Wednesday, October 31, 2007

reader / follow dividend hikes

You'll notice you can now subscribe to the monegardener via the feedburner (RSS) reader by clicking on the orange icon on the right panel. You can also subscribe to the email function by clicking on '' so that new posts are immediately emailed to you. For those of you who were subscribed to this blog via atom or another reader, this should automatically switch over to feed burner without a problem; at least this is how I understand it. Hopefully no one had a problem with this. Forgive me, as I am not the most computer savvy blogger out there...

Another feature that I have added is one that I am calling 'latest dividend hikes'. If you click on 'see latest hikes' under the 'latest divdidend hikes', you will be redirected to a great thread on the financial webring forum where posters track the latest dividend hikes by Canadian and U.S. companies. Obviously this source is not perfectly complete or accurate, but I consider it fairly reliable, and a good way to keep tabs on the dividend changes that occur regularly in the market. After clicking on the link you may have to skip to the last page of posts within the thread, but I will try to keep the link at the last page of posts so that you can see the latest dividend hikes first. You'll also notice a link for the main financial webring forum under my 'useful links' area on the right panel. Thanks to the financial webring forum, for maintaining a great resource for investors.

Tuesday, October 30, 2007

$50 in free trades from Questrade®

You know I'm a sucker for a good deal... If you are thinking of switching brokers, or you are just getting started - Questrade® discount brokerage has made me aware of a referral program where new customers get $50 in free trades if they are referred by an affiliate. Considering that their commissions are just $4.95, that's 10 free trades, just for joining this Canadian discount broker. Just click on the word Questrade®, or the banner at the bottom of the blog and use 'MG' as your Referrer ID when filling out your application.

Why should you use my Referrer ID?

"Referrer ID codes are also offer codes that referrals can use to take advantage of various exclusive bonuses such as free trades, platform upgrades and more. " - This is a quote from Questrade®

life's brighter under the sun...

Sun Life Financial (SLF) announced their third quarter earnings today. Here are some highlights:

- Earnings per share were up 9%, excluding the impact of currency, earnings would have been up 13% over Q3 of 2006.

- Return on Equity was 14.8% for the quarter.

- Sun Life launched their new advertising campaign describing the role SLF play in the lives of 1 in 5 Canadians.

- Segregated fund sales in Canada increased by 75%.

- Birla Sun Life, Sun Life's India division saw sales increase 177%; while in China Everbright's sales were up 162%.

- Sun Life's CEO Donald Stewart was awarded International Executive of the Year by the Canadian Chamber of Commerce.

- SLF's pay out ratio sat at 33%, while they paid $193 in dividends to shareholders, like me.

The stock is up about 3% to around $54.35, today in afternoon trading.

Monday, October 29, 2007


When it comes to my preference for where to spend my hard-earned money on consumer goods, it is absolutely no contest. I have bought everything from toilet paper to an LCD television there and I rarely, if ever, have a problem with one of their products, or a bad experience in one of their stores. Costco has the lowest prices on a wide range of quality goods of any retail establishment that I am aware of. Often I compare their prices to other chains such as Sears, Wal-Mart, Future Shop, and even recently Target and it's usually not even close. 

I think that Costco must employ the best 'procurement managers' or buyers in the industry, as the products they stock their towering shelves with are always second to none in brand, quality, and price. Everything from their coffee beans to their garden hoses are the best quality at reasonable prices. Their private label brand, Kirkland Signature, offers some exceptional value on several goods like bottled water, baby wipes, and even dog food among many other products. Costco frequently sells books for much less than the publishers price. I can't think of really any product category where they do not offer the best products at the lowest prices.

Costco is truly a best of both worlds retailer. Their return policy is seamless, their cashiers are very friendly, and you can buy a pair of Buffalo jeans for $30. Two years ago I bought a pair of sports sandals, a pair of leather sandals and a pair of running shoes at Costco all for under $30 each, and they're all still in tact. I am slightly embarrassed to say that last year my wife and I did our entire Christmas shopping there. Everyone seemed to love their gifts, and most people received two. No, nobody received the 3 kg mayonnaise from us.

Maybe it is the smell of the samples on Saturdays, or the 2kg jar tub of peanut butter, or the glow of the warehouse-type lights but I just adore the place...Some interesting facts about Costco:

The CEO, Jeffrey Brotman earns $645,000 per year as his base salary. He also answers his own phone.
I've heard that the cashiers make over $40,000 per year with benefits.
You can buy a hot dog and a bottomless pop there for $1.99. Pretty good hot dog too...
You can buy 35 bottles of Kirkland water for $4.39. That works out to less than $0.13 per bottle.
You can get your passport photo done for about $6 and fill your BBQ propane tank for $11.
Their net profit margins are under wonder....

Costco did not pay me to write this review, but if they did I would have taken payment in the form of raw Lilydale chicken

Saturday, October 27, 2007

registered portfolio update

Thus far, the moneygardener has not included much information about my registered investment portfolio. Like many other Canadians, I participate in a defined contribution pension plan through my employer.

The Plan
Here are the details of the program:

Employer contributes 2% of my annual base salary to the plan. Employer then matches my contributions to the plan, up to 4% of my annual base salary.

For example:
If I contribute 5% of my salary out of my own pocket, my employer contributes 2% (automatically), and a further 4% to match my contributions. This means the total amount contributed to my RRSP would be 11% of my annual salary.

The Portfolio
My basic strategy for my RRSP portfolio right now while I am relatively young is to aim for high growth, keep it simple, and minimize fees.

Here is how the portfolio breaks down:
PH&N Canadian Equity Segregated Fund = 34%
BGI U.S. Equity Index Segregated Fund = 41%
Templeton International Stock Segregated Fund = 25%

The MERs for these funds are 0.29%, 0.22%, and 1.12% respectively. Currently I am contributing 1/3 of incoming capital to each of these three funds.
Here is the actual breakdown of exposure within the portfolio.

Some of the largest individual stock weightings within this portfolio currently are:
Exxon Mobil
General Electric
Manulife Financial
Suncor Energy
Vodafone Group

Friday, October 26, 2007

portfolio update (non-registered)

Here is a summary of my allocation within my non-registered stock portfolio currently, and some comments about the outlook going forward:

Asset Allocation

As you can see I don't own any technology stocks. This is probably typical with many dividend growth portfolios, as tech companies tend to use earnings for R&D and growth rather than return them to shareholders. I am completely comfortable with my 28% weighting in financial services; in fact I could see that go as high as 50% if situations presented themselves.
This portfolio is currently yielding 3.7% and is 68% invested in Canadian stocks. 19% of the portfolio is in a Dividend Reinvestment Program.

I am currently sitting on about 4% cash as you can see from the pie chart above. One stock that I am watching closely right now is Bank of America (BAC), which sports a fat 5.5% yield, and trades at a P/E of 10.9. Several U.S. stocks are beginning to look attractive since the Canadian dollar closed at around $1.04 today. Home Depot is another stock that looks interesting. It is trading around a multi-year low, and sentiment regarding housing may be bottoming. HD's earnings have been coming down as of late, however the fundamentals for the company still look very strong. That being said, I may already be exposed a little heavy to the U.S. consumer holding Walgreen and Scotts Miracle Gro. I do feel a bias toward the U.S. right now since our dollar has appreciated so far so fast, as well U.S. stocks are showing more value than feels like an opportunity to use the $CAD buying power.

In Canada, nothing is really getting me too excited lately. Reitmans (RET.A) is probably the name that I have the most of my attention on. Bank of Nova Scotia (BNS) starts to look good whenever it wants to go below $50. I think BNS' next earnings report might give the stock a good bump, as I have a feeling Latin American earnings will come in very good, after seeing some numbers from U.S. companies like Whirlpool. Also BNS may look relatively unscathed in the subprime realm since they have smaller exposure than their peers.

Maternity-Leave Section
The Maternity - Leave section of the portfolio is about 83% complete. After some recent developments with my income, combined with recent looks at our budget, I may not bring the Mat. - Leave amount to 100%. Instead I may call the section complete and allocate funds elsewhere...I'm still debating that one.

the single best investment

I recently participated in the '4 Weeks on Dividend Winners' over at, which is a great blog, that I happen to have listed on the right panel as a blog that you might like. I was very pleased to be the lucky winner of the book, 'The Single Best Investment: Creating Wealth with Dividend Growth' by author Lowell Miller. I have actually heard a lot of buzz about this book in the online personal finance world, and I was planning on purchasing it anyway.

Many Thanks to The Dividend Guy!

I will write a review on the book after and maybe during the read.

Tuesday, October 23, 2007

bullish signal or drop in the bucket?

It was declared that in the past few days the CEO of General Electric (GE), Jeff Immelt bought 83,000 shares of GE for around 3.3 million dollars. Usually when a CEO buys a significant amount of his company's shares it could be viewed as a bullish signal for the company going forward.

Looking at it another way, Jeff pulls in around 18 million dollars per year according to Reuters. That is a pretty good chunk of change for one year's work. So essentially Jeff's purchase, if made by someone making $50,000 per year, would be the equivalent of $9,150... Still a decent sum of money but this is hardly betting the farm on a business that one controls.

Monday, October 22, 2007

a Husky dividend

Husky Energy (HSE), a Canadian integrated energy company, has just raised its dividend by 32%.

This company's recent record of dividend increases has certainly grabbed my attention as of late. Let's look at the numbers:

According to Husky's investor relations:

Dividends Paid
2004 = $0.44
2005 = $1.06
2006 = $1.50
2007 = $2.25

This represents a compound annual growth rate of the dividend of over 70%! This is quite impressive.

During the same time period the share price has gone up about 260% or a CAGR of about 53%! Also very strong.

The stock is currently yielding 3.1%, however they have been known to pay out special dividends as well in the past few years. This is surely not a typical Canadian energy company when it comes to the manner in which they return money to shareholders. Their emphasis on dividends has been unique. It would be hard to argue that this has been one of the best Canadian energy names to hold over the past 3 years.

One share bought in early 2004 would now be yielding 19% on original investment. Not too shabby.....

Tuesday, October 16, 2007

defying cash emergency funds

An often discussed topic in the personal finance blog world, is emergency funds, and whether they are necessary or not. I'd like to start by stating that I believe this is at its core a personal choice, and it really does depend on several factors including your financial knowledge, financial situation, comfort with debt, and life situation. The conventional wisdom that one will read from several trained financial minds is to keep anywhere from 3 months living expenses to 1 year's salary in the form of cash, emergency funds. When I say cash, I mean just that, the paper stuff that sits in a bank and hopefully earns interest of some percentage. Right now interest rates on cash balances being paid to most Canadians on their savings probably falls in the 2.0 - 4.5% range. The higher end is typically sought out by knowledgeable and attentive savers that use alternative institutions such as PC Financial or ING direct to store cash.

Without doing any research on the topic, I would venture to guess that there is a great majority of Canadians that right now are holding emergency funds in one of the big five bank savings accounts which will probably pay you towards the lower end of the 2.0 - 4.5% range. Or perhaps even worse, some Canadians are probably holding significant savings in cash form within chequing accounts and low interest savings accounts that would fall below the 2% lower limit in the range. Your personal definition of risk, also comes into the equation in the 'emergency funds' decision. It is important to remember that risk is not always defined as probability of major loss. There is risk in everything including the risk of the large opportunity cost associated with one's money earning 0.5% per year after taxes.

For our personal situation I am not a believer in emergency funds being held in cash for the following reasons (among others):

1 / My wife and I both have relatively stable full-time jobs with companies who have employed us for greater than one year. My wife's with a successful private company with strong government ties, and I work for a $8 Billion public Canadian corporation.

2/ We own a non-registered investment portfolio consisting of mainly large-cap, stable, Canadian and U.S. equities. The value of this portfolio is greater than 1 year's living expenses.

3/ We live below our means and have a debt: asset ratio of 0.57. We are able to live on one of our salaries alone.

4/ We own a ~$20,000 car, and lease one other

5/ We own significant registered investment portfolios

6/ I have above average financial knowledge and comfort level with debt

7/ We have access to a $35,000 unsecured line of credit at a reasonable interest rate (~ 8%)

For me, each one of the above factors provides some type of advantage in an 'emergency' - type financial situation. With these all taken together, the concept of having an emergency fund seems unnecessary to me. In fact I feel that it would be a shame to have my money growing at a rate barely beating inflation or perhaps declining in value over time, after the impact of inflation and interest tax.

What would I do in an emergency?

Well, it really depends on what type of emergency we are talking about. Generally I would evaluate the situation and adjust my balance sheet accordingly to account for the current impact of the emergency, and/or future impact of the emergency. Using debt would not be my preference, however given certain circumstances where future income would be known, debt might be an attractive option. Liquidating my non-registered investments to protect against the emergency putting us into some type of debt would be painful, but if pressured I could rationalize the sale of one or two of our equities to serve this purpose.

Just off the top of my head I can think of some life situations and environments when one might need a cash emergency fund. These are:

1/ I just started my own business and I have quite a bit of debt.

2/ We are a one-income household with a large mortgage, 2 kids and no investments of any kind.

3/ I work at a company that has been downsizing for years, I have lots of debt, and my wife makes less money than me.

Obviously there are several variations of the above, as well as other situations where a cash emergency fund may be necessary as well....

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Monday, October 15, 2007

~ 6 months of gardening

the moneygardener was born back in late April of 2007. Here is my first post below:

Well..., as a way to express and share my thoughts with others on investing, stocks, personal finance, the market in general, and other financial matters that life throws at us all. I've found myself following a few blogs on this topic lately, and in the process I've realized that it might not be a bad way to communicate with others, while organizing my thoughts and tracking my progress at the same time.We'll see how this goes.....

Well it's been almost six months and I have to say the moneygardener has been a rewarding endeavour so far. Just as I thought above, when I started out, the blog has been a great way to share thoughts with others and document progress in my investing and personal finance matters. I have really enjoyed all of the great feedback that I have received from readers and I thank you all for it. Special thanks to very regular commenters including:Middle Class Millionaire, Four Pillars, nurseb911, Augustabound, Mr.Cheap, Jungleguy, telly, torbjorn, and thicken my wallet. I'm sure that I have forgot someone, but I do appreciate all of you.

I know that there are some readers out there who follow the blog, but have yet to comment. I appreciate all readers and encourage everyone to participate. There are no stupid questions or stupid comments here in the 'garden'.... Whether it is commenting on a post, emailing me about something different, requesting that I post on a topic, or disagreeing with my views; I welcome all feedback from all readers.

I have certainly saved and spent a lot of money in the last six months. I am hoping that I spent most of it on the right stuff that will pay me back and/or grow in value nicely in future months and years. My net worth updates will continue bi-monthly on or around the 15th of the month, and soon I may start to actually post the dollar values. I am hoping that through this blog; the more I share, the more, both the readers and I, will learn from each other.

Thanks for following the moneygardener, and I look forward to continuing to dig, plant, and prune in the backyard of the stock market and personal finance with you!

Thursday, October 11, 2007

where were you august 16th, 2007?

Back in late July I posted here on my blog regarding the value that Canadian banks were beginning to show. Little did I know at the time that they were in for quite a sharp drop for the next two weeks, reaching a crescendo of selling on August 16, 2007. Were you a buyer on August 16th? I was a bit early, as I initiated a position in Bank of Nova Scotia (BNS), which I felt showed the best value at the time, on August 14th at $47.56, as I pointed out in another post.

Let's have a look at the rebound that these banks have experienced since that dark August day:

Royal Bank of Canada (RY) - 10% rebound since Aug.16.
Bank of Montreal (BM) - 7% rebound since Aug.16.
Toronto Dominion Bank (TD) - 14% rebound since Aug.16.
Bank of Nova Scotia (BNS) - 11% rebound since Aug.16.

Not much has changed since August 16th. I still drink my coffee every morning; Brantford recycling still empties my blue box and leaves it in the middle of my driveway every Wednesday. I still hear business news stories about declining U.S. housing activity, and credit gone bad. The weather is starting to get quite a bit cooler in Southern Ontario; but in the meantime 3, if not 4 of these banks have returned, in about 55 calendar days, what would probably please most conservative investors on an annual basis. Not to mention you probably grabbed yourself a pretty attractive yield if you bought on August 16. Timing seems to be everything sometimes...

Wednesday, October 10, 2007

"ad"ded value

Since I hold 16% of my non registered portfolio in Yellow Pages Income Fund (YLO.UN), I am quite pleased with the following announcement which I view a genuinely good news for Yellow Pages Group:

NEW YORK (Reuters) - The Yellow Pages Group, Canada's largest phone book publisher, said on Tuesday said it had a deal with Google Inc. to market its customer advertisements on-line through Google AdWords.
AdWords will allow Yellow Pages customers to be associated with certain keywords so that their adverts will appear beside search results for Google and Google Maps Internet searches.
Montreal-based Yellow Pages said it will be the first Canadian-based reseller of Google AdWords adverts.
"Under the agreement, YPG will be able to provide its approximately 425,000 advertisers an enhanced advertising offering," said Yellow Pages, which publishes more than 340 Yellow Pages and residential phone directories, in addition to operating and Web sites.

Teaming up with dominant online force, Google, in this way is a great value added feature for Yellow Pages to offer advertisers. Google is essentially tapping into Yellow Pages enormous database of advertisers by offering up their AdWords product. Yellow Pages is really acting as a broker for Google AdWords. In a way, they are turning a potential competitor into a partner. In Canada, 86% of Internet users are Google users. This move should bolster Yellow Pages earnings in their online segment, while enabling them to please more customers with diversity of ad coverage.

Since this announcement units of Yellow Pages Income Fund (YLO.UN) which owns 97% of Yellow Pages group are up 1.5%.

On another note, Yellow Pages Group was also named as one of Canada's Top 100 Employers for 2008 in a list published by Maclean's magazine. This was the second consecutive year they received the honour.

As long as Yellow Pages continues to pay me my 8.1% yield in monthly increments I will remain one happy investor.

Wednesday, October 3, 2007

be like the banks?

I tend to think that I know a little bit about investing, why currencies fluctuate, and how to spot value in the stock market. Even given this confidence in my modest investing acumen, I am obviously no match for the superior thinkers that are employed in the mergers and acqusitions departments at large institiutions like the Toronto Dominion Bank (TD), Canadian National Railway (CNR), or the Royal Bank of Canada (RY). It seems to me that those involved in making these high level decisions at these large companies have decided that now seems like as good a time as any to be buying U.S. assets. Recently these three companies and others in Canada have all been involved in takeovers of U.S. companies using our strong Canadian Dollar to buy up Uncle Sam's own.

I've often thought that a great metaphor for one's household expense system might be a corporation's. We all have cash flow as earnings, capital expenditures, debts, and investments that we want to grow or product income, just like corporations do. If Ed Clark from TD Bank thinks now is a good opportunity to buy a 8 Billion dollar U.S. bank, and the high Canadian dollar is at least one of the reasons for doing so, should I be taking a bias to buying U.S. assets as well, to try to grow my capital? To be fair, part of the reason that TD decided to buy Commerce Bancorp (CBH) was probably because of the weakness of the U.S. banking sector currently as a result of the ongoing credit crunch, but it is hard to imagine that the tremendous strength of the Canadian Dollar doesn't have anything to do with this trend. A trend that we may see continue, if you believe a certain MSNBC loudmouth with rolled up sleeves.

Monday, October 1, 2007

who said drugstore stocks were boring...

I'm always a sucker for a good sale. There was a 'SAVE 15%' sale on today the leading U.S. drugstore chain, as Walgreen Co. (WAG) shares were knocked flat on their back when the company announced a 3.8% decrease in 4th quarter earnings. I could not resist the opportunity to double my position within my non-registered portfolio.

Of course I think this is a huge buying opportunity, since even if earnings growth falters in the short term I still believe earnings growth will continue to be double digits long term which will grow my investment nicely. People will continue to choose drugstores over big box stores for their medication and related goods because of location, convenience, and service. Boomers will cause the industry to grow, and although there is strong competition Walgreens is positioned nicely in most markets already.

Reasons for the earnings drop were stated as follows:

"due in part to lower reimbursements on some popular generic drugs and higher expenses (increased store and staff costs)."

This was Walgreen's first year over year profit drop in over a decade. People are speculating that the generic drug problems are partly due to Wal-Mart's new initiative to offer generics at $4. This is sending the entire industry down today as CVS and Rite Aid are down 5% and 4% respectively as of writing this. Walgreen Co. earnings for the total year (2007) were up 16.6%, and sales grew 13.4%.

Not for the faint of heart, I guess, but it is mornings like this where I have to ask myself, 'What has changed?". Is this company instantly worth 15% less today than it was on Friday, or could this be a bit of an overreaction? This was certainly unexpected, and disappointing for Walgreen shareholders, but should I be disappointed as a very long-term investor? I think the answer is no, and on the contrary I should be happy to be able to pick up these shares at such low levels. Combine today's low levels with the current value of the Canadian dollar and maybe, just maybe this could be one of those very rare 'once in a lifetime' opportunities.

As of writing this the shares are still flat on their back at $40.34 down about 15% from Friday's close. This is a company has had such great success and consistency in earnings growth in the past that I believe high expectations were built up in the market. With high expectations comes significant disappointment when stumbles happen. I think that is what were are seeing today.

When a 50 Billion dollar, boring, blue-chip consumer staple stock falls 15% in one day it shows you that anything can happen in the stock market.

I promise this will be my last post, which refers to Walgreen Co. for at least six months...consumer staple stocks are boring...