February 2014 Update

Dreaming of Vacation

Dreaming of Retirement (4 months to go)

This is a jam packed update, so you might want to read it in multiple sittings.

February saw a real rebound from the dismal January we experienced. Canadian and US markets were up on average 4% leaving a YTD loss of less than 1%.

My portfolio only grew by around 3% as the Canadian dollar stabilized.  My YTD is about even with the general markets at about 1% down, but in Canadian dollars I am up 3% on the year, and I’m retiring to Canada, where I can take advantage of the favourable exchange.

Buying Opportunity??

Many believe that the recent pullback or correction presents a good time to buy. I tend to agree.


Click HERE for a retirement perspective.  Also see my stock portfolio below for some possible bargains.

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Dividends

I have received a few questions about how dividends work.  The strategy I’m using could be referred to as a dividend growth strategy.  I purchase companes that have a track record of continuously increasing dividends.  My main objective is to create a dividend stream (cash payments) that will provide me with an income in retirement and some protection from inflation.  I also have an objective of capital preservation, which is why I only select strong companies as defined by ValueLine (A++)

As investors we always look at dividend yield, which is calculated as the dividends per share, divided by the current share price.  The current share price can fluctuate wildly as we have seen, but the dividend per share does not vary – it maintains a steady growth.  So in spite of the variation in your net worth, you will not experience a variation in your income assuming the companies don’t change their dividend policy.  The companies on my list have never changed their dividend policy and if they do, they fall from the list and I sell.

Companies declare dividends on a dollars per share basis, not yield on share price.  So if a company declares a $1 per share dividend, it will remain $1 per share, regardless of whether the share price rises or falls. Yield is only a mathematical calculation.

I have provided some real examples from three companies below.  You see the dividend per share issued and the date.  The dividends are all issued quarterly, so I have shown the yield for the quarterly dividend and the annualized yield (multiply by four).  I have assumed the investor has 1000 shares of each of the company and have shown the cash dividend as well as the total value of the investment based on the price of that day.

You will see that the actual cash dividend either remains the same, or increases, in spite of the variation of the share price.  With 1000 shares in each of these companies the investor would be receiving an annual dividend stream of $4,540 which would actually grow whether the stock price rose or fell.

Date

Dividend

Price

Yield

annualized

 cash on 1000 shares  Value
INTC
5-Feb-14

0.225

   24.70

0.91%

3.64%

              225            24,700
5-Nov-13

0.225

   23.84

0.94%

3.78%

              225            23,840
5-Aug-13

0.225

   21.98

1.02%

4.09%

              225            21,980
3-May-13

0.225

   24.28

0.93%

3.71%

              225            24,280
5-Feb-13

0.225

   20.88

1.08%

4.31%

              225            20,880
5-Nov-12

0.225

   19.57

1.15%

4.60%

              225            19,570
3-Aug-12

0.225

   24.83

0.91%

3.62%

              225            24,830
3-May-12

0.21

   25.84

0.81%

3.25%

              210            25,840
3-Feb-12

0.21

   26.88

0.78%

3.13%

              210            26,880
TD.TO
2-Jan-14

0.43

   48.16

0.89%

3.57%

              430            48,160
1-Oct-13

0.425

   45.55

0.93%

3.73%

              425            45,550
5-Jul-13

0.405

   42.51

0.95%

3.81%

              405            42,510
1-Apr-13

0.405

   40.18

1.01%

4.03%

              405            40,180
2-Jan-13

0.385

   40.13

0.96%

3.84%

              385            40,130
1-Oct-12

0.385

   38.78

0.99%

3.97%

              385            38,780
3-Jul-12

0.36

   37.32

0.96%

3.86%

              360            37,320
2-Apr-12

0.36

   39.12

0.92%

3.68%

              360            39,120
3-Jan-12

0.34

   36.03

0.94%

3.77%

              340            36,030
ADP
11-Dec-13

0.48

   76.60

0.63%

2.51%

              480            76,600
11-Sep-13

0.435

   75.03

0.58%

2.32%

              435            75,030
12-Jun-13

0.435

   72.09

0.60%

2.41%

              435            72,090
6-Mar-13

0.435

   65.03

0.67%

2.68%

              435            65,030
12-Dec-12

0.435

   59.29

0.73%

2.93%

              435            59,290
12-Sep-12

0.395

   57.79

0.68%

2.73%

              395            57,790
6-Jun-12

0.395

   57.79

0.68%

2.73%

              395            57,790
7-Mar-12

0.395

   55.62

0.71%

2.84%

              395            55,620

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HERE is a video on dividend stocks with a Canadian flavour.

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Investing Small

Most of my commentary and suggestions are appropriate for those who have a significant amount of money to invest – at least $100,000, but better to have $250,000 or more.  For those with smaller amounts this might not be the most efficient approach.  HERE is an article written by Rob Carrick of the Globe and Mail has a suggestion for the smaller account.  I don’t necessarily agree with the mutual fund suggestion, but the ETF is a good idea.

***************************

Home Ownership

More of my bias on owning homes.

HERE is an article by Rob Carrick about helping your kids buy a home. He has some interesting perspectives.  Here is my favourite line:

Your thinking on the financial benefits of home ownership may be wrong.

Owning a home as a place to live and raise a family is one thing. But if you want to help your kids buy a home because it’s an investment, you’re making a backward-looking assessment that may not have any relevance to what’s ahead. Houses can’t keep rising in price at current rates and be accessible to anyone but upper income earners (read my analysis on what happens if house prices keep rising). The era of houses as a no-brainer investment won’t last. (from an article by Rob Carrick)

HERE is another one with a Canadian perspective on home ownership.

HERE is TD bank’s assessment of the Canadian housing market.

********************************

My Portfolio – arranged by 2014 winners and losers to date.  I think there are some real opportunities for buying in the loser column.

Losers Winners
T -9.19% TD.TO 0.32%
KO -7.53% TRP.TO 0.41%
PM -7.33% NA.TO 0.54%
GWO.TO -5.95% FTS.TO 0.59%
COP -5.87% RY.TO 0.76%
MO -5.55% ENB.TO 0.84%
TRI.TO -5.40% CM.TO 2.16%
INTC -4.62% RDS-A 2.24%
MMM -3.94% DD 2.54%
ADP -3.74% BMO.TO 3.01%
PEP -3.46% NVS 3.48%
PG -3.38% BCE.TO 5.00%
PWF.TO -3.19% KMB 5.64%
VZ -3.17% TOT 5.92%
MCD -1.94% T.TO 7.30%
ITW -1.88% LMT 9.18%
JNJ -0.58% MRK 13.87%
UL -0.41%

**********************************

Suggested Stocks

Company Ticker Financial   Strength Dividend Yield Dividend Growth   10-Year Current PE Ratio
3M Company MMM A++ 2.6 6.5 18.07
Abbott Labs. ABT A++ 2.26 8.5 18.29
AT&T Inc. T A++ 5.55 5 12.43
Automatic Data   Proc. ADP A++ 2.59 13.5 24.14
Baxter Int’l   Inc. BAX A++ 2.83 8.5 13.84
Boeing BA A++ 2.25 10 20.7
Bristol-Myers   Squibb BMY A++ 2.67 2 27.06
Chevron Corp. CVX A++ 3.49 9
Coca-Cola KO A++ 3.27 10 16.8
Colgate-Palmolive CL A++ 2.34 12.5 22.25
ConocoPhillips COP A++ 4.25 13.5 8.59
Deere &   Co. DE A++ 2.4 13 10.01
Du Pont DD A++ 2.85 2 17.24
Emerson   Electric EMR A++ 2.71 6.5 16.09
Exxon Mobil   Corp. XOM A++ 2.71 8 12.01
Gen’l Dynamics GD A++ 2.08 13 15.07
Home Depot HD A++ 2.01 19.5 18.36
Illinois Tool   Works ITW A++ 2.08 13 19.14
Int’l Business   Mach. IBM A++ 2.14 18 11.83
Intel Corp. INTC A++ 3.64 26 12.82
Johnson &   Johnson JNJ A++ 2.86 12.5 16.24
Kimberly-Clark KMB A++ 2.95 9.5 19.13
Lockheed   Martin LMT A++ 3.31 22.5 16.87
McDonald’s   Corp. MCD A++ 3.38 27 16.59
Medtronic,   Inc. MDT A++ 2.07 16 14.36
Merck &   Co. MRK A++ 3.15 1.5 16.46
Northrop   Grumman NOC A++ 2.02 9.5 14.46
Novartis AG   ADR NVS A++ 3 16 74.8
Occidental   Petroleum OXY A++ 3.02 14.5 13.03
PepsiCo, Inc. PEP A++ 3.36 13.5 17.34
Pfizer, Inc. PFE A++ 3.3 6 17.53
Procter &   Gamble PG A++ 3.09 11 18
Raytheon Co. RTN A++ 2.28 8 16.03
Royal Dutch   Shell ‘A’ RDS/A A++ 5.13 7.5 11.15
Smucker (J.M.) SJM A++ 2.4 10.5 16.41
Texas   Instruments TXN A++ 2.72 21.5 22.21
Total ADR TOT A++ 5.24 15.5 9.1
Travelers Cos. TRV A++ 2.39 4 9.71
Unilever PLC   ADR UL A++ 3.61 9.5 18.35
Union Pacific UNP A++ 2.05 19.5 17.02
United   Technologies UTX A++ 2.05 15.5 17.49
Verizon   Communic. VZ A++ 4.41 2.5 15.33
Wal-Mart   Stores WMT A++ 2.72 18 13.34
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About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
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