Wednesday, December 31, 2008

took a helping of Sysco

On December 30th I initiated a stock position within my non-registered portfolio in Sysco Corp. (SYY) at $22.51.

Who's Sysco?
Sysco Corporation is a North American distributor of food and related products primarily to the food service or food-prepared-away-from-home industry. It provides products and related services to over 400,000 customers, including restaurants, health care and educational facilities, lodging establishments and other food service customers. Sysco is the far and away global leader in this area with sales of $38 Billion. If you live on this continent you've likely seen Sysco's trucks driving around as they have the largest private truck fleet in North America (9,000 trucks).

Why Invest In Sysco?

Industry Factors

Sysco is the 800 lb gorilla of the food distribution industry. Due to their long successful operating and relationship history, extensive infrastructure networks, and broad reach, Sysco possesses barriers to entry and an economic moat that is similar to that of Canadian Pacific Railway (CP) or UPS (UPS). As North Americans age and enter retirement, dining out at a nice restaurant with their families is a habit that is unlikely to be sacrificed for any meaningful period of time. Although the restaurant sector is being hurt by these tough economic times, people will again visit restaurants in droves going forward where Sysco derives about 60% of their revenues. Owning Sysco, the supplier, there is no need to speculate on which restaurant chain will succeed.

Consistency - Earnings & Dividend Growth

As reader's know, I am a sucker for a really consistent (boring) company, and Sysco certainly fits the bill. Sysco has posted extremely consistent sales and earnings growth since 1970. For example over the past 10 years Sysco has had their earnings per share decline year over year one time. They've also increased their dividend for 38 consecutive years including a very recent 9% raise in November, 2008. The company also generates very strong return on equity well over 25% most years. Sysco's financial position is solid sporting a debt/equity ratio of about 0.5.

Why Now?

Similar to many other stocks in today's market Sysco is currently trading in uncharted territory valuation-wise. It is dirt cheap compared with where it has traded in the past relative to it's current earnings, sales, and dividend rate. Sysco currently changes hands at a P/E of about 12x. That multiple is nothing short of unprecedented when you consider Sysco's history of trading at an average P/E between 17 and 28x earnings. Same story when you consider their low price to sales and price to book ratio. Sysco yields about 4.3% as of writing this which is also very high and even unheard of relative to its history. They just raised the dividend 9% (after Lehman Brothers failed), and their pay out ratio of earnings is only 45%.

..The next few years could be painful for Sysco if people choose to eat at home in a big way. In some cases though eating away from home is unavoidable, and if one lives in a retirement home, is in hospital or visiting countless other establishments they'll have no choice but to use Sysco's services despite the economy. Regardless people will be back at their favourite restaurants in the future celebrating a graduation, retirement, or simply too lazy to cook.

Dividend Growth Investor profiles Sysco here.

Dividends4Life's take here

Tuesday, December 30, 2008

investing carnival new years edition

As we get ready to welcome in 2009. Snuggle up with a laptop by the fire and browse some of these investing articles:


Dorian Wales presents The Madoff scheme - 4 Valuable Lessons posted at The Personal Financier.

Ray presents Review Of E*Trade Bank High Interest Savings and Checking Accounts posted at Money Blue Book Finance.

FMF presents Employee Stock Purchase Plans: Great Investments posted at Free Money Finance.

Don presents Stock Trading On Margin posted at Beginners Investing Guide.

FIRE Finance presents Investing - The Mistake Of Timing The Market posted at FIRE Finance.

JCL presents How To Succeed In The Face Of Failure And Discouragement posted at The Real Estate Investing Journey.

The Shark Investor presents You Have The Potential To Raise 100 Times More Money Than You Do Now posted at The Shark Investor.

Joanne presents Beginner Investing: Diversify Your Portfolio posted at Beginner Investing.

Don presents Beginners Day Trading Questions And Answers posted at Beginners Investing Guide.

Declan Fallon presents New Lows reach extremes, but this is not necessarily bullish posted at Zignals blog.

Investing School presents 52 Must Read Quotes from Legendary Investor - Warren Buffett posted at Investing School.

Michael Cintolo presents It’s How You Think That Counts posted at The Iconoclast Investor.

Monevator presents How you can enjoy the profits of 2,267 companies around the world for free posted at Monevator.

Intelligent Speculator presents Legislating the CDS market? posted at Intelligent Speculator.

Michael Cohen presents I'm Betting On Oil posted at Stock Investing.

Robert Brus presents Blog posted at The Site Rush Preview.

srini Saripalli presents Information Marketing Business in A Distressed Economy: 5 Predictions posted at Internet Marketing Information Marketing Blog Marketing Business Success.

Dave presents Treasury Bill Pays Investors Nothing posted at Cheapo Groovo.

Sandy Naidu presents Bernard Madoff's Ponzi Scheme posted at FutureNestEgg.

Robert presents A Potential 100% Investment Return In Weeks posted at Ways to Survive Life.
Investing School presents 9 Terrific Investing Websites That is Sure to Suck Up Your Time posted at Investing School.

Intelligent Speculator presents Nov09: Hedge Funds report posted at Intelligent Speculator.

Deposit Accounts presents Investing in a Rocky Economy posted at Deposit Accounts.

Thursday presents Municipal Bonds: Investments With Tax Benefits posted at Wealth Junkies.

Ryan Suenaga presents It’s Cold in November: My Model Portfolio Performance in November, 2008 posted at Uncommon Cents.

Joy presents The Weirdest Story Ever about Trading and Finance posted at Fulfilled Dreams.

Paul Goodwin presents The Year in Verse posted at The Iconoclast Investor.

Declan Fallon presents Stocks for 2009 posted at Zignals blog.

Stock Analysis

Try INO Free! - Get your favorite symbols' Trend Analysis TODAY! Click Here

Surfer Sam presents NEW !! Best Stock Picks of the Decade !! posted at Surfer Sam and Friends.
Ajay presents How to perform stock research using fundamental analysis posted at Finance-Information.

D4L presents Stock Analysis: SUPERVALU INC (SVU) posted at Dividends4Life.

Jae Jun presents Puget Energy Merger Delayed posted at Old School Value.

Steve Alexander presents Quick Take: Manpower (MAN) posted at MagicDiligence - The Best Magic Formula Stocks.

Ripe Trade presents Breakout trade posted at Ripe Trade.

Mr. ToughMoneyLove presents Tools to Analyze Our Retirement Portfolio posted at Go To Retirement.

Ben presents Stock Trading Trends - Follow Stock Trends to Maximize Profits & Limit Losses posted at Stock Trading Success.

Alternative Investments

Helen Trump presents Replace Yourself in 2009 posted at Social Marketing by Michelle MacPhearson.

Helen Trump presents Where to Focus in Your Business posted at Social Marketing by Michelle MacPhearson.

Wealth Accumulation

Investing School presents Adding an Online Savings Account as Part of Your Investment Strategy posted at Investing School.

Ben presents Best Online Savings Accounts posted at Money Smart Life.

Deposit Accounts presents How to Choose a Money Market Account posted at Deposit Accounts.

Shaun Connell presents Financial Happiness: The Real Goal of Financial Planning posted at Free Financial Planning.

Relax presents Let’s talk about money posted at The Wise Curve.

Tushar Mathur presents Staying Afloat during a recession posted at Everything Finance.

One Family's Blog presents Frugal Living - Ten Great Gift Ideas for Frugal Families (Christmas Holiday Shopping Tips) posted at One Family's Blog.

Deposit Accounts presents Will Opening a Deposit Account Affect My Credit Score posted at Money Blog.

Robert Sanders presents Wall Street professionals may need major re-calibration in their lifestyle The Bailout Economy posted at The Bailout Economy.

Michael Haltman presents Bernie Madoff: Who Could (Should) Have Known? posted at The Political and Financial Markets Commentator.

KCLau presents Christmas On A Budget posted at KCLau's Money Tips.

One Family presents Employee Stock Purchase Plan (ESPP) and 401K Retirement Plan Annual Enrollment and Contribution Review posted at One Family's Blog.

Savings Toolbox presents Set Your Children Up With Savings Accounts posted at Savings Toolbox.

DebbieDragon presents Finding Your Growth Engine posted at 7 Millionaires... in Training!.

Bill Spohnholtz presents Best Tax Savings Tip For A Down Market posted at Learn The Stock Market And How to Trade.

kathryn presents Dealing with Financial Disaster posted at Out of Debt Christian.

Pinyo presents CD Ladder Explained posted at Moolanomy.

Real Estate

Joe Manausa presents REAL ESTATE TRENDS WORTH WATCHING Tallahassee Real Estate Blog posted at Tallahassee Real Estate Blog.

Joe Manausa presents What Is A RSS Subscription Tallahassee Real Estate Blog posted at Tallahassee Real Estate Blog.

FIRE Finance presents Renting Versus Owning Costs posted at FIRE Finance.

JCL presents Househunting For Investment Properties posted at The Real Estate Investing Journey.

Value Investing

Stock Pursuit presents Cheap Stocks Selling For Below Net Cash and Net Tangible Book posted at Stock Pursuit.

Dividend Investing

Mike C. presents Are Ratings Great Contrarian Indicators? posted at Stock Investing Tips.


Monday, December 29, 2008

2009, a new financial year

I've always thought that this is a great time period during the year to really have a sharp look at our personal finances and tweak, refresh, and look ahead for the new year. If you have been thinking about getting your financial house in order for some time now, I believe you should act right now. This short time period between Christmas and the new working year is a great time to:
  • Start a budget, review your budget, or alter your budget to fit your goals and needs

We don't strictly follow a budget in the truest sense of the word. For example we are not careful to only spend $120 on groceries every week. What I like budgets for is that I have Excel spit out a number (income minus expected expenses) ($B). This number is the main reason why I run a budget. I then have this number in mind as a measuring stick to determine if we had a good month or not for savings. If we are not coming close to saving $B, then there better be a good reason, or something is wrong with the budget. If we saved $B for the month, then we are on track and are doing well. I also know my budget is accurate when we can save $B without anything unexpected occurring during the month.

Budgets drafted in Excel like this are also handy for:

  • seeing what percentage of your spending is going where
  • determining what percentage of your income you are saving
  • determining what percentage of your income goes toward your mortgage etc.
  • showing the affect going down to one vehicle would have on our savings level

  • Create some sort of financial vision for 2009 and write it down

You should have some rough idea of what you would like to accomplish financially in 2009. Whether you want to use your excess funds to replace your home's windows and also put a new roof on, or you want to significantly bolster your child's education plan throughout the year, you should paint a picture in your mind and on paper. I have not formally written anything down yet, but I know roughly what 2009 will look like for us financially before the year has begun.

Perhaps you could assign a value to what you want to accomplish, "I will save $10,000 cash in 2009" or "I will pay of 20% of my total debt in 2009", whatever it is write it down and it will drive you to work toward achieving your vision. It helps to state your financial vision statements in an affirmative way to solidify your commitment. It is not 'I want to....' it is 'I will.....' or even the stronger 'I have...'. Never base short term visions or goals on a variable that you have no control over like an extra large bonus at work or stock market returns.

If you are unhappy with your financial situation or state of organization, and you have never drafted a budget or set goals or visions for the upcoming year or years, I'd encourage you to do so. You might just gain some confidence in that you at least know where you are headed and you can gauge your progress toward getting there.

Wednesday, December 24, 2008

happy holidays!..and wine too..

I'd like to take this opportunity to thank all of my readers for their tremendous support in 2008, and to wish everyone a Merry Christmas and a Happy New Year. I really hope everyone takes the time to enjoy the holidays with family. the moneygardener will trudge into 2009 with good riddance regards to 2008.

And what better way to enjoy the holidays and forget about your paper losses in the stock market, than with some Australian Red Wines.

Here are some of my favourite Aussie brands under $20 and the pertinent details:

Lindemans - Always reliable for a good bottle of red. Their blends are quite good and their Shiraz is nice as well. The inexpensive companion who never takes a write-down.

JJ. McWilliams - Got introduced to this brand through a bottle of their Cab/Merlot blend. Very fruity, drinkable wine.

WolfBlass - Their Yellow Label Cab. Sauvignon is probably my favourite wine under $20. Anything else they produce always goes down nice with Christmas Dinner. Good celebration wine.

Yellow Tail - I often refer to this as the Coca Cola of wine. Their reds never disappoint but I prefer their Shiraz and Merlot to their Cab. Sauv.

Hardy's - Another reliable and very affordable brand. Stamp Series; Start your Australian Red journey here. The money you save can go into dividend paying stocks.

Black Opal - I'm new to this brand but I've decided that it is worth some further investigation after I tried their Cab./Merlot blend.

Honourable mentions to LongFlat and Jacob's Creek.

The Aussies sure know how to make wine. Any further suggestions?

Tuesday, December 23, 2008

how did I save so much money?

I received an email from a reader recently in response to the post directly below this one, where I described that in 2008 we saved an average of $1,395 per month for our non-registered portfolio while my wife was on maternity leave. The gist of the reader's question was:

How on earth are you able to save so much money?

Well, simply put this blog's advertising revenue is approximately $1,395 per month.... :)

I wish the above were true. In reality my wife and I both pull in modest salaries. The best answer to how we are able to save so much money each month is a detailed description of several of our characteristics and habits which I feel allow us to do so. A simpler, more refined answer is we know how to get rich. It is really as simple as that. Read my "how to get rich, explained" post and that is basically the reason why we are able to save a significant portion of our income. Specifically:
  • The conventional wisdom says that your mortgage and property tax should account for no more than 28% of your gross income. Ours accounts for 14%.
  • The conventional wisdom says that as we age and earn more money we should buy larger houses and new cars. We don't subscribe to these theories whatsoever.
  • The conventional wisdom and human nature tells us to spend money on what we need and what we want before considering what is left as savings. We turn this idea around and make saving the first action.
    Try INO Free! - Get your favorite symbols' Trend Analysis TODAY! Click Here

Saturday, December 20, 2008

4 goals update - end of 2008

About two years ago my wife and I set 4 long-term goals for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I last updated my progress on these goals on June 1, 2008 here. Since 2009 is coming fast and my wife is now back at work, I thought a year end update is due to report our progress on these 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 $1,395 per month for this portfolio (not including these last 10 days or so). This is a tremendous result especially considering my wife has been on maternity leave for the year. I really would have never expected to accomplish this for 2008. It just shows what you can do if you put your mind and commitment to something. I may have to consider revising this $1,000 figure upwards!

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 6.5%. This means that we are being paid 6.5% 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 extremely poor performance of the stock market. The original intention of this goal was to ensure that I was striking a good balance between growth and income, but I am starting to question the usefulness of this goal as this is really hard to quantify and put a range to.

Goal #4 - Grow our portfolio to $175,000 by February, 2014.
Progress - Currently our portfolio is worth $52,097, including some debt. This is the most difficult goal to gauge progress on. Looks like if we are able to save an average of $1,100 per month average (above all debt repayment), and we get an annual investment return of ~10% we'll meet the goal.

Thursday, December 18, 2008

mr.dividend, the third earner

This article originally appeared on The DIV-Net in November of 2008.

It really is a luxury for my wife and I to have a third income earner in our household. This constant cash earner may not bring in a lot of money now but I think he has great potential to grow his earnings going forward.

This third partner in our family income is non other than our non-registered investment portfolio, let's call him "Mr.Dividend". Because Canadian dividends are tax advantaged, and regular employment income comes with a lot of baggage like taxes, pension fund contributions, and employment insurance deductions, Mr.Dividend's income is purer than mine or my wife's income. Mr.Dividend's take home pay currently is probably about $2,500 on gross earnings of around $3,000. In order for my wife or I to make an equivalent net amount we would have to pull in about $4,000 gross.

Here are some of the other characteristics of Mr.Dividend's income that I like:
  • Likely to grow at a much faster rate than our employment income
  • Mr.Dividend is lazy, and he really doesn't do anything
  • His income is very secure; impossible for Mr.Dividend to lose his job
  • I could potentially grow Mr.Dividend's income automatically every time he gets paid by setting up Dividend Re-investment Plans
  • Mr.Dividend earns money while he consumes none of our household resources, and he never complains.
A triple income family is always better than a dual income family. Why not make Mr.Dividend part of your financial future.

Try INO Free! - Get your favorite symbols' Trend Analysis TODAY! Click Here

technical difficulties resolved

My apologies if you have experienced further technical difficulties with the moneygardener.

The blogspot address has now been restored and everything should be back to normal. I attempted to switch to a dot com domain when it appeared that Google had the issue resolved but they failed to redirect blogspot links. Due to this I have decided to revert back to blogspot until Google resolves the problem. Once, again I apologize for any inconvenience this may have caused and I thank you for your support of the moneygardener.

Tuesday, December 16, 2008

dividend re-investment plan (DRIP) example

Getting a DRIP Started

In May of 2006 I bought 40 shares of Royal Bank of Canada (RY) and registered the shares inside a dividend re-investment plan with their transfer agent, Computershare by contacting my broker and having them send the shares there. Computershare sent me the actual share certificate (below) because the moment I registered for the dividend re-investment plan the shares were actually held with Royal Bank as opposed to held with my broker as my representative. Royal Bank uses Computershare to coordinate these services, but technically my 40 shares are now held directly with the company.

How It Works
Each quarter when Royal Bank pays a dividend to their common shareholders, like me, Computershare automatically reinvests that dividend into more common shares at the current trading price. They will even purchase fractional shares as opposed to shares purchased within a synthetic DRIP (with broker), which means that Computershare doesn't need my dividend amount to be sufficient to buy one whole share. Here is what my actual dividend payments have looked like:

Aug. 24, 2006 $14.40 reinvested bought 0.29 shares
Nov. 24, 2006 $16.12 reinvested bought 0.30 shares
Feb. 23, 2006 $16.24 reinvested bought 0.29 shares
May 24, 2007 $18.81 reinvested bought 0.31 shares
Aug 24, 2007 $18.95 reinvested bought 0.35 shares
Nov. 23, 2007 $20.77 reinvested bought 0.41 shares
Feb. 22, 2008 $20.98 reinvested bought 0.42 shares
May 23, 2008 $21.19 reinvested bought 0.42 shares
Aug 22, 2008 $21.40 reinvested bought 0.47 shares
Nov 24, 2008 $21.63 reinvested bought 0.52 shares

As you can see, each quarter the dividend that Royal Bank has paid me has been higher than the previous quarter. The reasons for this are as follows:

  • Royal Bank has increased their dividend during this time frame (parents have more babies)
  • Shares that were purchased with the previous dividend payment generate dividends for the current dividend payment (babies have babies)

Also the amount of shares purchased with each dividend payment is trending up. The reasons for this are as follows:

  • Royal Bank has increased their dividend during this time frame
  • Royal Bank's share price has fluctuated, and has trended down over this period, enabling more shares to be bought with the same $1 of dividend, especially lately

In summary, a weak share price and a rising dividend are the best conditions for the value of your holdings within a DRIP to grow. Even if the dividend rate is constant, a low current share price is beneficial to DRIP investors, as long as the share price is expected to be higher at some point in the future. In my case I plan to hold these Royal Bank of Canada shares for at least 15 years so currently a weak share price is welcome.

Try INO Free! - Get your favorite symbols' Trend Analysis TODAY! Click Here

Monday, December 15, 2008

potato wedges - joint finances

After enjoying and featuring "..Kraft Dinner.." by the colourful blogger, Potato, over at Blessed By The Potato, we thought we'd sign him to a temporary guest column series contract with the moneygardener for an undisclosed sum... This post series promises to be unlike any other consumer reporting/ offbeat commentary you've ever read. John Stossel eat your heart out.... This series will be a change of pace, and we're calling it potato wedges. Enjoy...

Well, I'm married now.

We talked early on about money. We agree on a surprising amount: we both are fairly frugal, and are comfortable with equity investing, we're both responsible and pay bills on time, and can keep (roughly) to a budget.

The one thing I was not expecting after the marriage was that we couldn't figure out the nuts and bolts of actually managing joint accounts. Before, we had recorded all our spending during a month, who paid for what, then would transfer money between us so that we both paid roughly half the household expenses, maintaining always our own individual accounts. I figured that there were a number of approaches to take once we were married: we could continue to split things equally; we could just simply pay for things and not worry about whether it was equal or not, perhaps transferring between our individual accounts if the balances got out of...balance; we could split the monthly costs instead according to who made what, so that our savings/investment accounts went up at about the same rate; or, we could have the higher-income person pay for everything, so that investments are made in the hands of the graduate student lower-tax bracket person. In all of my scenarios, there wasn't an explicit need for a joint account of any sort, and I hadn't really planned on making an extensive use of one.

Wayfare, being a more sentimental person (i.e.: female), was appalled at my down-to-earth practicality, and insisted that a joint account was a must, because we're married, damnit! So any wedding gifts that came in the form of cash or cheques went into the newly-minted joint account (and I wish I could describe with words the look on her face when I suggested we just split the wedding gifts and put them in our existing accounts and just record the wedding-gift-house-downpayment fund balance in a spreadsheet). This was just the beginning though, because that's our joint house savings account is for that purpose only now. It's sentimental and carries with it a certain lingering magic from the wedding (I wonder if PC financial offers bonus interest for magic?). In the face of a looming liquidity crisis, I suggested she just use the money in the joint account to pay her tax installment to the CRA, and re-deposit it when her paycheque arrived.

Whoa. It was a good thing there was halloween chocolate nearby, or I might not be here to blog about the experience.

So as you can plainly see, money is just money to me. But to Wayfare, things can be a bit different.

We still haven't fully figured out exactly how we're going to do this. Right now we're working off the "doesn't matter who pays for what, just let it ride" method, largely because it involves the least amount of work. We know that we don't really want to get a Joint Account for everything -- we don't really want all our paycheques going into some common pool and merging our credit cards and just working from there: we both like our autonomy, and don't want the other person to know what we spend on gifts, etc. Besides, it's all "our money" in the end. We don't really have a model to work from: talking about money is not a big topic for most people, especially the nitty-gritty of how they combine their individual accounts after marriage. We know that both our sets of parents have Joint Accounts (capitalized for emphasis that this is not merely a shared account) and one spouse takes care of all the finances. Since we're both financially savvy though, we both want to keep some measure of control, to keep our fingers in the pie as it were.

Michael James beat me to it this morning with a great quote: "Sharing a bank account feels sort of like sharing a toothbrush to me. It can be done, but you'd have to be in quite a romantic mood to think that sharing a toothbrush is a good idea."