Portfolio Update - September 2018

The month of September is now behind us. The United States and Canada have still not ratified a new NAFTA , or North American Free Trade Agreement. One of the hot button issues for the United States is the 300% tariffs that Canada has on its imported dairy products. 300% is not a typo. This number is often quoted by the United States President , Donald Trump. President Trump has said something like "They say it 272%, but it is more like 300% !!".

In Canada, a new political party was formed at the federal level called The People's Party and the founder is former Conservative Maxime Bernier. One of Maxime Bernier's reason getting into politics is the issue of supply management. With Canada having tariffs on their dairy, it causes Canadian consumers to pay more for milk, poultry and eggs. The federal government and the other political parties believe supply management helps protects farmers and the control of safety for the industry. Maxime Bernier wants to abolish supply management and let the free market decide.

Personally, I will be surprised if the United States and Canada will come to a new NAFTA agreement without the issue of Canada's dairy tariffs being addressed.

An industry that has been showing some positive momentum is the oil and gas industry. At the time of this writing, the price of West Texas Intermediate barrel of crude oil is $73.25 US. With Canada being a high cost producer of oil and gas, a price over $70 per barrel will definitely help the industry and its corresponding stocks that are involved with the oil and gas industry.


Portfolio Activity

On September 10, I sold a put option contract in Restaurant Brands International (QSR .TO) with October 19 2018 expiration date. The strike price is $72.00. I collected premium of $64.05 after commissions. This trade was in margin account. For disclosure, I am long QSR.TO inside my margin account.

On September 11, I decided to add to my position in Cominar REIT (CUF.UN.TO) inside my TFSA that was trading at a 52 week low. Cominar REIT has reduced their distribution a few times over the last couple of years. When they reduced their distribution the last time, my monthly distribution was not enough to acquire a whole share for the DRIP. I purchased 30 units of CUF.UN.TO at $11.89 for a total cost of $361.76 including commissions. This new purchase adds $21.60 to my annual dividend / distribution income. Since I bought after the ex-dividend date, my DRIP will re-start for the September distribution that is paid near October 15th.

On September 19th, my short put options in West Jet Airlines (WJA.TO) expired as the price of WJA.TO stayed about the strike price of $17 dollars. For disclosure, I am long 200 shares of WJA.TO inside my margin account.

Shares Purchased Via DRIP

0.392 shares of ENB.TO @ $44.32  for a total cost of $17.37  (transfer agent)

5 shares of HLF.TO @ $8.04 for a total cost of $40.20 (margin account)

Enbridge (ENB.TO) currently pays an annual dividend of $2.684 per share.  This DRIP purchase adds $1.05 to my annual dividend income.

High Liner Foods (HLF.TO) currently pays an annual dividend of $0.58 per share.  This DRIP purchase adds $2.90 to my annual dividend income.

Dividend Increases

There was no dividend increases during September.

Summary:

As of September 30 2018, the value of the portfolio is $114936.47. This is a 1.157% decrease over last month's total. The spreadsheet investment tab above has been updated.

Disclosure: Long all mentioned stocks

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

Please Note:  Positions in Restaurant Brands International (QSR.TO) and Brookfield Renewables Partners (BEP.UN) pay dividends and distributions in US dollars, respectively.  My investment tab spreadsheet displays the Canadian dollar equivalent within 15 to 20 minutes of real time.

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.

Recent Option Trade

     When an individual buys a piece or real estate, they purchase insurance to protect them against huge financial burdens.  When a person buys a vehicle, they have to have insurance.  In fact, a person must show proof of insurance before they are even allowed to register the vehicle.  This has become a new norm in Canada over the past several years and assuming this will become the norm in other countries.

      Can you insure you retirement accounts?  More often that not, retirement accounts deal with mutual funds.  So these accounts are often not insured.  

       Can you buy insurance for your stocks?  The simple answer is yes.  If you own 100 shares of a stock, you can BUY a put option contract at a future expiration date and strike price.  Just like when you have car or home insurance, you pay a premium for this protection.  If no claim is made, you do not get the premium paid back to you.  

        The other side of  buying put option contracts is the put option seller.  The put option seller is the "insurance company" for stocks.   The seller of the option is paid a premium by the option buyer.  The seller of the put option is obligated to BUY a hundred shares of a stock for each put option contract that was sold on or before expiration date.  If the price of the stock stays above the strike price, the put option will not be assigned.

 

    The put option seller gets to keep the premium regardless if the stock goes up, down or side ways.  If the option is assigned, the option seller is put the stock at a lower adjusted cost basis.  This is because of the following formula:

 Adjusted cost basis = # of contracts*100 shares* strike price - net option + premium assignment fee 

     Not all brokerages charge an option assignment  or exercise fee.  Interactive Brokers does not charge this fee.

  

SUMMARY

   On August 23 2018, I sold 2 put option contracts in WestJet Airlines (WJA,TO).

number of contracts  : 2

Strike price : $17

Expiration Date :  September 21 2018 

Days to expiration:  30

Current Annual dividend : $0.56

Net premium received : $28.05
Option Assignement Fee:  $24.95

Scenario #1 - Option Not Assigned

Return =  $28.05 / ($3400)

            = 0.825%

At first glance, this return seems small.  This return represents the return for 30 days.  The annual return on my high interest savings account is 1.25%.

Annualized return = ($28.05 / $3400  ) *(365/30)

                               = 10.04%

Scenario #2:  Option Is Assigned

Adjusted cost basis = # of contracts * 100 shares * strike price -net premium + assignment fee
                                =2*100*17 - 28.05 + 24.95
                                = $3396.90

Yield = $0.56 / ($3396.90/200)
          = 3.297%

Let's compare this yield to the yield of purchase shares at $17 without an option.

My brokerage would charge a commission of $4.95 for 200 shares of stock.

Adjusted cost basis = $3400+$4.95

Yield = $0.56 / (3404.95/200)
          = 3.289%

Disclosure:  - Own 200 shares of WJA.TO
                    - Long WJA.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.

Recent Purchase - Start Dripping Again

  

 During the last couple of years, Cominar REIT has decreased their distribution a few times.  When the distribution is cut, the unit price of the REIT drops dramatically.  With the distribution being reduced, the monthly distribution was not large enough to DRIP one unit of Cominar REIT.

 I notice the REIT price has been dropping and approaching a 52 week low.  The distribution is currently $0.72 per unit per year.  I owned 180 units of Cominar REIT, which  means I collected $10.80 per unit per month in distribution.

On September 11, I purchased 30 units of Cominar REIT ( CUF.UN.TO) at $11.89 for a total cost of $361.76 including commissions. The purchase price represents a 5.97% yield.

This purchase adds  $21.60 to my annual dividend ( or distribution) income.

So, I currently own 210 units of CUF.UN.TO inside my TFSA.  This means my monthly distribution will be $12.60 starting with the September distribution that pays middle of October..  I did not want to go crazy with the purchase as I just wanted a little more distribution that would allow me to DRIP.

I will update my investing tab spreadsheet in early October with this purchase.

Disclosure: long CUF.UN.TO

Photo Credit:  Market-Schools.org

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.

Dividend Income Update - August 2018

      

        The month of August 2018 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.

       

 Non-registered Accounts

• Bank of Montreal (BMO) - $33.60
• Cineplex  (CGX) - $14.50
• Dream Office REIT   (D.UN)  - $52.58 
• Emera Inc. (EMA) - $56.50
• Enerplus (ERF)  -$ 5.58
• Shaw Communications (SJR.B)  - $19.75

Subtotal :  $182.51

TFSA

• A&W Royalties Income Fund (AW.UN) - $5.36
• Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
• Cominar REIT (CUF.UN) - $10.80
• Dream Office REIT   (D.UN)  - $14.00
• Horizons Natural Gas Yield ETF (HNY)  - $6.48
• iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $0.57
• Killam Properties REIT (KMP.UN) - $  16.11

Subtotal:  $80.23

Total = $262.74

    I received a total of $262.74 in dividend income for the month of August 2018.  This represents a 0.440%  increase from 3 months ago and 15.2%  decrease year over year.  

    I received $56.10 from option premiums within my investment accounts in August 2018.

    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 August 2018?

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 - August 2018

The month of August is now behind us.  What an ending to the month!  The ongoing talks between the United States, Canada, and Mexico continued through out the month in regards to NAFTA, or North American Free Trade Agreement.  Canada was sort of left out towards the end as the United States and Mexico came to an agreement.  This agreement was announced in the past week and the United States gave Canada until Friday August 31 to come to an agreement. There was no agreement reached involving Canada.

This was not the only major news in Canada.  A panel of 3 judges denied the expansion of the Trans Mountain pipeline between Alberta and British Columbia that would of meant Alberta getting their oil resources to foreign markets beside the United States. The panel of 3 judges stated the Canadian government failed to consult properly with indigenous people with respect to their land and rights and, " that the National Energy Board's review of the proposal was so flawed that the federal government could not rely on it as a basis for its decision to approve the expansion.".  The day of the expansion being denied was the same day as the Kinder Morgan shareholder's voted approximately 99% in favor of selling the exist pipeline and other related assets to the federal government of Canada.

The Canadian federal government says it is determined to getting the pipeline built and will continue with the acquisition of the current Trans Mountain pipeline and its related assets. Canada's finance minister, Bill Morneau, said that the sale of Trans Mountain pipeline and related infrastructure will be finalized in a few days. 

After hearing the denial of the expansion of the Trans Mountain Pipeline, the premier of Alberta said Alberta is withdrawing from the federal government Climate plan immediately.  Currently, the Alberta has a carbon tax of $30 per tonne which was expected to increase in 2021 to $40 per tonne and $50 per tonne in 2022.  Alberta has said it will keep the carbon tax at $30 per tonne unless the Trans Mountain expansion of the pipeline can move forward. 

Portfolio Activity

With the recent interest rate hikes in the past several months, the interest rate on my margin was 7.2%.  That is quite high, so I decided to take action.  I sold the 631 shares of Dream Office REIT (D.UN) inside my margin account, which you can read about here.  I started to accumulate shares of D.UN inside my margin account in 2013. The distribution payout has been cut a few times.  This sale decreases my annual dividend income by $631.00.

For disclosure, I still own 168 shares of D.UN inside my TFSA.

We often hear that we are suppose to eat fish at least once a week for health benefits. For most people, their lives are so busy they do not want to make a special trip to the grocery store to buy fresh fish.  Instead, they can look to the frozen fish market for the fish eating needs. High Liner Foods is a company that sells frozen fish products under its High Liner brand and other brands.  Also, High Liner Foods is the supplier of fish burgers for McDonald's filet-o-fish sandwiches.

I purchased 90 additional shares of High Liner Foods (HLF.TO) to bring my total share account to 290.  High Liner Foods currently pays a $0.58 per share annual divided, therefore this purchase increases my annual dividend by $52.20.

I sold 2 put options contracts in WestJet Airlines with an August 17 2018 expiration date. The strike price was $17.  I collected $28.05 premium after commissions. As the seller of the option I get to keep the premium due to the obligation to be PUT, or buy, the shares at the strike price on or before expiration.  This option expired as on August 17 2018 as the price of WestJet Airlines stock (WJA.TO) stayed above $17.

On August 23, I sold 2 more put option contracts in WestJet Airlines with a September 21 2018 expiration date.  The strike price, as before, is $17.  I collected another $28.05 in premium after commissions.

I collected a total of $56.10 in option premiums on these 2 option trades.

My covered call on Restaurant Brands International (QSR.TO) expired on August 17 2018 as well.  The strike price was $88.00.

Click to Enlarge

 Shares Purchased Via DRIP

There was no shares purchased this month via DRIP.  My shares directly with the transfer agent are full drip.  In August these positions did not pay a dividend.  For the other DRIPs, the dividend is not large enough to acquire a full share, therefore the entire dividend is paid out as cash.

Dividend Increases

Emera Inc. (EMA.TO) announced on August 9 2018 that they will be increasing the annual dividend from $2.26 to $2.35 per share commencing with the November dividend payment date.  This represents an increase of 3.98%.  This is a smaller increase than in previous years as the company lowered its target of increases for the next few years to lower their debt and to have the dividend increases be lower then expected earnings growth.  Since I own 100 shares, this increases my annual dividend income $9.00.

Canadian Imperial Bank of Commerce (CM.TO) , better known as CIBC, announced on August 23 2018 that they will be increasing their dividend from $5.32 to $5.44. This represents an increase of 2.26% increase. CIBC has been increasing there dividend after every two quarters for the past several years. Since I own 28 shares, this increases my annual dividend income by $3.36.

Bank of Nova Scotia (BNS.TO) announced on August 28 2018 that they will increase the annual dividend from $3.28 to $3.40 per share.  This represents an increase of 3.66%.  Bank of Nova Scotia has been increasing their dividend every 2 quarters for the past several years.  Since I own 60.971474 shares altogether, this increases my annual dividend income by $7.32.

These dividend raises increase my dividend income by $19.68.  This is equivalent of investing $562.29 of my own money at a yield of 3.5%.

Summary:

As of September 1 2018, the value of the portfolio is $116281.67. This is a 0.936% decrease over last month's total. The spreadsheet investment tab above has been updated.

Disclosure: Long all mentioned stocks

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

EDIT:  September 1 2018  - The federal government in Canada now officially owns the Trans Mountain pipeline and infrastructure in Alberta and British Columbia.  The expansion of the pipeline is not allowed as of this date. More work by the government will need to be done.

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.