Dividend Income Update - April 2019

      

        The month of April 2019 is another month of dividend income landing in my accounts. Recently, I switched my pay yourself first model to concentrate a little on debt repayment.  The interest on debt is 7.16% plus the insurance on the debt.  I currently pay myself 10% of income from job(s) and non-registered accounts to my TFSA.  The TFSA income is staying within the account.  I will deviate the 10% to savings account instead of to TFSA if a large expense comes up like a dental appointment.

       

 Non-registered Accounts

• Bank of Nova Scotia (BNS) -  $36.49  (Transfer Agent)
• Bank of Nova Scotia (BNS) - $17.40
• Bell Canada Enterprises (BCE) - $79.25
• Canadian Imperial Bank of Commerce "CIBC" (CM) - $39.20
• Cineplex  (CGX) - $14.50
• Enerplus (ERF)  -$ 5.58 
• Restaurant Brands International (QSR) - $65.78 
• Rogers Communications Class B (RCI.B) - $100.00
• Shaw Communications (SJR.B)  - $19.75
• Telus Corporation (T) - $54.50

Subtotal :  $432.45

TFSA

• A&W Royalties Income Fund (AW.UN) - $5.59
• Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
• Cominar REIT (CUF.UN) - $12.96
• Dream Office REIT   (D.UN)  - $14.00
• Killam Properties REIT (KMP.UN) - $  16.61
• TD Bank  (TD) - $14.80 
• TFI International (TFII) - $12.00
• Telus Corporation (T) - $13.08

Subtotal:  $115.95

Total = $548.40

    I received a total of $548.40 in dividend income for the month of April 2019.  This is my highest total ever! This represents a 8.59% increase from 3 months ago and 10.8% increase year over year.  

    I received dividend / distribution income from 16 different companies.   

     I received $0.00 within my investment accounts in April 2019.

    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 April 2019?

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.

Recent Sale

 On October 1, 2018, I purchased 100 shares of Telus Corporation (T.TO) inside my margin account.  I purchased with the attention of selling covered calls.  A covered call is when you sell (or write) a call option when you own the corresponding number of shares for said contract.

When selling covered calls, the individual is obligated to sell their shares at or on expiration date.  For this obligation, the seller of the call option is paid upfront an option premium.  The option seller gets to retain this premium regardless if the stock moves up, down or sideways.  If the price of the stock is $0.01 above the strike price at expiration the option will be assignment.

The initial cost basis of the shares is $4743.30.

Total dividends received = $109.00
Total Options received = $78.10 ( $44.05 and $34.05 on 2 trades )
Option Assignment Fee = $24.95
Strike Price = $48.00

When a covered call is assignment, the premium is added to the proceeds of sale resulting in a larger capital gain or capital loss for tax purposes.

When the covered called is not assigned, the gross proceeds of sale is the premium received and the outlays and expenses is the commission for the option trade by your brokerage.  The adjusted cost basis is $0.00.


Summary:

Net profit on assignment = # of contracts * strike price * 100 shares + net premium - assignment fee
                                         = 1* $48 *100 + $34.05 - $24.95
                                         = $4809.10

For total return we use all the money received

Total return =[ (net profit on assignment + other premium received + divys )  / ACB on purchase]  - 1
                    = [($4809.10 + $44.05 + $109.00)  / $4743.30]  - 1
                    = 4.62%

The total return is not that high. In the past month, T.TO increased to over $50.00 per share and then retracted to mid $49.00.

Telus currently pays an quarterly divided of  $0.545.  This option assignment reduces my annual dividend income by $218.00 

I will update my investing tab spreadsheet in early May to reflect this transaction.


Disclosure:  - Own 24 shares of T.TO in my TFSA
                        - Long T.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 Dividend Increases

As investors, we love to have raises without doing any extra work on our part.  Once we put our money to work by starting a position in a company, we can sit back with our feet up as the economy keeps rolling along. The companies we own are busy operating and growing year to year.  With profits growing year to year, the company awards its shareholders with increasing dividend payments.

During the first half of February 2019, I received 4 dividend increases.

On February 7, Bell Canada Enterprises (BCE.TO) raised their quarterly dividend from  $0.755 to $0.7925 per share.  I own 100 shares of BCE.TO so this increases my annual dividend income by $15.00.

On February 8, Brookfield Renewables Partners LP (BEP.UN) raised their quarterly distribution from $0.49 USD to $0.515 USD.  This represents an increase of 5.10%.  I own 33 units of BEP.UN, so this increase adds $3.30 USD to my annual dividend income. I own this position inside my TFSA and the canadian equivalent gets deposited to my account.  As of the time of this writing, the exchange rate is $1 USD = $1.32455 CDN.  Therefore at the time of this writing, the Canadian equivalent is $4.37 increase to my annual dividend  income. 

On February 12, Killiam Properties REIT (KMP.UN) raised its monthly distrubition from $0.053333 to $0.055.  This represents an increase of 3.125%.  I own 302 units of KMP.UN, so this increases my annual dividend income by $6.04.

On February 13, A&W Royalties Income Fund (AW.UN) raised its monthly distribution from $0.143 to $0.147.  This represents an increase of 2.80%.   I own 38 shares of AW.UN, so this increases my annual dividend income by $1.82.

Summary:

As of the time of this writing, my annual dividend income was increased by $27.23.  This is equivalent of investing $778.00 of my own money at 3.5% yield. 

What dividend increases have you received this month? 

Disclosure:  Long BEP.UN, AW.UN, KMP.UN, and BCE.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 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.

Portfolio Update - July 2018

The month of July is now behind us. The big news in Canada is the start of the new PC government in Ontario, Canada having a session in the legislature.  The Doug Ford led Progressive Conservatives won a majority on June 7 2018.  A few weeks later the cabinet was named and the legislature was recalled for a session to start July 11 2018 to get down to business. This government is hoping they can restore confidence in Ontario and make Ontario the economic engine of Canada.

NAFTA is still not settled between United States, Canada and Mexico.  The markets continue to march higher even with oil falling to below $70.00

The government of Canada in May announced $4.5 million deal acquire the assets of Kinder Morgan Canada. That deal is expected to be done by August.  As of this time of this writing, the deal has not been finalized.  The government of British Columbia, the western most province in Canada, are going to court to stop the expansion of the Kinder Morgan Pipeline.

The price of a barrel of crude oil for West Texas Immediate is trading at $68.58 US.   Why do I keep mentioning the price of oil?  Energy companies make up a large percentage of the capital markets in Canada.  Also, the economic engine of Canada is Alberta, mostly to the oilfields directly or indirectly.

Portfolio Activity

During the month of July, there was 3 options trades started. During the month of June,  I made 2 options trades at the beginning of the month and one towards the end of the month.

Rogers Communications raised in value to above the strike price and stayed there.  Noticing the stock price was not receding to below the strike price of $65, I put a buy to cover order to closed the option and keep my shares.  The lost on this option trade was $395.10.

Restaurant Brands International (QSR.TO) has increased in value and I wanted to keep my shares. The strike price of was $82.00. So, I sent in a buy to cover order to close the option trade.  The lost on this option trade was $251.90.

The  naked 2 put option contracts in WestJet Airlines (WJA.TO) with a strike price of $17 expired, and I keep the $68.05 in premium.

In July, I "rolled" my trade in QSR.TO by selling a coverd call with a strike price of $88 and Aug 17 2018 expiration date. I collected a premium of  $54.05 after commissions.  The stock is trading  at $82.56.

I sent a personal check to the transfer agent for Bank of Nova Scotia.  The shares purchased this way are purchased with no commissions. This is the old, old way of purchasing shares.  The downside, you have no control over the purchase price of the shares.  I purchased 4.244999 shares of BNS.TO at $76.5607 for a total of $325.00.  Bank of Nova Scotia currently pays an annual dividend of $3.28 per share.  Therefore, this purchase adds $13.92 to my annual dividend income.  The yield on cost of this purchase is 4.28%.

Finally, the drip was turned on for High Liner Foods (HLF.TO).  The stock has been trading a lot lower over the recent months.  High Liner Foods over frozen fish products under High Liner and other named brands.  Also, High Liner Foods provides the fish burgers for McDonald's Filet of Fish sandwiches.

Shares Purchased Via DRIP

 0.387545 shares of BNS.TO @$76.8944 for a total cost of $29.80 (transfer agent)

As stated above, Bank of Nova Scotia pays a $3.28 per share per year dividend.  Therefore, this purchase adds $1.27 to my annual dividend income. The yield on cost of this DRIP is 4.27%.

Dividend Increases

A&W Revenue Royalties Income fund (AW.UN.TO) increased their distribution from $1.656 to $1.692 per unit annually.  This represents an increase of 2.17%.  I currently own 38 units of AW.UN.TO.  This distribution increase adds $1.37 to my annual dividend income.  This distribution increase is the second one in under 6 months.

Summary:

As of August 3, the value of the portfolio is $117380.88. This is a 2.54% increase 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.

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

 In May 2018, the pilot's union voted 91% in favor of strike action.  As a goodwill gesture to WestJet passengers, the pilots said they would not strike during the Victoria Day long weekend in May.  One of the major issues was that WestJet planned on hiring pilots from over seas for their new ultra low cost carrier Swoop.  Swoop launched on June 20 in Canada.  The pilot's union and WestJet came to an agreement the SWOOP planes will be piloted by WestJet pilots.  As a result of this agreement, a strike was averted even before the 72 strike notice was even given.  The pilot's union and WestJet continue to talk to have other issues addressed. but the possibility of a strike as been basically eliminated.  

  

Before the agreement over SWOOP being piloted by WestJet pilots, passengers were hesitant to book due to the possibility of a strike.  WestJet did come out and state that they will 100% refund any flights that were cancelled due to the strike.

WestJet lost millions of dollars as some of their potential passengers chose to book with their competitors as they did not want the worry of a strike hanging over their heads.

The price of the stock has fallen a lot over the last couple of months. Below is a 6 month chart of WestJet.

Click to Enlarge

Over the last week, a WestJet plane was grounded for 60 hours in London, England due to a mechanical problem.  The flight that was delayed was from London, England to Toronto, Canada.  The passengers on this flight could get compensation from WestJet.  

To Take Action or Not?

I currently own 200 shares of WestJet Airlines.  The company currently pays a $0.56 per share annual dividend.  WestJet (WJA.TO)  has not raised their dividend since the first 3 months of 2015.

I did not have a large amount of cash available. In fact, I do not have any cash available so the purchase would be entirely on margin. My current interest rate on my margin account in 6.95%.  The stock is trading at a dividend yield that is less than half of this amount.

I decided to sell 2 $17.00 put contracts with a July 20 2018 expiration day for a net premium of $68.05 including commissions.  As the option seller, I get to keep this premium regardless if the price of the stock goes up, down, or sideways.   

If the option is assigned before or at expiration, I would be buying the stock at a cheaper price and therefore a higher starting yield.

Summary:

annual dividend = $0.56

net premium received = $68.05

Strike Price = $17.00

number of contracts = 2

days to expiration = 23
option assignment fee = $24.95

Scenario 1: Option Not Assigned

Total Return = $68.05 / ($3400 -$68.05)

                     = 2.04%

This return of 2.04% is for 23 days. For comparison, the interest on my high interest savings account is 1.1% per year.

Annualized Return = [ $68.05 / ($3400 -$68.05)]  * 365/23

                               = 32.41%

Scenario 2:  Option Assigned 

I currently own 200 shares of WestJet. These shares were actually result of an assignment of short put option, which you can read about here.

Previous adjusted cost base = 4496.90

ACB = prev  ACB+ # of contracts *100 shares*strike price - net premium + option assignment fee 

         = $4496.90 + 2 *100*$17.00 - $68.05 + $24.95
         = $7853.80

ACB per share = $7853.80 / 400
                         = $19.63 per share

Yield on cost = $0.56 / $19.63
                       = 0.0285
                       = 2.85%

Conclusion: 

WestJet's biggest shareholder is a UK-based hedge fund.  Recently, the hedge fund added to their position below the $20 per share level.  The hedge fund is not demanding changes to WestJet and believes WestJet is a great company and is trading at a good value.

The share price recently dipped below $17 per share for a bit but quickly rebounded to close on Friday June 29 slightly above $18 per share.

I will be adding cash to my margin account when available instead of TFSA.  This will lower my margin.

Do you use options in your investing?

Disclosure:  Long WestJet

Photo Credit: www.westjet.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

Option Assignment

     

    I recently wrote about selling 2 put contracts in WestJet Airlines (WJA.TO) at a strike price $23 and expiration date of April 20, 2018.

    Fast forward to Monday April 23, I was "put" 200 shares of WJA.TO as the share price was below $23 at the close on April 20th.  Puts can be exercised by the buyer anytime prior to expiration.  For example, if WJA.TO dropped to $21 per share then the buyer will likely notify there broker than they want to exercise (sell to close) their put contracts. Exercising a option involves notifying your broker and not the traditional way by clicking "Sell"".  At expiration, if your short option is $0.01 in the money then it is suppose to be automatically assigned.

  So my yield on cost is 2.491% with an adjusted cost base of $22.4845 per share. When short put options are assigned, the adjusted cost base for tax purposes consist of the following:

   ACB = (# of put contracts*100 shares*strike price) - (net premium received )+ (option assignment fee)

  This option assignment adds $112.00 to my annual dividend income.

   I plan to write covered calls on WJA.TO as their dividend has not been increase in the last few years.  Airline stocks are very cyclical and volatile due to the type of costs such as fuel and weather events.

Disclosure:  Long WJA.TO

Photo Credit: www.westjet.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.

Recent Option Trade

         Over the past several months, WestJet Airlines have made announcements to try to grow as a company.  One of the announcements is the start up of their no frills ultra low-cost airline called Swoop. Swoop is suppose to start flying in June, despite the issues with the union.
        WestJet Airlines started in 1996 with 3 planes and is based out of Calgary, Alberta. Almost all of WestJet employees own shares in WJA.TO, as the company always believes "Owners Care".
  
         The price of fuel with oil over $60 a barrel, the union thinking different hiring practices for Swoop, and getting Swoop off the ground has been a negative for the stock in recent months.  The shares have faced resistance around $27 per share.  During the last week, WestJet CEO Gregg Saretzy retires unexpectedly. Gregg Saretzy has led WestJet for nearly a decade.

         At the market opening on Friday, the price of WestJet dropped to $23.00 per share.  I decided to take advantage of this.  I sold 2 WJA,TO April 20 2018 $23 put options at $0.70 per contract.

Summary

   My brokerage charges an option assignment/exercise fee of $24.95. Not all brokerages charge this type of fee.  I know for sure, Interactive Brokers does not charge this fee.

Premiums received minus commissions = $140.00 - $11.95 = $128.05
Option Assignment Fee = $24.95
Annual Dividend = $0.56 per share
Strike Price = $23.00
Expiration Date: April 20 2018
Days to Expiration : 42

Scenario One : Option not assignment 

Total Return = [$128.05 / $4600]*100
                     =  2.78%

 This represents the return for 42 days.  This return sure beats the interest rate on high interest savings accounts.

Annualized return = 2.78% * (365/42)
                              = 24.19%

 The amount of capital required in a margin account is 20% of break even. So, now lets calculate the return on capital

Return on Capital = $128.05 /(0.20*(4600-128.05)) *100
                              = 14.32%

This ROC of 14.32% is the return on capital for 42 days.

Annualized ROC = 14.32% * (365/42)
                            =124.4%

Option Two - Option is Assigned 

Adjusted cost basis = $4600-$128.05 + $24.95
                                = $4496.90

Yield = dividend rate / ACB per share
          = $0.56 / ($4496.90 / 200 )
          = 2.491%

For comparison, I calculated the yield if I just bought 200 shares at $23.00. My brokerage charges $4.95 commission.

Yield = dividend rate / ACB per share
          = $0.56 /[ ($4600+$4.95) / 200]
          = 2.43%

Edit: Option trade was made on Friday not Monday

Photo Credits: www.westjet.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.

Brief Review A&W Income Fund Quarter Results

     There is a lot of variety in Canada when it comes to fast food chains.  These restaurants included Burger King, McDonald's, A&W and Wendy's.

      The Fund is a limited purpose trust established to invest in A&W Trade Marks Inc. (Trade Marks), which indirectly owns the A&W trade-marks used in the A&W quick service restaurant business in Canada. The trade-marks comprise some of the best-known brand names in the Canadian foodservice industry. Trade Marks licences these trade-marks to A&W Food Services of Canada Inc. in exchange for a royalty of 3 per cent of the sales of 861 A&W restaurants in Canada. Source: A&W Income Fund website  )                           

       This structure makes the A&W Revenue Royalties Income Fund a "top-line" fund because income is based solely on the sales of A&W restaurants minus the Fund's and Trade Marks' minimal operating expenses, interest on Trade Marks' term debt and income taxes. The Fund is not subject to the variability of earnings or expenses associated with an operating business. (Source: A&W Income Fund website )

A&W has changed their menu in the last 3-5 years to such as can be found in this list of facts.  I will highlight some of those here:

• In 2013. A&W started to use beef that is raise without the use of hormones or steroids.
• In Sept 2014, A&W started using chicken that was raised without the use of antibiotics and fed  a grain-based, vegetarian diet without the use of animal by products.
• In Feb 2016, A&W started to use pork raised without the use of antibiotics.

    With these changes over the last several years, this has increased the prices on the menu up besides increases due to inflation.  A&W also has a lot of restaurants in Alberta and Saskatchewan, which have seen there economies struggle over the last 3 years with falling oil prices.

      The number of restaurants in the royalty pool increased from 838 to 861, which is updated every January.  This represents a increase of 2.67% in the restaurants in the royalty pool.

      A&W saw a decrease of 0.3% in Same Store Sales growth from the period between January 1 2017 to March 26 2017.  For the same period in 2016, there was an increase of 8.6% in same stores sales growth.

       The royalty income increased from $7314000 for Q1 2016 to $7355000 for Q1 2017, which represents an increase of  just 0.56% .  This small increase in royalty income and increase in expenses for administration of the fund and an increased distribution as pushed the payout ratio higher. Since this is an income fund, A&W must pay out 90% or more of their profits as distributions to unitholders.

      The income fund has fallen over the last month by 10.94% and 3.03% on May 29. The fund pays monthly distributions. 

Disclosure:  I own 38 units of AW.UN in my TFSA and 115 units of AW.UN in my trading account.

EDIT (May 30 2018) - This stock has had a rough start to the trading day once again. We have also had lots of things happen recently.  The Green party is British Columbia holds the balance in power.  They now have a agreement in place with the NDP, in which the current government will lose power. If this gets approved then I believe the NDP will form the government.  The NDP has said they will increase corporate taxes.  

   The premier of Ontario has announced that the minimum wage in Ontario will change dramatically. It is already set to go increase from $11.40 to $11.60 this October. In her announcement, Premier Wynne stated the minimum wage will increase to $14 on Jan 1, 2018 and to $15 the following year.  I personally think this will have dramatic effects. People of all income levels are not happy with the prices in stores now. Businesses have to raise their prices in order to increase wages.  

    The minimum wage in Alberta is supposed to be raised by $1.40 on October 1, 2017 and then raised to another $1.40 on October 1, 2018.  A&W has lots of restaurants in Alberta.  With the state of the economy in Alberta, these stores are going to struggle financially.

    I wish I would of set a stop loss in the trading account.  This position has a purchase price of $36.65.

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.