Friday, April 30, 2010

weird distribution increase at canadian oil sands

The largest owner involved in the Syncrude Oil Sands Project, Canadian Oil Sands Trust (COS.UN) has increased their distributions by 43% to $0.50 quarterly per unit. Higher oil prices have benefited the company in a large way as oil has rebounded since the financial crisis
($43 per barrel - $79 per barrel)

The kicker, and what makes this a weird increase, is that the company is outright stating that the distribution level is probably not sustainable and part of the reason they raised it is to maximize their tax position going into conversion into a corporation for 2011. During 2010 the trust is planning to pay out more in distributions than cash from operations less capital expenditures. Go figure...

Investors in this trust quickly need to get used to changes in dividend levels as the company has historically just adjusted the payout with rising or falling crude prices.

Thursday, April 29, 2010

J&J; dividend rises & shares should be bought

Ho hum...Johnson & Johnson (JNJ) has increased it's dividend for 2010 by 10.2%. The stock has essentially gone nowhere over the past 8 years - since 2002. However:

Earnings per share have doubled over this period.

Dividends per share have tripled over this period.

J&J used to trade at a P/E multiple of 26x back in 2002 and now trades close to 13x. Net profit margins are actually higher now than they were in 2002, and return on equity has been fairly flat in the mid to high twenties. The company's debt position has grown slightly since 2002, however it sits at a very manageable level currently.

Pharmaceuticals are a tricky business as drugs come off patent and new drugs are hard to come by but J&J is only about 40% pharma. Consumer healthcare and medical devices provide more stable earnings to bolster the company year after year. The stock looks attractive right now at historic low P/Es.

Wednesday, April 28, 2010

personal finance activities

Like any other family our personal finances are under a constant state of flux. We are in the process of or have recently completed the following changes to our financial situation:

1. Paid off a 4 year old vehicle in full. We ended up saving some interest on this open loan.
I was just sick of this payment and I felt that it would be nice to be payment free for my wife's maternity leave.

2. Renewing our mortgage; choosing a variable rate, changing our amortization to 35 years & lumping our HELOC balance into our first mortgage.
Going variable was an easy choice due to the current rate options and my view on the economy and Canadian rates going forward. Increasing the amortization just means that our mortgage is manageable and I'd prefer to put it on the back burner and enjoy lower rates during this period. The money not deployed here will be invested. The HELOC was lumped in to get a better interest rate on the HELOC portion.

3. Opening a second RESP with TD e-funds for our second son.
I've been very pleased with TD's online portal and the fund fees are hard to beat. I'll continue to focus on using the $200 per month UCCB as the base to fund the RESPs. We will add aditional money when appropriate to take advantage of the full grant.

Wednesday, April 21, 2010

Procter & Gamble pays more

Consumer products giant, and often misspelled, Procter & Gamble (PG) has raised it's dividend by 9.5%.

Here is a glance at Procter's recent dividend history:
2007 = $1.36
2008 = $1.55
2009 = $1.72
2010 = $1.89 (EST)

This represents a compound annual growth rate of the dividend of almost 12%. Industry leading firms with iconic brands that raise their dividends annually can really pay off if you hold them for the long term.

Here is a brief list of other companies that fit this bill and would be worth having a look at:

McDonalds (MCD)
Johnson & Johnson (JNJ)
Diageo (DEO)
Intel (INTC)
Microsoft (MSFT)
Pepsico (PEP)
Coca Cola (KO)
Clorox (CLX)
Colgate Palmolive (CL)
3M (MMM)
Kimberly Clark (KMB)

Thursday, April 1, 2010

banks have finger on dividend button

Canadian bank CEOs have been going out of their way in the last few weeks to hint at upcoming dividend increases. The top brass at Royal Bank of Canada (RY), National Bank of Canada (NA), and even high pay out ratio, Bank of Montreal (BMO) have been expressing their thoughts on dividend raises lately. All three CEO's have essentially hinted at dividend raises in the near future. While regulation is holding them back a bit I am looking forward to the resumption of dividend growth in Canadian banks very soon. These canuck banks are overcapitalized! Share the wealth...

Here are the current dividend yields:

Royal = 3.4%
National = 4.0%
BMO = 4.5%
TD = 3.2%*
Bank of Nova Scotia = 3.9%
CIBC = 4.7%

*TD is my favourite bank and they make up the greatest portion of my portfolio (about 12%). It is interesting to note that they have actually trademarked the word 'WOW' in the US. They are very customer service focused in Canada and the US. The stock has given me a return on investment of over 39% including dividends since April of 2008.

Friday, March 26, 2010

dividend income rises to a record

We've likely all suffered dividend cuts in our portfolio and and some companies that have been consistent dividend raisers over the years have frozen dividend payments since early 2008. Recently our dividend income has finally gone back into record territory. The funny thing is that the record just eclipsed the amount of dividend income we were receiving way back in December of 2008. At that time when the market was plunging our portfolio was yielding a whopping 6.2%. I guess it was primed for a drop in income just like a high yielding stock.

Fast forward to today where our portfolio is yielding 4.1% and has grown considerably from 2008. We've endured dividend cuts from Manulife Financial (MFC), General Electric (GE), Yellow Pages Income Fund (YLO.UN), Husky Energy (HSE), and Bank of America (BAC) all of which I still hold and expect great things from in the future. Aside from income trust conversions from Yellow Pages and Canadian Oil Sands I don't expect any more negative dividend action over the next year or two so I look forward to really starting to grow our dividend income through purchases and dividend hikes.

doubled Canadian Oil Sands position

Yesterday I doubled my position in Canadian Oil Sands Trust (COS.UN).

To reiterate my reasons for purchase:
  • looking to increase exposure to resources in this portfolio
  • good way to get paid on the fate of oil with large potential capital appreciation in the future
  • distributions (interest income) will become dividends next year and they have large tax pools to offset some tax
  • well positioned company in a politically sound country
  • I believe oil prices will be strong for the next 20 years, China will be a good customer
  • Potential buyers should crop up over the years
  • Will add to position from time to time when it looks attractive for the long term

Saturday, March 20, 2010

bullish dividends

"If 'buy & hold' is dead, then I am the embalming fluid"

So is buy & hold still dead? Lil' Wayne and I never thought so.

The S&P 500 is up 53% over the past year...

Dividends are being raised all over the place by firms like Coke (KO), Wal-Mart (WMT), Pepsico (PEP), Rogers (RCI.B), Abbott (ABT), and the most bullish of all..........HOME DEPOT (HD).

Why GE's Dividend Increase Matters (please note GE had not raised it's dividend yet)

The patience that all of us long term investors have exhibited over the past 2 years is really starting to pay off. Buying during the depths of the financial crisis is looking more and more like a wise decision.

Tuesday, March 16, 2010

simplest ways to ensure financial difficulty your entire life

Classic moneygardener; Revisiting an old post from September 12, 2007.....

List compiled with inspiration from young, (age 25 - 35), friends and relatives (ie they helped me compile this list without realizing they did so)

1. Buy a vehicle without looking at total cost of ownership (financing, gas, insurance,maintenance)

2. Buy a home for your maximum lender pre-approval amount.

3. Do not start an RRSP because you have debts to pay off.

4. Do not make proper (higher interest to lower interest) debt repayment a priority.

5. Maintain a short-term view of your finances.

6. Fail to coherently plan finances around life events.

7. Fail to work as a team with your partner when it comes to your household finances.

8. Fail to realize that how you spend and manage money matters more than how much money you make.

Monday, March 15, 2010

net worth update March '10

It's time to report my bimonthly net worth. I report my net worth on the moneygardener or around the 15th of May, July, September, November, January, and March.

Net worth results for the 2 Months Ended March 15, 2010:

  • Debt/Asset ratio dropped to 0.44 from 0.46 (record low)
  • Net Worth gained 6.7% (record high)
  • Total Assets rose 3.2% (record high)
  • Total Liabilities dropped by 0.9%
  • House Value/Total Assets fell to 60.6% (record low)
  • Non-Registered Portfolio grew 5.7% (record high)

Another strong gain in net worth and we are looking good in all categories. Records were set across the board with the exception of our liabilities where we still above early 2009 levels. We're curbing expenses lately as we deal with less employment income. We are also hoping to continue to save money this year and we're determined to find ways to get it done as we reduce fixed costs and consider more frugal options.