Monday, August 7, 2017

Recent Purchase

      As we go about our lives day by day, we must look for opportunities that can be of benefit to us.  These opportunities can come in from different areas such as a new career, new business idea, new investment etc.  In some cases the opportunity may be there in front us, but we are totally blind to the opportunity.  In a lot cases, the individual must be in a position to take advantage of the opportunity.

      For investors, we are on the lookout for opportunities as this is the peak of earning season for publicly listed companies.  Some companies report before the opening bell, while others report during the trading session or after the market closes on a giving day. These date and time of these earning releases is known in advance as a company must announce on a prior date, the exact time and date they are going to release earnings and a possible conference call to discuss the results.

     Cineplex Inc. (CGX.TO) released its earnings on August 2.  The quarter was a lackluster one and investors sold off there shares.  The share price had fallen to $41.50 before rebounding.  Some of the highlights are as follows:
  • Earned $1.4 million (or $0.02 per share) in the last quarter, down from $7.2 million (or $0.12 per share) a year earlier
  • Revenue of $364.1 million, up from $338.0 million for the same period last year
  • Amusement Revenue was $45.7 million, compared to $24.6 million a year ago
  • Media revenue was $36.6 million for the quarter, compared to $40.2 million in the same quarter from last year.
  • Attendance was approximately 16.5 million, slightly down from 16.9 million from a year ago.
  • Food Service revenue was $101.4 million, compared to $96.8 million for the same quarter a year ago
  • Box Office revenue per customer was $10.86, compared to $9.89 a year ago
  • Concessions revenue per customer was $6.03, compared to $5.74 for the same quarter last year
Cineplex is mostly a theatre company, but the company is diversifying its business in other areas of entertainment.  These new venues are Rec Rooms complexes, which include eateries, live entertainment, and games. The have launched Rec Rooms in some locations already, and plan to expand across Canada.

A couple of weeks ago, CGX.TO announced an exclusive partnership with Topgolf Entertainment complexes, which combine a driving range with other entertainment options over the next several years.

Conclusion:

        The company has missed lower earnings for the past 5 quarters.  The struggling economy in Alberta for the last 3 years  has hurt their earnings.  When the economy of Alberta struggles, the rest of the country feels it. Some people avoid going to the movies due to the cost. These costs consists of the price of a ticket plus the price of concessions. The price of a ticket can be reduced depending on the day and time of the week an individual goes to watch a movie.

Click to Enlarge

  CGX.TO is down 17.08 % over the last month. I do believe people are not going to stop going to the movies.  I do believe movie goers , will not spend as much on concessions with the possibility of a recession around the corner.

   On August 4, I purchased a 100 shares of CGX.TO at $43.85 per share for a total cost of $4389.95 including commissions. 

Click to Enlarge

  Currently $CGX.TO pays an annual dividend of $1.68 per share per  year.  This purchase adds $168 to my annual dividend income.

   I will sell covered calls against this position in the future.  I will update my investment tab spreadsheet in early September to reflect this new purchase.

Disclosure:  Long CGX.TO
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, August 5, 2017

Is The Dividend or Distrubition Safe?

     As an investor I am like most people, I want to get paid via a dividend or distribution.  Any investor loves dividend increases.

     Every time a company makes an announcement regarding their dividend or distribution, the result can be one of four things:  dividend or distribution can be increased, decreased, ssuspended, or remain the same.

     I recently wrote about a REIT that I owned has lowered its annual distribution.  Since writing that post, I received another distribution payment and increased the number of units via drip.  Going forward the drip will be turned off.  Dream Office REIT (D.UN.TO) reduced its annual distribution rate from $1.50 to $1.00 effective with the July 2017 distribution and corresponding August 15th. I currently own 631 units in my margin account and 168 units in my TFSA.  That means my annual dividend/distribution income will be reduced by $399.50.

      Another REIT that I owned, Cominar REIT (CUF.UN.TO) just released earnings in the past week. They also announced  a distribution cut from  $1.47 per unit per year to $1.14 per unit per year. This reduction will start with the August distribution to be paid out September 15th. I currently own 176 units in my TFSA.  This reduction will reduce my annual dividend / distribution by another $58.08

      Besides holding CUF.UN.TO inside my TFSA account,  I hold CUF.UN.TO in small savings account.  The interest rate for high interest rate savings account are so low that it is actually laughable.  So I started a small experiment with a few positions. These 2 positions are 26 units of HNY.TO and 152 units of CUF.UN.TO.  Horizon's Natural Gas Yield ETF has ticker symbol HNY.TO.  So for this savings account, my annual distribution is reduced by $50.16My adjusted cost base of CUF.UN.TO is $14.25 per unit.

     This distribution cuts are proof it is best to diversify. A reasonable portfolio should be around 15 to 20 positions with their weights more equal to each other. When there is a cut to a major holding and not many positions, you will feel it more as a greater percentage of your income is lost. 

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, August 2, 2017

Dividend Income Update - July 2017




      The month of July 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 price of barrel of crude oil continues to channel between $45 to $50 per barrel of WTI crude oil.

        Emera Inc. reported its earnings and there was no dividend increase announced.  This payment on Aug 15th will be the 5 quarter of a quarterly dividend of $0.5225 per share. Emera Inc. (EMA.TO) is a utilities company involved with the transportation and distribution of energy.  Emera Inc. is a partner in the controversial Muskat Falls project. The Muskrat Falls project is a Hydro Electric Project the will create electricity from the falls to supply Newfoundland and Nova Scotia. The electricity will come to Nova Scotia via a subsea cable and land on the Eastern shore of Nova Scotia. This project is currently over budget.
.

      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

  • Bell Canada Enterprises (BCE) - $71.75
  • Bank Of Nova Scotia (BNS) - $15.20
  • Canadian Imperial Bank of Commerce (CM) - $35.56
  • Enerplus (ERF)  -$ 5.58
  • Dream Office REIT   (D.UN)  - $78.50
  • Roger's Communications Class B (RCI.B) - $96.00
  • Shaw Communications (SJR.B)    - $19.75
  • Bank Of Nova Scotia (BNS) - $25.21  (Transfer Agent) 

    TFSA
    • A&W Royalties Income Fund (AW.UN) - $5.05
    • Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
    • iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $0.62
    • Cominar REIT (CUF.UN) - $21.44
    • Dream Office REIT   (D.UN)  - $ 20.88
    • Horizons Natural Gas Yield ETF (HNY)  - $5.83
    • Killam Properties REIT (KMP.UN) - $  15.60
    • TFI International (TFII) - $9.50


    Total = $453.38
        
        As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 12 months ago. This dividend income total of $453.38 represents an increase of 1.455% from 3 months ago.

         Dream REIT has reduced the amount of distribution they pay monthly which was announced in February 2016.  Dream Office REIT again reduced their annual distribution again and will take effect with the July 2017 distribution to be paid on August 15.  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 $68.05 in July  2017.

         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 July?

    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.




    Portfolio Update - July 2017

            The month of July 2017 is now behind us.  We have seen the markets hits new all time highs a few times, usually the results of strong earnings from selective companies.

         We have seen strengthening of the Canadian dollar, equivalent of a decrease in the US dollar.  The price of a barrel of crude oil continues to channel for the most part between $45 and $50.  As a result of the low oil prices, the province of Alberta continues to struggle with its finances and it's overall economy.  Alberta is the only province in Canada that does not have a sales tax, as the GST of 5% is a federal tax. Alberta government receives royalties from the oil and gas activity, which greatly affects the government's revenue.

         As earnings are reported on a daily basis in the short term, is going to affect the markets positively or negative.


    Shares Acquired Through DRIP


    3 Unit of D.UN.TO @ $19.84574 for a total cost of $59.54 (Margin Account)

    1 units  of CUF.UN @ $13.12431 for a total cost of $13.12 (TFSA)

    1 unit of D.UN @ $19.84574 for a total cost of $19.85 (TFSA)

    0.324878 shares of BNS.TO @ $77.5984 for a total cost of $25.21 (Transfer Agent)           

        I have turned off all DRIPs in my margin and TFSA accounts. They only drips turned on will be for BNS.TO and ENB.TO directly with the transfer agent.  These 2 positions are shown in the investment tab spread sheet with the color orange.

    I recently wrote about Dream Office REIT after they made an announcement. They are once again, cutting their annual distribution by around 33% starting with July's distribution which will be paid on August 15.  There annual distribution will be cut from $1.50 per unit to $1.00.  So, my annual dividend income will be cut by approximately $400.00.


    As of August 1,  the value of the portfolio is $104451.57. This is a 1.148%  increase over last month's total.  The spreadsheet in the investment tab above has been updated.

    Note:  I do  have 2 short put option contracts currently in my portfolio as of Aug 1.

    Disclosure:  Long D.UN, ENB.TO, CUF.UN, BNS.TO

    Please Note:  All stocks are from the Toronto Stock Exchange except TTR which trades on the Venture 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.



    Sunday, July 30, 2017

    Benefits Of The Rate Hike For Investors

            The FED and the Bank of Canada have recently raised their interest rate by 25 bps each.  What does that mean?  It meant the cost of borrow money will increase and payments on variable rate mortgages and lines of credit will be increased immediately. Consumers and businesses will have their expenses increases due to the cost of borrowing increasing.  Shortly after the Bank of Canada raising their rate by 25bps, the big 5 banks in Canada followed suit within 24 hours.

             A way for banks to make money is too have savings accounts.  The bank then takes the money savers deposit and lend it out at a higher interest than they pay the saver.  The bank "promises" the saver that for the use of the saver's money, they will be paid interest.

             A lot of banks have not raised their rates on the savings accounts along the rates on their lines of credit, loans and mortgages.  So that means the bank will make more money. Therefore the shareholders of the banks will likely be rewarded with increased profits and therefore possible larger dividend increases than the banks have recently done.

    Conclusion

         I am a shareholder in 4 of the 5 big banks.  Currently, the only bank stock I do not own is Royal Bank.  So, if North America does no go into recession in the near future then the banks will do well.  I always hear people complain how profitable the banks are each quarter.  My response to them if they are talking directly to me is "With them being so profitable, do you own any shares in any of them?".  I will often get a snarl or " I am too poor to invest!!" response.

         There are ways to invest with very little money.  A person can buy stocks the old way directly through the transfer agent.  How this works, at least in Canada, is that you go to a website like www.dripprimer.ca and try to buy a share of a company.  I will talk about the way I have done through this site.  I posted a message on the share board looking for a share of Enbridge (ENB) and BNS.  Eventually, some will respond and agree to sell you a share.  You then send the person a check with that amount agreed upon. In return, you will get an actual share certificate with your name and I believe your new account number will show up.  The transfer agent sends you the share certificate and not the individual.  The seller as to follow steps outlined by the transfer agent to make their transaction to go smoothly. Once the share certificate is received the buyer can make purchases directly with the transfer agent for that particular stock operating within the guidelines outlined in the company's DRIP program.  Most of the times, investing this way you get to purchase shares at a discount with reinvested dividends.  The downside you do not know the price of shares when you make purchases of additional shares directly with a check or a debit from your bank account.  When buying stocks this way, you directly own the shares in your name.  When you purchase the shares in a brokerage account, you do not own the shares directly but are given all the rights of shareholder ownership  such has voting, dividends, distributions, buyouts, and interest.

        In United States, Capital One (formerly Sharebuilder) allows you purchase fractional shares and the entire dividend gets reinvested. I believe if you put in the order Monday night, to invest X amount of dollars into "ABC", then the shares are purchased the following day.  With Capital One, you can also buy shares like any other brokerage and pay a commission of around $7.00.  Also, with Capital One, you can turn the drip on or off with a click of the mouse.  Most brokerages you have to call or e-mail the brokerage to tell them to turn the drip on or off for each stock in the account.

    Friday, July 21, 2017

    Turning Off The Taps A Bit

    Over the past couple of years I have had DRIPs turned on for a few positions. I haved DRIPped shares and units of Boston Pizza Royalties Income Fund (BPF.UN), Cominar REIT (CUF.UN), Dream Office REIT (D.UN), Killam Properties REIT (KMP.UN), Enbridge (ENB.TO) and Bank of Nova Scotia (BNS.TO). Some of these positions are through the brokerage while others are directly with the transfer agent. The latter is the basically the "old" way of buying stocks where you get actual stock certificate. The downside of the "old" way of purchase stocks is that you do not have control over the purchase price or sell price as you just send in a check and the shares or units are purchased on a certain date. Also the purchase prices could be averages of the last few days or some other criteria that would be often spelled out in the documentation.

    Recently, I have had DRIPs turned on the Enerplus Corporation (ERF.TO), D.UN, CUF.UN, BNS.TO, and ENB.TO. The DRIPs for BNS.TO and ENB.TO are directly with the transfer agent and these positions are in the investment tab spreadsheet and have partial shares. Some brokerages off partial shares, but they are few and far between.

    I have turned off my DRIPs for D.UN, CUF.UN, and ERF.TO. The dividend payout for ERF.TO is no where close to being able to purchase 1 whole. D.UN was dripped in both my TFSA and margin accounts. I have turned off the DRIPs due to my current financial situation. I would prefer to keep the DRIPs on for both D.UN and CUF.UN as these positions are trading above my average cost basis per share.

    I am keeping the DRIPs on for ENB and BNS with the transfer agents. For disclosure, I also have positions in ENB in my TFSA and BNS in my margin account.

    The benefits of DRIPs, is that it is a way to acquire more assets for doing basically nothing. Also, a lot of DRIPs have discounts on the shares purchased with re-invested dividends. Does this apply to DRIPs by brokerages? Some brokerages pass the discounts along while others do not. My brokerage, Questrade, does not pass the discount along.

    There is also some posts on DRIPs in my DRIP tab above.

    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, July 14, 2017

    What Happened to Big Banks After The Rate Hike?

             I recently wrote about the recent rate hike by the Bank of Canada.  On July 12th, the Bank of Canada announced that they are increasing the interest rate from 0.75% to 1.00%.

            Shortly afterword the rate hike, the big banks raised their rates.  Royal Bank of Canada even raised the rate prior to the rate hike on their 1,3, and 5 year terms by 0.20%.

            The chart below compares how the big banks on the Toronto Stock Exchange have done this week.  The announcement was 10am Eastern Standard Time on Wednesday.  As we can see from the chart, the Canadian Imperial Bank of Commerce was the leader over the last week.

    Click to Enlarge



             As you can see, the investors and trades liked the rate increase.  Royal Bank (RY.TO) went up the morning of the rate increase but dropped  back down.  As state above, RY raised their 1,3, and 5 year term rates by 0.20% prior to the rate hike, and the rate hike was likely factored in. When people go get a mortgage or renew their fixed rate mortgage will have higher payments.

         After the rate hike, Royal Bank was the first to raised there prime rate from 2.70% to 2.95%.  The other 4 big banks followed suit.  The increase in the prime rate affects loans, variable rate mortgages and line of credit. Anybody with variable rate loans, lines of credits, and variable rate mortgages will see an immediate increase in their payments due to higher interest rates.

          Why is the rate hike good for the banks?  The rate hike means more profits for the big 5 banks. The big 5 banks do not immediately increase the rates on their savings accounts, therefore the spread of interest paid to savers and the interest the banks received from payments of individuals or companies is larger.

           The banks offer very low interest rates on their respective savings accounts.  This makes savers to look elsewhere for yield, and they usually turn to the stock market for dividends and interest. This is why the stock market is trading near all time highs as their is more buyers than sellers for majority of blue chip stocks.

           Currently I own shares in 4 of the big 5 banks. I do not own RY.TO as of this date.  The big 5 banks in Canada are known around the world to be some of the best run banks in the  world.

          How do you like the rate hike by the Bank of Canada?

    Disclosure: Long TD.TO, BNS.TO, CM.TO, BMO.TO

    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, July 13, 2017

    Bank of Canada Announcement

             I recently wrote on the possible rate increase by the Bank of Canada.  This made the markets relatively quiet.  Although investors and analysts were factoring in a rate increase, there is always the possibility of a rate remaining unchanged.  Some analysts and people in the higher ups on the corporate ladder in the big 5 banks said it is not a good time to raise rates.  This is largely due to the economy in Alberta being in the gutter and the housing prices in Vancouver and Toronto.

            Although housing remain expensive in Fort McMurray and Calgary, the economies of these 2 Alberta cities is struggling.  There has hint of optimism in the air in Calgary in recent months.  The Alberta government based their budget on the price of a barrel of crude oil averaging $55 per barrel. Well, three and a half months into Alberta's fiscal year, an oil is currently trading around $46.00. The price of oil has not come close to $55 per barrel.  The price of oil actually dipped below $43.00 per barrel a few months ago.  Some analysts are predicting oil to go to $80 dollars a barrel while others believe oil will trade between $45 and $55 per barrel for the foreseeable future.

           At 10am eastern standard time on July 12, the Bank of Canada governor raised the interest rate from 0.50% to 0.75%, which is a 25 basis point increase.  This is on the heels of the Fed raising the rate in the United States recently.  Did the governor of the Bank of Canada raise the rate because the FED raised their rate?  Our economies are different.  The economic engine of Canada currently is Alberta.  With Alberta having a carbon tax along with the low oil prices, this is making companies hesitant to drill for oil.

          The increase by the Bank of Canada has lead, to no surprise, the big banks increasing their rates. So borrowing money will be more expensive for mortgages and loans.  I believe this could affect interest rates on line of credits and credit cards in the very near future.

    Conclusion

         I believe the Bank of Canada should not of raise the rate due to the state of our economy.  Although Canada is doing well as a whole, there are provinces struggling with their economies and finances.  We hear every month recently that jobs have been created.  These jobs are often part time jobs though.  People often have to work 2 or 3 jobs to get by nowadays.  Also with part time jobs, their are no benefits which adds a lot of expenses to people who have lots of medical expenses.

        Vancouver and Toronto have home prices that are through the roof.  On the other extreme, we have houses that are super cheap as their are not buyers available.  For Vancouver and Toronto, people are paying over a million dollars on average for a home.  The mortgages will come with high payments.  With the rate increase, when it comes to a new mortgage or renewables, the payments on their mortgages will be higher.  This 25 basis point increase is the first time, the Bank of Canada has raised rates in over 7 years.

       North America, as a whole, as not seen a recession since the financial crisis of 2008-2009.  History has shown that a major recession occurs every 8-10 years.  When recessions do occur, the interest rate by the Bank of Canada and the FED usually decreases by a few percentage points.  See, the FED and Bank of Canada raises the interest rate to slow the economy.  Likewise, the effect of decreasing the interest rate, is to in courage people  to spend money as they have more money available due to lower payments.

       In the past several years, we have seen people buy homes for the first time due to the low rates.  These people might be OK now, but when time comes to renew their mortgages, their payments will be higher.  The term of mortgages are 1, 3, or 5 years.  See, a mortgage could have an amortization of 25 years but a mortgage has to be renewed towards the end of the term.  The United States, unlike Canada, can have an amortization of say 30 years and have a 30 year term mortgage. This is advantageous to US residents who take out mortgages when interest rates are low as they are right now.

       On the flip side, there is no major announcements of the banks raising the interest rate on savings account. The bank that I have my high interest savings account, if you can call it that, has not increased their rates as the time of this writing.  However, prior the interest rate hike by the Bank of Canada, Tangerine is paying an interest rate of 2.97% on new deposits up to a maximum $500000 for a few months.  Currently , the interest rate is 0.80% for Tangerine high interest savings accounts and the Tax Free Savings accounts.

       Some analysts and investors believe we will see another rate increase by the Bank of Canada this year.  This possible future rate increase is believed, by many, is going to happen in December 2017.

    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, July 8, 2017

    Possible Rate Hike Next Week

             In the years between 2007 to 2009, the world experienced the biggest recession since the Great Depression. This recession is commonly referred to the subprime meltdown or the financial crisis.  As a result of this, the interest rates in the United States and Canada were lowered to below 1% by the Federal Reserve and the Bank of Canada, respectively.

             With the interest rates so low, it made borrowing money cheaper.  At the same time, savers felt the pinch as they were getting little to no interest on their high interest savings account or GICs.  GICs, equivalent of CDs in the United States, is a guaranteed investment certificate. The low interest rates mean lower mortgages for people who are renewing their mortgages and buying there first house.
       

            These  people who took out mortgages to buy a house might be in for a shock in the future.   When their term of the mortgage is near done, the individuals will have to renew their mortgage for another term.  When this time comes, the interest rates will likely be higher than they currently at this point in time.  This means that they will have higher mortgage payments in the immediate future.

            Recently, the Fed raised the interest rate from on June 15 2017 from 1% to 1.25%.  Previously, they raised it from 0.75% to 1% in March.





           Currently north of the 49th parallel has Bank of Canada interest rate of 0.50%.  Bank of Canada has not raised its rate in over 7 years. The consensus is the Bank of Canada is going to raised the rate to 0.75% this coming week.







           During the last week, Royal Bank has raised their rates on their 1 , 3, and 5 year-term mortgages by 0.20% each.  Has history has shown, usually all the other banks in Canada follow by raising some of their rates.

           Canada has a excellent jobs report during the last week, fuelling the likelihood of them raising their rate for the first time in 7 years.  Although Canada has strong economy, their economic engine is the province of Alberta. Alberta has been hit extremely hard since late 2014 with low oil prices.  Alberta received money from oil and gas royalties, which have been falling due to low oil prices and exploration companies not drilling as much due to the low oil prices. In Canada, the wealthy provinces help out the not so wealthy provinces via transfer payments. The 2 provinces that do this are Alberta and Ontario.  In Alberta, there has been massive layoffs in the oil and gas sector and companies the service the oil and gas sector.  In my case, the latter applies.  My company has since closed their doors in November 2016.

     Conclusion:

         People from all over Canada, work in the oil and gas industry in Alberta.  The oil and gas industry is spread out over British Columbia, Alberta, and Saskatchewan.  Most of the oil and gas in in Alberta.  People fly in and fly out of the jobs , besides the people who work nearby.  The reason is the a lot of the shifts in the oilfield and oilfield service companies are  like 15 days on and 6 days off or 14 days on and 7 off. For oilfield services, the workers involved in field operations are on call 24/7 along side with showing up to work at their shops. For example at a previous job I did years back, the shift would start Wednesday at 8am.  I would have to show up to work and if their was no rig book for our services within a day, I would work in the shop.  If an exploration company booked our services for later in the day or evening, our team would decide a plan of action.  This could be going home to sleep, what time to meet back at the shop, and what route to take to rig.   For oil rig workers such as drillers, roughnecks and derrick hands, their shifts 12 hours long and they stay in camps or nearby hotels on off time.

          Some analysts in Canada are on the record saying that this is not the right time for Bank of Canada to raise its rates. Besides what is going on with the economy is Alberta, there is a potential for a major housing crisis in Toronto and Vancouver. These two cities have extremely high prices on homes compared  to the rest of Canada.  Calgary is not far behind.

        North America has not had a recession since 2009.  With interest rates so low, a recession now would be horrendous.  It would likely mean negative interest rates. The Fed and Bank of Canada raise their rates in order to slow the economy down.  During a recession the price of oil usually goes lower.  I believe the Bank of Canada, should really think twice of raising the rates at this time. Alberta does not have a sales tax, whereas all other provinces and territories in Canada do have a sales tax in one form or another.

        It does appear rather odd to have the stock market in Canada flirting with all times highs despite having price of oil below $50 dollars per barrel.  Neither Alberta or Canada are members of OPEC, which is the Organization of Petroleum Exporting Countries.  The price of oil will have a huge negative effect on Alberta for years to come.

    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, July 3, 2017

    Dividend Income Update - June 2017




          The month of June 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 price of barrel of crude oil has falling during the month, and it currently sits $47.00 per barrel as the time of this writing.  The price of oil previously dropped to below $43.00 per barrel in the last week and a half.

            The Bank of Canada is hinting at a rate increase possibly next week.  If so, it will be the first time the interest rate would be increase in 7 years.  When interest rate is increase, usually the banks are not far behind raising their rates.  Basically, it cost more to borrow money and current interest payments for most people will be higher.

            I personally believe Alberta is going to struggle for the next few years. As we are due to for major recession , if history repeats itself, in the next few years, the price of oil usually remains low or decreases.

          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

    • Enerplus (ERF)  -$ 5.58
    • Dream Office REIT   (D.UN)  - $78.00
    • Highliner Foods (HLF) - $14.00
    • Shaw Communications (SJR.B)    - $19.75
    • Enbridge Inc. (ENB) - $9.85  (Transfer Agent) 

      TFSA
      • A&W Royalties Income Fund (AW.UN) - $5.05
      • Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
      • Canadian National Railway (CNR) - $15.68
      • iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $0.62
      • Cominar REIT (CUF.UN) - $21.32
      • Dream Office REIT   (D.UN)  - $ 20.75
      • Horizons Natural Gas Yield ETF (HNY)  - $3.90
      • Killam Properties REIT (KMP.UN) - $  15.60
      • Enbridge Inc.  (ENB) - $20.13


      Total = $257.14
          
          As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 12 months ago. This dividend income total of $257.14 represents an decrease of 2.54% from 3 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 $59.10 in June  2017.

           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 June?

      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.



      Saturday, July 1, 2017

      Portfolio Update : June 2017

              The month of June 2017 is now behind us. The markets have seen some major news during the month.  Amazon announced they are purchasing Whole Foods for around $13.7 Billion dollars. Warren Buffett's Berkshire Hathaway has made a deal to help out Home Capital Group. 

              Home Capital Group is a Canadian public company that writes mortgages to people at a higher interest rates than at a bank. I have lost some money with Home Capital Group. So,  Home Capital Group has been in the news the last couple of months with Ontario Security Commissions investigation over the last year or so.  Savers who had the high interest savings accounts offered by Home Trust, part of Home Capital Group, pulled most of their money out of these accounts.  Banks depend on deposits by savers to be able to make mortgages and loans to their customers.

              Home Capital Group received a $2 billion line of credit from HOOPP, which is Healthcare of Ontario Pension Plan.  The interest on the LOC was quite high, and the company decided to try to find a replacement source of cash to keep them solvent.

             They were in discussions with several financial organizations, which included some Canadian Banks, but the felt Bershire Hathaway was the best source to help them out.  Warren Buffett, CEO of Berkshire Hathaway, offered a line of credit and equity ownership in the company. 



      Under the agreement, Berkshire will make an initial investment of $153.2 million for 16 million Home Capital shares at a price of $9.55, representing a 19.99 per cent stake in the company, subject to approval by the TSX.  
      Berkshire Hathaway has also agreed to make a second investment of $246.7 million for nearly 24 million shares at a price of $10.30, which would take its stake in Home Capital to 38.4 per cent, subject to shareholder approval. (Source www.ctvnews.ca)

              Another major topic in the markets is the price of a barrel of crude oil.  The price per barrel of WTI crude oil had fallen to below $43.00 US per barrel, but rallied towards the end of the month close at $46.33 US per barrel. 

               British Columbia, Canada had a provincial election recently in which the Liberals retained power.  The won 2 seats more than the NDP and the Green Party won 3 seats.  So NDP and the Green Party came to a agreement that would mean these 2 parties will work together.  Last week, the liberals lost a non-confidence vote in the legislature.  Their premier and Liberal party leader accepted the results of the vote and visited the Lt. Governor. The Lt. Governor has given the NDP the right to form the government.

                So, now we will have NDP governments in both Alberta and British Columbia who are at "war" with each other.  Oil and gas plays a huge part in the economy of Alberta.  The federal government gave their OK for Kinder Morgan to build their pipeline from Alberta to the British Columbia coast.  The cost of this pipeline is $7.4 billion.  The NDP government and Green Party of British Columbia, along with environment activists and indigenous people.

              I made a purchase in my margin account in a stock that does not pay a dividend.  Titanium Transportation Group Inc. is a transportation and logistics company based out of Bolton, Ontario.  This company was created in 2002 and went public in April 2015 with the ticker symbol of TTR.  TTR trades on the Venture Exchange in Canada.

             I sold 2 put options in the month of June. I previously, had a put option expire on June 2.  The 2 short put options were 1 contract of $RY.TO with a strike price of $92.00.  The first short put option expired on June 16.  Few days after this expired I sold another put option for June 30 expiration.  I collected $24.05 and $35.05 in net premiums on the 2 short puts for a net profit of $59.10.

             I made two small purchasing in my TFSA to add to my units of HNY.TO.  This is Horizon's Natural Gas Yield ETF. I purchased these units with small commissions (i.e. ECN fees) has my brokerage offers commission free ETFs.

      •  June 13  ->  4 units at $12.98 with $0.01 ECN fees
      •  June 19  ->   2 units at $12.72 with $0.01 ECN fees


      Shares Acquired Through DRIP


      4 Unit of D.UN.TO @ $19.32137  for a total cost of $77.29 (Margin Account)

      1 units  of CUF.UN @ $13.03499 for a total cost of $13.03 (TFSA)

      1 unit of D.UN @ $19.32137 for a total cost of $19.32 (TFSA)

      0.192 shares of ENB.TO @ $51.3021 for a total cost of $9.85 (Transfer Agent)           

      Please note, that the DRIPs inside my margin account and TFSA are synthetic drips which indicate the distribution or dividend must be enough to purchase whole shares. 

      I recently wrote about Dream Office REIT after they made an announcement. They are once again, cutting their annual distribution by around 33% starting with July's distribution which will be paid on August 15.  There annual distribution will be cut from $1.50 per unit to $1.00.  So, my annual dividend income will be cut by approximately $400.00.


      As of July 1,  the value of the portfolio is $103266.23. This is a 1.485%  decrease over last month's total.  The spreadsheet in the investment tab above has been updated.

      Note:  I do not have any option contracts currently in my portfolio as of July 1.

      Disclosure:  Long D.UN, ENB, CUF.UN, TTR.V, HNY.TO

      Please Note:  All stocks are from the Toronto Stock Exchange except TTR which trades on the Venture 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, June 30, 2017

      When A Stock Doesn't Have Much Daily Average Volume?

               What is the one thing that would cause a massive panic in people lives.  One thing we all take for granted.  When we drive or walk down a road we often do not think about it as it is all we know and we do not know any different.  I am talking about the trucking industry.  The saying "If you got it, a truck brought it" is so true.  The stones to make a retaining wall, the steel gates for businesses, cars, and gasoline at the gas station. A truck has to be utilized to bring all these to their current location in one form or another.
             
               Titanium Transportation Group Inc is a relatively new trucking company.
            
      Titanium Transportation Group Inc is a Canada-based transportation and logistics company, which offers its services in North America. It operates in various segments, including Truck Transportation, Logistics and Corporate. It provides freight transportation services to customers, including large multinational corporations across various industries, with truckload and cross-border trucking services, freight logistics, and warehousing and distribution services. It offers trucking services through a range of trailer types, including flatbeds, step-decks, heavy axle trailers and other specialty equipment, totaling approximately 400 power units and 1,000 trailers. It also provides a range of ancillary transportation services, such as third-party logistics and freight forwarding. It also offers warehousing and distribution services, including order management and fulfillment, shipment consolidation or de-consolidation, cross dock, and reverse logistics (refurbished and restock processes). Source: Google Finance
          Titanium Transportation Group Inc. was founded in 2002 as logistics broker.  Their first truck was purchased in 2005.  In 2007, Zzen Group made a private equity investment.   The company has made 7 acquisitions from April 2011 to March 2015. The company remained private up until April 2015 and then became a public company.  The are listed on the Canadian Venture Exchange under the ticker symbol TTR.  The company is headquartered in Bolton, Ontario.

           Currently the stock trades at $1.13 a share and has a market cap of $42.63 million.  According to a June presentation, Zzen Group owns 39.2% of the company, which corresponds to 14,657,482 shares.  Titanium had 37,388, 510 shares outstanding as of June. The next highest shareholder is the founder and CEO, Tim Daniels, who owns 9.8% of the company with 3,667,647 shares.

           TTR does not have very low trading activity with an average daily trading volume of approximately 3500 shares. The company has made some acquisitions after they went public.

           Over a span of 5 years there revenue has grown each year in 2 of the 3 segments.  The revenue consists of 3 segments which are corporate, logistics, and trucking.  The corporate segment has grown to  $116.6 million in 2016 from $32.7 million, which represents a compound annual growth rate of 37.42% over 5 years.  The logistics segment has grown to $33.9 million in 2016 from $15.8 million in 2012, which represents a CAGR of 21.03% over the last 5 years.  The trucking segment has grown to $84.0 million in 2016 from $17.2 million in 2012, which represents a CAGR of 48.66% over the last 5 years.

          TTR has grown revenues a lot over the last 5 years. As they are relatively a new company, they will be growing the company and likely not pay a dividend.  Could the company continue to grow?  The company has currently has over 400 tractors and over 1300 trailers.  The company does not do intermodal as of this time, from what I get from there website. I believe the company will get involved in intermodal by opening terminals in major markets in Canada or develop partnerships with major carries in different geographical locations. Canada has access to a lot of freight from all over the world via their ports located in Vancouver, Prince Rupert, Montreal and Halifax. Canada also has 2 class one railways in Canadian National Railway and Canadian Pacific Railway. 

         Conclusion:

        Trucks play an important vital role in our lives as everything moves by truck at one point or another. Trucking is a very cost intensive business, which affect the margins.

       I do believe this company will do well in the future, but will face some immediate future due to the high possibility of a recession. North America has not had a major recession since the 2008-2009.  A recession, on average, happens every 8-10 years. 

         Today, I ended up purchasing 1000 shares at $1.24 inside my margin account. I had limit orders in over several days but the price never went down to my limit price. Last night, I apparently mis-typed my limit price of $1.08 by typing $3.08.  Always double check or even triple check your orders when it comes to the markets.  The order got filled at $1.24 this morning at the market opening.  I guess I should be thankful as my purchase price got of been higher.  I will hold on to my shares for now as I do not expect the stock price to fall that much in value.  With the stock thinly traded, I do not expect much movement in the stock over the next few months unless a major announcement happens of some sort. This is a stock that an investor or trader has to be patient with and just go about other business.

         The company could be acquired by one of the major players in the industry.  I own shares currently in TFI International which is involved in Transportation and Logistics and Canadian National Railway.

      Disclosure:  Long TFII, TTR, CNR

      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, June 26, 2017

      Alberta Economy And The Price of Crude Oil

               Alberta is a province in western Canada that is known for its oil and gas industry.  Alberta's neighboring provinces Saskatchewan to the east and British Columbia to the west has oil and gas as well.  These neighboring provinces do not have nearly the quantity of oil has Alberta.  Alberta has has the oil sands located in the Fort McMurray area.  Alberta is said to have the 3rd largest amount of crude oil in the world, behind only Saudi Arabia and Venezuela.  The east coast of Canada currently imports about $12 billion worth of oil for Saudi Arabia on a yearly basis.

              A couple of months back, the Alberta finance minister released the budget for the upcoming fiscal year.  Finance minister Joe Ceci based his predictions on oil being $55 a barrel.  Why is this important to know?  Alberta does not have a sales tax, unlike all other provinces have a sales tax separate from the federal GST (Good and Services Tax) or a harmonized sales tax (HST).  The HST is a combined tax of the GST and provincial sales tax. Alberta gets tax money from royalities from the oil and gas industry on top of corporate taxes and personal income tax.  A few years back, Alberta was known for the Alberta Advantage due to its strong economy and low taxes.  The price of oil started to decline around Sept 2014 when it was trading at around $92 dollars. Since then we have seen government changes at the provincial and federal level.

           There are lots of Albertans who are out of work and are losing their homes.  The jobs they had in the oil and gas sector are not easily replaceable in terms of skill and wages.  People who work directly in the oil patch or with companies that involve workers going to rigs to do fracking, cementing, wireline operations etc. have cut back their staff by huge amounts of the last 3 years.  We have some pundits believing that Alberta is coming out of the recession.  I totally disagree as the recent optimism has subsided with oil fallen well below $50 a barrel. Currently, WTI crude oil is trading at $43.44 per barrel as of the time of this writing. Alberta is known has a high cost producer, unlike Saudi Arabia is a low cost producer. 

           The provincial government is going to be running a bigger deficit than they originally thought as oil patch activity is way down when oil prices at these levels.  Lots of people have moved out of Alberta, while some oil patch workers are hesitant to re-enter the oil and gas industry after the fallout due to the recession. There is still a net migration of people in Alberta despite the low oil prices.

           The scary part of the Alberta recession is that the stock markets are flirting with all time highs for Canada and the United States.  History has shown that recessions happen ever 8 to 10 years. These recessions affect the entire country or countries around the world.. Major recessions also cause crude oil to be low.

            Currently, there is an oversupply of crude oil and plus the surgence of renewable energy companies affecting the price of crude oil. Some countries are members of OPEC (Organization of Petroleum Exporting Companies) can sway the price of oil when OPEC member companies get together.  Canada unfortunately is not a member of OPEC. 

           Cities and towns in Alberta have been hugely affected by the low oil prices.  Calgary is said to have an office space vacancy nearing 35%.  Calgary is where a lot of oil and gas companies have their corporate headquarters.  Lots of small communities spread throughout Alberta are feeling the pinch as well as they get a lot of oil patch workers stopping in their communities for some food or lodging.

      Conclusion:

          The recession in Alberta affects the entire country has a whole.  Besides the workers inside its own border, people from all across the country come to work in Alberta.  These out of province workers spend money in their home regions which increases tax revenue for their respecting provincial governments.

           Personally, I do not believe the recession is even close to being over.  Every week, we hear in the business news that we have an oversupply of crude oil. Canadian companies are hesitant to drill when the prices are this low as their chance of not being profitable are too high.  Just a few months ago, I recall a person on Business News Network saying that a company in Alberta used to hire oil patch workers at $40 per hour and now hired some people back at only $15 per house. I believe oil will dip down to around $40 per barrel before he hit $45 per barrel again. 

           Often is says the one rig creates approximately 135 jobs both directly and indirectly.

            I do believe Alberta will have to institute  a sales tax within the next couple of years if this recession caries on. 

         What are your current thoughts on crude oil and the effects on the economy?

      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, June 25, 2017

      Dream Office REIT - Recent News

               Dream Office REIT is the result of a name change within the last couple of years . The REIT was formerly known has Dundee REIT.  I have own units in this REIT for awhile.  I owned units in Whiterock REIT in 2011.  Dundee REIT acquired Whiterock REIT, so I decided to keep my units which became units of Dundee REIT in 2011. I have purchased more shares by both buying more units and via DRIP.

              Dream Office REIT has cut its distribution in the past year of so from $2.24 per unit per year to $1.50 per unit per year.  That decrease alone represented a decrease of 33.03%.  The share price  dropped considered over the last 5 years as evident by the chart below.

           
      Click to Enlarge




      Below is a 1 year chart and the units of struggled to trade over $20.00 per unit.   



          On June 22, Dream Office REIT  (ticker symbol : D.UN) announced a sale of $1.7 Billion of properties with $1.4B sale to KingSett , including interest in one of there signature properties Scoita Plaza.  Scotia Plaza is in Toronto.  The trust announced they will be reducing their annual distribution from $1.50 down to $1.00 per unit per year starting with the July 2017 distribution to be paid Aug 15, 2017.   You can read more about this here

         The REIT seems to be poorly managed.  D.UN has office properties in Canada.  I think the REIT management should concentrate on paying down the debt  even with interests being so low.  They currently have 106 properties with 15.4 million square feet of gross leasable area.  They have a portfolio occupancy of 86.5%.  They have properties in Alberta that have been in trouble due to the low oil prices.  Due to the recession in Alberta the past 3 years, Calgary has 33% vacancy with regards to office properties. They have a high concentration of properties in the Greater Toronto Area.


      Conclusion:

             I currently own 795 units of D.UN.  So, this distribution cut to $1.00 per unit per year will reduce my dividend income by $397.50. 

            As the leases are coming up for renewal,  they have companies not renewing or doing so at lower prices due to the climate of the economies of Canada and the United States.  Companies are hesistant about being bullish on the Canadian economy as we are in odd situation.  The odd situation is interest rates being so low, the price of oil being low and the stock market at all time highs.   

            If my adjusted cost basis on my positions were below $20.00 per unit, I would definitely look to selling my positions if the price went over $20.00.   The price went up on Friday, but I believed it will be short lived.  I believed the REIT will trade between $17 and $19 for the next several quarters.

      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, June 11, 2017

      Analysis of WestJet

                 
               Is it often said one of the worse types of companies to invest in are the airline stocks.  In fact, Richard Branson once said "The quickest way to become a millionaire is to be a billionaire and start an airline".  The airlines as an investment has garnered a lot of attention recently as in the past year Berkshire Hathaway has invested heavily in airlines in the United States. Berkshire Hathaway is the holding company which is ran by Warren Buffett and Charlie Munger.

              In Canada, currently we have 4 airlines which are Air Transat, Porter Airlines, WestJet Airlines, and the Air Canada.  I am going to talk about WestJet Airlines in this article.



              WestJet Airlines (ticker symbol WJA.TO) was started in 1996 by Clive Beddoe and a team of partners with just 3 planes.  WJA.TO is headquartered in Calgary, Alberta, Canada.  The company has grown tremendously since its inception. Often people who work for airlines belong to a union, but this has not been the case for WestJet as most of their workers own shares in the company.

              When people decide to take a trip, they often go on the websites of airlines or to travel agencies to look for a deal.  This makes it harder for the airlines to be profitable and remain profitable over time. Why would some one choose a specific airline over another one if they can save money?  If the savings is not significant, the traveller will choose the airline in which they find the service better.  WestJet believes just because fares are cheaper does not mean poor quality service.

               Personally, I have travelled on both WestJet Airlines and Air Canada, and the service was the same. My very first time on a plane was with WestJet in 2003.  I flight was from Moncton, New Brunswick to Grande Prairie, Alberta and I had to change planes for the final leg of the trip in Edmonton, Alberta.  The last leg of the trip was the airplane get circling the airport and it was late at night.  The lights on the runaway in Grande Prairie were not working, so we went back to Edmonton and were put up in a hotel.  I basically told them, I absolutely refuse to share a room as I do not know anyone. I was allowed to stay in a room with 2 beds by myself without a hassel.

             When deciding on an investment, we have to do research such as pouring over annual reports doing a quantitative analysis and then doing a qualitative analysis.  Quantitative analysis is pouring over the numbers.  Investors can get information from annual reports or from online sites such as google finance or Morningstar.

               WestJet revenues have grown revenues from 2.151 billion in 2006 to 4.123 billion in 2016.  This represents a compound annual growth rate, CAGR, of  7.50%

              This CAGR for revenue of 7.50% for an airline is quite impressive. Over the 10 year period, WestJet has added routes to more destinations and increased frequency of some routes when the time is warranted.   The company has aggressively repurchased shares over this time.  In 2010, WestJet actually issued more shares but have aggressively bought back shares afterwards. Over the 10 year span, the amount of shares outstanding have declined by around 8%.


              WestJet earnings per share have grown from $1.47 in 2007 to $2.45 in 2016.  This represents CAGR of  5.84%. 

              With a bottom-line growth of almost 6 percent for this airline is quite impressive and even more impressive that this includes the great financial recession of 2008-2009 and the fact Alberta is in a recession for the past 3 years due to lower oil prices.
        
              WestJet did not pay a dividend until 2010 and actually the first dividend payment date was January of 2011.  The dividend has grown from $0.20 per share per year to $0.56 per year in 2016.  This represents of CAGR of 18.72% over last 6  years.  A dividend growth rate of 18.72% is impressive for any company and even more impressive for an airline.  The dividend payout ratio for 2016 is 22.4%, so the company has room to grow the dividend in the future.

          Let's turn to the balance sheet.  The long term debt to equity ratio is 0.92. The interest coverage ratio is  9.48.

      Currently, WestJet is trading at a P/E ratio of 10.7.  That is well below the broader market. This is also below the stock's own 5 year average of 11.4.  Investors are paying less for WestJet's cash flow than, over average, over the last 3 years.  The current dividend yield of 2.4% for the stock is higher than it's 5 year average of 1.5%.

      Valuation

      Now we will at the valuation. For a valuation we will use dividend discounted model. I used a dividend growth rate of 12% for the next 5 years then leveling off after that to a 7% growth rate after that. I am using a dividend discount rate of 10%.  With these numbers I have come $24.81

      According to Questrade's Market Intelligence, they have Morningstar fair value at $25.00.

      If we take a average of these numbers, we get a price of $24.90.

      Right now, WestJet is at $22.93 as of Friday's close.  So the company appears to be approximately 9% undervalued.

      Conclusion:

      As only 2 numbers were used to get an approximation of the average price the stock is worth, I would take this with a grain of salt. The low price of a barrel of crude right now lowers the operating expenses of this company. So for a larger margin of safety, I would not be a buyer at these levels.

      Also I do believe WestJet has some headwinds in the future with increase competition and possibility of lower load factors for a couple of years with people tightening their purse strings in fear of recession across North America.

      Disclosure:    Currently do not own any shares of WJA.TO in any accounts.

      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.




          

      Need Money To Start?

                 When a person decides to start investing, they often do not know where to start.  What type of investments should an individual pursue?  Well, the potential investor has to know what their time horizon, risk tolerance, hands on or hands off, invest themselves or have someone else invest on their behalf.

                A real estate investor is more hands on then an investor in the stock market. See, a real estate investor might have to deal with tenants directly in gathering rent, doing maintenance, and showing the property to them.  The real estate investor might be involved in choosing the proper, buying the property, getting a mortgage and advertising them. It is said that real estate investing is a business. But a individual must ask themselves if they want to fix toilets, deal with tenants, look for new tenants etc.

                 On the other hand, investing in the stock market can be done real hands off or hands on.  If an individual decides they want to be a strict hands off investor, they have to find a stock broker or consult with investing professionals who will manage their money for them. A hands on investor can purchause instruments like precious metals, stocks, bonds, debentures etc by doing their own reseach and clicking a mouse.

               The method the rest of this article is about is investing in the stock market.  The big advantage of the stock market is that an individual can close a position really quick.  However, unless an individual investor has basically no control over the direction of the company unless they own a significant amount of shares already. The stock market is highly liquid.

             A question that always comes up is "Where to I start or how to begin?".  Starting out an individual might not have a lot of money.  I believe an individual should read about how the stock markets works.  He or she should also understand how to read financial statements.

             An individual investor does not need a lot of money to begin.  How to you come up with money to invest in the stock market.  Starting off, an investor needs to keep adding cash to the account.  The investor can buy stocks for cheaper commissions than ten years ago.  An investor can purchase stocks the "old way" which was purchasing stocks directly from the transfer agent or purchasing a share from a person.  The investor can purchase additional shares without commissions.  The downside to purchasing shares directly through the transfer agent is that he or she does not know what the price of the stock at the time of purchase.  If they company overs a discount on their DRIP shares, the investor is guarantee to receive this discount whereas a pseudo DRIP by a brokerage might not pass the discount onto the investor.

              Another method of purchasing stocks, is to pick stocks that pay monthly. For example, the investor saves $100 a week and their position size if $300.  So the position that pays monthly can have it's monthly dividend along with new cash to buy another position of the same stock or a new one.  A way to speed this up is to purchase commission free ETF or a REI,  rather than purchase an individual stock.  The reason for this is the ETFs and the REITs have a higher yield, for all intended purposes.  ETFs and REITs pay distributions whereas a stock pays a dividend.  Unlike a dividend, which is all the same type of income, a distribution can have its payment broken into dividends, return on capital, capital gains or interest.  The investor can take the distribution payment and add it to his own capital to purchase shares.  ETFs and REITs have  pay out 90% of their profits to unit holders. The downside to investing in ETFs or REITs, is that their is not much room for growth unless these raise more money through increasing the amount of units.

               When buying a stock that pays quarterly, an individual has to weigh 3 months to see any income from the investment. This psychologically is difficult to see at the beginning as the payments will be small. With having more money to invest at the beginning, can see an investor stay in the game though more patience and able to not throw in the towel so to speak.

      Conclusion:

                Investor's will not see huge returns starting off on their journey.  It takes a while for the snowball to gather momentum and grow, but they can help speed up the process.  An individual is actually doing this right now live in real time. Dan of Sharpe Trade LLC is demonstrating starting from $500 and adding $25 each week, how an individual can build an account that pays you an income. This portfolio, which is called Sharpe Income, has an investing section and a capital gains section. The capital gains section will eventually be used to speed up the income investing side of the book. 

               If an investor buys a monthly dividend paying stock, ETF or REIT, he or she can put that capital back to work quicker.  The downside to this that dividend growth stocks, provide higher returns over the long haul as their businesses tend to grow quicker.  The companies that are considered dividend growth companies can use some of their profits to grow the business.

            The most important thing is to start.  I think a person should pay off their debts first as fast as they can and then save as much as possible this allows you to become financially free at an earlier date.
         

      Disclosure:  I have no affiliation with Sharpe Trade or any of their subscription based projects. However, I do follow their public side at www.sharpetrade.com.

      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, June 7, 2017

      Price of Oil

            Western provinces in Canada have seen their industries change a lot in the past century.  The western provinces are from west to east British Columbia, Alberta, Saskatchewan, and Manitoba.  The latter 3 are also referred to as the Prairies. 

             The Prairies are known for the farmland and the flatness of the land.  Just west  of Edmonton, Alberta the land started  to increase in elevation  as the Rockie Mountains are just a 3-4 hour drive west. Although farming is still great part of the Prairies, the economic landscape changed when conventional oil was discovered in Leduc, Alberta in 1947.  Oil and gas are concentrated mostly in Alberta, but there are concentrated areas of Saskatchewan and British Columbia.

             Alberta in particular is known for boom and bust cycles with the commodity of crude oil.  Alberta has two different methods of extracting oil from the ground.  The first method is by using drilling rigs to drill for oil and all the secondary services. The second method is extraction by mining.  The latter involved extracting oil from the dirt which in the Fort McMurray and Wood Buffalo region of Northern Alberta and if often referred to as the oilsands.  The extraction of oil from the oilsands involves the use of lots of energy and there needs to be a higher price per barrel of crude oil then what the current price is.

             Currently, Alberta has the 3rd biggest oil reserves in the world, behind only Saudi Arabia and Venezuela.  The ecomony of Canada has a lot riding on the oil and gas industry.  The oil and gas industry not only employs people in the western provinces, but people from all over Canada work in the oil industry either moving to where the jobs are or flying back and forth to their place of residence.  The reason they are able to fly back and forth is due to the high wages.

         


              
            The price of a barrel of WTI crude oil was trading at $45.82 at the time of this writing.  It is often said that one operating drilling rig creates around 135 jobs, not all oil field related.  These jobs include restaurants and hotels to service the oil and gas workers.

             From the chart, we can see that oil has been struggling to reach $50  since January 15.  This has caused massive lay offs in the oil and gas sector which leads to people losing their homes and families being torn apart.  People who have high expenses, will find it difficult to replace the income that they made in the oil and gas sector.  The recession in Alberta has effected other businesses and communities all across the country. 

      Conclusion:

              In North America, we have not had a recession since the big financial crisis of 2008-2009.  A recession usually happens approximately every ten years.  Currently, we have the stock markets in North America flirting with new all time highs although the price of oil is low.  So if North America goes in to a recession the price of oil will be impacted even more. 

               I think Alberta will be in major trouble if we have a North American recession. 

      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, June 3, 2017

      Dividend Income Update - May 2017




            The month of May 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 price of barrel of crude oil has falling during the month, and it currently sits below $48.00 per barrel.  As April and May is when breakup occurs in the Western Canadian oil patch. There continues to be a major surplus of oil even with OPEC extending cuts for another 9 months.  The tide is turning towards using more renewable energy sources. That being said, the worldwide need for oil will not go away anytime soon.

            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 (BMO) - $30.80
      • Emera (EMA) - $52.25
      • Enerplus (ERF)  -$ 5.58
      • Dream Office REIT   (D.UN)  - $77.63
      • Shaw Communications (SJR.B)    - $19.75
      • TD Bank (TD) - $60.00

        TFSA
        • A&W Royalties Income Fund (AW.UN) - $5.05
        • Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
        • iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $0.62
        • Cominar REIT (CUF.UN) - $21.19
        • Dream Office REIT   (D.UN)  - $ 17.63
        • Horizons Natural Gas Yield ETF (HNY)  - $4.13
        • Killam Properties REIT (KMP.UN) - $  15.60


        Total = $337.14
            
            As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 12 months ago. This dividend income total of $337.14 represents an increase of 13.88 % from 3 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 $108.15 options premiums in May 2017.
        0
             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 May?

        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.