Thursday, January 31, 2008

hikes from my watchlist

Three stocks that are on my watchlist, but that I do not hold, just raised their quarterly dividends.

  • TransCanada Corp. (TRP) - hiked to $0.36, a raise of 6%
  • United Parcel Service (UPS) - hiked to $0.45, a raise of 7%
  • Canadian National Railway (CNR) - hiked to $0.23, a raise of 10%

Two of these companies are extremely economically sensitive, while one is certainly not.

Remember, you can always see some of the latest dividend increases in Canadian and U.S. markets by clicking on the 'see latest hikes' link on the right panel of themoneygardener.

Wednesday, January 30, 2008

my favourite graph

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.

Current Total Annual Income From Investments Per Year = $1,523
Current Total Annual Income From Investments Per Month = $126.91
Current Total Annual Income From Investments Per Day = $4.17

One Year Income From Investments Growth Rate = 390%

The graph is plotted at the end of each month.

Tuesday, January 29, 2008

diaper mayhem

Expenses that I always think of as key when trying to save money are those that are repeating. Those little repeating purchases that never end, like gasoline, dishwasher detergent, and even toilet paper, can really add up over time and not allow you to keep the money you want to save, invest, or spend on more worthwhile pursuits. They may at times seems trivial, but these small repeating expenses can pull you down like an anchor when you are trying to move ahead financially.

Becoming a parent, the first new repeatable expense that really kicks you in the a$$ (pardon the pun) is diapers.

Now keep in mind, I have been a parent for less than two weeks, so I am speaking from my very limited personal experience. Here is how I see the situation so far:

The Contenders:
Huggies - by Kimberly Clark (KMB)
Pampers - by Procter & Gamble (PG)
Teddy's - Loblaws Private Label (L)
Kirkland Signature - Costco Private Label (COST)
Parent's Choice - Wal-Mart Private Label (WMT)

Our Preference:
It did not take us long when we were filtering through the diapers we were given by friends before our son was born, to realize that Pampers are the best. I am not sure if they are just a better product, or if this is unique to a baby's shape, but we have found that Pampers not only fit better but work better. The Pampers advantage over Huggies is so pronounced that I am afraid I do not want Huggies no matter what the price.

I've heard negative reviews of each of the above brands of diapers with the exception of Pampers.

The Problems:
I fail to understand why Pampers size 1 diapers (which are made for babies 8lb - 14lb) are not available in bulk sizes. As far as I can tell the largest quantity these are available in is about 90. Considering we probably go through about 8 - 10 diapers per day, I would welcome a 256 pack.

I have heard from several sources that Kirkland Signature from Costco are actually Huggies private label which makes a lot of sense since Costco only sells Huggies, aside from these. My fair Costco, you have disappointed me for the first time...I forgive you..

The Numbers:
Kirkland Signature at Costco bulk pack - $0.15 / each --------- $1.50 per day
Pampers at Zehrs (Loblaws) on sale = $0.17 / each
Pampers at Zehrs (Loblaws) = $0.19 / each
Pampers at Wal-Mart - $0.27 / each ----------------------- $2.70 per day
Teddies at Zehrs (Loblaws) = Not Available
Parents Choice at Wal-Mart = Not Available

As you can see, diaper costs can really add up. I imagine that if I just blindly purchased my favourite diapers from any store, at any quantity, I could easily end up spending about $5.00 / day, or $1,825 annually on diapers.

The Conclusion:
I'll admit it - I am a slave to the Pampers brand, I want to know where I can buy these little puppies the cheapest per diaper. So far the winner is Zehrs, which is surprising. Any suggestions?

I welcome much participation in the comments section here by fellow diaper geeks...I know you're out there...

Monday, January 28, 2008

going global

Lately I have been hearing whisperings from the business news media with respect to the idea that the global economy might be slowing. We've all heard the ongoing chatter about the U.S. economy slowing, and whether or not it is going into recession, but now the talk seems to be drifting to global themes. Perhaps the U.S. economy trouble will cause the global economy to slow. I'm not sure what will happen, but I'm pretty sure someone forgot to tell heavy equipment maker Caterpillar (CAT), and conglomerate General Electric (GE). Both of these enormous global companies announced earnings recently and these were the results and forecasts...

GE - profit up 15%, 2008 earnings projected to rise at least 10%
CAT - profit up 11%, 2008 earnings projected to rise 5% - 15%

It is interesting to see that for the first time GE's revenue scales tipped to international, accounting for more than domestic dollars did. Also CAT explained that booming overseas demand made up for slowing U.S. sales. These two companies are really taking advantage of global growth to keep the earnings growth chugging along despite U.S. weakness. There are probably countless other examples, (Honeywell (HON) & Schlumberger (SLB) being two) of companies where this compensation is occurring, and we should see more to come as earnings come in.

Saturday, January 26, 2008

goal # 1 progress report

In a post back in November, 2007 I disclosed # 1 of our 4 goals for our non-registered portfolio.
Goal # 1 is : Save an average of $1,000 / month, to be added to this portfolio.

I thought I'd provide an update on our progress towards this goal since we are now a solid 2 months into my wife's year long maternity leave, which caused our employment income to decrease dramatically. Here are the results so far:
--------- December, 2007 savings = $1,351 -----------------
----------- January, 2008 savings = $1,518 -----------------

This is obviously a great result as these two months combined provide a buffer where we could save $130 for one month and still meet our goal. I am seeing some clouds on the horizon though, as we need to purchase a new set of tires for our car next month which will eat up a good chunk of potential savings. I will post soon with an updated Household Savings Rate (HSR), based on our new income and recent savings levels.

Friday, January 25, 2008

10 secrets for my subscribers

the moneygardener has reached 100 subscribers!

Subscribers are people who are subscribed to my blog through some sort of syndicated reader which makes it more convenient to read multiple blogs regularly. Thanks to all that have subscribed to this blog feed, and in honour of the 100 of are the top 10 secrets I hold true about my investing and personal finance style that may seem counter intuitive, and that you'll rarely hear in the mainstream media. That's one secret for each 10 subscribers!
  1. The Canadian Economy does not like me.
  2. I am praying for a stock market Crash.
  3. When investing I like Brands, when shopping I like Private Labels.
  4. I'd rather take risks to aim for a Higher Return long term, than get a guaranteed risk-free return now.
  5. My ideal holding period for my investments is Forever.
  6. Dividend Increases make my day.
  7. I hope stocks Underperform in the short to mid term.
  8. I like Boring Stocks, operating in really boring industries with relatively predictable cash flow.
  9. I'm happier if my dividends go up and my stocks stay flat, rather than if my dividends stay flat and my stocks go up.
  10. I'd like to Benefit from Older People before I become one.

Thursday, January 24, 2008

my investing philosophy

I am of the opinion that in order to be successful every long term investor requires some type of 'investing philosophy'. Simply put, these are statements that define my behaviour as an investor for the long term. This philosophy is the backbone my strategy as a whole.

It is especially important to have some investing rules to live by when the markets are as volatile as they have been lately. With the loud business media, falling markets, whining analysts, and frightened friends and colleagues all ringing in your ears - these statements will be your enduring battle cry that pushes you forward.

Here is my philosophy which can also be found on the right panel of this blog...

1. I am foremost a buyer of securities and seldom a seller, with a stalwart view to the long term.
2. I will only buy stocks that I would average down on. 'Average Down' - Means I will buy the same stock at a lower value to increase my holding and at the same time lower my adjusted cost based on the holding.
3. I will be patient, and disciplined, and always stick to my system.
4. I never worry or panic, and I always remember my initial reason for purchasing the stock in the first place.
5. Dividends are half the journey; meaning that a large chunk of total returns will come from dividends. It is also important to remember that dividends are always more stable than their underlying share values, and that the growth of dividends over the long term has a powerful affect.

I refer back to these statements sometimes to ensure I am on staying on the right track. Notice how there are no real specifics here, however the generalities really lend themselves to guide a certain mode of actions. Emotions can often crop up in an investor which one did not realize was present. These emotions can often lead to reckless actions or actions that take you away from your philosophy and therefore away from your goals. I find that having an investing philosophy in writing like this helps you combat these emotions, and aids you in being a 'solid Pine tree' among a plantation of withering deciduous shrubs and wavering annual grasses.

Wednesday, January 23, 2008

going out of business sale

Every now and again a stock gets so cheap that you have to scratch your head. I realize that there are two sides to every trade, and for every buyer there is a willing seller, but who was selling shares of Canadian clothing retailer Reitmans Ltd. (RET.A) today around $15.50? I don't believe Reitmans is going out of business, yet it seems the market is holding a 'going out of business sale' on the stock. Unless someone out there knows something that I don't know, which I hope is not possible, then in my opinion this is absurd.

My view on Reitmans here.

The price the market was asking for shares of Reitmans today was too attractive to pass up. I gobbled some up at $15.57. At this price they were trading under 11x earnings and yielding over 4.6%. For a company with return on equity and assets north of 18%, no debt, and a solid history of earnings and dividend growth this is the utter definition of cheap. My discounted cash flow model indicates that at $15.50 the market is pricing 3 - 4% earnings growth for the next 10 years from Reitmans. It felt good to add those new dividends into my annual income from investments flow. I'm always a sucker for a good sale, especially one that pays fat dividends.

With this purchase Reitmans now makes up about 6% of my portfolio. I'm now 15% weighted in consumer products.

Tuesday, January 22, 2008

talking the dividend talk

"We have not changed our philosophy on the dividend, and we are proud of our record of 30 years of annual increases in the common share dividend."

This is an approximate quote from Bank of America (BAC) CEO Ken Lewis on the company's fourth quarter conference call this morning where they announced a profit drop of 95% in the quarter. Apparently in maintaining appropriate capital ratios going forward Lewis may choose to pare back share repurchases, raise capital, etc.; he seemed to indicate that the dividend is either safe or is regarded as sacred to the company's plans. Lewis also projected 2008 profit to be well above $4/share, whereas analysts expect $4.33. 'Well above' $4 per share in profit is a nice increase on 2007's EPS which is now finalized at $3.30/share. Lewis did mention that this is all barring 'a new market shock'.

While this can not be misconstrued as 100% assurance that Bank of America will not cut their dividend, the type of language and emphasis Lewis used has me taking notice. Being a dividend growth investor for the long term, I get really interested when a great company with temporary problems like BAC is yielding 6.8%, and is confident enough to put priority on their long term dividend growth philosophy. This statement tips me off that BAC is serious about maintaining their dividend and will use other means necessary to maintain capital ratios.

Based on this positive dividend and earnings growth guidance, I may add to my position in the coming weeks.

Monday, January 21, 2008

the bear approaches

Wow, what a week to take off from posting!

The markets are now in what certainly can be described as 'free-fall'. Whether capitulation has occurred yet remains to be seen, but one has to assume that there are some investors out there that have had enough and have bailed out of stocks all together for the time being. Looking at the charts for many of the main indices and some of the stocks that I follow indicates that we are in dangerous territory. In most cases resistance points have been blown through, and values are dropping like stones. Here are some examples:

XDV (Canadian Dividend Payers ETF) broke down below 2006 lows, and is down 8.3% in the last week.
IGM Financial (IGM) broke down to 2006 lows, and is down 8.2% in the last week.
The S&P 500 Index broke down below 2007 lows, and is down 5.4% in the last week.
Yellow Pages Income Fund (YLO.UN) broke down to 2004 levels, and is currently yielding 9.1%.

These are starting to look like the type of market conditions which I have prepared for psychologically by education myself and learning the mechanics of dividend growth investing. Seeing the markets really take a turn like this might hurt in the short term, however just as I described in my fear the bear post, long term this pain should turn into pleasure.

In order to realize my long term goals I will:

1. Stick to my strategy of buying quality, dividend growing stocks when I deem them to be cheap. (My problem now is that I don't have enough cash to buy what I want)

2. Accumulate cash and deploy it into stocks that fit the bill, no matter where the market goes.

3. Watch my annual dividend stream grow month after month and look to that income stream as one of the factors that motivates me to stick to my knitting.

4. Take solace in the fact that I can now buy more dividends for each dollar I deploy than I could at any time in my investing career.

Too many cheap stocks, too little money. I will have to be selective here and look for deep value in quality names with likely dividend and earnings growth despite the current conditions. If I can concentrate on dividends and dividend growth, long term things should fall into place and I will be rewarded.