Tuesday, December 31, 2013

2013 Investment Goals Updated at Year End

As 2013 comes to an end, it's time to look back and see how I fared against the goals I set out for my portfolio at the start of the year.

1. Get Rid of Non-Dividend Growers
I'm very happy with the progress I made on this goal. Gone are non-dividend growers such as Power Financial and Transalta. That said, as we start a new year, there's a couple companies I have to keep an eye on (i.e. Western Union and Intel) to ensure they re-start policies to raise dividends. After all, being a dividend growth investor requires companies in my portfolio to actually raise their distributions.

2. Increase my Dividend Income and Total Portfolio Value by 25%
In 2012, I managed to increase dividend income by 45% while increasing my total portfolio value by 34%.  With less proceeds to invest in my portfolio in 2013, I still managed to achieve both goals, increasing dividend income by 37% while increasing my portfolio value by 38%. It helped that the North American markets were up nicely YoY, and the raise in the USD compared to CAD also benefited my portfolio value.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
In 2013, my non-Canadian (all US stocks at this point) holdings increased from 20% to 28%. I had some very nice gains in US stocks, the rise of the USD vs the CAD helped, and I also sold some Canadian stocks and invested in US companies. With the exception of one USD company I own (Realty Income Corporation), I aim to buy US companies who sell internationally in order to get worldwide diversification in my portfolio.

I had another soft goal of posting once a week in 2013. Sadly, with 44 posts, I didn't meet this goal. Life, work, and relationships got in the way....and I don't regret that at all.

Here's wishing everyone a healthy and prosperous 2014!

Saturday, November 23, 2013

Selling Walgreens and Buying Realty Income Corp?

 I held on to half of my investment in Walgreens (“WAG”) after selling shares in the fall. As the share price keeps climbing, and is now near a 52-week high, the dividend yield is only 2.1%. The yield seems ridiculously low, especially given they just boosted their dividend by 15% in August.

On the other hand, Realty Income Corporation (“O”) is trading near its 52-week low, yielding a tantalizing 5.6%. They have grown their dividend at about 5% per year over the past 5 years. I’m impressed with their management, tenant list, and the potential upside of rent increases in the US as the economic recovery continues.

I haven’t decided if I’ll pull the trigger and sell my shares of WAG to up my investment in Realty Income Corp, but it’s very tempting. 

Thursday, November 14, 2013

Christmas in November?

After patiently sitting on a chunk of cash in my RRSP portfolio, eagerly waiting for a market over-reaction to a negative earnings report, and hoping it would happen to a US dividend grower, I was very happy to read about Cisco Systems (“CSCO”) reporting Q3 results that fell (barely) short of analyst expectations. The fact management also revised their full year estimates downwards (ever so slightly), made my morning even brighter. Cisco has been on my watch-list for over a year, and I have been waiting for a good entry point into this market leader that gushes cash. I gladly placed a buy order this morning, bought shares at a bargain basement price, and welcomed a new additional to my RRSP.

Why do I like Cisco so much?
-          Entry point provided me yield of 3.3%
-          The company’s relatively low payout ratio 30-35%
-          Recently announced plans to increase their share buyback program
-          A history of revenue, earnings, and dividend growth (from $0.12/share to $0.68 in the last 4 years)
-          A strong balance sheet (more cash than debt), great free cashflow generation, and strong margins (gross margin =~ 60%)
-          A world leader in their segments which helps me diversify globally
-          Issuer ratings of A+/Stable, A1/Stable

I could go on and on. I’m so happy to have this great company as part of my investment portfolio. I feel like Christmas came early this year. 

Wednesday, November 13, 2013

Bought: Enbridge Income Fund ("ENF")

It's a good day to be a dividend growth investor. Despite a recent announcement that they were increasing their distribution by 3%, Enbridge Income Fund ("ENF") was down this morning, allowing me to double my position. I used to the proceeds of my sale of SNC to invest in a company paying a 6% dividend yield, and a history of growing that yield. Now I won't feel so bad about paying my monthly gas bill, knowing my shares in Enbridge Inc. (which usually raises their dividend in December), ENF, and Inter Pipeline Ltd (recently boosted its dividend by 13%) all pay me an increasing distribution each year just for holding their stock.

Saturday, November 9, 2013

Sold: SNC-Lavalin

I sold the last stock in my portfolio that I was no longer comfortable with: SNC-Lavalin ("SNC"). When SNC's CEO indicated the company would consider selling their interest in Altalink earlier this week, the shares surged enough for me to get out of the position with a small gain. After waiting out SNC's ethical issues of the last couple years, watching them only raise their dividend at a snail's pace, and then warn how their 2013 figures would likely disappoint on the downside, I was extremely happy to get rid of my investment in this company.

The plan is to the put the proceeds into shares of the Enbridge Income Fund ("ENF"). ENF currently yields close to 6% (vs SNC's yield of just over 2%) and recently raised their distributions by 3%. Knowing my Enbridge heating bill keeps going up, I look forward to growing my investment in ENF over the long-term. 

Thursday, October 24, 2013

Best Stock Buy of 2013 - Telus

At the risk of posting early, and seeing my stock purchases from 2013 plummet, the table below shows how the stocks I've bought this year have progressed. Note, dividends aren't included in the return (misleading giving every one of these securities has healthy, growing dividends), and the returns are not time or dollar weighted either.

Stock Symbol Percentage Gain/Loss
HR.UN -5.3
IPL 15.8
NA 15.3
T (Unregistered) 5.7
LB 7.5
PFE 9.8
POT -19.4
O 4.1
CAR 5.6
ENF -0.6
REI.UN 5.8
INTC 12.7
T (RRSP) 17.8
Average: 7.6

Some shares I bought of Telus (TSX: T) in my RRSP are my top returning stocks for the year at 17.8%. The current dividend yield is around 3.8%, and they are expected to continue to grow their distributions at about 10%/year in the future. I'm also very impressed with Inter Pipeline (IPL) and National Bank (NA), who both yield around 5%, and are up about 15% from the time I bought them. 

On the flip side, I wish I held off on buying Potash (POT) by about 2 weeks, before the cartel they were part of came apart. That said, I still feel comfortable holding the stock. Despite the 19% paper loss, I'm considering buying some additional shares given I think the 4.5% dividend is safe, and I see it as a long-term play in the fertilizer industry. HR REIT (HR.UN) is also a bit down, but they pay a very nice dividend that would completely eliminate the loss, and then some. I just bought my shares of Enbridge Income Fund (ENF) a couple weeks ago, and am hoping it stays low so I can buy some more shares before the end of the year.

All in all, I'm very happy with the performance of my stock picks in 2013.

Wednesday, October 16, 2013

Dividend Income Offsetting Expenses

One of the reasons I like owning dividend stocks is that the income they generate helps to offset related expenses I incur each  month. As I pay more for certain expenses, my dividend growth stocks should keep pace with these inflated expenses over time.

Early in my investing career, one of my first stock purchases was shares in Bell Canada where I calculated the dividends would offset my $25 monthly phone bill. The fact that Bell has continued to increase their dividends regularly, long after I have stopped using their services, makes the transaction all the sweeter.

Below are a couple more examples of shares I hold in my current portfolio, and the degree to which the dividends help offset my regular expenses.

Phone/Cable/Internet Expenses - Since I now live in Quebec, my telecommunications bill comes from Videotron, and is a little over $100 a month. I'm not a big fan of Quebecor, Inc. (Videotron's parent) given their paltry 0.5% dividend yield, but continue to own shares in Bell, Telus and Rogers.  Together, these companies provide me with enough dividends to cover about 150% of my Videotron bill each month.

Bank Expenses - I'll admit to being clueless as to how much in banking fees I pay on a monthly basis. My main account with a credit union doesn't charge me any transaction fees, but I know my CIBC account (coincidentally, the only big bank in which I do not own shares) charges me a certain amount per transaction. Given I try to keep transactions to a minimum (taking out cash once a month or so), I think $50 would be a high-end estimate of the amount I spend on banking fees a year. Given the substantial amount of bank shares I hold in my portfolio (about 25% of my total holdings), it's safe to say that my bank expenses are very well covered by my dividends from RBC, BNS, BMO, Laurentian Bank, and National Bank.

Heating Expenses - This is one of the bills I've been trying to build up a steady stream of growing dividends to help offset. We heat our house with gas provided by an Enbridge subsidiary, and I think we average a little over $100/month in expenses. I own shares directly in Enbridge Inc and Enbridge Income Fund Holding, whose dividends pay off about 43% of my average monthly energy bill. If I add in the dividends I receive from the Interpipeline Fund and TransCanada Corp, that percentage increases to around 80%.

Fast Food, Drug Stores, and Other Expenses - My 100 shares in McDonalds provide me with $324 a year in dividends, which probably covers my fast food dining expenses. The $126 I collect a year from Walgreens probably doesn't totally cover my total medical expenses per year, but it comes close. My Potash shares would likely cover the expenses associated with our small garden. The dividends I get from Microsoft and Intel would allow me to buy a new laptop every couple years. Lastly, the amount of income I generate from various REIT holdings comes close to covering my property taxes for our house.

Given my long-term goal of generating enough portfolio income to cover my day-to-day expenses, I think I'm on a pretty good track. Here's hoping the increases in dividends keeps up with the inflation associated with my normal monthly expenses.

Saturday, October 12, 2013

Recent Buys: Realty Income Corporation (NYSE: O) and Canadian Apartment Properties REIT (TSX: CAR.UN)

Although I haven’t written much about my portfolio in the past months, I’ve been  busy initiating positions in two great businesses: Realty Income Corporation (“RIC”) and Canadian Apartment Properties (“CAP”).  Both of these businesses have been discounted lately as rising bond yields drive down the price of REITs. Why buy now? Both of these companies have a history of increasing their distributions over time, and pay very healthy yields in excess of any debt security I’d consider buying (5.6% for CAP and 5.5% for RIC). I was also very impressed by the high quality tenants and good diversity of RIC. Having lived in a CAP building in Ottawa, I know the company buys good properties, keeps them well maintained, and increases rents regularly.

The only two moves I foresee making in the next months are moving out of my position in SNC (and investing the proceeds in one of my current companies) and possibly deploying my excess cash in my RRSP if an overreaction occurs in the US markets (hopefully one of my long-term US company holdings misses an earnings estimate).  My portfolio is in great shape as we move closer to year end.

Wednesday, October 9, 2013

Investment Goals Updated at Q313

In one of my first posts in January, I outlined my three investment goals for 2013. Since it's officially the end of the third quarter, it's time to provide another update of how I'm progressing toward my goals.

1. Get Rid of Non-Dividend Growers
Done! I got rid of Power Financial Corp in Q1 and Transalta at the start of Q3.  As an added bonus, seven of 24 companies increased their dividend payout during Q3!

2.  Increase my Dividend Income and Total Portfolio Value by 25%
Even before adding some capital to my portfolio at the start of Q4, my portfolio value was up about 27% over its value at YE12. I consider this goal to be completely accomplished. Regarding dividend income, I was holding approximately 5% of my portfolio value in cash at the end of Q3, but still had managed to increase the dividend income of my total portfolio by 22% over the amount at YE12. So long as I deploy my capital in Q4, I should be able to increase the dividend income by over 25% by YE13.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
Despite 5% of my portfolio being in cash at the end of Q3, almost all of which I plan to deploy in US dollars, I still managed to have US holdings of approximately 23.7% of my total portfolio value. This was a function of a couple US stock soaring, and my earlier actions to shift some of my Canadian funds to US companies.

The last goal I set forth in my January post was to blog at least once a week. This has been my most challenging goal, and I've missed it often in Q3. With a wedding and a month long honeymoon, I simply didn't care to spend time updating my investment blog. Hope to improve on this during Q4, but am not holding my breath.

Monday, September 23, 2013

Sold: Walgreen (NYSE: WAG) and Dundee REIT (TSX: D.UN)

In order to create some liquidity in my TFSA and RRSP (there are some companies I’d like to buy on their next dip), I sold my position in Dundee REIT and half my shares in Walgreens this week.

Walgreens has had a great run, and my shares were up over 50% this year alone. Although the company is an industry leader, and a proven dividend grower, the shares were yielding about 2.3% at the time I sold half my position. I also think Walgreens is a bit expensive at the moment, with a P/E approaching 25X.

Dundee was another company in which I had realized a large gain (over 50%), but had slumped a bit lately as bond interest rates rose. Even though it yielded over 7%, the distributions grew very slowly, and I wanted to move some capital away from office REITs.

Now all I have to do is wait for the two stocks I’d like to purchase to drop a bit. Sounds simple enough, but it’s always tricky to sit on a bunch of cash in my portfolio.  

Tuesday, September 10, 2013

Home for a Rest

After taking some time off blogging to finalize planning my wedding, and then taking a four-week European vacation, I’m back ready to share my thoughts on investing.

Before leaving, I made some purchases adding to my positions in both Riocan REIT (REI.UN) and H&R REIT (HR.UN). I think REITs are undervalued at the moment, and bought two of the leaders in Canada, both of which have committed to increasing their payouts over time. 

Granted, I didn’t follow my portfolio very closely while on vacation, but there were a couple headlines that caught my attention, and impacted my portfolio.

-          Verizon’s decision not to enter Canada helped restore the share values of my Canadian teleco’s, adding about 3% to my portfolio’s overall value.
-          Microsoft’s planned purchase of Nokia for $7.2B knocked a couple dollars off Microsoft’s share price, but didn’t materially impact my portfolio (I only hold 100 shares of MSFT).
-          The Canadian banks delivered very strong quarterly results. This was the least surprising for me, and helped boost my portfolio’s value by a percentage point or two.

In terms of what’s on deck, two companies on my watch list, Enbridge Income Fund and Realty Income Corporation, are very interesting to me at their current price-levels.  I’d like to initiate positions in both, and am just figuring out some details around where to hold them and how to finance the purchases. 

Wednesday, July 17, 2013

Sold: Canadian Western Bank ("CWB")

No, I didn't take the job that required me to get rid of all my shares in Canadian banks. Instead, despite an impressive record of profitability and dividend growth, I decided to sell my holding (100 shares) in Canadian Western Bank ("CWB"). There were two main reasons I decided to sell my shares in CWB:

- The paltry 2.4% dividend yield. This yield is much lower than its Canadian banking peers average dividend yield (~4.3%). Management had lots of room to increase the yield (dividend payout ratio ~ 35%), but has instead re-invested back into the bank. To me, this speaks to management not placing sufficient importance of paying a dividend sizable enough to attract investors to hold shares for the long-term.

- As mentioned, I only held 100 shares of CWB, making it one of the smaller holdings in my portfolio. Furthermore, the investment was made in my non-registered account, and I had accumulated a sizable capital gain on the holding. It came down to a decision if I wanted to increase my holding (which I didn't given the low yield), or sell and take the taxable capital gain now, when I have enough losses to offset it.

Selling CWB allows me to create some liquidity that can be used to increase my holdings in another company I'm more comfortable with, that offers a better yield. This was one of my harder sell decisions in recent years, but I think I made the right choice.

Wednesday, July 10, 2013

What would you do with $10,000?

I'm currently reading the book "All The Money In The World" by Laura Vanderkam in which she asks some interesting questions about money and time. One of the questions she raised that got me thinking was 'What would you do with $10,000?'

Since $10K was about the amount of cash I held in my portfolio until near the end of last month, I guess my answer was buy 100 shares of Potash, 100 shares of Telus (at near its 52-week low), and add 30 shares of National Bank. Assuming no dividend cuts/growth, my answer should add about $380 to my investment portfolio over the next year.  Given I have no interest in selling any of the shares in the great companies I bought, the amount of principal at the end of the next year won't matter to me.

One of my positions I'm currently thinking of selling (Walgreens), will yield approximately another $10K. I'd like to re-invest this in another US stock (my two likely candidates are McDonalds and Johnsons and Johnson), but given the crummy CAD/USD exchange rate, and that both of my two likely picks are trading near 52-week highs, I'd have to hold the money again until the Canadian dollar appreciated, or a more interesting US company went on sale.

Although Ms. Vanderkam's hypothetical question is enticing, in reality, for dividend growth investors focused on buying high-quality companies at attractive prices, it's more complex than what meets the eye. Ah well, given I have no problem being patient with the market, time is on my side.

Sunday, July 7, 2013

Bye Bye Bank Stocks?

It’s rare that my professional and investing lives meet. Some might find this odd since I work in the financial industry, and analyze many public companies and banks as part of the daily duties. In order to avoid any conflicts of interest, I’ve never bought shares in a company I looked at for work. Given my work specialties have been in the forestry, automotive parts, and automotive manufacturing sectors, industries not exactly known for their steady dividend growth rates, it further explains why I wouldn’t be pulled toward the companies in these industries.

I’m very happy at my job, and the company I work for has treated me well. That said, I try to keep my eyes open for opportunities to expand my breadth and depth of knowledge of the financial industry in Canada. Recently, while interviewing for a job with another organization, one of the interviewers confirmed my hypothesis, that if I was the successful candidate, I would have to sell my shares in Canadian banks in order to avoid any actual and/or perceived conflicts of interest.

If you have followed this blog for long, or know my investing tendencies, you might guess that selling my holdings in Canadian banks wouldn’t be particularly easy for me. Quite simply, I think Canadian banks are profit machines that have a proven tendency to kick back a nice percentage of those profits to investors as dividends that grow over time. After opening my trading account in 2000, I bought 100 shares of Bank of Montreal as one of my first investments. My investing love-affair with Canadian banks has only grown over the years, with shares in these institutions accounting for approximately 25% of my current holdings.

Although the challenge of replacing such a large percentage of my portfolio with shares in other companies would be difficult, it’s something I think I could do if required. However, I’d also have to take a tax hit by selling bank shares in my unregistered trading account…and that’s something I’m much less inclined to do.

I decided to decline the organization’s request for a second interview, as I don’t think the job would be a good fit for me at this time in my career. The fact I’d have to sell my shares in Canadian banks definitely contributed to my decision. 

Friday, June 28, 2013

Updated Investment Goals at Q213

In one of my first posts in January, I outlined my three investment goals for 2013. Since it's officially the end of the second quarter, it's time to provide another update of how I'm progressing toward my goals.

1. Get Rid of Non-Dividend Growers
Since getting rid of Power Financial Corp in Q1, I'm still at 50% of this goal, as I continue to hold on to Transalta.  I briefly considered selling Transalta before their ex-dividend date earlier this month, but held on and watch it drop a bit further. It's still a stock I'm looking to sell, I'm just waiting for a better price to pull the trigger. Despite the 8% dividend yield, Transalta hasn't grown their dividend in years, and likely won't given industry conditions.

2.  Increase my Dividend Income and Total Portfolio Value by 25%
Due to some contributions to my TFSA, RRSP, and my unregistered portfolio, along with some strong returns from my US dividend growers, my portfolio value is up by 20.4% from its value at December 31, 2012. There's also some US dollar currency gains that have inflated my return number. With respect to dividend income, I'm closing in on my goal, with dividend income up 23% from YE12. By shifting some US capital around in H213, and through regular dividend increases, I expect to overshoot this goal by year end.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
Due to a recent drop in telecomm share prices in Canada, US dollar appreciation compared to the Canadian dollar, and strong performances by a couple of my US holdings (i.e. Western Union and Microsoft),  I've already increased the percentage of my portfolio invested in US stocks from 20% to 26.98%. I'll have to keep an eye on how this turns out at YE13, as the US/CDN exchange rate makes it difficult to predict.

The last goal I set forth in my January post was to blog at least once a week. I've had a difficult time thinking of topics to write about each week. I've missed a couple weeks at this point, but still average a post a week. Although I'm happy to see the great majority of my stocks have gained ground in the first half of 2013, I'm having an increasingly difficult time find good companies to buy at reasonable valuations, particularly US based companies. I'm hoping the Canadian market stays depressed over the summer, so I can add to some holdings I'm particularly excited about.

Bought Potash Corp (TSX: POT) and Telus (TSX: T) for RRSP

Verizon is coming, Verizon is coming! With news that Verizon was looking to enter the Canadian wireless market via acquisition of a couple bit players, the market over-reacted and sent shares of the big three Canadian telecomm players down on Wednesday and Thursday. Don't get me wrong, I think Verizon can make a splash as a carrier in Canada, particularly out west where they could offer subsidized handsets at cheap prices and free US roaming. However, having watched Rogers and Telus shares drop over 10% in two days, I decided to stock up with some more Telus shares that came with a mighty 4.6% dividend yield. Even if they lose some market share to Verizon down the road, Telus will remain a great wireless company. Plus, my bet is that if Verizon ever gets to be too dominant of a threat to the incumbents, the federal government will come riding to the rescue with protectionist measures.

While the Canadian market slumped, I also initiated a position in Potash Corp ("POT") that I'm pretty excited about. I've had Potash on my watch list for six months, during which time they've twice increased their dividends, and reported very solid results. Despite the good results and strong metrics, the market has sent their shares near a 52-week low.  I like this industry leader that provides me with some diversification into a new sector. With a yield of 3.5%, and a reasonable P/E of 15, I'm happy to add this great Saskatchewan company to my RRSP portfolio.

Although I originally had the extra cash in my RRSP pegged to buy some shares in US companies, with the Canadian dollar slumping compared to its US counterpart, I decided to invest in Canadian companies instead. It feels great to buy quality companies at discounted prices...no to wait and watch the dividends roll in :)

Wednesday, June 19, 2013

Bought: National Bank of Canada

With the proceeds of my sale of SNC Lavalin Group (“SNC”) shares last week, I decided to increase my holdings in National Bank of Canada (“NA”) in my TFSA. There were a couple reasons I felt comfortable investing more in NA:
-          The dividend yield (4.7%) coupled with the payout ratio (38%) and history of dividend growth (10% over last year, and 8% average over the last 5 years) are all very appealing to me.
-          Part of my goals for this year was to increase investments in companies where I was comfortable buying more stock at any time. National Bank falls into this category being a systematically important bank in Canada, given its history of impressive results, and based on the dividend numbers above.
-          Compared to its peers, NA trades at a lower P/E (8.7X), thus giving me a larger margin of error.
-          Compared to SNC, NA has a clear business reputation, and the yield is better than double of that provided by SNC.

All in all, I’m very happy with the redeployment of my capital from SNC to NA. I’m hoping NA’s stock stays flat for a while, as I’m looking to exit a position in Dundee REIT to add more shares of NA (or TD) in my TFSA.

Wednesday, June 12, 2013

Sold: SNC Lavalin Group

SNC Lavalin Group ("SNC") represents one of the few dividend growth stocks I've ever sold.  However, when the price rose above $45 earlier this week, I didn't hesitate in selling a position in my TFSA. My two main reasons for selling are the low dividend yield (about 2.0% at the time I sold earlier this week) and their ongoing ethics/bribery/corruption problems. Of the two, I could have looked past the low dividend yield (due to the impressive history of dividend growth), had the company not continually been in the media for all the wrong reasons over the past 18 months.

What's most depressing is that I still believe in the long-term potential of this Canadian construction company. Having said that, I tend to believe the nature of the projects they bid on globally leads them to tricky situations...and they haven't proven less than adequate at handling these ethical dilemmas. Even with new anti-bribery/corruption policies and processes in place, my bet is that their reputation will take them decades to restore. 

As a side note, I still hold a small position in SNC in my non-registered account, but it's likely one I'd think of selling as well if the price of SNC stays strong. There are simply better, more ethical, larger yielding Canadian dividend growth plays.

Friday, May 31, 2013

Bought: Pfizer (NYSE: PFE)

Even though the balance of my trading account has been trending down this week, I’m a pretty happy camper given there are some stocks I’ve been watching for months that are finally trading at attractive valuations. In-line with my goals of increasing my holdings I’m comfortable with for the long-term, and adding some US dollar exposure to my portfolio, today I doubled my position in Pfizer.

With a dividend yield of 3.5%, a reasonable 43% payout ratio, a history of dividend growth, and a strong commitment to R&D, I’m pleased to have picked Pfizer up on a dip today.

A couple other companies I’ve been keeping a close on lately: Telus, Coca-Cola, and Enbridge Income Fund Holdings Inc.

Wednesday, May 22, 2013

Update on Investment Goal - Reaching Desired US Exposure

Back in January, I wrote about my goal to increase my non-Canadian investment holdings from 20% to 25%. With the recent appreciation of the US dollar, purchases of Microsoft and Intel, and the run-up of a few US stocks (JNJ, WU, WAG and MCD)...US stocks now represent 24.8% of my total portfolio! Even better, US holdings account for 48.8% of the value of my RRSP. I hold US dividend payers in my RRSP to avoid paying the 15% with-holding tax on their dividends.

Given I've been thinking of selling Walgreens and Microsoft, I have to keep some US stocks on my watch list to replace them with. I'd really like to initiate a position in Coca-Cola, but given the 2.6% dividend yield, and P/E of 22X, it's too expensive for me at the moment. I've also been waiting for a pullback to add some shares of Pfizer, but it hasn't fallen to a point that it's really attractive for me. Given I have about 4% of my portfolio in cash right now, if either Coke or Pfizer falls, I'll be in a position to take advantage, and add to my US holdings. I'm glad to add to my non-Canadian stock holdings as the Canadian market has been moving sideways for the first five months of 2013.

Sunday, May 19, 2013

Screen #1: Get Rich with Canadian Dividend Growers

A couple months ago, I read a book called "Get Rich With Dividends". It wasn't particularly informative, but it gave me the idea to run a screen for Canadian Dividend Growers. The criteria for the screen:
1. Traded on the TSX
2. Dividend yield of at least 4%
3. 3-year cumulative average dividend growth rate of at least 10%
4. Dividend payout ratio less than 75%.

Any guesses how many stocks on the TSX met the above criteria? Before I ran the screen, I was thinking less than ten...but as of May 19th, there are 13 companies. Listed in order of highest yielding to lowest:
- Iamgold
- Genworth
- Morguard REIT
- Laurentian Bank
- Barrick Gold
- Boliden AB
- Pan America Silver Corp
- Evertz Technologies
- Corus Entertainment
- Brookfield Canada Office Properties
- Allied Properties REIT

If you'd like the specific screen results, let me know and I'll send them to you. Out of the 13, I own shares in three (H&R, BCE, and Laurentian Bank), and have Corus and Brookfield on my watch list. Since I know absolutely nothing about mining companies, I wouldn't touch the gold and silver companies listed above, but might consider the other two REITs and Evertz in the future.

Sunday, May 12, 2013

Telus (TSX: T) The Best Canadian Dividend Growth Stock

I’ve written about Telus before, questioning if it is the best Canadian dividend growth stock. On Thursday, the company announced a two cent dividend increase, bringing the dividend growth in the last twelve months to 11.5%. The company also announced to continue to target dividend growth of 10% a year through 2016, and re-upped their share buyback plans ($500M / year) through 2016 as well. The company also confirmed that their dividend growth should keep them in the 65-75% range of their payout ratio. With a 3.6% dividend yield, Telus’s yield is lower than Bell Canada’s (approx 4.9%) and a pinch above Rogers (3.5%).

I continue to look for dips to add to my Telus position. With such great disclosure of future dividend plans, and revenue and EPS growth to back up those plans, Telus is my choice for best Canadian dividend growth stock. 

Friday, May 3, 2013

Considering Selling Microsoft

Back in January, when Microsoft was selling for $26.50, with a dividend yield of 3.5%, I decided to take the plunge and buy 100 shares in my RRSP. I hadn’t bought shares in a company in the technology sector in years, so the 100 shares were to “test the waters”.  I liked that Microsoft had very little debt, a low payout ratio, and generated incredible amounts of cash through its various business segments. There were also rumors of a new Xbox system coming out in 2013, which made the buy even more enticing.

Four months later, with recent news of a private equity firm investing in Microsoft, the price of  shares at a 52-week high, and the dividend yield down to under 2.8%, I’m thinking of selling. My beliefs in Microsoft’s business model and future prospects haven’t actually changed, I just think the stock price is ahead of the company’s fundamentals. Having identified another technology company I’m interested in (Cisco), where I see more upside over the next couple years, and a higher dividend yield (about 3.3%), I’m having a hard time convincing myself not to sell my Microsoft shares.

As much as I like to think of myself as a ‘Buy and Hold Investor’, I definitely wouldn’t buy more shares in Microsoft at its current levels, which makes me ask myself why I’m holding on to it. When Mr. Market drives the price of a company higher than can be reasonably justified, it might be time to take profits. 

Saturday, April 27, 2013

No Buying, No Selling, Just Patience

Although I describe myself as a dividend growth investor, even more fundamentally, I consider myself a buy and hold investor. I've learned that overconfident investors and money managers trade more often, thus increasing transaction costs, and decreasing returns. Despite being close to pulling the trigger on a couple buys over the several weeks, nothing really caught my attention enough to convince me to buy into a stock.

My most likely next two purchases are adding to my positions in Microsoft and Pfizer. Both stocks are trading near 52-week highs, so I'll sit back and wait for some bad news on either company. Hopefully, it'll pay to be patient.

Saturday, April 20, 2013

Watch List Company: Potash Corp. of Saskatchewan

In previous posts, I’ve mentioned that I have a watch list of about 20 companies that interest me, but that I haven’t decided if I’m willing to take the plunge to invest in. One of these watch list companies that has been looking more interesting lately in Potash Corp. of Saskatchewan (“Potash”).  For those of you not familiar with this Canadian company, Potash mines and produces fertilizers that it sells worldwide.

Here are the main reasons I’m considering the company:
-          It’s the type of dividend growth company that is rare in Canada. In the last three years, it has went from paying $0.13 per share a year in dividends to $0.70 a share.
-          The company has a very low current dividend payout ratio of 23%, which leaves it plenty of room to boost dividends in the future.
-          As a mining / fertilizer company, it would help diversify my Canadian holdings away from banks, telecos and REITs.

So what’s holding me back from investing in Potash?
-          The company operates in the mining sector, which I know little to nothing about. Even though Potash is a leader in their business, I’m not sure I want to invest in a company I don’t understand.
-          Even with the spectacular dividend growth over the last three years, Potash is still only yielding 2.9%, and that’s despite a recent dip in the stock price. I rarely buy into a company yielding less than 3% unless it has a compelling story.
-          Potash’s revenue and earnings over the last five years have been pretty volatile. This has a lot to do with Potash being a commodity seller, and their inability to influence the market price of their product.

Having written out this brief analysis, I’m still uncomfortably on the fence about Potash. I’ll keep it on my watch list, but it would likely take another drop in the stock price or a dividend boost before I bought. 

Wednesday, April 10, 2013

Bought: Laurentian Bank of Canada (LB)

One of the Canadian companies that kept coming up in many of the dividend growth screens I have set up to identify possible investments is Laurentian Bank of Canada ("LB"). Owning every shares in every major Canadian bank except for CIBC (they seem to be in the middle of any scandal that comes up), I wasn't sold on adding another to my portfolio of investments, until I took a closer look at Laurentian Bank. The reasons I decided to initiate a position in the bank were:

- The bank's steady growth in interest income and net income over the past five years.
- The bank's annual average dividend growth rate of 10.6% over the past 5 years, and a dividend yield of 4.6% when I bought my shares last Friday. 
- A fair payout ratio of 44%, and recent comments in an earnings call about the possibility of looking to increase the dividend twice per year, when business conditions would allow it.
- A P/E of 8.9X (similar to its Canadian peers)
- The fact that it had dipped substantially last week, and was closer to its 52 week low, than to its 52 week high.

Since my shares of LB are in my non-registered account, I'm comfortable adding to my position if the shares should dip again, and I have some capital available to invest. Although my portfolio might be too heavily tilted toward Canadian banks, telecommunications companies, and REITs...they seem to be the three sectors I've had the best luck with picking winners in over the course of the past 10 years.

Wednesday, April 3, 2013

Bought Intel (INTC)

Given the dip in the US and Canadian markets today, I took advantage of the buying opportunity to purchase some shares of Intel for my RRSP. Given I wrote a previous post about why I was not comfortable buying Intel shares, I thought I'd give you a peak inside my decision process that caused me to change my mind today.

- Intel's total revenues decreased by about 1% in FY12 vs FY11 as more customers are opting for tablets and smartphones, instead of PCs where Intel has a dominant position as a chip maker.
- Although Intel is finally making in-roads into the smartphone market, they don't appear to be capitalizing in the surging demand for tablets.

- A 4.25% dividend yield, a 39.5% payout ratio, and an average 11% dividend growth rate over the last 5 years.
- A growing cash balance (supported by strong free-cash-flow generation) that is in excess of total external debt.
- Issuer ratings of A+ and A1 from S&P and Moody's respectively.
- Dominant market share and a history of investing heavily in R&D.

In short, I think Intel will be able to invest in R&D and acquisitions that will enable them to maintain their strong market chare in the PC chip market, while allowing them to enter the tablet and smartphone markets. The company has extremely solid financial metrics, and this should provide them with the flexibility to increase dividends and respond to competitive threats going forward.

Saturday, March 30, 2013

Updated on Investment Goals for 2013

In one of my first posts in January, I outlined my three investment goals for 2013. Since it's officially the end of the first fiscal quarter, it seems like a good time to provide an update of how I'm progressing toward my goals.

1. Get Rid of Non-Dividend Growers
Even though this was a relatively easy goal, I have only accomplished 50% of it so far, getting rid of Power Financial Corp (hadn't increased dividends in almost five years), but holding on to Transalta. I've even recently thought about adding to my Transalta position, as the stock is trading near a 52-week low, and by my calculations, the 7.8% dividend yield seems sustainable (an assertion backed up my the company's management in recent earnings calls). I'm not sure exactly what I'll end up doing with this position. On a happy other note, one of the companies I didn't name in my January post, Dundee REIT announced a small distribution increase, so although technically I wouldn't have to sell them, I'm still considering getting rid of them as it was a very small distribution increase.

2.  Increase my Dividend Income and Total Portfolio Value by 25%
Due to some contributions to my TFSA and my unregistered portfolio, along with some strong returns from my US dividend growers, my portfolio value is up by 19.5% from its value at December 31, 2012. There's also some US dollar currency gains that have inflated my return number. With respect to dividend income, I didn't do the calculation today, as I'm currently sitting on a substantial amount of cash in my RRSP from selling some shares in Bank of Montreal. I plan to target a couple US dividend growing companies with this money, but am waiting on a retreat in the US market, which has been red hot recently.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
As per my explanations above, it's difficult to accurately measure my progress toward this goal today. However, due to a purchase of Microsoft in my RRSP, and the run-up of a couple other holdings (McDonalds, Walgreens, and Western Union), I've already increased the percentage of my portfolio invested in US stocks from 20% to 21.6%.

The last goal I set forth in my January post was to blog at least once a week. With the exception of my week of vacation in Cuba, I've met this goal...but barely. I'll make a greater effort in the coming weeks to post more frequently, even if I don't anticipate making a large number of portfolio transactions in the second quarter of the year. Although I'm happy to see the great majority of my stocks have gained ground in the first quarter, I'm having an increasingly difficult time find good companies to buy at reasonable valuations.

Saturday, March 23, 2013

Telus – The Best Canadian Dividend Growth Stock?

Over a year ago, I bought my first shares of Telus at $56. Given the stock chart looked like one of the steep hills I used to run up during cross-country races, I wasn’t sure how much upside was left in this stock. The dividend yield at that time was a little over 4%, and the CEO had previously announced an investor friendly policy of increasing the dividend by 10% a year, for 3-years. 

Fast forward to March 15th, when I read in my morning portfolio alerts that the company announced an upcoming 2-for-1 stock split.  My initial investment was up over 20% (without including the dividend that had been raised in-line with the company’s generous policy). Thinking back to my Chartered Financial Analyst studies, I remembered that when dividend growers announced stock splits, the usual outcome is a nice boost in share price even before the split actually occurs. Despite Telus having a dividend yield of only 3.7%, I decided to increase my holding in the company so that it was relatively even to my holdings in Rogers and Bell (Canada’s two other big Telco’s).

The shares are already up about a dollar from when I bought them on the morning of March 15th. With another dividend increase expected to be announced at their upcoming annual general meeting, and a potential renewal of their 3 year, average dividend increase of 10% plan as well, I’m really looking forward to watching my shares in Telus grow. Having slowed the loss of their wireline subscribers, and with their strong foothold in Western Canada, it’s one of the many Canadian companies I plan to hold for the long haul.

Thursday, March 14, 2013

Selling a Bank to buy some Coke & Viagara

As stated in a previous post, I've been looking for ways to increase my holdings in US dividend growing companies that I hold in my RRSP. There are no shortage of US companies that interest me, and I like the idea of investing in US companies with global operations as a way to diversify my investment holdings. Since my employer offers a defined benefit pension plan, I have limited contribution room for my RRSP each year. Additionally, at the start of today, shares in three Canadian banks represented over 30% of my total RRSP holdings.

Therefore, with Bank of Montreal ("BMO") trading just off it's 52-week high today, I took the opportunity to sell the shares I held inside my RRSP. I don't mind admitting that the capital gain (non-taxable) on the sale was significant. I continue to hold some shares of BMO in my non-registered account, and reap the benefits of their 4.6% yield and history of dividend growth. I might even add to the position in my non-registered account, although I believe I have to wait 30-days before adding additional shares in order to avoid a taxable capital gain.

The two US companies that interest me most at the moment are Coca-Cola (a long history of dividend growth and a reasonable payout ratio of ~50%) and Pfizer (another dividend grower in which I already own shares). I'm in no rush to buy either and will now be hoping for analyst downgrades or maybe a missed earnings estimate (if I'm lucky) in the next couple months. If any of my other US holdings (WAG, JNJ, WU, MCD, and MFST) slump over the next couple months, the additional capital from today's sale will allow me the flexibility to react and buy more.

All in all, I'm very happy with my trade today.

Friday, March 8, 2013

Book Review "The Clash of the Cultures: Investment vs. Speculation" & Stock Thoughts

As stated in a previous post, being a passionate reader (about two books a week), I end up reading most of the popular investment books published each year. Having found John Bogle's latest offering at the local library, I was drawn to the red and white cover with "Investment vs Speculation" on it. Being a recovering speculator, and always yearning to move further toward the rationale investor persona, I checked out "The Clash of the Cultures: Investment vs. Speculation".

For those of you who are unaware, Mr. Bogle started the first index fund in 1977, and his company, the Vanguard Group, grew into a major investment powerhouse by promoting low-cost, index funds geared toward long-term investors. It was interesting to read Mr. Bogle's thoughts on the mutual fund and investment industries, his reasoning behind starting the first index funds, and his perception of ETFs. Also educational to find out that institutional investor account for almost 90% of the investment holdings, making us retail investors a small minority. My only criticism of the author is that he spends most of the book preaching to the converted, instead of explaining in detail (instead of generalities) how a long-term investor could prosper in today's markets. The book reminded me a lot of a university text, until I reached the second half of the last chapter where the author presented "Ten Simple Rules for Investors" that although general, were pretty useful. 

It's been a weird week in the markets. After completing my post last Friday, lamenting how difficult of a time I was having finding attractive Canadian companies to add to my portfolio, I ended up doubling my position in H&R REIT. It seems that REITs have been a bit out of favor with Canadian investors through the first couple months of 2013, and I decided to take advantage of a temporary dip in the stock price to buy a solid REIT, yielding almost 6%, and with a history of increasing their distributions.   Sometimes, the market baffles me, as it has done in the last two days with the reaction to the latest results for Canadian Western Bank (down 5% after reporting another strong quarter and increasing their dividend payment) and SNC (down 6% after reporting record revenues and boosting their dividend). Neither have a dividend yield high enough to make my 'Buy' list, but I'll continue to hold both companies given I like their long-term investment potential and their strong financial fundamentals. 

Friday, March 1, 2013

Trouble Finding Canadian Companies to Buy

After receiving my year-end bonus from work last week, I have been looking for Canadian companies to add to my portfolio.  Despite going through the names on my watch list portfolio (about 20 companies I keep an eye on), two screens I have set up in CapitalIQ to identify reasonably priced dividend growers, and my current holdings, I haven’t found any companies that have caused me to pull the trigger and invest this week. Even though I realize that keeping a little extra cash to take advantages of market over-reactions is not a bad thing, I still feel down about not finding any Canadian companies to invest in or add more to my holdings.

I’ve read lately about a run-up in prices of shares of dividend paying companies. Although I appreciate the valuation of my investment holdings is up substantially in the first two months of 2013, I’m not crazy about buying stocks in this type of market.  Between an influx of money into the market (especially in ETFs, which tend to invest in the types of stable, large cap companies I like), individual investors buying dividend growers in their search for yield, and some dividend increases from the big names lately (BMO, TD, TransCanada, Enbridge, etc.), it seems like a perfect storm for dividend stocks. On the other hand, when I look at potential US stocks…I see a lot of opportunity. I’m thinking of selling the shares I own in Dundee REIT (down a bit lately, but still run-up past the point of logic) in my RRSP to take advantage of some bargains I see in the US markets. In particular, I’m really fond of Coca-Cola lately (if only it would dip again so I could buy it with a 3% dividend yield) and would also consider adding to my positions in Microsoft and Pfizer if I could catch a dip in either company.

On the Canadian side of things, to be fair, I still think a couple of stocks don’t look bad; I just don’t like the idea of buying a stock near its 52-week high.  Laurentian Bank, Shaw, and Corus Entertainment are all at the top of my watch list.  I’m hoping for a market over-reaction to bump them down long enough for me to load up on them. 

Friday, February 22, 2013

Bought : National Bank of Canada

After mentally preparing a blog post about how difficult of a time I was having finding quality Canadian dividend growers to purchase with the cash in my TFSA, I pulled the trigger and bought some National Bank shares today. Between this purchase and a recent one of IPL for my TFSA, I've basically used up my 2013 contribution (and the proceeds of my disposal of shares of Power Financial Corporation). However, since I'm still planning to sell my TFSA holdings in SNC Lavalin and Dundee REIT, there will likely be one or two more purchases within my TFSA in 2013.

Already owning some shares in Royal Bank, TD Bank, Bank of Montreal, Scotiabank, and Canadian Western Bank, I've discovered long ago that buying and holding shares in Canadian banks is a formula for slowly accumulating wealth, and collecting rising dividends. Looking at the 5-year track record of National Bank, and earnings estimates going out to 2015, I saw a company that has managed to grow revenue and EPS at an impressive rate, while boosting dividends by a 10% average over the last 5 years, and a 12.5% average over the last two years. Management has also maintained a conservative payout ratio, an adequate level of capitalization, and a good risk management system. Additionally, with a dividend yield of about 4.25%, and a P/E of 8.9X, I felt comfortable buying this bank at a reasonable price.

While looking at National Bank today, I also consider adding shares of Laurentian Bank to my portfolio. Instead, I added it to my watch list portfolio, to keep an eye on going forward.

Friday, February 15, 2013

Sold Power Financial Corporation

After collecting a dividend payment from Power Financial Corporation ("PWF") on February the 1st, and watching the stock price run up to near it's 52-week high, I decided to sell my shares of PWF earlier this week. As stated in a previous post, PWF had not increased their dividend in the past 4-years, which was my main reason for selling.  Another contributing reason to the sale decision was my belief that Canadian retail investors will no longer tolerate the high-cost mutual funds sold by PWF's sub Investor's Group, and will instead switch to low-cost index funds.

I'll also admit to seriously considering selling my shares in SNC Lavalin earlier this week, as the share price rebounded to a position where I was above water on both of my holdings (in my TFSA and non-registered account). I decided to wait until SNC releases their FY12 year end results, as I feel the market will irrationally push SNC's stock up even further given projected revenue growth. I'm also wondering if the company might decide to reward shareholders with an increased dividend for sticking with them through a scandal-filled year. Fingers crossed!

Wednesday, February 6, 2013

Inter Pipeline Fund Added to my TFSA

As noted in my last post, one of the companies I was looking to add to in my Tax-free savings account ("TFSA") was Inter Pipeline Fund ("IPL"). When IPL dipped earlier this week to $22.60, I was able to act quickly, adding to my position in the company.

I was very comfortable adding more IPL to my TFSA holdings for several reasons. Over the last five years, the company's stock price has more than doubled, while they've been able to grow their distribution by an average of 6.4% per year. Adding to IPL on its recent dip allowed me to acquire the stock when the dividend yield was 4.9%. The company's debt is investment grade rated by both Moody's and S&P. There's also the fact that the recent slip in the share price was caused by IPL's large 2013 Capital Expenditure projections. Being a dividend growth investor, with a long-term investment horizon, I'm confident the company will be able to fund their 2013 CAPEX program, and that these initiatives will allow the company to keep increasing their distributions in the long-term. Lastly, given management's past performance, and their commitment to undertake projects that add value for unit holders, I'm comfortable that they will continue these actions going forward.

Wednesday, January 30, 2013

A Peak Inside my TFSA

After a week of all inclusive fun in Cuba, I'm back to the world of work and dividend growth investing.    Since I didn't actually have to make a deposit to my RRSP in order to purchase shares of Microsoft earlier this month (thank you dividends), I decided to max out my tax-free saving account ("TFSA") for 2013 by transferring in some cash from my non-registered portfolio (thank you again dividends) and making a deposit. Before I decide what exactly to use the money to invest in, I decided to give you a peak inside my TFSA.

After four years of maxing out contributions ($5K/yr), my TFSA was valued at approximately $26.5K today, representing an average return of 8.1% per year. Given the volatility of the market over the four years in question, and considering most people I know have their TFSA funds invested in a high-interest savings account (2-3% return), I'm pretty happy with the 8.1% return per year. I'm also pleased the Jim Flaherty has increased the contribution limit for TFSAs to $5.5K starting in 2013.

My holdings in my TFSA only consist of six stocks: Dundee REIT, Inter Pipeline Fund, Power Financial Corp, Rogers, SNC, and TD Bank. I've experienced very nice unrealized gains on Rogers, Dundee, and TD. Having only recently invested in Inter Pipeline, I'm up about 5% currently, and am interested in increasing my holdings in that company. I'm slightly down on SNC and PWF, but when accounting for dividends, am above water on both holdings.

I'm seriously thinking about selling Dundee given they haven't increased their distributions in 5-years, and I have no idea why the stock has almost doubled since I first bought it. I've also been waiting for a good exit point on Power Financial, as they have also had a stagnant dividend for the last several years. Plus, I've lost all faith in the Canadian public's continued support of high cost mutual funds (i.e. Investor's Group) given the increasing number of low cost, better performing exchange traded funds ("ETFs").

I've been looking at TD, Laurentian, and National Bank as potential investments in my TFSA in 2013. Of these, Laurentian looks the most tempting at the moment (highest yield and great history of dividend growth). As previously stated, I've also considered adding more Inter Pipeline Fund units, as the company has a great ability to throw off free cashflow. Lastly, I've thought about adding another REIT (likely replacing Dundee), but have held back given H&R's recent bid on Primaris's assets.

There's a brief peak inside of my TFSA. I'll keep you updated on any moves I make in it during 2013.

Wednesday, January 16, 2013

Selling Decisions

The toughest investment decision for a buy-and-hold investor like me is when to sell. The constant flow of dividends trickling into my portfolio, even from poor performing stocks, makes the decisions even harder. Afterall, even some of my weaker performing stocks have excellent yields that boost my overall portfolio return (i.e. Transalta at 7.3% and Power Financial at 5.1%).

Peter Lynch indicated in one of his books that you should hold onto companies so long as the story hasn't changed since you invested, and you still believe in your investment decision. Although I generally think this is good advice, for me, it's the philosophy behind the story that has changed. For instance, as previously indicated, when I used to follow the 'Dogs of the Dow' theory, I would look for  very high yielding stocks that had stable operating and financial performance. Transalta was one of those stocks. Although, I don't feel Transalta's dividend is in any real danger of being cut,  I also don't think they'll be raising it any time soon given changes in their industry.

Another stock I've been debating about selling lately is Canadian Western Bank. I bought CWB in 2009 when I was looking for lower yielding dividend stocks with a history of fast dividend growth (supported by strong cash flow generation). CWB continues to fit those parameters given their 70% dividend growth in the last 5 years, which has been supported by earnings growth, and a relatively low payout ratio (about 30%). My issue is that given the current dividend yield of 2.3%, I could easily double the dividend yield by investing in a larger, more established bank. The fact that CWB is held in my taxable portfolio also complicates matters, as I'd have to pay taxes on 50% of the capital gain I've achieved by holding CWB the last four years.

Decisions to sell are clearly complicated, but I come back to one of my goals for 2013: selling stocks with dividends that are stagnant at a certain level. Being a dividend growth investor, I can't be happy with companies that can't afford to increase their dividends, or choose not to pay higher dividends. Not being able to raise dividends or choosing not to are both unacceptable excuses given the large number of companies who make it a practice to increase their dividends regularly as their income and free cash flow grow. Those are the companies I wanted to be invested in for the long-term.

Friday, January 11, 2013

Nay for Intel, Yay for Microsoft

After spending a couple weeks taking an in depth look at Intel, I decided against buying their stock. Even though they have an economic moat, healthy liquidity, and could easily increase their tempting 4.2% dividend yield given their 38% payout ratio, I got scared off by the flat to decreasing revenue projections from analysts. I’m also not sure how Intel’s management will be able to adapt to the decrease in personal computer sales as consumers move toward tablets and smart-phones. I haven’t totally written off Intel as an investment, it’s just moved down my list of potentials.

Instead of Intel, my first buy for 2013 was Microsoft. In Microsoft, I get a 3.5% dividend yield with room to grow given their 37% payout ratio and history of almost doubling their dividend amount in the last 5 years. There’s also the fact that Microsoft’s capable management is sitting on a $66B pile of cash and securities, and has very little debt. In my view, this enviable liquidity position should allow them to respond to competitive threats relating to their operating system not being used on many tablets or smart phones. It was also encouraging to see that analysts are expecting mid-single level revenue growth for the next several years, which should enable management to continue to increase their dividends. Lastly, I managed to buy Microsoft on a little dip January 10th, where they closed in on a 52-week low.

The Microsoft position allows me to diversify into a new sector (technology) while increasing the US content of my portfolio. This assists in accomplishing two of my goals for 2013. Now if only Microsoft’s stock price stays low until April, when I should find out how much I can contribute to my self-directed RRSP in 2013. 

Wednesday, January 9, 2013

Buffet Book in Brief

One of the ways I've enhanced my investment knowledge over the years is through reading the investment approaches of professional investors and money managers. When I saw 'Tap Dancing to Work - Warren Buffet on Practically Everything, 1966-2012' available through the library at work, I couldn't help but checking it out. I've read a couple Buffet biographies before, but nothing as comprehensive as Carol Loomis's offering. 

The book centers around various articles about Buffet and by Buffet in Fortune magazine over the years, with Loomis's (who edits Buffet's annual letter to shareholders) inside perspective on each story. Although the details around Buffet's investment approach aren't explained in as much detail as I'd like (which was expected), the book does give a great deal of insight into Warren Buffet the person.  The various stories led me to admire Mr. Buffet even further as a person, based on his thoughts on wealth distribution, capitalism, tax codes, and charitable giving. His ability to be rational, and not swayed by his emotions (especially fear and greed) is most commendable. 

There was one piece of advise that Mr. Buffet gave a group of business students that I found particularly interesting. To quote the great Oracle from Omaha:

"Pick out the one person you admire the most, and then write down why you admire them....And then put down the person that, frankly, you can stand the least, and write down the qualities that turn you off in that person. The qualities of the one you admire are traits that you, with a little practice, can make your own, and that, if practiced, will become habit-forming."

Although Warren Buffet isn't the person I admire the most, I am planning on being more rationale, and less ruled by emotions in my investment decisions. I'd highly recommend you check out the book if you get a chance. 

Wednesday, January 2, 2013

Investment Goals for 2012

As the new year starts, instead of resolutions, I've decided to set some investment goals for 2012.  The investment objectives relating to my portfolio management are outlined below.

1. Get Rid of Non-Dividend Growers
Having previously followed other investment philosophies before experiencing the fantastic results of dividend growth investing, I have a couple of non-dividend growers left in my portfolio. My goal by the end of 2013 is to rid myself of all stocks in companies that have failed to increase their dividend in the last 12 months. Specifically, I'll target exiting such companies as Power Financial and Transalta unless they re-commit to increasing their dividend regularly.

2. Increase my Dividend Income and Total Portfolio Value by 25%
In 2012, I managed to increase dividend income by 45% while increasing my total portfolio value by 34%. My goals for 2013 are more modest, as I won't have the proceeds of the gain on the sale of my condo to invest, and I also have a wedding to pay for. Having said that, by re-investing my current dividend income, making modest monthly transfers of new funds into my portfolio, and focusing on high quality dividend growth companies, my 25% targets are definitely achievable in 2013.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
As per my last post, I'm having an increasingly difficult time finding solid companies with a long history of dividend growth in Canada. Although I'm limited by how much I can contribute to my self-directed RRSP, I feel there is an opportunity to divert some funds currently invested in Canadian banks and telecoms (my two heaviest sectors) into foreign companies. I'm also going to commit to examining if foregoing the 15% with-holding tax on dividends from US companies might be worth it in the long-term to add international diversity to my TFSA.

In addition to the above investment goals, I also plan to write at least one blog post per week. I'm finding these posts help me sort out my thoughts on various companies and provide a different perspective from my normal investment research.

Here's wishing everyone a healthy and prosperous 2013!