October Dividend Increases, Money Experiment and Goals

As October draws to a close, and I hope to break my record of two trick-or-treaters visiting our house tomorrow, here’s an update on the dividend increases in my portfolio, the results of my money experiment, and my progress on non-financial goals.

There were two companies in my investment holdings that announced dividend increases in October.

-   Kinder Morgan boosted their payout by 4%, raising the quarterly dividend from $0.49 to $0.51 per share. However, Kinder’s quarterly earnings release contained more tricks than treats for its shareholders, as management revised their forward dividend growth guidance down from 10% to between 6% and 10% for 2016. Additionally, management mentioned some “alternative funding sources” to finance growth initiatives at a lower cost than equity financing. It’s worth noting that distributable cash flow per share was only $0.51 during Q3, barely enough to cover the dividend.

-   In a much more boring and straight forward press release, Omega Healthcare Investors announced their 13 consecutive quarterly dividend increase, boosting their quarterly payout from $0.55 to $0.56. I’m interested to hear Omega’s Q3 results on November 2^nd.

After buying a poppy from a veteran this morning, and with only a tip to grocery store baggers planned tomorrow, I’m officially calling my October money experiment a success.  As per the picture below, today I have $7.25 left of my initial $100. My largest expenditures in the second half of the month were treating my wife and son to chocolate dipped ice cream cones ($8.05) and a work team breakfast ($8.00 including tip). Not only did I get to test my frugality muscle, I also have a better idea of where my cash goes to over the course of an average month. I’m planning on starting another money experiment in November, so stay tuned to hear more about it.

Each month, I track three non-financial goals. I’m happy to report that I remain under my maximum weight of 160 pounds, weighing in a shade over 154 this morning. With a bronchial infection and cold knocking me out for a few weeks in October, I was happy to meet this goal. Going to the gym at work has really helped me in weight maintenance. As this is my ninth post this month, I’m well ahead of my goal of averaging a blog post each week. That said, the quality of my posts has not been high lately, and I promise to put more effort into improving this next month. Lastly, I made a donation to the Canadian Mental Health Association, so I’m tracking well against my giving back goal as well. Mental health is an important issue for me, and I hope my gift helps others connect to resources when they are in need.

All in all, October was a hectic, but great month. Bring on November!

What was your high-light of October?

Recent Buy - Canadian Utilities

Sometimes things work out beautifully. After posting last week about selling my position in Canadian Utilities, and indicating that I’d be interested in re-establishing the position inside my RRSP at a lower price, the company announced their Q3 results on October 23rd. Although I didn’t find the Q3 results disappointing, they were below analyst expectations causing the stock to promptly drop almost 10%. Since I’m a big fan of this business, I took the opportunity to re-establish my position. I was able to buy shares at $33.92, making my dividend yield on cost 3.48%. Given Canadian Utilities enviable 43-year record of increasing their dividend annually (the longest of ANY Canadian company), I’m thrilled to be a shareholder again. I bought the shares in enough time to qualify for the November 5^th holder of record date for the dividend, thus ensuring I didn’t miss a payment. My Investment Holdings page has been updated to reflect this recent acquisition. 

Given a very hectic month at work, little else has happened with my portfolio. I was close to buying shares in Kinder Morgan and Enbridge Income Fund earlier this week, but my limit orders weren’t met (literally pennies away from my limit price in each case). With one business day left in October, it’s safe to say it was a quiet month for me on the financial front. I’ll post the results of my October money experiment, and a non-financial goals update tomorrow.

When buying stock, do you use market or limit orders?

Thoughts on the MoneySense Retirement All-Star Stocks for 2015

The only magazine I subscribe to is MoneySense. Each year, my favorite issue lists the 100 Retirement All-Star Stocks. The focus is on dividend stocks that have delivered a steady stream of income year after year. The best stocks are given an 'A' while the second best group are given a 'B'.  From 2007 (when the first list of was published) to 2015, 'A' stocks have generated a 117.5% return (included re-invested dividends), while 'A' and 'B' stocks increased 67.2%. In comparison, the S&P/TSX Composite Index ETF (XIC) increased 25.1% while dividend-oriented iShares Canada Select Dividend ETF (XDV) rose 35%.

Although the weighting of their ranking method is not released, only quantitative criteria are used in their calculations. Quantitative factors include dividend yield, dividend growth, P/E, dividends/earnings, debt/equity, price / cash flow, price to book, one-year return, and five-year return.

Seven companies were given an 'A' grade this year:
Bank of Montreal
Bank of Nova Scotia
Genworth MI Canada
Great-West Lifeco
Power Corp of Canada
Sun Life Financial
Toronto-Dominion Bank

HOLY FINANCIALS BATMAN! Three out of the seven companies are banks, two are general insurance companies (GWL and Sun Life), Genworth is a mortgage insurer, and Power Corp of Canada is a financial conglomerate (which I tend to think of as an asset manager). Although any one of the seven would make a good addition to a portfolio, you'd definitely want to make an effort to further diversify outside of the financial sector.

Fourteen companies were given a 'B' grade in 2015:
ATCO
Brookfield Asset Management
CIBC
Finning International
First Capital Realty
IGM Financial
Industrial Alliance Insurance
Manulife Financial
National Bank of Canada
Potash Corp of Saskatewan
Power Financial
SNC-Lavalin Group
TMX Group
Whitecap Resources

Again, financials play a huge role in the 'B' list accounting for nine of the fourteen companies. The non-financials contain some interesting names like ATCO (watch list company), Finning (showing up on many of my Canadian dividend screens), and SNC (I've owned in the past).

It's odd that the only Canadian major bank not represented on either list is Royal Bank, the largest bank in Canada. Another oddity about the list is that it contains ATCO, yet not its subsidiary Canadian Utilities with a higher dividend yield and better 5-year performance which was given a 'D'.  The last observation is that MoneySense once again gave Rogers Communications, their owner, a 'D'. Obviously, there's something to be said for demonstrating editorial independence!

Do you own any of the retirement all-star stocks for 2015? If you had to buy just one of them, what would it be?

Two Recent Sells: BCE Inc and Canadian Utilities

With the TSX up over 4% in October, I took advantage of the market upswing with two recent stock sales. Although my sale of BCE Inc (“BCE”) in my RRSP was something I previously planned and explained, my sale of my position in Canadian Utilities is undoubtedly more of a surprise.

After completing a full position of BCE in July in my non-registered account, I bided my time before selling the equivalent full position in my RRSP. Although I was fine being overweight this telecommunication heavyweight, I felt the time had come to part ways with my RRSP position as BCE’s share price climbed steadily over the last few months to the point where it has a P/E of almost 20X. The share price appreciation has drove the dividend yield down to about 4.5%, compared to the 4.9% yield on cost on my July purchase.

How could I sell my Canadian Utilities position while simultaneously having it on my watch list the last two months? As Canadian Utilities moved further above my target price over the last two months, I realized that although I think it’s an excellent company, due to its slow growth nature, I would be more comfortable re-initiating my position at a lower entry point. Since my previous Canadian Utilities position was inside my RRSP, I knew there would be no tax penalties if I re-bought the position at a lower price within a month. Like BCE, as Canadian Utilities’ P/E grew closer to 20X, and their dividend yield decreased to slightly over 3%, my perception of value declined accordingly.

With plenty of cash now sitting idle in my RRSP, I’ve been close to increasing my position on Alaris Royalty, as I continue to feel strongly that they represent an exceptional value at their current price. Nothing else on my watch list jumps at me at the moment, so I’ll do my best to remain patient until a juicy pitch comes along. My investment holdings page has been updated to reflect the two sales outlined above. 

Have you ever sold a stock with the hopes of re-initiating a position at a lower entry point? If so, were you successful?

October Money Experiment

Being a huge fan of J. Money and his budgetsaresexy site, as homage to one of my favorite bloggers, I decided it was time to conduct my own money experiment. Although I’ve tried money experiments in the past, by documenting my trial here, my accountability to see it through will increase. My October money experiment is incredibly simple: Can I limit my out of pocket expenses to $100?

 (Photo By DiH)

Since my wife started back to work in September, I noticed that I’ve been spending much less cash. One of the main reasons for my decrease in cash expenses is that I’m bringing a lunch to work more frequently than when my wife was on maternity leave. Since my wife is as smart as she is beautiful, she generally prepares bigger dinners when she works, in order to create some leftovers for lunches. Since she returned to work in September, I’ve bought exactly three lunches.

With October half over, here’s what my cash situation looks like today after buying my first lunch of the month.

 (Photo By DiH)

Although I’ve never been much for budgeting or tracking expenses, I can provide an overview of what I’ve spent my cash on so far in October:

-          $20         Race entry for a 5-km run

-          $20         Hair cut (including tip)

-          $10         Book of stamps

-          $4           Hot dogs for my two nephews

-          $4           Lunch today

-          $3           Miscellaneous (mainly tipping baggers at grocery store)

Although $39 might not seem like a lot for 15 more days in the month, I feel like it’s plenty. With no need to pay for a haircut until next month, a low chance of entering another  road race, and a near 0% chance I’ll need more stamps (I use about one a month), I should be fine. I might bring my nephews out for milkshakes this weekend, but at most, that’s only an extra $20 out of my pocket.

I’m optimistic that I can make my remaining cash last until November 1^st. If my money happens to run out, I still consider this experiment a big success, as it’s made me more aware of what I spend on regular monthly expenses.

Have you ever conducted a money experiment? Do you think I can make the $39 last until the end of the month?