No Money to Invest?

        When it comes to investing, a lot of people say they cannot afford to invest.  I think people can not afford NOT to invest. What do I mean by that?  Investing means putting your money to work.  If a person spends on their income, they will not get anywhere in life. People often say you need tens of thousands of dollars to invest. The modern day potential investor has a lot of advantages over someone years ago.

       Years ago before the birth and rise of discount brokerages meant that investors had 2 options. They could call up the brokerage and purchase shares or units at high commission. This made it harder to pick entry points.  Also investor's were not able to see real time quotes like they do today.

        The investors of today have another method still at their disposal.  The real old method of purchasing shares is directly through the transfer agent. In Canada, can purchase shares through the transfer agent directly.  Before using the transfer agent, often times the potential investor has to buy a share from another person.  In Canada, this can be done through the website dripprimer.ca.  An individual would then go to the Share Exchange board and put a message on the board saying they are looking for a share in a certain stock. A share certificate is then sent to the transfer agent by the seller and the buyer would receive the share in a few days or so.  When an investor purchases shares through the transfer agent, they have no control of the purchase price of the new shares. Purchasing shares through the transfer agents means investors do not pay commissions and the entire dividend is reinvestment or paid out.  Some of the companies have a DRIP discount on shares purchased with re-invested dividends.  This method of investing do not require a lot of upfront costs.

     Nowadays, investors pay low commissions via discount brokerages. These discount brokerages have commissions of $10 or under compared to full brokerages which have commissions of $30 or more.  Unlike a full brokerage, an investor using a discount brokerage has to  pick their stocks on the own after doing their own research.  Currently, Dan of Sharpe Trade is proving a way this can be down.  You can read about this project, called the Sharpe Income project on Sharpe Trade and search for Sharpe Income or click on the Sharpe Income label.  Their entries on Monday provide a link to the start of the project and also a link for a spreadsheet.

   For disclosure, I have no affiliation with Sharpe Trade LLC or any of its products on their website. 

      A few of the discount brokerages off commission free ETFs for purchasing only or for both purchasing and selling. The fees associated with the purchase or selling is a ECN, or electronic exchange network, fee which is usually very small.

      Exchange Traded Funds, aka ETFs, are cheaper than mutual funds when it comes to fees and trade like a stock on the stock exchange.  Investment fees eat into returns, so an investor should keep their fees as low as possible.

      The power of DRIPs is shown in the following video.

Dividend income Update - April 2017

      The month of April 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 just below $48.00 per barrel.  As April and May is when breakup occurs in the Western Canadian oil patch.  What is breakup? Breakup is where oil rig activity slows to a crawl as the ground is thawing.  This thawing causes the dirt roads and lease roads to be difficult to have large trucks travel.

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

 Non-registered Account

• Bank of Nova Scotia (BNS) - $24.96  (transfer agent)
• Bank of Nova Scotia (BNS) - $15.20
• Bell Canada Enterprises (BCE) - $71.75
• Canadian Imperial Bank of Commerce (CM) - $ 35.56
• Enerplus (ERF)  -$ 5.58
• Dream Office REIT   (D.UN)  - $77.25
• Roger's Communications Class B (RCI.B) - $96.00
• Shaw Communications (SJR.B)    - $19.75

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) - $21.07
• Dream Office REIT   (D.UN)  - $ 17.63
• Horizons Natural Gas Yield ETF (HNY)  - $4.45
• Killam Properties REIT (KMP.UN) - $  15.60
• TFI International (TFII) - $9.50

Total = $446.88

    
    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 $446.88 represents an increase of 8.09% 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 $0.00 in options premiums in April 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 April?

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.

Option Trade

 

   

        The big banks in Canada have falling in value recently. This decrease in value can be the result of a lot of things currently.  We are due for a recession in North America ,as historically, we have had a recession every 8-10 years.  Currently, right now Alberta is in a recession all of its own in Canada.  The province of Alberta major employer is the oil and gas industry.  The oil and gas industry involves drilling companies, production companies, oilfield service companies and companies whose derive a lot of business due to indirectly serving the oil and gas industry.  My previous employer made machined parts for the oil and gas industry and had one major client.

        A major issue in central Canada is the housing situation in Ontario in their largest city which is Toronto. Toronto and its adjacent areas such as Mississauga are part of what is known as the GTA.  The prices of houses here extremely high due do the population.  The mayor of Toronto and some members of their provincial government are concerned about a possible housing correction as they believe many people will not be able to afford their homes. Our interest rates are extremely low right now.  When they start to rise, the will mean higher mortgage payments eventually for the people.

       The other major city in Canada with similar high priced homes is Vancouver.  Vancouver is located in British Columbia. 

      So on May 2, I sold a put option in TD with a May 26, 2017 expiration day.  I collected a premium of $41.05 after commissions.

Summary:

Strike Price: $62.50
Total Premium Received : $41.05
Days to Expiration: 24
Current Annual Dividend = $2.40
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $41.05 / (1*100*$62.50)
                     = .0066
                     = 0.66%

The total return for 24 days is 0.66%.  The annualized return is 9.99%.  For comparison, my interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*$62.50- $41.05 +$24.95] / 100
                                                = $62.34

Yield on Cost = $2.40/$62.34*100 %
                       = 3.850%

 What would the yield be if shares purchased directly at $62.50 using a limit order?

Commission = $4.95

ACB/per share = [1*100*$62.50+$4.95 ] / 100
                         = $62.55

Yield on Cost = ($2.40/ $62.55) * 100%
                       = 3.837%

Disclosure:  Long 100 shares of TD.TO in my margin account.

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.