I decided to invest a little time in my blog today to make it easier on the eyes. No huge changes just four tabs that will help readers navigate the site more efficiently. If you ever wanted to know more about me, my investment philosophy, what I read, or what my holdings are, you're now in luck!
As always, your feedback is always welcome. Hope you enjoy!
Wednesday, April 29, 2015
Saturday, April 25, 2015
Johnson & Johnson Dividend Increase and Quick Obsevations
One of my beautiful, boring, US stocks with global sales diversification is Johnson & Johnson (“JNJ”). As they had for 52 consecutive years previously, on Thursday, the Board of Directors at JNJ increased their dividend yet again, this time by 7.1%. With a yield at close to 3%, and a reasonable P/E ratio of about 18X, I’m fine with continuing to hold JNJ, collecting an ever increasing stream of dividends year after year.
A couple of companies in my portfolio had some interesting price changes this past week. I thought I’d share a couple of observations regarding these price changes below, as I found them amusing.
- Friday morning Microsoft announced strong quarterly results and their stock subsequently went up over 10%. It’s hard to believe in efficient markets when a stable, solid, stead-as-she-goes company like Microsoft can jump 10% on one quarterly earnings release. I know some equity analysts would tell you differently, but having read through the company’s comments, nothing material jumped out at me.
- I own some monthly dividend payers (i.e. Alaris Royalty, H&R REIT, Corus, etc.) and always find it interesting to watch their price spike just before a shareholder of record date. I can somewhat understand when quarterly dividend payers show price spikes before their record dates, but for the life of me, I don’t get why monthly dividend payers show the same behavior. That said, I’ll totally take advantage of the usual fall off in price after the shareholder of record date to pick up shares on the cheap.
- Prior to announcing their quarterly results, Rogers was trading at a 52-week low. After announcing mixed results (earnings miss, revenue meet), Rogers is now up almost 10% off their 52-week low. This might be short-term investors moving into the company in order to pick up the next quarterly dividend, it might be investors expecting bad results and then being pleasantly surprised, it could be lots of things. As a long-term investor in Rogers, I was happy to pick up my latest block of shares at a bargain basement price.
Here’s hoping that dividend aristocrats continue to regularly boost their payouts, markets continue to be inefficient, and that I’m able to benefit from both phenomenon! A good weekend to all!
Wednesday, April 22, 2015
2015 Government of Canada Budget - My Thoughts
As a Canadian working in the financial sector who has a keen interest in personal finance, there are very few days as important to my fiscal well being than federal budget day. After falling oil prices caused Joe Oliver, Canada's Minister of Finance, to delay his budget by several months, and with a fall election looming, yesterday's budget was full of goodies aimed at key constituents for the Conservatives, namely seniors and parents with families. Since my wife and I fall into the latter category of key constituents, there were a couple of perks for us in yesterday's budget. Key among the goodies that impacted me were:
1. Increasing the Tax Free Savings Account Limit to $10,000 from $5,500
As a Canadian who saves and invests a substantial percentage of my earnings, the thought of being able to double the amount that can grow tax free is extremely appealing. Don't get me wrong, I know that only a small percentage of the population will actually be able to take full advantage of the $10,000 contribution room per year, but it's still a great perk for savers and investors. I'd argue that increasing the contribution limit on TFSAs could make our other main tax advantaged savings vehicle, Registered Retirement Savings Plans ("RRSPs") less relevant in the future. The flexibility that TFSAs provide regarding withdrawals (not taxed, no need to pay them back within a certain time frame) will appeal to younger savers who see RRSPs as rigid and irrelevant given their lack of faith in the concept of a government funded retirement.
2. An Enhanced Universal Childcare Benefit
Parents with children under the age of six will now receive $160 from the federal government each month to help offset the costs of childcare, as opposed to $100 previously. Although I'm not one to turn down "free money", I'd point out that $160 couldn't pay for childcare for one week in Ontario. Even under Quebec's subsidized childcare system, $160 won't go far at all paying for my son's care this coming fall. Pundits say that the Conservative government tries to encourage one parent to stay at home with the enhanced childcare benefit and income splitting. The NDP and Liberal parties in Canada have long proposed national childcare programs (similar to what we have in Quebec), but the Conservative party seems reluctant to consider such a costly program.
3. Decreasing the Mandatory Withdrawal Rate on Registered Retirement Income Funds
By the age of 71, senior must convert their RRSPs into registered retirement income funds ("RRIFs"). These RRIF rules required seniors to withdraw (and get taxed) on their funds at a rate of 7.4% at 71 and escalating to 20% by 94. Quite simply, with people living longer due to advances in the health, science, and technology, these mandatory withdrawal rates led to situations where seniors would outlive their retirement savings. The new mandatory withdrawal rates (5.3% to start increasing to 18.8% by 94) make a little more sense.
I'd feel guilty leaving out the fact that income splitting for tax purposes, which my wife and I benefited from in fiscal 2014, remains a part of the 2015 budget. This was an incredibly controversial matter when introduced due to the high cost (~$2.2 billion per year) and relatively low percentage (estimated ~15%) of households who benefited.
Putting aside my saver/investor persona for a second, and changing into full fledge accountant mode, I'd like to point out several points that really irked me about this year's budget.
1. You Don't Balance Budgets by Selling Assets and Cutting Contingency Funds
The government incorporated gains on their sale of General Motors shares (bought during the 2008 auto industry bailout) and cut a $3B contingency fund to $1B in order to balance the 2015 budget. Clearly, these methods are unsustainable, and can only be done once. Plus, I have to question a government who had a $3B contingency fund incorporated in previous budgets. To me, this is the equivalent of charging unforeseen expenses to "miscellaneous".
2. Announce Now, Spend Later
In terms of horrible political tricks, announcing major spending initiatives now, but not actually delivering the funds for years, is despicable. The Conservative government announced major spending on national defense, infrastructure, health care, and innovation...but don't expect to see any dollars invested in those key sectors until 2017/2018. Instead of ranting about this deplorable tactic, I'll simply say it amounts to false advertising.
3. Buying Votes
As alluded to in my opening paragraph, if you happen to be a senior, or be part of a younger family, the 2015 budget was aimed at you. You could go as far as to generalize that the Conservatives are trying to beef up support with seniors (who vote in higher proportions than most other age groups), soccer moms, and conservative Christians (the Conservatives stronghold in Western Canada). For the record, my vote has never been for sale, and despite the perks offered to me in budget 2015, I'll continue to vote for the best local federal candidate that I feel will represent my interests parliament.
As tempting as it is to start a tirade on the 'Balanced Budget' legislation the Conservatives introduced, I'm going to steer clear of that. There's ample evidence that proves that such legislation is ineffective, not to mention disingenuous given the Conservatives' own fiscal record.
Do any fellow Canadians have thoughts on the 2015 budget? Or am I the only one geeky enough to find it a compelling read?
1. Increasing the Tax Free Savings Account Limit to $10,000 from $5,500
As a Canadian who saves and invests a substantial percentage of my earnings, the thought of being able to double the amount that can grow tax free is extremely appealing. Don't get me wrong, I know that only a small percentage of the population will actually be able to take full advantage of the $10,000 contribution room per year, but it's still a great perk for savers and investors. I'd argue that increasing the contribution limit on TFSAs could make our other main tax advantaged savings vehicle, Registered Retirement Savings Plans ("RRSPs") less relevant in the future. The flexibility that TFSAs provide regarding withdrawals (not taxed, no need to pay them back within a certain time frame) will appeal to younger savers who see RRSPs as rigid and irrelevant given their lack of faith in the concept of a government funded retirement.
2. An Enhanced Universal Childcare Benefit
Parents with children under the age of six will now receive $160 from the federal government each month to help offset the costs of childcare, as opposed to $100 previously. Although I'm not one to turn down "free money", I'd point out that $160 couldn't pay for childcare for one week in Ontario. Even under Quebec's subsidized childcare system, $160 won't go far at all paying for my son's care this coming fall. Pundits say that the Conservative government tries to encourage one parent to stay at home with the enhanced childcare benefit and income splitting. The NDP and Liberal parties in Canada have long proposed national childcare programs (similar to what we have in Quebec), but the Conservative party seems reluctant to consider such a costly program.
3. Decreasing the Mandatory Withdrawal Rate on Registered Retirement Income Funds
By the age of 71, senior must convert their RRSPs into registered retirement income funds ("RRIFs"). These RRIF rules required seniors to withdraw (and get taxed) on their funds at a rate of 7.4% at 71 and escalating to 20% by 94. Quite simply, with people living longer due to advances in the health, science, and technology, these mandatory withdrawal rates led to situations where seniors would outlive their retirement savings. The new mandatory withdrawal rates (5.3% to start increasing to 18.8% by 94) make a little more sense.
I'd feel guilty leaving out the fact that income splitting for tax purposes, which my wife and I benefited from in fiscal 2014, remains a part of the 2015 budget. This was an incredibly controversial matter when introduced due to the high cost (~$2.2 billion per year) and relatively low percentage (estimated ~15%) of households who benefited.
Putting aside my saver/investor persona for a second, and changing into full fledge accountant mode, I'd like to point out several points that really irked me about this year's budget.
1. You Don't Balance Budgets by Selling Assets and Cutting Contingency Funds
The government incorporated gains on their sale of General Motors shares (bought during the 2008 auto industry bailout) and cut a $3B contingency fund to $1B in order to balance the 2015 budget. Clearly, these methods are unsustainable, and can only be done once. Plus, I have to question a government who had a $3B contingency fund incorporated in previous budgets. To me, this is the equivalent of charging unforeseen expenses to "miscellaneous".
2. Announce Now, Spend Later
In terms of horrible political tricks, announcing major spending initiatives now, but not actually delivering the funds for years, is despicable. The Conservative government announced major spending on national defense, infrastructure, health care, and innovation...but don't expect to see any dollars invested in those key sectors until 2017/2018. Instead of ranting about this deplorable tactic, I'll simply say it amounts to false advertising.
3. Buying Votes
As alluded to in my opening paragraph, if you happen to be a senior, or be part of a younger family, the 2015 budget was aimed at you. You could go as far as to generalize that the Conservatives are trying to beef up support with seniors (who vote in higher proportions than most other age groups), soccer moms, and conservative Christians (the Conservatives stronghold in Western Canada). For the record, my vote has never been for sale, and despite the perks offered to me in budget 2015, I'll continue to vote for the best local federal candidate that I feel will represent my interests parliament.
As tempting as it is to start a tirade on the 'Balanced Budget' legislation the Conservatives introduced, I'm going to steer clear of that. There's ample evidence that proves that such legislation is ineffective, not to mention disingenuous given the Conservatives' own fiscal record.
Do any fellow Canadians have thoughts on the 2015 budget? Or am I the only one geeky enough to find it a compelling read?
Sunday, April 19, 2015
Kinder Morgan and Omega Healthcare Investors Raise Dividends Again
At work, if I meet expectations and my organization has a good year, I receive a small raise come February. As a dividend investor, as long as I pick the right companies to invest in and sit patiently, I receive regular raises as often as quarterly. After Kinder Morgan and Omega Healthcare Investors were kind enough to give me small raises during the first quarter of 2015, each increasing their respective dividends by a penny, both recently gave me another raise!
Omega Healthcare Investors boosted their quarterly dividend by another penny, despite cautioning their previous 2015 guidance was too aggressive. Although it took longer than expected to complete the merger with Aviv, management still had the confidence to boost their distribution for the tenth quarter in a row. Having recently added more shares to my position in Omega, I loved management's vote of faith in the combined company.
Kinder Morgan could very well be the best dividend growth stock in the United States over the next five years. With a dividend yield of 4.4% currently, and management expecting to grow their dividend by 10% per year through 2020, I'm glad to be a part of this juggernaut's flight path. Pipelines such as Kinder have huge competitive advantages in that it would take a new organization a huge amount of time to get the necessary regulatory approvals and money to actually build the infrastructure in order to be able to compete current companies. Ethical objections aside, as long as America needs to transport fuel, I expect Kinder to continue to increase the flow of dividends to its shareholders, just as it sees more oil and natural gas flowing through their pipes.
The second quarter of 2015 is off to a strong start, and I expect the positive news to continue as Telus and Johnson & Johnson should also soon announce dividend raises.
Wednesday, April 15, 2015
Recent Buy - Rogers Communications
In a beautiful twist of fate, as Mr. Market marked the share price of Rogers Communications ("Rogers") down almost 2% today for no reason at all, I was able to buy one of my favorite dividend growers of all time! Better yet, by purchasing these shares in my tax-free savings account ("TFSA), I was able to get closer to completing my portfolio transformation. I'll just have to wait more than a month to sell the same number of shares in Rogers that I bought today in my RRSP, and then I'll hold all my Rogers stock in my TFSA.
Rogers has been a long-time holding of mine (over 5-years), and I've slowly added to my position over time. Although their customer service is notoriously bad, something the relatively new CEO has indicated is a priority to improve, I can assure you there are many positives about the company. These positives include:
- They're the industry leader in wireless in Canada with over 9.5 million subscribers. They're also the second biggest cable company in Canada servicing cable, internet, and fixed line phone subscribers.
- Despite our TSX hitting all-time highs, Rogers is still priced at a very reasonable P/E of ~16X.
- Their balance sheet and financial performance is strong as reflected in their BBB+/Stable and Baa1/Stable issuer ratings from S&P and Moody's respectively.
- The dividend yield of 4.5% is impressive, as is the 1-year dividend growth rate of 5% and the 5-year average dividend growth rate of 10%.
As you may have guessed, I'm extremely happy to keep progressing toward my goal of finishing my portfolio transformation. Holding all my shares of the same company in the same account, and focusing on tax-efficient placement of my holdings are one of my big three goals for the year.
Rogers has been a long-time holding of mine (over 5-years), and I've slowly added to my position over time. Although their customer service is notoriously bad, something the relatively new CEO has indicated is a priority to improve, I can assure you there are many positives about the company. These positives include:
- They're the industry leader in wireless in Canada with over 9.5 million subscribers. They're also the second biggest cable company in Canada servicing cable, internet, and fixed line phone subscribers.
- Despite our TSX hitting all-time highs, Rogers is still priced at a very reasonable P/E of ~16X.
- Their balance sheet and financial performance is strong as reflected in their BBB+/Stable and Baa1/Stable issuer ratings from S&P and Moody's respectively.
- The dividend yield of 4.5% is impressive, as is the 1-year dividend growth rate of 5% and the 5-year average dividend growth rate of 10%.
As you may have guessed, I'm extremely happy to keep progressing toward my goal of finishing my portfolio transformation. Holding all my shares of the same company in the same account, and focusing on tax-efficient placement of my holdings are one of my big three goals for the year.
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