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.  

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. 

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.

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.

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.