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.