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.