Wednesday, September 30, 2015

Goals Update at September 30, 2015

Before 2015, when this blog was basically a personal trading journal, one of my primary motivations of maintaining it was to hold myself accountable to reaching my financial and non-financial goals. Despite changes to make my blog more externally focused, at the end of each quarter, I still like to track my progress toward meeting my yearly goals. In prior years, I tracked far too many financial and non-financial goals. In order to simply things, I now only track three financial goals and two non-financial targets.  Here's how I progressed against my five goals in the third quarter of 2015.

Increase Expected Forward Dividend Income by $1,800/yr 
From the outset of 2015, I knew that this was an incredibly aggressive goal. In Q1, I was able to add $453, before adding another $687 to my total in Q2, putting me on track to achieve this goal. In Q3, I added $662 of expected forward dividend income, bringing my total to $1,802! Although it feels great to be ahead of my goal with three months left to go, I know that some of my remaining portfolio transformation trades (i.e. selling shares of Royal Bank and Bell Canada in my RRSP) will likely result in lowering my forward dividends in Q4. This decrease will occur if I choose to buy US stocks with the proceeds of my Canadian share sales since I expect to pay a 1.35 exchange rate to acquire US shares. In contrast,  I continue to track my forward dividend income using a CAD/USD exchange of 1:1.  That said, I plan to keep on adding funds to my investment accounts each month, and hope that the dividend increases (seven in Q3!) keep coming. 

Complete the Transformation of my RRSP by Year End
My RRSP transformation is all about making my portfolio more tax efficient, while moving shares in companies into the same account (TFSA, RRSP, and non-registered). I continued to make progress on this goal, initiating a position in Royal Bank in my non-registered account, and adding shares to my BCE position in the same account. All that's left to do in the last quarter of the year is to purchase some shares of Royal Bank in my non-registered account, so that I can sell them in my RRSP (after waiting at least a month in order to avoid creating a taxable event). I also have to sell my shares of BCE in my RRSP, as I now have an offsetting position in my non-registered account. Lastly, I decided to harvest a tax loss relating to the shares of Corus Entertainment in my non-registered account, and set up an offsetting position in my TFSA. Now I have to sell my shares of Corus in my non-registered account since more than a month has passed since I acquired Corus shares in my TFSA.

Give Twice as Much to Worthy Causes as in 2014
I'm one month behind my pace to double the amount of money that I gave to worthy causes in 2014, but have a plan to catch up. My plan is two make two larger contributions to two of my favorite causes during Q4. After donating to the Red Cross, the Canadian Cancer Society, and my local food bank in Q1,and Oxfam Canada's efforts in Nepal (a donation that was subsequently matched by both my employer and the Government of Canada!), St Paul’s church (where my son was baptized), the  Renfrew Hospital, and the United Way of Ottawa in Q2, I gave to the Terry Fox Foundation and a federal political party in Q3. 

My non-financial goals to maintain my weight under 160 pounds (revised downwards from 165 in June 2015) at the end of each month and average a blog post each week are both being met. In fact, I haven't weighed over 160 pounds since March, and currently maintain my weight closer to 155 pounds. Also happy to report I had 21 blog posts during Q3, well ahead of the pace of one per week. My goal since returning from vacation was to write two posts per week, and that consistency has really helped grow my number of page views. Here's a little secret: the number of page views I got in September was five times more than the number in July. To that end, thanks to all the new readers :)

Looking back, I had an awesome third quarter. The fact that North American markets were down allowed me to pick up shares of great companies at the lowest prices and best values in years.  I look forward to achieving all my goals in 2015, and setting more aggressive ones for 2016.

Are you on track to meet or exceed your investment goals for 2015? If not, what corrective action are you taking?

Monday, September 28, 2015

Recent Buy & September Dividend Increases

After publicly sharing my watch list for the first time at the start of September, I was a tad nervous my target prices were aggressively low.  When I saw the North American markets were slated to open lower on Monday morning, I wondered if TransCanada Corporation (my recent analysis) would drop as their ex-dividend date was Friday. Being a long-term investor, missing one dividend payment doesn't make much of a difference to me. While watching TransCanada's stock price fall over the course of Monday, the smirk on my face turned into a full blown smile. I'm happy to share that I was able to increase my position in TransCanada today by buying more shares at $41.99 (a full penny under my target price!). Although this doesn't complete my position with the company, it's a large step in that direction. 

The other reason why I have a smile draped across my face today is thinking about the three dividend raises related to my portfolio that were announced in September. 

- Enbridge Income Fund Holdings boosted their payout this month by 10% after completing a $30B asset purchase from Enbridge Inc. 
- Microsoft increased their dividend 16%, one of the largest percentage dividend hikes in my portfolio this year.
- Realty Income upped their monthly payout by 0.26% which was the 82nd dividend increase for the company since it went public in 1994.

Although I also expected McDonald's Corporation to announce a dividend increase in September based on their historical pattern, their CFO indicated in their Q2 earnings call that they would wait for November to make an announcement. This seems reasonable given the company would want to see some preliminary results of their all-day breakfast initiative in the US before making capital allocation plans for 2016. Personally, I don't mind waiting since November is usually a very quiet month for dividend raise announcements in my portfolio.

Three dividend raises in a month and adding to a position at a aggressively low target price make me feel very positive about September. I'll update later this week with my progress towards my 2015 goals.

Did you add to or initiate any positions during today's market drop???

Friday, September 25, 2015

Dividend Stocks to Offset Specific Life Expenses

My definition of financial independence is reaching the point at which my passive income exceeds my life expenses. With that goal in mind, I started to invest in dividend paying stocks in order to generate passive income to offset specific life expenses. Additionally, realizing most of my life expenses would grow over time, my focus was on investing in stocks that grew their payouts so that my rising passive income would exceed my rising life expenses.

The first time I explicitly invested in a company with the goal of neutralizing a specific monthly bill was Bell Canada. I had recently moved into a one-bedroom condo, and hated paying the $22 monthly cost of a having a telephone landline. Although there was definitely a convenience associated with having a landline, sending a monthly cheque to Bell (which had a monopoly for home phone services in Ontario at that time), was mentally tough on me. The day I realized that by acquiring 200 shares of Bell Canada, I would reach a point where my dividends (200 shares x $0.33 per quarter x 4 quarters = $264) would offset my yearly payments $264 ($22 x 12 months = $264), I was on a mission! I immediately started on a quest to accumulate 200 shares in Bell Canada. After completing my quest that year, I was ecstatic. In my mind, Bell Canada was no longer making a dime of profit off of me. Psychologically, I felt like I had beaten the system and I was getting my home phone service for free! Better yet, after Bell raised their dividend to $0.365 a share per quarter, and my bill didn’t go up by as much, I was basically being paid by the company to have a home phone J

Other specific bills that I’ve manage to offset include
-          Cable and Internet: Thanks to Rogers and Telus, my monthly Videotron bill is eclipsed.
-          Bank fees: Thanks to the six Canadian banks I own, I no longer care what CIBC (the one major bank I don’t own) charges me in fees.
-          Property taxes (at least my share of these): Thanks to Riocan REIT, H&R REIT, and Realty Income Corportation I considered my property taxes covered.
-          Fast food: Thanks to my position in McDonalds, I don’t hesitate to indulge in fast food when there’s no healthier and more convenient alternatives.

There are three bills I’m currently working on offsetting:
-          Heating: By growing my positions in Enbridge Corporation and Enbridge Income Fund Holdings, I soon hope to be in a position to neutralize the cost of heating my house through Enbridge’s subsidiary Gazifere.
-          Electricity: Although my position in Canadian Utilities helps to offset these costs, the late fall IPO of Hydro One (from Ontario) might prove interesting to me, depending on its price.
-          Gas: Since we have two cars, but mainly drive my wife’s car, I can generally get by with filling up the tank of my Honda Civic once a month, costing about $40. With Suncor paying a $0.29 quarterly dividend, my long-term goal is to acquire enough shares of the company (~400 currently) to completely offset my gas costs.

Clearly, not all of the companies I have invested in perfectly offset my monthly bills. For instance, instead of investing a small fortune in Quebecor, and relying on their paltry 0.5% dividend yield to offset our cable and Internet bill, I’ve chosen their better managed and more diversified peers, Telus and Rogers with dividend yields over 4%. Additionally, I know that my REIT holdings don’t truly relate to my property taxes, but I figure my approach of having real estate income offset real estate expenses is close enough. I also understand that my imperfect hedges totally ignore taxation on dividends. That said, the majority of my stock holdings are held in my RRSP and TFSA, where dividends are not taxed. Plus, the mental and emotional boost I get from setting up these offsetting stock positions more than makes up for the reality of being imperfectly hedged.  There's also the fact that I have positions in a number of dividend paying companies that don't specifically offset any expenses (i.e. Pfizer, Omega Healthcare, Alaris, etc.).

In the long-term, if I can set up enough positions in dividend stocks to offset each of my regular life expenses, I’ll acheive my goal of financial independence. In the short-term, it’s extremely fulfilling to be able to offset another monthly bill by building a position in a dividend paying company.

Are there companies that you have invested in as a way to offset the amount you pay them? 

Tuesday, September 22, 2015

Recent Buy: Enbridge Income Fund Holdings

There are three Canadian dividend growth stocks that I find tempting to buy any time their price unexpectedly decreases: Telus, Alaris Royalty, and Enbridge Income Fund Holdings. The reason is that all three companies have management whose primary objective is to grow their dividends over time. Not only have all three sets of management talked the talked, they've also walked the walk. 

Last week, when Enbridge Income shares were down 4% for no apparent reason, I decided to scoop some up in my RRSP. I was able to buy my shares of Enbridge Income with a dividend yield of 5.3% (dividends paid monthly) and at a very reasonable P/E of 18.5X (vs their 2015 YTD average P/E of 22.7X). Since an Enbridge subsidiary, Gazifere provides the natural gas that heats my house in the winter, this buy also provides me with a "life hedge"; where my increasing stream of dividends from the company help pay my monthly gas bill.

Speaking of increasing streams of dividends, at the start of September, Enbridge Income Fund's management raised their dividend by 10% after completing a $30B acquisition of assets from Enbridge Inc. Management indicated it plans to raise the dividend another 10% in January 2016 and each year their after through 2019. If it this sounds familiar, it's very similar to the intentions of Richard Kinder at Kinder Morgan (albeit his planned increases run through 2020).

I'll admit that this might be a short term trade. The shares have already recovered a couple percentage points from when I bought them, and I might be tempted to sell and reinvest in a long-term holding  (i.e. the companies on my September watch list at their target prices). Either way, I'll keep you posted.

Are there companies that you would consider adding to your positions even if they represent a disproportionately large share of your portfolio?

Friday, September 18, 2015

Stock Analysis: TransCanada Corporation

One of the four stocks on my September watch list is TransCanada Corporation. Although well known to Canadian dividend growth investors, despite also being traded on the New York Stock Exchange (NYSE: TRP) and its proposed Keystone pipeline being vetoed by President Obama in February 2015, the company isn't a familiar name for most US dividend growth investors. The analysis below is meant to demonstrate why I think TransCanada is worthy for consideration to include in a dividend growth portfolio.

Business Overview: 

The company company has operated for over 60 years and reports on three segments: natural gas pipelines (56% of H115 revenues), liquid pipelines (25% of H115 revenues), and power generation (24% of H115 revenues). TranCanada has over 68,000 kilometers of natural gas pipelines, The company is also one of North America's largest providers of gas storage with over 368 billion cubic feet of storage. Lastly, the company is a growing power producer with interests in over 10,900 megawatts of power generation.

Since 2000, the company has grown its asset base from CAD $26 billion to $63 billion of quality, long-life pipeline and power generation assets. TransCanada reports that they have $46 billion of new growth projects under long-term contracts or regulated business model.

Financial Results & Credit Ratings:

Over the past 4.5 years, TransCanada has managed to grow their revenue at a compound annual growth rate of 9%, while growing their net income at 7%, and EBITDA at 10.2%. The company's EPS CAGR over the same period was 6.5%, while their dividends grew at 4.6%.

The company has issuer ratings of A-/Stable from S&P and Baa1/Stable from Moody's.

Dividend Growth, Yield and Safety:

Since 2000, TransCanada has grown its dividend from $0.80 per share to $2.08 per share, for a CAGR of 6.6%. During Q2 2015, the company indicated that they remain committed to 8-10% dividend growth through 2017. This commitment was first made in the winter of 2015, when the company stated their intentions to grow their dividend by at least 8% through 2017 based on its strong asset base, and predictable earnings and cash flow generation from its sizeable portfolio of small to medium-sized, near-term growth projects.

On September 17th, TransCanada's dividend yield was approximately 4.7%.

Although the company's payout ratio of 81.2% might seem high when calculated using EPS (see the table in the Financial Results section), it is only 43.8% using EBITDA which gives a better indicator of distributable cash for pipelines.

Analysts Recommendations & Valuations:

Of the 14 analysts who cover the company, 6 rate its stock a Buy, 7 rate it a Hold, and 1 rates it a Sell. The consensus analyst price target is CAD 59.19.

On September 17th, TransCanada trades at a Price / LTM EPS multiple of 18.2X. This multiple compares to an average Price / LTM EPS multiple of 21.6X YTD 2015, and an average Price / LTM EPS multiple of 19.7X over the past 5 years.

Using a very simplified dividend discount model, assuming a 5% growth rate, and an 8% required return, the fair value of the company's shares would be $72.80.

Key Risks:

Key risks relating to TransCanada include:
Heightened regulatory and permitting risk to pipeline approvals due to political and environmental concerns.
-  High capital expenditures associated with their large scale projects that will require significant external funding.
- Uncertainty related to both the likelihood and timing of large scale projects that will also expose the company to execution risk. 
- Safety risk: Leaks, ruptures, and other safety concerns can cause delays in approval and reputation damage to pipeline operators.
- Sensitivity to commodity prices: If the price of oil or natural gas was to stay at a depressed state for a long period of time, the rates pipeline operators could charge when contracts are renewed would decrease. 

Final Thoughts:

Given the current valuation of TransCanada compared to past P/E multiples, the company's impressive history of revenue and dividend growth, and their strong balance sheet as evidenced by their investment grade credit ratings, I'm looking to add to my position. I'm aware of the key risks of investing in pipelines, but think their competitive advantage of being difficult to duplicate without intense capital investment, and the fact that they majority of the revenues they collect are predictable and subject to long-term contracts, help compensate me for assuming the risks involved.

Do you hold shares in any pipelines and are there others you would consider as future investments?

Tuesday, September 15, 2015

Perspective: Staying the Course When the Market Dives

Back when I was young, dumb, and full, I often went for runs along the beautiful Rideau Canal. One summer night, while out for an easy 30 minute jog, listening to my new 64 megabite MP3 player, I ended up plastered across the hood of a car. Although I had many near misses with bikes, rollerbladers, and cars, that night was the first time I actually got hit. The car was trying to make a right turn on a red light, I assumed the driver saw me in their side mirror, and as I proceeded without much caution, BAM...I found myself sliding up toward the windshield of the car.

The S&P/TSX composite index ended Monday at 13,350. This value is about 9.5% below the starting value of the index on January 2, 2015 of 14,750, and 14% lower than the 2015 high point of 15,550.  This comes as no surprise to most Canadian investors as key sectors such as banking and energy have been hit particularly hard. Given that banking, energy, telecommunications, and REITs account for a major portion of my sector allocation, it's been a poor year for my portfolio measured from a return perspective. Even after making nine months of contributions to my portfolio and re-investing dividends, my total portfolio value is essentially flat compared to where it started 2015. Pretty underwhelming results.

However, being a dividend growth investor focused on the long-term, and considering the key metric I track is anticipated forward dividend income, the market downturn means I've been buying stock in companies at reduced prices and higher yields for the last nine months. The longer this correction or dare I say...bear market...lasts, the easier it is for me to meet my forward dividend income goals. Here's a little spoiler alert: with over three months to go, I've already surpassed my 2015 forward dividend goal! Seems like cause for celebration!

Don't get me wrong, I completely sympathize with newer investors, who see their portfolio value and net worth decrease with every stock purchase they make. To those people, my advice is simply to take advantage of this great buying opportunity. Having been through the technology bubble around the turn of the century, and the financial crisis of 2008, even though now feels like a hard time to stay the course, following your plan will be rewarding in the long-term. If you started investing in stocks without a plan, and with hopes of fast gains, this correction should serve as a wake-up call. For me, it's all about sticking to my plan, and possibly accelerating it if Mr. Market gets more depressed. 

While I was draped across the hood of the car, I did a mental check to ensure everything was still in working order. When I opened my eyes, my perspective immediately changed when I saw a young woman driver, who was absolutely devastated. I'll never forget the look of worry and shame on her face. Instead of lashing out and letting my temper get the best of me, I simply slid off the hood of the car, and very cautiously walked away after waving at the driver to let her know I was alright. When you find yourself on the hood of a car, or in a falling market, do your best to remain calm, count your blessings, and keep things in perspective. 

Friday, September 11, 2015

30 Canadian Large Cap Dividend Growers

After self-diagnosing as a gorger who yearns to nibble more, and because none of the four stocks I’d really like to buy this month have hit my strike price, I decided to run a screen to identify potential nibble candidates. Here are the criteria I used:

-          Traded on the Toronto Stock Exchange (TSX)
-          No preferred shares
-          Market capitalization over $1B (CDN)
-          Dividend yield of at least 3%
-          1-year dividend growth rate > 5%
-          3-year and 5-year dividend compound aggregate growth rate > 5%

Here is the resulting screen:

Unsurprisingly, I’m already very familiar with many of the 30 companies who met my criteria. In fact, I have positions in 14 of them. Other companies such as Algonquin Power & Utilities, Evertz Technologies, Brookfield Infrastructure, and Agrium have long been on my Google watch lists.  I’ve also owned Suncor and Home Capital before, and would consider them again if the price was right. There’s even one company on the list that I’m prohibited to investing in, as they are a major client of my employer.

More importantly, there are some companies I’ve never heard of and will now put them on my ‘Further Research’ list. In particular, as embarrassing as it is to admit, Russel Metals, Aimia, MDC Partners, Pason Systems, and Finning International are complete unknowns to me. Since researching potential investments is a fun part of the investment process, I look forward to seeing if any of the above are nibble worthy.

Do you own any of the names on the above stock screen? Are there any companies you don’t own that interest you?

Tuesday, September 8, 2015

Nibbling vs Gorging on Stocks

Sometimes in reading investing and personal finance posts, you run across a nugget in the Comments section that causes you to stop and reflect. Such was the case when I read a reply to a comment on Divhut over the weekend.  In response to a reader’s comment about adding to his positions in Canadian banks at a regular rate, Divhut responded:

 “As you have noticed I am a stock nibbler and not a gorger. Slow and steady small buys each month allow me to enter into a position with ease and not cause me great concern about wild market price swing. Slowly but surely is the motto…”

After reflecting, I came to the conclusion that I’m a gorger. Although I’d like to develop the nibbler mentality, and slowly create and add to positions over time, it’s currently not the way in which I operate. I have great respect for all the nibblers out there, but here are the three reasons why I gorge.

1. Transaction Costs

The best price I can get from my discount brokerage, Scotia iTrade, without making 150 trades per quarter, is $10 per trade. In contrast, Divhut indicates he pays only $2 commission per trade. Simply put, Canadian brokerages are not as competitive on price as their US counterparts. It’d be much easier for me to adopt a nibbler mentality if transaction costs didn’t account for 1% vs 0.2% of a nibble sized trade of $1,000. Additionally, most DIY investors are well aware that transaction costs drive down portfolio performance, and are to be minimized. Although I realize that my blog will never be action-packed, by trading less frequently, I hope to keep my transactions costs relatively low.

2. Nibbling Regrets

Back in January of 2013, when I was still in the early stages of buying shares in US companies for my RRSP, I nibbled by buying 100 shares of Microsoft at a time when I thought they were cheap ($26). My plan was to do some deeper due diligence after my initial nibble, and possibly add to the position to a point where it was meaningful in my portfolio. Before I got a chance to take a deeper dive into researching Microsoft, its shares climbed to around $38 a share at year end 2013, making it one of the best performers in my portfolio.  That said, Microsoft’s appreciation didn’t add much to my total portfolio return in 2013. The shares reached a point where I no longer considered them cheap. Now, as we close in on the last quarter of 2015, I’m finally starting to consider adding to Microsoft (which I find attractive around $40) as it remains one of the smallest positions I have in my portfolio.  One of my few investment regrets is not gorging on Microsoft back in January 2013.

3. Sticking to My Plan

My plan for 2015 revolved around making my portfolio more tax efficient and limiting my number of positions to make monitoring holdings easier. Moving holdings between my unregistered account, TFSA, and RRSP was best accomplished by making a couple of rather large transactions along with managing time delays to steer clear of unintended tax penalties. I’d characterize these types of moves as gorging, as nibbling would have only complicated matters further. Keeping my number of holdings low has resulted in severely limiting the number of new companies I invest in. Whereas in the past, I’d be apt to buy a 100 shares of a company to motivate me to do further research (i.e. Microsoft), I now only make investments in companies I’m very familiar with and willing to invest in for the long-term.

In closing, I’d like to re-iterate my respect and admiration for all the nibblers out there. Although I hope to someday be more like you, it’ll be a challenge for me to adopt your mentality.

Do you consider yourself a nibbler or a gorger?

Friday, September 4, 2015

August Goals Update & Challenges

Although my portfolio value and net worth trended downward in August, it was a very successful month for me in terms of achieving my non-financial goals.  All three of my non-financial goals were achieved as outlined below:
-    I posted eight entries, two a week, each Tuesday and Friday, in-line with my new schedule, and well in excess of my one entry per week objective.
-   By limiting my indulgences and exercising semi-regularly (still working on that), I managed to stay below my maximum target weight of 160 pounds.
-    I donated to the political party I will be supporting in the upcoming Canadian federal election. Although I hate what North American politics have evolved into, I strongly encourage all Canadian readers to cast their vote next month.

I’m a big fan of J. Money and his budgetsaresexy site. One of the reasons I admire him are his challenges, through which he challenges himself and his readers to try short experiments as a way to improve different aspects of their lives.  By thinking of these challenges as experiments, there is limited downside if you are unable to complete them. I decided I could do with a few changes in my life, so I decided to try two experiments in recent weeks.

Challenge #1: Commenting on Blogs

Here’s a secret – bloggers love to receive comments on their posts! It shows readers are engaged and care about what they wrote. With this in mind, in mid-August, I decided I’d comment on a different blog I enjoy every day for a week. Since I enjoy reading various personal finance and dividend blogs, but rarely ever comment to show my appreciation, this was overdue. I’m proud to say that I accomplished my mission easily! Two unexpected benefits of the challenge were a couple interesting comment conversations I started with bloggers who I admire, and the number of page views on my own blog increased. Going forward, my plan is to comment on posts I appreciate, especially longer ones that take a lot of research and effort.

Challenge #2: Spend Nothing

Last week at work, I used about $50 of cash, and had little to show for it. So this week, I decided I’d try to spend nothing (cash, debit, and credit). If I can make it through today, I’ll have accomplished this challenge. Lessons learned are that it takes some planning to bring in a lunch every day (i.e. I had to cook pasta at 9pm last night before bed), and that temptations are everywhere! For instance, I thought of buying an umbrella this week when my wife re-claimed hers one morning, but lucked out when it turned out to be a sunny day. The other lesson I learned was that it’s much easier not to spend money when you’re working from home, like I did yesterday.

Here’s hoping you accomplished your goals in August and are off to a good start in September.

What’s the toughest challenge you ever completed? Do you have any non-financial goals you track?

Tuesday, September 1, 2015

Stock Watch List for September 2015

Whichever dividend blogger posted their watch list first, I owe them a debt of gratitude. I freely admit that I use other investors’ picks as a starting point for my own research. There is an additional benefit of posting my own watch list, as a means of concentrating my efforts on a handful of companies. Speaking of a handful, I decided to limit myself to a maximum of five companies in order to limit my research and purchasing activities over the next month.  In order to be precise, I'm including a target price at which I’d likely buy the below mentioned securities (assuming adequate cash resources when the price was reached).  Here are the stocks I will consider buying in September 2015.

TransCanada Corporation (TSX = TRP); Target Price = $42

I established a half position in TRP almost three years ago, and haven’t added to it since. Previously, I was unimpressed with their stodgy dividend growth (4-5% a year) and how expensive their stock was with a P/E well in excess of 25X. Recently,management has committed to accelerating dividend growth (in the 8% range) and with a recent decrease in price, coupled with continued strong earnings, the stock is now priced much more attractively with a P/E of about 18X. My target price (close to the 52-week low of $41.95) would provide a dividend yield on cost of about 5%. Putting ethical questions about the company aside, reality is that Canada will continue to produce oil, and that the oil will need to be physically moved.  Looking at their cashflow statement, TransCanada continues to invest heavily in pipelines that should fuel dividend growth for years to come.

Alaris Royalty Corp. (TSX = AD); Target Price = $25

Despite already having a full position in Alaris in my RRSP, I’m very open to initiating a position on this high yielding (~6% currently) dividend growth royalty company in my unregistered account. There are so many things to love about this company, but a few of my favorites are their diversified royalty revenue stream, the fact it’s a monthly payer, their very affordable P/E of 14.5X, and the fact they are now looking at smaller opportunities through a new business development stream. My target price represents a yield on cost of 6.5% and is only slightly below their 52-week low price of $25.50.

Canadian Utilities Limited (TSX = CU); Target Price = $34

A boring utility company with high exposure to the downtrodden Alberta economy? Sounds like the perfect opportunity to complete my position in this company and wait for a recovery in fortunes and perception in what was for many years Canada’s fastest growing province. Other reasons to look into this company include their long history of dividend growth (more than 10 years), its reasonable price with their P/E of 17X, and their strong financial position reflected in their A/Negative issuer rating.  My target price equates to a 3.4% yield on cost and is higher than their recent $31.00 52-week low that occurred on black Monday.

Omega Healthcare Investors Inc (NYSE = OHI); Target price = $32

With a limited amount of funds currently available in my RRSP, and a Canadian dollar worth only $0.76 of a USD, I have to be extremely sure of any US company prior to taking the plunge.  Therefore, I limited myself to only one US company on my watch list, with a honorable mention going to Kinder Morgan. Although I think Kinder is underpriced, I’m already overweight on the company. I’m simply more tempted to buy enough shares to complete my position in Omega. The company has raised its dividend for 13 quarters in a row and now yields 6.6%. The P/E of 23X is slightly misleading for this REIT that has a price to adjusted funds from operations of below 15X. I hope for more volatility that causes this great healthcare company to fall below its 52-week low of $33.10 to my target price.

There you have the list of companies I’ll be playing close attention to in September. I debated including Royal Bank on the list, due to its recent price weakness, but ultimately don’t see myself going even more overweight on my position in Canada’s biggest bank.

What companies are on your watch list this month? Do you have differing positions on any of the four companies outlined above?