Thursday, June 19, 2008

free stuff

If you are a fan of the free stuff like I am you may like this one. My wife has discovered a great blog called 'Smart Canucks, The First Canadian Deals Blog'. This blog appears to offer the latest links, codes, coupons, and news about all things free in Canada. For example they posted a coupon for a free iced coffee from McDonalds which was valid from 11am to 6pm today only. I picked one up on my way home from work. This may not be a bad blog to keep tabs on by subscribing or bookmarking it.

Wednesday, June 18, 2008

new jersey devils investing

I am often asked by friends, family, and associates if I've noticed the recent performance of stocks like Research in Motion (RIM), Potash Corp. (POT), and Encana (ECA). They would like to know if this is a good time to get involved with stocks like these because they have been rising nicely over the short term. Heck, Canada's benchmark index is at a record high, let's make some money.... I often explain to people who don't read my blog that I am about as exciting an investor as many successful New Jersey Devils teams. Remember when the NHL's New Jersey Devils used to excel every year playing hockey that could be compared to watching paint dry? Let's just say my investment style is tantamount to hockey's 'trap'. Dump it in, don't send anyone in deep, and watch the dividends roll in from the neutral zone! Our goalkeeper is always our MVP.

If you are a long term investor who gets stars in your eyes when you look at charts for the above mentioned stocks, please do yourself a favour and read the latest post at the great blog, Dividend Money, Are dividend investors idiots? This post references the Globe and Mail Article - I may be an idiot, but I'm sticking to my plan, which is along similar lines. Unfortunately I'm a Leafs fan....

Monday, June 16, 2008

Target-ing dividend growth

U.S. general merchandiser Target (TGT) increased their dividend by $0.02 or 14% from $0.14 to $0.16 per share last week. Target's dividend growth history is impressive. Since 1998 Target's dividend has grown at a compounded annual growth rate of 13.5%. Having a quick glance at Target's EPS (earnings per share) history since 1998, I would rate Target as an excellent candidate for a dividend growth investor's portfolio. Target's EPS growth history has been strong and consistent, as it has not decreased in any year over year period for the past 10 years. One share of Target purchased in 1998 would have cost $21, and therefore an investor who bought shares at that time would be garnering a yield of over 3% on their original investment.

Although Target currently yields only 1.2%, they could likely be compared with Walgreen (WAG), as far as past dividend growth and earnings growth goes. TGT and WAG are both low yielding stocks with strong past dividend and earnings growth. They are also both retailers that operate exclusively in the United States. As an investment idea I like Walgreen much better as I believe convenience-based drug retailing has a strong future due mainly to demographics, as well as other trends such as high energy prices, and changing consumer preferences and time constraints.

Target may not be a bad name to consider adding to my watchlist due to their consistent earnings and dividend growth as well as their strong brand, marketing and position in the U.S. marketplace.

Friday, June 13, 2008

Caterpillar is hot

Heavy equipment maker Caterpillar Inc. (CAT) raised its quarterly dividend by 17% this week, from $0.36/share to $0.42/share. CAT has impressively doubled their dividend since 2005, however their dividend growth history has not been as consistent as I would like it to be in order to add this stock to my watch list. For example, from July, 2000 to April, 2004 CAT's dividend grew from $0.170/share to $0.185/share, growth of a measly 2% per year. CAT's EPS (earnings per share) were actually higher in 1998 vs. 2003.

Obviously CAT is a cyclical company who benefits from large scale construction and mining activity but can be hit hard when the cycle turns and activity slows down. Overall I think CAT is a great company and a great brand, however I view the business model as not consistent enough for my long term dividend growth portfolio. The stock has had a massive run up since 2002 as their earnings have increased nicely. CAT currently yields about 1.8%.

Wednesday, June 11, 2008

top 5 stock picks - 1 year update

About one year ago I selected 5 stocks that I believed were undervalued at that time. Just for fun, I update the performance of these stocks vs. comparable benchmarks. Here is the 1 year update:

Manulife Financial -1.4%% vs. / Canadian Financials ETF (XDV) -13.2%
Walgreen -20.2% / Vanguard Consumer Staple ETF (VDC) +0.8%
FedEx -20.3% / Dow Jones US Transport Index (.DJUSTS) - 8.1%
Lowes - 28.1% / Vanguard Consumer Discretionary ETF (VCR) - 23.2%
Johnson & Johnson +4.7% / U.S. Healthcare ETF (IYH) -12.4%

Overall my 5 stocks had an average return of -13% over the past year, while their benchmarks had an average return of -11%. Well, I'm trailing the indexes by 2 solid points after one year. The poor performance of the markets continue to show through as 8 of the 10 securities are down over the year period.

Tuesday, June 10, 2008

one up the moneygardener

Like any of the stocks that I hold? Want a better entry point than I had? The following dividend stocks, which I happen to currently hold, can be bought cheaper right now than at most times in the past few years. I believe they're all great buys at today's prices.

Bank of America (BAC) $30.00 8.5% dividend yield
We are all well aware of the trials and tribulations of the U.S. banking sector due to the subprime mess. Whether a dividend cut is in the offing or not, might not matter. If BAC cuts their dividend by 50%, you are still receiving a respectable 4.25% yield on today's price. Contrary to current sentiment the U.S. economy will survive and people will eventually buy homes and seek loans again. When they do, BAC is a well positioned, dominant lender.

Reitmans Canada (RET.A) $15.70 4.6% dividend yield
Earnings for this retailer came in flat last quarter as sales fell. Reitmans operates banners that span demographics and they're extremely well located. Retailing clothing can be a fickle business and can be hurt by odd weather, but RET.A has proven in the past that they can provide what Canadian consumers want and they know how to grow earnings. They're also paying you 4.6% to wait...

General Electric (GE) $30.20 4.1% dividend yield
Emerging markets, alternative energy, and ageing and new infrastructure work.

The Clorox Company (CLX) $53.50 3.4% dividend yield
Just raised their dividend by 15%. Innovative new product lines and industry leading brands.

Friday, June 6, 2008

UPS & the flat world

Always the value investor, always the contrarian......"Buy stocks when there is blood in the streets", "You want to be buying stocks when everyone else is selling'. Well today was one of those days when the stock market was all of a sudden a bad idea for many. I was actually down about $900 today! Good day to keep the eyes on the old income from investments chart. It didn't budge one dollar.

One stock that I always keep an eye on, but never seems to get cheap enough for my liking is United Parcel Service (UPS). I wanted to mention UPS today for 2 reasons, one that I found an article today that sums up what I'll call the 'kicker' on why I like UPS going forward. Another way to put this is that I see this trend as the catalyst for the growth of UPS in the years to come. One word: LOGISTICS. Basically they are doing supply chain and operations management for other firms. I first read about this trend in the book 'The World is Flat' by Thomas L. Friedman. I see this move by UPS as pure genius and a service that will pay huge dividends as the global economy evolves, and only gets more attractive as energy prices rise. If you think UPS is simply a package delivery firm, you are dead wrong. Needless to say that I wouldn't care much about UPS unless they were a solid raiser of dividends and a consistent grower of earnings, with a huge moat and brand - which they are.

Another reason I brought up UPS today goes back to the opening paragraph of this post. When do you want to be thinking about buying a company that ships packages for profit? Perhaps a good time would be when oil touches $138/barrel and every economist and his dog sees black gold going to $200/barrel. It seems that these days that the biggest bull on oil wins.

More on 'Brown' in posts to come....

Wednesday, June 4, 2008

shrink yourself or grow your net worth

I'd be willing to bet that at some time in most people's lives they have set out to accomplish one or both of the following:
Lose Weight, Eat Better, & Get Healthier (Shrink Yourself)
Save More Money & Invest It For The Future (Grow Your Net Worth)

These two popular 'worthy' pursuits of self improvement don't actually have a lot in common. OK, they both require discipline, but the similarities end there.
  • Saving Money and Investing it is Passive

Spending less money takes less effort than spending more money. It might be a lot of work to figure out different ways to trim your budget, but buying a house well below your bank pre-approval amount, and avoiding large frivolous purchases is easy. One of the keys of investing for the long term is sitting on your hands. Tinkering with a portfolio and trading in and out of different stocks and different instruments will often take a large percentage out of your return. Spend less than you earn, invest the difference, and ignore it for several sweat.

  • Working Out Regularly and Choosing Healthier Foods is as Active As It Gets

Getting active and/or getting to the gym regularly takes a great deal of effort. Sticking to a workout regimen is very difficult. Changing your diet in order to take in less calories and more healthy foods takes some thought, adjustment, and effort. Lot's of sweat and activity here...

If you are reading this blog you might find the former much easier than the latter, as I do, but is it really easier to most? How do personality types and values affect one's successes in these areas?

Tuesday, June 3, 2008

the most popular dividend in America

In my short history following stocks and participating in the stock market, I can't remember a set of dividends that was so anticipated, and so questioned as the upcoming Bank of America (BAC) pay outs. In November, 2007 when I purchased Bank of America shares I asked the question, Will Bank of America continue to raise its dividend year after year, and survive this credit crunch just as they have survived every financial crises in the past. At the time BAC was yielding 5.7% and I was betting that they would not cut their dividend, and that they would survive the credit crunch. Needless to say that even though I purchased BAC when the Loonie was trading around $1.07 vs. the Greenback, I am currently underwater on my BAC position.

Fast forward to today where BAC yields a whopping 7.8% and the CEO, Ken Lewis recently made the following comments:
Chief Executive Officer Ken Lewis said on Monday the second-largest U.S. bank has no plans to cut its dividend. "You have to do what is in the best interest of the company, but we see no reason to cut the dividend," Lewis said "

Should we believe Ken? Considering all the dividend payments in the U.S. banking sector that have fallen by the wayside, I'm not sure. WaMu, Citi, and Wachovia among others, have all cut their dividend since November, 2007. It does seem that Ken left some ambiguity in his statement. He sees no reason to cut right now, but he may see a reason in the future; if he does he'll do what is in the best interest of the company.

The next few dividend payments that BAC pays out will tell the story. If BAC raises their dividend within the next few payments I am certain that several dividend investors will be adding to their positions or getting in for the first time, as these yield levels are hard to pass up for a bank with such a solid history of dividend growth. One would have to assume that because of where BAC is trading today (7.8% yield), the market is pricing in a dividend cut.

Sunday, June 1, 2008

4 goals progress report

Last year I set 4 goals for our non-registered portfolio. Since June is now upon us, which marks about 6 months from the time I posted the goals, I'd like to update our progress toward these portfolio goals.

Goal #1 - Save an average of $1,000 per month to be added to this portfolio

Progress - For 2008 we've saved an average of $2,559 per month. This is a tremendous result especially considering my wife has been on maternity leave for the year. I expect this average figure to be peaked out right now and decline for the balance of 2008, as the month of April included some one time funds that won't be repeated this year.

Goal #2 - Keep our 'Buy Fee' under 2.0%

Progress - Currently our Buy Fee sits at 1.9%. This is something that is important to me, as I know the impact fees can have in investing. This fee should creep down as the years go by. I would expect the fee to get under 1.0% someday.

Goal #3 - Keep our portfolio dividend yield between 2.0% and 4.0%.

Progress - Currently our portfolio yield is 4.3%. This means that we are being paid 4.3% of the money we have invested annually. We are not meeting our goal in this area. The reasons for this are that a part of our portfolio was purchased to provide some additional income for my wife's maternity leave, and this section is made up of high yielding income trusts. The other reason for this is the poor performance of the stock market. If not for the recent weakness in the stock market our yield would likely sit just below 4.0%.

Goal #4 - Grow our portfolio to $175,000 by February, 2014.

Progress - Currently our portfolio is worth $45,875. This is the most difficult goal to gauge progress on. Looks like if we are able to save an average of $1,200 per month and we get an annual investment return of ~8% we'll meet the goal.