Tuesday, December 6, 2016

Dividend Increase

        What happened Tuesday Dec 6, prior to the markets opening?  One of Canada's big 5 banks released its 4th quarter earnings.  This bank was Bank of Montreal, whose ticker symbol is BMO.  BMO trades on both the Toronto Stock Exchange and the New York Exchange.  Some of the highlights are as follows:

  • 4th quarter earnings of C  $1.40 billion  vs C 1.26 billion in 2015
  • Earnings growth of 11.1%  year over year
  • Q4 EPS C $2.10 vs EPS C$1.90 in Q4 of 2015
  • EPS Growth 10.5% year over year
  • Q4 Revenue C $5.28 billion vs C $4.98 billion in 2015
  • Revenue Growth 6.0% year over year

Note:  C in the bullet section stands for Canadian as in Canadian dollars
  
   Bank of Montreal's board of directors feel good going forward and decided to raised the dividend by $0.08 per year per share.  The annual dividend was raised from $3.44 per share to $3.52 per share.  This represents a 2.33% increase.  This does not seem good at first.  But the Canadian banks of been raising the dividend twice a year. The Feb 2016 dividend payment was $0.84 per share, which corresponds to an annual dividend rate of $ 3.36 per share. The dividend was then raised $0.02 per quarter per share for the Aug 2016 payment.  Therefore as you can see the annual dividend was raised from $3.36 per share to $3.52 per share.  This represents an effective increase of 4.76% over 4 quarters.

    A 4.76% increase over 4 quarters does not seem much.  Considering the unemployment rate in Alberta due to low oil prices, this increase is more than welcome.

    Currently, I own 35 shares of BMO which was purchased on the Toronto Stock Exchange. Therefore with this $0.08 per year increase, my forward annual dividend income is increase by $2.80.   This $2.80 is equivalent to investing $80 of my own money at a 3.5% yield. But I did not have to invest any of my money and got this $2.80 per year increase in my annual dividend income.  I get this increase to my annual dividend income for just being a shareholder in Bank of Montreal.

Note:  The annual dividend rate for BMO has been updated on the Investment Tab spread sheet

Disclosure:  Long BMO

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.

Sunday, December 4, 2016

Dividend Update - November 2016




      The month of November 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 November.  The price of a barrel of crude oil continues to play a major role in market sentiment. OPEC recently cut production by 1.2 million barrels per day. This caused the price of oil to go up to slightly over $50.00 per barrel recently.  I do not see the price going up much more than this in the foreseeable future.  On Nov 8, Donald Trump became President Elect of the United States.  Donald Trump is pro business, so this should be positive for the markets going forward.

      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 Montreal  (BCE) - $30.10
  • Emera (EMA) = $52.25
  • Enerplus (ERF)  -$ 5.58
  • Dream Office REIT   (D.UN)  - $ 75.00
  • Potash Corporation of Saskatchewan (POT) - $26.45
  • Shaw Communications (SJR.B)    - $19.75
TFSA
  • Boston Pizza  Royalties Fund (BPF.UN)   - $26.91
  • Claymore 1-5 yr Laddered Corporate Bond ETF (CBO)  - $0.63
  • Cominar REIT (CUF.UN ) - $20.46
  • Dream Office REIT   (D.UN)  - $ 17.50
  • Killam Properties REIT (KMP.UN) - $  15.10

Total = $289.73

        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.  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 currently have DRIP turned on for the following stocks in margin account, which are D.UN and ERF.  DRIP is turned on for D.UN and CUF.UN inside my TFSA.  DRIP is turned on for BNS and ENB with the transfer agents. When investing with transfer agents directly, all the dividend is reinvested as you are able to buy partial shares. When you can only purchase whole shares with DRIP, then the dividend received has to be higher than the price of the stock to receive at least one share.

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

How was your dividend income for November 2016?

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, December 1, 2016

Portfolio Update - November 2016

       The month of November 2016 is now behind us. What a month as we had 2 major events occur. Donald Trump become President Elect of the United States and OPEC agreed to cut oil production by 1.2 million barrels per day. The latter caused a jump in oil prices to slightly above $50 a barrel for WTI Crude Oil.

      On November 11, I sold 2 call option contracts on the 200 shares of Potash Corporation of Saskatchewan (POT) that I currently own which you can read here. The strike price is $25 with a December 16, 2016 expiration date. 

       On November 14, I wrote about purchasing 39 units of Horizon's Natural Gas Yield ETF, whose ticker symbol is HNY on the Toronto Stock Exchange.  My brokerage provides the opportunity to purchase most ETFs commission free.

      November 18 was option expiration day as it is the third Friday of the Month.  I recently sold 3 call contracts with a $6.00 strike price and 3 put options with a $5.00 strike price.  The 3 put option contracts was assigned at expiration, which you can read about here.  I decided to sell 3 put option contracts at $5.00, in order to average down on my position of  IAMGOLD (Ticker Symbol IMG).  When an investor or trader sells a put option, they are obligated to BUY 100 shares of in the underlying stock.  By selling an put option, an investor can collect a premium up front, for something he or she is willing to do anyway.  So, after this put option assignment I owned a total of 600 shares altogether.

     I purchased an additional 300 shares of IMG as the price was lower than $5.00 a share.  With 900 shares and my adjusted cost basis being around $5.22 a share, I am looking to unload these shares with a direct sell or by selling covered calls.  I did not write a post about this purchase. 

      On November 23, I wrote about different Pathways to Retirement. As lot of people invest in Registered Retirement Savings Plans such as a 401k in the United States and RRSP in Canada. These accounts are savings plans where an investor hopes the money grows and stays above the amount they contributed.  Therefore, these plans will affect an investor's net worth.  An investor in a non-registered account can invest for cash flow or capital gains. The cash flow can come from dividends  interests, and selling options to collect premiums upfront.

      On November 29, I wrote about purchasing 50 shares of High Liner Foods Inc (HLF) at $19.99 per share.  HLF trades on the Toronto Stock Exchange.  As people live busy lives and the health recommendations of eating a certain amount of seafood for things such as Omega 3 fatty acids, people will often purchase Frozen Fish products, to reduce their trips to the grocery stores.  HLF also sells their products to restaurants.  I purchased one of their products today at the grocery store today, as it was on sale.




I recently wrote about selling a put option in Royal Bank (RY) with a strike price of $86.00 and an expiration date of December 16, 2016.  A few days after selling this put option, Royal Bank released its earnings.  Investors reacted negatively to these earnings and the stock fell a few dollars but still remained about my strike price.

 Shares Acquired Through DRIP

1 Unit of D.UN.TO @ $16.8635 for a total cost of $16.86           (TFSA)
1 Unit of CUF.UN.TO @ $13.8035 for a total cost of $13.80      (TFSA)

4 Unit of D.UN.TO @ $16.8635 for a total cost of $67.45 (Margin Account)

As of Dec  1,  2016, the value of the portfolio is $96166.29.  This is a 2.22%  decrease over last month's total.  The spreadsheet in the investment tab above has been updated.

 Disclosure:   Long HLF, IMG, RY, HNY

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.

Option Trade - Royal Bank

      
      I am looking to establish another position with Royal Bank. The stock was currently trading around $89.00 a share after the recently earnings release from Bank of Nova Scotia. The closing price on November 28 was $89.27.

    On Nov 28, I sold 1 put contract on RY with a strike price of $86.00 and expiration date of December 16.  I collected a total premium of  $25.05 after commissions.

Summary:

Strike Price: $86.00
Total Premium Received : $25.05
Days to Expiration: 18
Current Annual Dividend = $3.32
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $25.05 / (1*100*$86.00)
                     = .0029
                     = 0.29%

The total return for 18 days is 0.29%.  The annualized return is 6.08%.  My high interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*86.00 - $25.05 +$24.95] / 100
                                                = $86.00

This would represent a discount of 3.66 % on the closing price of $89.27 on November 28.

Yield on Cost = $3.32 /$86 *100 %
                       = 3.860%

 What would the yield be if shares purchased directly at $86?

Commission = $4.95

ACB/per share = [1*100*$86.00 +$4.95 ] / 100
                         = $86.04

Yield on Cost = ($3.32 / $86.04) * 100%
                       = 3.859 %

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:  As of the time of this writing, Royal Bank was fallen in price after releasing earnings but still above $86.00.

Disclosure:  I do not own any shares of RY 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.

Tuesday, November 29, 2016

Recent Purchase

    High Liner Foods Incorporated (HLF) is a Canadian company that is involved in the processing and marketing of prepared and packaged frozen seafood. Some of the company's retail branded products are sold in Canada, United States and Mexico. These brands of products consist of names such as High Liner, Fisher Boy, Mirabel,  and Sea Cuisine.  High Liner Foods offers its products to restaurants, institutions, food retailers and food service distributors under Icelandic Seafood  and FPI brands. The Canadian business includes 100 individual products sold under the brand High Liner.

 Information about Financials

    High Liner Foods Inc Revenue grew from $260.4 million in 2005 to $1.002 billion in 2015. This represents a CAGR = 14.43% over 10 years.

     HLF had earnings per share (EPS) has grown from an -3.93 in 2005 to $0.96 EPS in 2015.  The 2015 of EPS is after a 2:1 stock split on May 30, 2014.

   The Interest Coverage Ratio is ratio that is used to determine how easily a company is able to pay its debt. The interest coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense over the same period.  HLF had an  interest expense in 2015  $16,102,000 and  EBIT of $36,310,000.  Therefore the interest coverage ratio is 2.25.  With an interest coverage ratio below 2.5, the company should not take on more debt and try to increase its earnings or pay down its debt some.

   HLF paid a dividend of $0.465 per share in 2005. The stock had a 2:1 stock split on May 30, 2014. Therefore on a split adjusted basis, HLF paid a dividend of  $0.2325. In 2016, HLF will pay an annual dividend of $0.56.  This represents a CAGR of 8.32% over 11 years.

Summary

    As people are encouraged to add more seafood in their diets for a variety of reasons such as Omega 3 fatty acids, along with increase in population, the demand for their product should continue. Although people would prefer fresh fish, it is not always convenient as we live busy lives.

    On Nov 23, I purchased 50 shares of HLF at $19.99 per share for a total cost $1004.62 including commissions.  Currently, HLF pays an annual dividend of $0.56 per share. The yield on cost of these shares is  2.79%.  This purchase of 50 shares increases my annual dividend income by $28.00.  

    HLF is set to pay a dividend on December 15 and the record date is December 1. The ex-dividend date is therefore November 28. As my shares were purchased prior to the ex-dividend date, I will receive the dividend on December 15.


    I will update my investment tab spread sheet in early December with purchase.

Disclosure : Long HLF

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.

Wednesday, November 23, 2016

Pathway to Retirement

     All individuals and couples all have one thing in common when it comes to retirement. We all have to have enough money to live off as people will be unable to work most jobs past a certain age. 

     This income in retirement can come from a pension, capital gains, interest, or cash flow. Some people think their only way to retirement is too win the lottery.  These lottery players think investing in stock market is gambling or that you need a lot of money to invest in the market. 

      I know of a lot of people play various lotteries every week.  These lotteries include scratch tickets, even splits, and the major lottery games. In Canada, one of the lottery games is 6-49.  The odds of winning are 1 in 14.3 million (1 / (49C6).  For those not familiar with math, 49C6 represents "49 Combination 6".  This game consists of 49 numbers in which 6 balls are randomly chosen by a machine. A bonus number is also drawn. If the number on these 6 balls are the same as the 6 numbers picked by the lottery player winner, then he or she wins the jackpot.  The lottery player can also win other ways, but the money will be a lot less.  The scratch tickets winning amounts are a lot less.  So if you add the amount of money paid to play various lottery games, it can add up. Personally, I think a person is better off playing bingo instead of playing these lottery games. If the bingo game has 400 players, then your chance of winning is 1 in 400.

       The pension can come in various forms. They can be small government pension for old age, a small government pension or a defined benefit pension.  The defined benefit pension is not an option for most people, as usually only government or crown corporation employees have this setup. Defined benefit pension a liability for the employer for as long as the pension receiver is alive.  So most companies have down away with them, and made the worker responsible for his or her own retirement by using a registered contributions plan.

      The downside of a contributions plan to a worker, is the money put in is not guaranteed to be there when you go to take it out.  These plans are called RRSP (Canada), 401k (US), super annotation (Australia) etc. are capital gain types of setups.  So as the value of these plans go up or down, corresponds to the same change in an investor's net worth at that given time. So an investor will have to withdraw money out of this account therefore reducing the balance.

   An individual could invest in investments that pay them either every month, quarter, semi-annual or annual. This pay is called cash flow. So the investment is paying a cash flow in the form of a dividend, interest, premium, distribution, or rent.  The goal of this is to have enough income coming in from your investments to exceed your expenses, which means the investor will be financially free.  Even if the investor is not financial free, the income from the investments will help cushion the blow in cash of a lay off at a job.

    Which is best?  The two best options are pensions and/or cash flow investments in my opinion.  In Canada, an individual can invest in non-registered accounts  or tax-free savings accounts.  These individuals can invest in other cash flow investments such as real estate or oil and gas.

     Most people in Canada have heard about Derek Foster.  Derek Foster let the rat race at age 34 by investing in dividend paying stocks, income trusts and REITS.  Derek used leverage of few times to aid is investing.  To find out more about Derek, feel free to check out his website www.stopworking.ca.

    In summary, an individual who thinking the best chance of retirement is, for lack of better word, is gambling with their life. The odds of winning is so high that an individual should only play the lottery once and awhile for entertainment purposes.

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, November 21, 2016

Option Expiration Day - Nov 18

   I recently sold a covered call involving 3 contracts of IAMGOLD (Ticker Symbol IMG) with a strike price of $6.00 and option expiration day of Nov 18, 2016, which you can read about here.  The option has expired and was not assigned. As the seller of the option, I get to keep the premium I received.

   I also sold puts options involving 3 contracts of IMG with a strike price of $5.00 and option expiration day of Nov 18, 2016.  You can read about this transaction here.  I currently owned 300 shares of IMG, so by selling puts I was collecting premium while waiting to buy at my price target.  This option was assigned at the stock price for IMG was trading slightly below $5.00 at expiration. 
My brokerage charges an option assignment fee of $24.95.  So I now own a total of 600 shares.

   IMG does not pay a dividend, so I will be looking to sell all these shares either a direct sell or a covered call in the near future.

Disclosure:  Currently own 600 shares of IMG.

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.