Thursday, July 31, 2008
Wednesday, July 30, 2008
My thoughts on IGM Financial.
Monday, July 28, 2008
Looks like Toronto Dominion Bank (TD), my largest single stock holding, is doing some business that I'd have to classify as fitting into my 'economic green' theme that I blogged about back in May. The company's Green Wheel™ program rewards those who own or lease a hybrid vehicle by offering a five to ten per cent discount on auto insurance premiums. While most research that I have seen still shows the pay back period when buying a hybrid vehicle to be too long to make economic sense, this insurance initiative is a step in the right direction; not to mention good marketing and PR for TD.
"At TD Insurance, we're listening to consumers who want environmentally-friendly products - and leading with programs that reward green behaviour," says Jean-Francois Tougas, Vice President, TD Insurance. "With TD's Green Wheel discount, saving the environment and saving money can go hand in hand."
Saturday, July 26, 2008
Dividends more reliable than share price rises in the U.K. from professional advisor.co.uk
Cars Are the New Smoking, by Squawkfox, that got your attention didn't it.
Thursday, July 24, 2008
Below is the way I see Husky's dividend history when all of the special dividends are included, and the split is factored in:
2006 - $1.13
2007 - $1.25
2008 - $1.56
2009 - $2.00 (EST)
The stock is yielding about 4.9% on today's share price.
Wednesday, July 23, 2008
Diversified conglomerate General Electric (GE) announced their second quarter earnings this past Friday. GE's finance unit, GE money's profits fell 9% while the consensus estimate was for profits in that unit to drop 15-20%. Their Infrastructure unit's earnings, on the other hand, were up 24%. Overall the company met expectations by posting nearly flat earnings growth over the same quarter in 2007. Revenue actually rose 11% to $46.9 B.
GE's shares got hit hard last quarter when they surprised the market by announcing an unexpected drop in earnings due to weak credit markets. In this most recent earnings release GE affirmed it's full year earnings forecast of $2.20-$2.30 per share. This is barely above their 2007 earnings per share of $2.20. With plans to spin off their industrial and appliance units, and forecasting further lower profit from their finance segments, GE's earnings growth looks stagnant for the short term.
But really, here at The DIV-Net we don't care about the short term. Here are a few points to ponder with respect to GE as a potential long term dividend growing investment:
GE's current dividend pay out ratio is about 52% (they are paying out half of their earnings)
The current yield on the stock is around 4.5%
GE has grown earnings per share in 8 of the last 9 years
Their dividend growth has swift, consistent, and has stood the test of time
Global infrastructure, alternative energy, and emerging economies are great areas to be a leader in long term and GE is there with bells on
GE is already deriving about 50% of revenue from outside of the U.S.
The company currently has their hands in a lot of cookie jars. The main focus of management is to get their hands out of the cookie jars that are growing slower and keep searching for cookies in the faster growing jars. Maybe buy more nice jars too...
As of writing this GE shares of off about 25% year to date, and it's not a purely financial company. Yes GE has some financial exposure but one of the scary things about investing in financials, for a dividend growth investor, is the possibility of dividend cuts. Since GE has a pay out ratio of about 52%, and minimal exposure to finance as compared to, say a bank, the dividend is not at risk because their other divisions profits are looking pretty solid. This is a key point because as mentioned GE is now yielding about 4.5%, and probably has a bright future, even without light bulbs. A 'yield on cost' of 4.5% with solid growth potential is a great starting point for a position in this company.
Tuesday, July 22, 2008
Case in point are oil stocks right now. Most oil stocks in Canada are fairly low yielding but Husky Energy (HSE) stands out in offering a higher dividend yield to investors. Recently as oil climbed from under $100 to around $147 oil stocks soared with sentiment all around claiming high oil was here to stay and that we could hit $200/barrel quickly. Since then oil has begun to come off as it is now flirting with $125/barrel. Evidence exists that high oil is curbing demand, and that the U.S. economy is slowing. These factors along with the usual speculative trading dynamics seem to have turned the bus around.
Anticipating this move, the stocks of the oil companies themselves have been falling. So much so that Husky Energy (HSE) has actually come off about 23% since May 21. The energy ETF (XEG) has come off about 18% during the same time frame. What makes the move down by Husky so intriguing to me is that the stock pays a nice, rising dividend. Husky is now yielding almost 4% and sports a dividend pay out ratio of earnings of about 35%. If you expect the world's insatiable appetite for oil to continue, and expect per barrel prices to leave double digits as a distant memory, take note. Remember, oil is still well above it's average price over the last few years.
For every $1,000 invested, Husky is paying you $40/year currently and this will likely rise as their fortunes rise with oil and oil demand. As the sentiment mounts and oil trades lower it is no fun to have the value of your oil stock fall. However, a nice yield certainly cushions that fall and allows you to pick up more yield or at least get paid while you wait for your holding to appreciate with the global demand for energy. In my opinion this is a very low risk yield with minimal downside and major upside potential. If your investment strategy focuses on dividends and dividend growth, as mine does, then a 4% yield on a non-financial stock that adds diversity to a portfolio is interesting to say the least.
Monday, July 21, 2008
Bear Market Advice from Ben Stein. He might be oversimplifying things, but interesting thoughts nonetheless.
Talk about volatility...long term dividend grower, Bank of America's dividend yield has gone from 9.4% to 13.9% to today's 8.5% over the past month. There goes that efficient market again pricing in every one's fears, hopes, and best guesses...
Thursday, July 17, 2008
Last Wednesday I wrote about my dividend growth philosophy. This is my investing plan that I employ through good times and bad, no matter what the market throws at me. The first factor in the last point within my investment philosophy, and a factor that I consider crucial when selecting and analyzing investments, is consistency.
Consistency to me means steady growth of sales, earnings, and dividends over many years. It also means maintaining market share, return on equity, and a solid balance sheet as well as a stable, positive corporate culture and direction. When selecting companies (stocks) to evaluate for my watchlist, which I will later use to monitor price action and select an entry point, consistency is critical.
In order to be successful long term using a dividend growth investment strategy, I believe that selecting consistency is a must. The reason for this is that for a corporation to be a long term raiser of dividends they need to be a long term raiser of earnings. Stable, boring companies that raise their earnings and therefore their dividends year in and year out are what I am after. I am not after companies that double their earnings one year, and then go on to earn 30% less the next year. Since a dividend is actually money that is paid out in cash, some reliability and consistency must be built into a company in order for that company to raise dividends every year. The company must have the wherewithal to know that they'll be able to come up with ever increasing amounts of cash to pay me each year.Generally, cyclical, fly-by-night, sporadically growing, or companies struggling with business model issues do not have this luxury.
Companies that raise their dividends every year have made a conscious decision to make consistency a priority. The reason for this is because they know they'll need to come up with an every increasing pile of cash to use for dividend payments each year, so in most years they must earn a little bit more than they earned in the previous year. Their culture as a company, their relationship with investors, and their long term performance and investor return metrics all absolutely depend on them becoming consistent.Here is an example to clarify my point.
One company that fits the consistency bill to a tee is consumer products giant Procter & Gamble (PG). Let's look at how PG gets it done:
Earnings Per Share: PG has increased EPS in 7 of the last 9 years
Sales: PG has increased sales in 8 of the last 9 years
Dividends: PG has increased dividends in 9 of the last 9 years (this track record goes back very far)
Return on Equity: PG's return on equity as been above 15% in 8 of the last 9 years
Procter makes an excellent candidate for any dividend growth investor's portfolio for several reasons. Their past consistency is one of the factors that most investor's likely consider when evaluating P&G as a potential investment.
Wednesday, July 16, 2008
Tuesday, July 15, 2008
Debt/Asset ratio rose to 0.52%
Net Worth moved down 4.9%
Total Assets decreased 2.9%
Total Liabilities decreased 0.9%
House Value/Total Assets rose to 71.7%
Non-Registered Portfolio declined 12.9%
Calendar Year to Date Gain/Loss: +7.1%
Ouch...what a horrible 60 day period. Almost 5% of our net worth was lost since May 15, 2008. This is our first ever net worth decline. Obviously the poor stock market performance has hit our net worth pretty hard. The S&P 500 index is down 16.4% year to date.
Monday, July 14, 2008
If you are interested in obtaining a free copy of A Million Bucks By 30, by Alan Corey (reviewed and pictured in the post below this one)....please leave a comment on this post. I will draw a winner this week and you'll be sent a copy right away.
Sunday, July 13, 2008
A Million Bucks By 30 is a unique personal finance book by self proclaimed 'fame whore' and cheapskate, New York City-based entrepreneur, and author Alan Corey. By his own account Corey has no particular skills, and is not really good at anything, but yet he was able to reach a net worth of a million dollars before he turned 30. The basis for the 'fame whore' title are his many television appearances including Queer Eye for the Straight Guy, The Restaurant, and The Big Idea with Donny Deutsch. The basis for the cheapskate moniker is due to the fact that, among several other examples, Corey maintained a food budget of $2 per day during his journey to a million.
My Thoughts on A Million Bucks By 30
What I really liked about this book was the simplicity of the writing, the story, and of the author himself. Not that Alan Corey is a 'simple' man by any terms, but it is refreshing to read a personal finance book that comes from a really down to earth, easy, and straightforward place. The book is an easy read, it's funny, it's inspirational, and it begins every chapter with guy in his twenties talking to himself.
Without giving the book away Corey proves that living an extremely frugal lifestyle, being innovative, creative, and a little bit lucky is the formula for financial success. The book is stuffed with loads of smart personal finance tidbits as well as several 'cheapskate strategies' (some that would even make Canada's Mr.Cheap blush). Some of these strategies are at the root of living below your means, while some are downright uncalled for. The book also delves into the world of real estate investing in a big way.
Overall I really enjoyed the book mainly due to it's humour, simplicity, and motivational qualities. It really makes you want to find a way to save an extra $100 this week. Corey does a great job of portraying himself as someone with no special money making advantage over any one else. I would argue that the man possesses an outgoing entrepreneurial spirit, great discipline, and an amazing will to win. Admittedly Corey got lucky due to a very hot real estate market, however his outgoing and courageous personality and dedication to his goals would have likely allowed him to succeed no matter what the market held. In summary the overriding theme of this book in my eyes is; sacrifice now for your future goals. Alan Corey took sacrifice to a new level as he focused on squeezing every dollar he could out of his every day twenty-something life. Absolutely worth the read and a great read for someone just out of university.
the moneygardener was not compensated for this book review
Friday, July 11, 2008
Canadian Banks & Insurance
This and That # 100
Canadian Dream: Free at 45
The Green Spot: Ground Rules & What’s Wrong
Disciplined Approach to Investing
Market In A Downtrend But Ready For A Bounce?
Dividend Growth Investor
"Determining Withdrawal Rates Using Historical Data" - My Opinion
Weekly Links: Carnivals & Articles - July 11, 2008
Bye Bye Zero Down and Forty Year Mortgages
Michael James on Money
The Trap of Trying to be Normal
Middle Class Millionaire
High Interest Saving Accounts - Guest Post
Million Dollar Journey
Weekend Reading - July 11, 2008
my Value Idea
Personal Finance 101
Dividend Growth Investing At Work
Quest For Four Pillars
SeekingAlpha.com: Home Page
Fannie and Freddie Waterfalls are Too Big to Bail
10 Free Ways to get into Fitness this Summer
Stock Market Prognosticator
Smart Money - May You Rest in Peace
The Div Guy
Zecco: Great broker for dividend investors and get $25 for opening an account
The Dividend Guy Blog
The 9 Rules of Risk Management
Thicken My Wallet
The Running Man
Triaging My Way To Financial Success
A Lap Of The Blogs
Thursday, July 10, 2008
Of all the Excel charts and graphs that I keep in managing our personal finances and investments, I must admit I am partial to one. I have explained previously how powerful I believe dividends can be, as well as how I consider them crucial to our investing philosophy long term. Dividend increases mean more money in your pocket, and they have the added benefit of being one of the more permanent aspects of investing. The graph below is immediately affected in this relatively permanent way every time a company that we own raises their annual dividend, as well as every time I add new shares of a dividend paying company to our non-registered portfolio. It is this relative permanence of value that really has me routing for this graph to rise week to week and month to month.
Our Annual Portfolio Income has now reached $2,000! The latest dividend raise by Walgreen (WAG) allowed us to hit this wonderful milestone. Please see the graph below for our progress over the past year and one half. Our investment income is now up 126% from one year ago. $5.48/day and counting...
Wednesday, July 9, 2008
Last year in July WAG increased their dividend by about 23%.
Monday, July 7, 2008
Here are a few good articles to convince investors to stick to their knitting.
Dividend Growth Investing At Work by Dividend Money
Investing & Hockey by The Dividend Guy
Intelligent Value Investing from The DIV-Net
Thursday, July 3, 2008
This metric is mentioned in the book 'The Millionaire Next Door' and is an interesting way of looking at one's wealth level, as it factors in your personal cost of living. In essence this formula compares your assets to your lifestyle costs, quite simply - How Long Could You Go Without Receiving a Paycheque. Simply take your net assets (assets minus liabilities) and divide by your monthly expenses. This will give you the number of months that you or your family could go without regular income. I think I will call it 'Net Freedom'
Whether you would include your home equity in the calculation or not depends on personal choice. If you use your home equity as an asset then don't forget to include an amount in your expenses that you would be paying for rent. Also, if you are a homeowner, when adjusting your expenses think about how they would change if you no longer owned a home. If you would choose not to move when you became paychequeless then the calculation becomes simpler. Obviously there are flaws to all of this as many more changes to your expenses could come to light if you suddenly were without a job (ie benefit loss).
When I perform the calculation for our family, our Net Freedom is about 46 months, or 3.8 years. I like this metric because it not only measures wealth, but it measures wealth against lifestyle costs. This allows those who live below their means to score higher and rightfully so, as their financial situation is truly more flexible and powerful than someone who lives high on the hog and earns just enough to get it done. Certainly it is an interesting, and perhaps eye-opening exercise to calculate this for your personal situation. As always, I'd enjoy hearing reader's thoughts on this.
Wednesday, July 2, 2008
Million Dollar Journey reports his net worth each month. His net worth currently stands at $310,483. That is a gain of just over 2% from May, 2008 to June, 2008 due to some good performance by a micro cap stock in his RRSP, as well as some solid savings results despite a maternity leave situation. Year to date MDJ has been able to increase his family's net worth by just over 11%.
Tim at Canadian Dream: Free at 45 also track his net worth bi-monthly as I do. His net worth currently sits at $247,900. That is a 10% drop from February due to a reduction in his home's value due to local real estate market conditions. Year to date Tim has been able to increase his family's net worth by just over 15%.
My last look at our net worth was on May 15, where it stood at. This represents a 13.6% increase since the start of 2008.