Wednesday, April 29, 2009

what you'll get free from equifax

Following up on my investigating your credit history for free post; I have now received my credit report back from Equifax. This arrived in the mail 4 business days after I phoned their automated request line. Below is a summary of what the report contains:

4 pages front and back were included.
Section 1 PERSONAL IDENTIFICATION INFORMATION
This contains some personal information that they have on file for you including your prior addresses and a brief employment history. Mine seems to be accurate and complete back to 2002. This section also includes the date that Equifax opened a file on me.

Section 2 CREDIT INQUIRIES ON YOUR FILE
This section first lists Equifax members who have received a copy of my credit file for credit granting followed by a list of authorized parties who wanted their records updated regarding my existing account with them. Very little detail and nothing real shocking here.

Section 3 CREDIT HISTORY
This is the meat of the report as it goes into detail on your account with each creditor. This includes a rating for each, for example R1 meaning 'paid as agreed and up to date'. Information on what your balance was at the time of last reporting, when the account was opened, your credit limit, and date of last payment made are included. Items listed here might include credit cards, student loans, lines of credit, bank accounts with overdraft, auto loans and leases, and other loans.

This section was interesting to read and I made sure that I went over it in detail to ensure accuracy. Everything was in order and aside from a very old credit card with a $0 balance, there were no surprises.

Section 4 PUBLIC RECORDS AND OTHER INFORMATION
This section seems to be a place for official filings of secured loans/chattel mortgage, etc.

Section 5 'GLOSSARY'
This section just gives some general information on different credit terms and time frames for when records will be purged. They then go on to give some more general information about credit and Equifax and their services.

The last page is a Consumer Credit Report Update Form to request changes to your file.

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Overall obtaining this report was beneficial, and I feel there is enough information here to set my mind at ease regarding my credit. Although I am a little curious, I don't feel the need to obtain my actual score.

One thing that I did not expect was the absence of our mortgage on this report. After some quick searching on the Internet I've learned that this appears to be common practice, as apparently a mortgage does not affect your credit score. This was a surprise to me and I still don't quite understand why this would be the case. Does anyone know anything about why mortgages are not included in Equifax reports?

Monday, April 27, 2009

income from investments at $8.93/day

It has been a while since I updated the status of the income we are receiving from our investments inside our non-registered account. Recently I have suffered three dividend cuts within our portfolio. General Electric (GE), Bank of America (BAC), and Husky Energy (HSE) all cut their dividends significantly, and I continue to hold all three stocks because I still believe these companies will prosper long term.

Procter & Gamble (PG), Johnson & Johnson (JNJ), Fortis (FTS), Diageo (DEO), Sysco (SYY), and Telus (T.A) have all raised their dividends recently. I expect Clorox (CLX), and Walgreen (WAG) to increase their dividend over the next few months.

Since Lehman Brothers failed in September of 2008 and the stock market fell off of a cliff, I have poured a significant amount of capital into our portfolio. In summary our income from investments is now sitting at $3,258 which is roughly 56% higher than we were earning pre-Lehman failure. During the same time frame our portfolio is up about 42%.

Our portfolio is currently yielding 5.5% and has a yield on cost of 4.2%. 9% of our portfolio is tied up in dividend re-investment plans.

J&J raises dividend for '09

In these tight economic times, global healthcare firm Johnson & Johnson (JNJ) has raised their dividend by 6.5% right on schedule. J&J's 2008 raise was by 10.8%.

Below is their recent annual dividend payment history:
2005 - $1.275
2006 - $1.455
2007 - $1.620
2008 - $1.795
2009 - $1.96 (est.)

This represents a compound growth rate of the dividend of 11.3%.

Thursday, April 23, 2009

investigating your credit history for free

If you are Canadian and you've ever wondered what your credit file looks like, there are two reports that you can access for free. It appears that obtaining your actual credit score will cost you some money though. Below is what I have requested free of charge. I'll review this material on the moneygardener after I receive it.

"Consumer Disclosure" from TransUnion, requested by mail with copies of both sides of two pieces of ID and the necessary completed form.
Total time commitment = 20 minutes with access to a computer, photocopier, your wallet, pen, envelope, and stamp.
What is a Consumer Disclosure?
A Consumer Disclosure is a complete account of all the information on your credit report, as mandated by consumer reporting legislation. Unlike the version supplied to a business that purchases TransUnion services, which is referred to as a "Business Version," a Consumer Disclosure lists all inquiries made to your credit information, including account management inquiries, non-credit-related inquiries and your own inquiries. The Business Version is an abbreviated version of the Consumer Disclosure. This is the credit report that creditors do see. The Business Version does not contain account management inquiries, non-credit related inquiries, or your personal inquiries to obtain a copy of your credit information.

"Credit Report" from Equifax requested by phone using automated voice recognition system. This is supposed to be mailed to me within 3-5 days.
Total time commitment = 3 minutes with access to a phone and your wallet.
What is a Credit Report?
Your credit report includes personal information such as your name, address, date of birth and Social Insurance Number. It also includes historical data such as current and previous addresses, current and previous employers, and public records like bankruptcies, liens or judgments. Most importantly, your credit report contains your credit card, mortgage and loan payment information. This information is used by lenders to see if you have missed payments, carry high balances, or are in other ways over extending yourself financially. Payment history is the most important factor in your credit rating — so pay your bills on time — even if it is just the minimum balance due each month. Lenders evaluate your credit risk based on information in your credit report. It is a good idea to review your credit report periodically and check for inaccuracies that may have an impact on your credit standing.

Wednesday, April 22, 2009

outside of the box income

Want to make your neighbour or brother-in-law's head spin?

Right around this time of year is an absolutely perfect time to mention to someone that eligible dividends from Canadian Corporations attract a tax rate of only 6.9% if you live in Ontario. If you happen to live in BC or Alberta that rate gets even better at 4.4%. This is assuming that one earns $55,000 in total taxable income.

This compares with employment income which draws an average tax rate of about 20% in these provinces and a marginal (last dollar) rate of about 30%.

The only problem is that if you would like to earn dividends totalling a net amount of $44,000, as you would in employment income, you would need a portfolio valued at about $945,000. That being said, dividend income can provide a very good supplement to employment income as you go through your career and can be relied on more and more as you grow your portfolio.

Monday, April 20, 2009

google reader links

Well I took some time to blow through my Google Reader again, and this is what I found...

Greg Donaldson from Rising Dividend Investing explains how Procter & Gamble showed that dividends talk when they hiked their dividend by 10% recently.

Market Timers Are Still On The Sidelines, and only time will tell whether they should have hopped the boards earlier, says Michael James On Money.

Rob Carrick from The Globe & Mail shows you how to Prepare Your Portfolio for a Rebound , Rob says buy energy, metals, and banks instead of pipelines and grocery stocks.

Friday, April 17, 2009

canadian banks look frothy

Canada has recently been lavished with praise because of the strength of their financial institutions amid all of the global financial turmoil. Despite this halo effect, these banks have had their challenges. Royal Bank of Canada (RY) just took a large write down on their US assets. That may be a bell weather for other institutions such as Toronto Dominion (TD) and Bank of Montreal BMO), who also have large assets in the US.

I can’t help but thinking that Canadian banks are not looking attractive right now as investments whatsoever. With headwinds of further write-downs, low consumer confidence, increasing unemployment, increasing loan losses, and Canadian real estate value declines, the big 5 Canadian lenders share prices look downright frothy. This is quite a change from a few months ago when you could have bought some of the banks at decade lows and towering yields.

Let’s look at Royal Bank of Canada (RY) as an example for the group:
How quickly things can change. Royal Bank was trading at $26 in late February and is now changing hands at $43. That means that the stock was yielding 7.7% back in February and is now paying out more like 4.7% of their share price in dividends. That is dramatic rise in share price of 65%!

The P/E ratio is now 13.4x for a company that just took a $850M write-down and is facing multitude of pressure brought about by a recession. There is very little probability of any dividend growth in the short term so investors don’t have much to look forward to in the next two years in that arena. When Royal yields north of 7%, I would argue that as long as they don’t cut their dividend, buying might be wise; however 4.7% does not carry the same appeal.

You could look at all five banks and probably see a similar pattern. The rally in these banks recently looks overdone to me and I believe the expectation currently built up in their share prices is not realistic. The risk return on these investments is not attractive at the current level because the potential short to mid term return has probably evaporated and the risk still exists.

Wednesday, April 15, 2009

bullish on canadian pacific

Every once in a while on the moneygardener, I get the urge to explain why I like a certain company as an investment. The reasons why I own the stocks that I own for the long term are not as simple as past dividend growth or current low price to earnings ratios. I have specific qualitative, forward looking reasons for owning each and every stock that I own.

Right now, one stock that I am watching intently because I want to add to my position is Canadian Pacific (CP). I was not as interested in CP when it was trading at $86.00 back in July of 2007, but now that the stock is trading below $40.00 I believe CP is ripe for an attractive long term investment. So other than the reasonable valuation, why am I so bullish on Canadian Pacific?

Well, it is a fairly simple thesis; Asian economic growth should be the story of the next 50 years, Canada is flush with resources, and railroads are a boring monopolistic way to play this growth.

Consider this, CP holds a significant market position in the transportation of bulk commodities, which account for a large portion of the company's revenues. Grain, coal, and fertilizers accounted for about 43% of CP's freight revenue in 2007. As a comparison, automotive related products only accounted for 7% of CP's freight revenue.

Over the next 50 years Asia will require a whole whack of coal for steel production and loads of fertilizer and grain for food production. Canada happens to be a prime source for these materials. I see this trend of growing Canadian exports of these materials to Asia as a given and CP will inevitably be a large beneficiary of this growth as they transport from West to Far East.

I own CP shares and I will be looking to add to my position on any weakness in share price in the upcoming weeks, months, and years.

Tuesday, April 14, 2009

Procter's 2009 raise

Right on schedule, consumer products giant Procter & Gamble (PG) has increased it's dividend by 10% to $0.44/share. I recently bolstered my ownership in Procter back in February, and the company now makes up about 6% of my non-registered portfolio. Always nice to receive a double digit raise in dividend income from a company that is confident about the future.

Here is Procter's recent dividend history;
2004 - $0.98
2005 - $1.09
2006 - $1.21
2007 - $1.36
2008 - $1.55
2009 - $1.72 (estimated)

PG has raised their dividend for 53 straight years. Last year they hiked the pay out by 14%.

Tuesday, April 7, 2009

kanye west, bang on about money


One's relationship with money in life can often be complex, emotional, and multi-faceted. Most of us know that we want more money, however most of us do not want to let money rule us or make decisions as if all we care about is money. Many would agree with the statement 'Money Can't Buy Happiness' or 'Money Can't Buy Love' because most people agree that achieving fulfillment in life is not simply about having wealth.

A lot of people grew up poor or lower middle class which influenced their attitudes toward money and allowed them to become frugal as adults. These people tend to attempt to ensure they'll never be broke, rather than striving to be wealthy to achieve happiness. Sometimes the best quotes come from the most unlikely sources. One of the best quotes that I have ever heard that surrounds the human relationship with money came from rapper, Kanye West in the song 'Good Life'.

"Having money's not everything. Not having it is."

At least this is what I think the correct lyrics are. There are conflicting quotes on popular song lyric websites. I like this line better than the alternatives anyway.

What I like about this quote is that it defines the human relationship with money pretty well in few words. When you have money, are comfortable and wealthy, money is certainly not everything and does not feel like the be all and end all. However, if you get into the situation where money is extremely tight or you literally have very little money to survive on, money can often become your sole focus and seem like it is the root of everything bad in your life.

Saturday, April 4, 2009

saving $ is fun again!

I must admit, I've lost my motivation to save money.

In the process of getting really busy with my day job, my excitable one year old son, and planning and taking a wonderful Vegas vacation, I've lost my saving mojo recently. These factors were not the only detractors from my usual saving prowess, I've been weak lately. My wallet has sprung open too wide and I've been very prone to the 'we deserve it' mentality. While I do believe this type of occasional extravagance keeps one sane, it's time to get back on the horse; and I've never been more ready to saddle up.

Our indulgence has cost us some progress toward Goal #1 which states:
Save an average of at least $1,000 per month to be added to our non-registered portfolio. (These savings are on top of regular RRSP and RESP contributions.)

We've come up empty the last two months:
February, 2009 = $0
March, 2009 = $0

As of right now we are not meeting our goal. Over the last rolling 12 month period we have manged to save an average of only $701.

Even though my wife was on maternity leave for half of the period, I am not happy with that, and we have been motivated to turn it around. Following the surprisingly frugal lead of my wife, I feel like we have a renewed motivation to sock away cash. I don't know if it is Spring breaking or just a natural snap back from overspending but we're definitely acting more frugal lately. Given the ongoing recession, we seem to have a lot of company all of a sudden. Saving money seems to be in vogue now; everyone was at the malls in 2007 when the moneygardener ruled saving money?

April's savings have already been booked at $1,500 and growing. I'm happy to proclaim that after a luxury sabbatical, saving is fun again!

Friday, April 3, 2009

5 market rally drivers

We are in a recession and the economy is looking very bleak. From accelerating job losses in many industries to the potential bankruptcy of GM there is a lot of bad news to digest out there. So this being what it is, why is the stock market rallying like nobodies business? The S&P 500 index is up a whopping 23% since just March 9.

The Wall Street Journal has an interesting article in the 'Smart Money' section of their website titled Dow 8,000 - 5 Reasons Driving The Rally. This article outlines 5 reasons why the market is rallying despite the despair saturating the economy.

1. G-20 Boosts Global Confidence (THUMBS DOWN)
The appearance of a coordinated response to the global financial crisis is apparently buoying markets. I would sell on any market strength that is generated by this fluff. This is all about perception and these meetings tend to not churn out any definitive actions. Global leaders have no choice but to give the impression that they are working together and on the same page.

2. Accounting Change Bolsters Balance Sheets (THUMBS UP)
Although the change to allow financial institutions looser criteria in order to value their hard-to-value assets is kind of like painting grass green, it might be just what these institutions need to finally get out from under themselves and start serving the public. This may signal that the bottom has been seen in stocks like Wells Fargo and Bank of America.

3. Team Obama Gets Act Together (THUMBS DOWN)
TARP, TALF, PPIP Burt & Ernie might have just as much luck throwing these acronyms at the market as Tim and Barack. Could they be stoking future inflation as well?

4. Blue Chips Too Cheap To Resist (THUMBS UP)
It always sounds silly to say that, wait a minute, wait a minute....right now 'blue chips' are too cheap. Many large, stable dividend growing companies have been pretty cheap for months. Stocks with nice dividends that shouldn't be cut should be bought when times are tough not when things look rosy.

5. The Early Bird Gets The Worm (THUMBS UP)
I do believe in the general thought that some great gains in the market can be missed out on by those who sell and attempt to get back in when things turn around. The markets can't go down forever, and nobody wants to miss the parade.

It is my believe that housing stats and the fate of GM will also be huge factors to where we are going in the market in the next six month.

Wednesday, April 1, 2009

google finance adds canadian dividends

It has been a long time coming but my favourite stock market tracking website has finally added dividends for TSX traded Canadian firms including income trusts. I have long used Google Finance on a day to day basis for tracking stocks and my portfolio, and browsing company news. Their charts are great and one of the only drawbacks has been that they did not contain dividends for Canadian firms.

I noticed yesterday that Google has now added the small dividend markers with values for Canadian stocks. As an example, check out Bank of Montreal's (BMO) 5-year dividend history on the chart here.