Wednesday, February 22, 2017

Recent Buy

     As the fear of the possibility of a major correction or recession coming in the next year, some investors have sold out all of the holdings hoping to buy back in later at lower costs. At the same time, there  are also investors who are looking for opportunities to find good income producing stocks at reasonable prices. 
  
    The food business is a recession proof business to some degree.  Regardless if the economy is good or bad people have to eat. This eating can be food that is grown by themselves, food from a grocery store, a fast food  restaurant, and a regular restaurant. Nowadays, people are watching their money more closely by chosen fast food over the regular restaurants as it is cheaper. 

    Lots of the fast food restaurants still use meat products that have hormones in them.  There is one such restaurant that uses hormone free meat.  This company is A&W Food Services of Canada Inc.  Although the regular stock market investor can not hold shares in A&W Food Services directly, they can own units through their Royalty Fund.  The ticker symbol for the royalty fund is AW.UN

    How does the AW.UN make money? The fund makes money from royalties from sales at all their restaurants that are currently in the royalty pool.  

About the Fund

The Fund is a limited purpose trust established to invest in A&W Trade Marks Inc. (Trade Marks), which indirectly owns the A&W trade-marks used in the A&W quick service restaurant business in Canada. The trade-marks comprise some of the best-known brand names in the Canadian food service industry. Trade Marks licences these trade-marks to A&W Food Services of Canada Inc. in exchange for a royalty of 3 per cent of the sales of 838 A&W restaurants in Canada.
This structure makes the A&W Revenue Royalties Income Fund a "top-line" fund because income is based solely on the sales of A&W restaurants minus the Fund's and Trade Marks' minimal operating expenses, interest on Trade Marks' term debt and income taxes. The Fund is not subject to the variability of earnings or expenses associated with an operating business.   ( Source: http://www.awincomefund.com/aboutfund/default.asp )

    On February 14, A&W released it earnings for 2016. Some of the highlights of the earnings release are as follows :
  •  Same store sales growth up 3.4% for the year
  • Two years stacked same store sales growth  +11%
  • Royalty income by 7.3% from $31826000 in 2015 to $34135000 in 2016
  • Distributions increases twice during 2016
  • 861 restaurants now in the Royalty Pool as per press release Dec 19, 2016

     As per the table immediately above, A&W has the second most amount of restaurants.

    In the last 5 years, A&W Food Services of Canada has changed where their products come from. They have been the first in the industry in Canada to do this in these respective categories. These changes are as follows:
  • In 2013, A&W launched new beef which is raised without the use of hormones or steroids.
  • In September 2014, A&W introduced eggs from hens fed a fully vegetarian diet without animal by-products.
  • In October 2014, A&W began using chicken raised without the use of antibiotics and fed a grain-based, vegetarian diet without animal by-products.
  • In January 2015, Organic and Fair Trade coffee was introduced.
  • In February 2016, A&W introduced pork raised without the use of antibiotics. 

Conclusion:

    Recently A&W released its earnings on Feb 14. The CEO of A&W was on BNN, which is a Canadian Business News Network  channel. The CEO stated the company is targeting millennials who want to become entrepreneurs  by becoming  franchisees over the next several years.

   The stock has seen some weakness during the last while, as investors are taking profits.  On February, I purchased 38 units of AW.UN for a total cost of $1487.08 including commissions. This purchase was in my TFSA

     AW.UN currently pays a annual distribution of $1.596 per unit.  Therefore, this purchase adds $60.65 to my annual dividend income. 

  I will update my investing tab spreadsheet in earlier March to reflect this transaction.

Disclosure:  Long AW.UN

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Saturday, February 18, 2017

Recent Dividend Increases

                                                       
  We are just past the mid point of February 2017, and I have received 4 dividend increases so far. Dividends are "proof in the pudding" that a company has profits.  Therefore dividend increases indicate the Board of Directors believe the company will grow its profits and therefore like to award their shareholders with a dividend increase.  A lot of companies increase the dividends every year.  If  a company has increased their dividend for 25 consecutive years, an investor can be confident that the company will increase the dividend the following year.

     The first dividend increase I received was from Enbridge Inc, which you can read about here.  Enbridge Inc. (ENB) trades on both the NYSE and the Toronto Stock Exchange.  This dividend increase was 10%.  This past week, Enbridge's deal to acquire Spectra Energy was approved by regulators. The deal was previously approved by shareholders of both companies.  ENB has stated the dividend would likely increase some more once the Spectra Energy acquisition was approved.  As of Feb 18, this dividend increases mean I will collect $10.38 more in dividends over the next 12 months.

     Canadian National Railway is the only railway in North America that services 3 coasts.  These coasts are east coast via Halifax and Montreal, west coast via ports of Vancouver and Prince Rupert, and the Gulf coast.  Currently, Halifax is the closest port to Europe and Asia on the East Coast.  Bill Gates company owns approximately 14% of CN Rail. CN Rail trades on the NYSE (CNI) and Toronto Stock Exchange (CNR).  CN Rail, became was part of a crown corporation and became privatized on Nov 17, 1995. Since the privatization of CN RAIL and becoming a public company, CN Rail is considered to be the best railroad company in North America. CN Rail increase its dividend by $0.15 per share annually, from $1.50 to $1.65.  I currently own 38 shares of CNR, which means my dividend income increases $5.70.

    Bell Canada Enterprises (BCE) is one of the big 3 telecom providers in Canada. They communication services include internet, digital TV, telephone and wireless.  The industry has lots of regulations to contend with via the CRTC. CRTC is the Canadian Radio-Television and Telephone Commission. The CRTC is an administrative tribunal that regulates and supervises broadcasting and telecommunications in the public interest.  On February 2, BCE released its 4Q earnings and announced a dividend increase of 5.1%. This represents a $0.14 per share per year increase from $2.73 to $2.87 per share.  Currently, I own 100 shares so this means my annual dividend income increases $14.00  over the next 12 months.   BCE is also a significant investor in Canada's leading sports and entertainment institutions, the Montreal Canadiens and Maple Leafs Sports and Entertainment. Bell  is a minority owner  of the Montreal Canadiens, represents 18%. So I own a tiny sliver of the Montreal Canadiens and the Maple Leafs via my investment in BCE.

    Killam Properties REIT, is a real estate investment trust, headquartered in Halifax, Nova Scotia. Killim Properties REIT (KMP.UN) operated as a corporation and converted to a REIT on January 1, 2016. KMP.UN owns, manages and develops multi-family residential properties in Atlantic Canada, Ontario and Alberta. Alberta is currently going through a major recession due to the price of a barrel of crude oil. Fortunately, KMP.UMN does not have a lot of exposure to the Alberta market. KMP.UN could pick up new properties in Alberta as well below Net Asset Value due to this recession.  During the last week, KMP.UN releases its earnings and announced a distribution increase of 3.3% from $0.60 to $0.62 per unit per year. KMP.UN pays a monthly distribution.  The distribution increase comes into affect for March's distribution that is paid out mid April.  I currently own 302 units of KMP.UN, so this means my dividend income will increase $6.04 over the next 12 months.
    
Summary:

  • ENB   - $10.38 increase in total between 2 different accounts
  • BCE - $14.00
  • CNR - $5.70
  • KMP.UN - $6.04
The net increase in my dividend income is $36.12.  If I was to invest my own money and using a yield of 3.5%, I would have to invest $1032.00 of my own money.

Disclosure:  Long ENB, BCE, CNR, KMP.UN

Photo Credit: www.mipaq,co.za

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Thursday, February 16, 2017

Option trade

    With the markets on both sides of the border (US and Canada) marching higher, it is difficult to find stocks trading for cheap. I am bulling on Telus Communications at the moment. Looking at a 6 month chart of Telus Communications (T.TO).


Click to Enlarge

      On February 15,  I sold a put option in T.TO with a March 17 2017 expiration day.  I collected a premium of $29.05 after commissions.  The strike price is $42.00 per share.

Summary:

Strike Price: $42.00/
Total Premium Received : $29.05
Days to Expiration: 30
Current Annual Dividend = $1.92
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $29.05 / (1*100*$42.00)
                     = .00692
                     = 0.692%

The total return for 30 days is 0.692%.  The annualized return is 8.42%.  My high interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*$42- $29.05 +$24.95] / 100
                                                = $41.96


Yield on Cost = $1.92./$41.96*100 %
                       = 4.575%

 What would the yield be if shares purchased directly at $65.50 using a limit order?

Commission = $4.95

ACB/per share = [1*100*$42.00+$4.95 ] / 100
                         = $42.04

Yield on Cost = ($1.92/ $42.04) * 100%
                       = 4.567%

Disclosure:  I do not own any shares of T.TO in any accounts as of this writing.


DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.




Monday, February 13, 2017

How To Get High Yield in Savings Account

       In this current interest rate environment, the interest rate on high interest savings accounts are laughable.  With inflation, a saver is losing money as the interest rate is lower that the rate of inflation. The rate of inflation in Canada, as per www.tradingeconomics.com is approximately 1.6%.  As of Feb 12, the highest interest rate is 2.00 at EQ Bank as per www.ratehub.ca, which surpasses this by a small amount.


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   I went hunting to look for a higher yield that is greater than inflation.  I had previously purchased units in an ETF that had a high yield. The Horizon Natural Gas Yield ETF was trading below $16 a unit, so I decided to take a closer look.  Below is a chart of  HNY over the past 365 days.





     From the chart, we see the price of the ETF is highly volatile.  This high volatility is justified by the investment  objective of the fund which is:

The investment objectives of Horizon's HNY are to provide unit holders with : (I) exposure to the price of  natural gas futures hedged to the Canadian Dollar less the ETF's fees and expensens, (II) tax-efficient monthly distributions, (III) in order to mitigate downside risk and generate income, exposure to a cover call writing strategy. (Source : http://www.horizonsetfs.com/ETF/HNY )

    In general, a savings account is not suppose to decrease in value unless you take money out.  I put some savings into my margin account to purchase high yield assets. On of these purchases involved purchasing units of HNY.  On Nov 8 of 2016 I purchased 14 units of HNY at $13.64 per unit. My brokerage has a commission free ETFs, so the overall commission was $0.05 due to ECN fees.  Therefore the total cost of my units is $191.01. 

    The distribution varies month to month.  The last distribution payment was $0.11363 per unit. So if this yield was paid each month, an investor (in this case: a saver) could annual yield of 8.64%.  This yield of 8.64% represents a percentage of net asset value the day before the ex-dividend corresponding to the last distribution of the fund. 

I received 3 distributions so far from this position which are  $1.59, $1.38 and $1.59 for the last 3 months.

     Currently, the annual interest rate on my high interest savings account is 0.80%.  So for a balance of $191.01, I would roughly have made $0.42 total in interest. I used 100 days which is slightly above the actual amount of days from Nov 8 to Feb 12.

      With the high volality of this ETF, as indicated in the chart above, the majority of my savings are in high interest savings accounts that pay little interest.  With the high volality of this position,  I purchased my units when the price of the ETF was below $14 per unit.  I do not count the distributions from these HNY units in my monthly dividend income totals.

Do you use strategies like this, to boost your savings?

Disclosure:  I own 39 units of this position inside my TFSA at a cost of $13.60 per unit.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Saturday, February 4, 2017

Dividend Income Update - January 2017




      The month of January is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.

       The markets continue to go higher in the month of January.  The price of barrel of crude oil continues to trade over $50.00 per barrel and is currently around $53.00 per barrel.  With the price of oil seeming to remain above $50.00,  the drilling activity in western Canada has begun to pick up. It is no where near it was about 3 years ago, but certainly a big increase in activity over the last year and a half.

      One thing for sure, is that I was paid dividends and distributions for being a shareholder or unit holder in  various companies or funds. In  Sept 2016, the Dream Office REIT in the margin account will be counted as dividend income  for the first time.

 Non-registered Account

  • Bank of Nova Scotia (BNS)  - $24.07   (Transfer Agent)
  • Bank of Nova Scotia (BNS)  - $14.80
  • Bell Canada Enterprises (BCE) - $68.25
  • Canadian Imperial Bank of Commerce (CM) - $34.72
  • Enerplus (ERF)  -$ 5.58
  • Dream Office REIT   (D.UN)  - $ 76.00
  • Shaw Communications (SJR.B)    - $19.75
  • Rogers Communications Class B (RCI.B) - $96.00

TFSA
  • Boston Pizza  Royalties Fund (BPF.UN)   - $26.91
  • iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $1.28
  • Dream Office REIT   (D.UN)  - $ 17.63
  • Horizons Natural Gas Yield ETF (HNY)  - $3.85
  • Killam Properties REIT (KMP.UN) - $  15.10
  • TransForce International (TFII) - $9.50

Total = $413.44

        The bond ETF , iShares 1-5 yr Laddered Canada Corporate Bond ETF, paid 2 distributions this month for a total of  $1.28.  Cominar REIT did not pay a distribution as they paid on December 30 in addition to the middle of December.

        As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 3 months or from 12 months ago.  Therefore, I will not compare November 2016 dividend income with that of 3 months and 12 months ago.

 Dream REIT has reduced the amount of distribution they pay monthly which was announced in February 2016.  Recently, I wrote about purchasing more units of D.UN inside a margin account.  Starting in September, the distribution from this D.UN inside the margin account will be included in my dividend income.

    I received $64.10 in options premiums in January.

     I will update my dividend income tab with the new amount I will include my option premium income also.  It is great to see money from passive income sources deposited into my brokerage account every single month.

How was your dividend income for January 2017?

Disclosure : Long all securities above.

Photo Credit: www.mipaq,co.za

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.



Thursday, February 2, 2017

Portfolio Update - January 2017

       The month of January  2017 is now behind us. The price of a barrel of crude oil trades between $53 to $54 a barrel for WTI crude oil. On January 20, Donald Trump started his job as President of the United States. He has companies and investors on edge right now as they are not sure what he will do.  Trump vows to "make America great again".  Trump wants to create jobs and one way of doing this is to get companies to operate plants or factories within the United States instead of outside. 

     I had 3 dividend raises since last Portfolio update.  Enbridge (ENB) raised there dividend by 10% and may raise it again if the Spectra Energy deal passes all the hurdles.  Canadian National Railway (CNR) increased and Bell Canada Enterprises (BCE).  Shaw Communications (SJR.B) and Rogers Communications (RCI.B) reported dividends by did not raise its dividend. SJR,B and RCI.B did not raise their dividend most likely due to lack luster revenue from their internet streaming service, Shomi.  RCI.B and SJR.B teamed up to run Shomi to complete with Netflix, which you can read about here. Shomi was shut down on November 30, 2016.  Netflix can allow 5 profiles on one account, so you can share your account with another member of household or a friend at a different location. As RCI.B and SJR.B have not raised their dividends in about 2 years, investors are hoping for a dividend raise soon now the Shomi has been shut down.

   On January 5, I wrote about my first option trade for the 2017 calendar year, which you can read about here.  This option contracts ended up being assigned on expiration day as the price of Potash Corporation of Saskatchewan was trading higher than the strike price of $25.00 at expiration.  My 900 shares of IAMGOLD (IMG.TO) ended up behind assigned at expiration as well.  You can read about POT and IMG assignments here.

   I sold a put option contract in TD Bank (TD) with a strike price of $65.50 with a February 17 expiration day.  I collected a premium of $24.05 after commissions.  I previously owned TD in the past, but is was called away.

Shares Acquired Through DRIP


3 Unit of D.UN.TO @ $19.5535 for a total cost of $58.66 (Margin Account)

0.308128 shares of BNS @ $78.1688 for a total cost of $24.07 (Transfer agent )

Cominar REIT did not pay a distribution this month as it paid a distribution at the end December besides it usual middle of the month. Enerplus dividend is not large enough to purchase 1 whole share.  The distribution of D.UN.TO inside the TFSA is not large enough to purchase a unit of D.UN as the unit price as rising in value during the last couple of months.

As of February 2, the value of the portfolio is $102753.21. This is a 1.686%  increase over last month's total.  The spreadsheet in the investment tab above has been updated.

 Disclosure:   Long D.UN, CUF.UN, RCI.B, SJR.B, ERF, BNS, ENB, CNR

Please Note:  All stocks are from the Toronto Stock Exchange.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Friday, January 27, 2017

Option Trade

    With the markets on both sides of the border (US and Canada) marching higher, it is difficult to find stocks trading for cheap. One stock that I have owned in the past was TD Bank (ticker symbol: TD).  My prior position was called away. This stock keeps marching higher and higher, following the trend of the markets over the last while.

      So on January 23, I sold a put option in TD with a February 17, 2017 expiration day.  I collected a premium of $24.05 after commissions.

Summary:

Strike Price: $65.50
Total Premium Received : $24.05
Days to Expiration: 26
Current Annual Dividend = $2.20
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $24.05 / (1*100*$65.50)
                     = .0037
                     = 0.37%

The total return for 26 days is 0.37%.  The annualized return is 5.154%.  My high interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*65.50- $24.05 +$24.95] / 100
                                                = $65.51


Yield on Cost = $2.20/$65.51 *100 %
                       = 3.358%

 What would the yield be if shares purchased directly at $65.50 using a limit order?

Commission = $4.95

ACB/per share = [1*100*$65.50+$4.95 ] / 100
                         = $65.55

Yield on Cost = ($2.20/ $65.55) * 100%
                       = 3.356 %

The yield on cost appears to be the same almost. If the premium received was higher, then the yield on cost for the option assignment would be greater as the adjusted cost basis would be a lower dollar figure.

Please Note:  Since January 23, TD has increased in value.

Click to Enlarge



Disclosure:  I do not own any shares of TD in any accounts as of this writing.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.