almost doubled our original investment in this Alberta-based pipeline company and we are coming off another strong period with a six-month gain of 14.2 per cent. That includes an increase of $3.29 in the share price plus monthly payments of $0.1075 ($1.29 a year). It doesn't get much better than this for income investors.

Brookfield Renewable Energy Limited Partnership (TSX: BEP.UN, NYSE: BEP). The sell-off in defensive securities last summer really hammered this limited partnership. At the time of my last review in September, I commented that the shares looked to be oversold. The market finally figured that out and the units are up $4.67 in the past six months. Add to that distributions of about US$0.98 per unit and we have a six-month return on this one of 18.3 per cent.

Brookfield Infrastructure Limited Partnership (TSX: BIP.UN, NYSE: BIP). This Bermuda-based limited partnership has also recovered well from the hit it took last summer. The share price is up by $4.17 and the total return over the past six months was 11.8 per cent.

BCE Inc. (TSX, NYSE: BCE). BCE shares have gained $3.58 since last September as the stock continues to recover from the combination of the interest rate scare and concerns about Verizon entering the Canadian wireless business. We are ahead 10.3 per cent since the last review in September.

Cash. We invested $1,664.24 in a high interest savings account paying 1.35 per cent. Total interest over the latest six-month period was $11.45.

Here's how the portfolio stood after the close of trading on March 21. Commissions have not been factored in. Canadian and U.S. dollars are treated as being at par for purposes of the calculations.

Comments: Based on the initial portfolio value of $25,027.75 we have a cumulative return to date of 27.9 per cent. This works out to an average annual compound rate of return of 10.3 per cent, which is well in excess of our target.

The portfolio has been fuelled primarily by four components: IPL, BEP.UN, BIP.UN, and BCE. We have a decent six-month gain on CGX, a modest but expected return on CBO, and a break-even on FRU.

Changes: The original plan was to create a portfolio asset mix of about 40 per cent bonds/bond funds and 60 per cent stocks/equity funds. I reduced the bond weighting to just over 20 per cent last year when rising interest rates hammered the fixed income market. However, I am not comfortable with an on-going bond rating at this level because of the risk it entails. Therefore I recommend sacrificing some return potential in order to boost the bond weighting.

To achieve that we will sell our position in H&R REIT, generating cash of $2,657.86 (market price plus accumulated distributions). We will use that money to buy 225 units of the no-load CIBC Global Bond Fund (A units), which has the code of CIB490. The current NAV is $11.78 so we have $7.36 left which will be added to our cash reserve.

This will increase the bond weighting of the portfolio to almost 30 per cent. Two-thirds of that is in short-term Canadian bonds (CBO) and one-third in global bonds.

This fund provides exposure to fixed-income securities from around the world with the U.S. being the largest single country at 42 per cent of assets. About half the portfolio is in short-term securities, which reduces risk.

This is a small fund, with only $36-million in assets under management and the MER is high for a bond fund at 2.07 per cent. I don't like paying that much for a bond fund but my search for a global bond ETF that invests in the same type of portfolio came up empty. Despite the high MER, returns for the CIBC fund have been very good for this category with a 4.3 per cent net gain over the year to Feb. 28 and a three-year average annual compound rate of return of 7.9 per cent.

Distributions are paid quarterly and the minimum initial investment is $500.

Here is what the revised portfolio looks like.

Our total cash holdings are now worth $2,245.21. Once again, we will keep that money in an ING Direct savings account paying 1.35 per cent. I'll review this portfolio again in six months.

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