Tuesday, January 17, 2017

Dividend Payout Ratios

For Dividend Payout Ratios, they will change depending on the type of company or the sector the company is in. There are some rules of thumbs that you can follow. For Dividend Payout Ratio in connection with EPS I look for the following ratios.

Sector DPR
REITs 75% to 95%
Utilities 70% to 80%
Non-Utilities 50% to 60%
Banks 40% to 55%

Note that some people calculate the earnings Dividend Payout Ratios using Dividends over Net Income. There can be a big difference between that calculation and Dividends per Share over EPS if there is a big difference between the basic and diluted EPS. Also some analyst use Cash Dividends over Net Income. If the company is has a DRIP plan there could be a big difference the dividends paid and the cash dividends paid.

I also check the Dividend Payout Ratio against Cash Flow per Share. The Cash Flow per Share I generally use is that after removing working capital. (See my blog for further information on Cash Flow.) The rule of thumb here is that Dividend Payout Ratios for Cash Flow per Share should not be greater than 40%.

These are just guidelines. Fast growing companies will need to retain earnings for expansion and/or reinvestment purposes. There is a tradeoff for some companies about what to give shareholders in dividends and what to hold on to for investment purposes. Some companies have very low payout ratios because of this.

As expected Investopedia has an article on this subject. There is also an article on Wikipedia. What is interesting about this article is that they have a chart about average payout ratios from the 1930's to the 2000's. This table says the payout is based on Operating Earnings, which excludes non-operating expenses such as interest and taxes. An article My Accounting Course also talks about Dividend Payout Ratios.

John Heinzl in the Globe and Mail wrote an interesting article on this subject in 2013. It might be a bit old, but his information is not out of date. There is also a long, but easy to read talk about this subject on Wiki How. The most interesting item on this article by Simply Safe Dividends is the chart of Dividend Payout Ratios by sector for the S&P500.

On my other blog I wrote yesterday about Sylogist Ltd (TSX-SYZ, OTC-SYZLF)...learn more. Tomorrow, I will write about Toronto Dominion Bank (TSX-TD, NYSE-TD)... learn more on Wednesday, January 18, 2017 date around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Thursday, January 12, 2017

Year 2016

My first question is how did I do? My portfolio is up by 21.3% compared to the TSX increase of 17.51%. Looking over the data from 2000, I tend not to go as high as TSX and not to go as low as the TSX.

Looking at Dividend Growth, it seems to be declining for me. For 2016, my dividends only went up 5.08%. This is the second lowest level. The lowest level was in 2014 when growth was only 3.83%.

Date My Ret Div Gth TSX Ret
31-Dec-00 17.82% 11.72% 6.18%
31-Dec-01 -7.48% 9.73% -13.94%
31-Dec-02 -11.41% 32.27% -13.97%
31-Dec-03 17.73% 12.91% 24.29%
31-Dec-04 9.71% 11.64% 12.48%
31-Dec-05 12.12% 7.77% 21.91%
31-Dec-06 15.36% 23.96% 14.51%
31-Dec-07 5.94% 23.21% 7.16%
31-Dec-08 -21.85% 11.35% -35.03%
31-Dec-09 28.37% 14.94% 30.69%
31-Dec-10 13.85% 5.29% 14.45%
31-Dec-11 4.92% 9.23% -11.07%
31-Dec-12 13.09% 9.63% 4.00%
31-Dec-13 19.02% 10.53% 9.55%
31-Dec-14 16.61% 3.83% 8.25%
31-Dec-15 -5.76% 7.58% -11.77%
31-Dec-16 21.30% 5.08% 17.51%

I looked for any article about dividend growth slowing down. I got this article by Jeff Brown in US News. He says that US dividend growth dropped to 5% in the first quarter of 2016 due to corporate earnings not growing. I cannot find any comments on dividend growth in Canada.

On my other blog I wrote yesterday about Rogers Sugar Inc. (TSX-RSI, OTC- RSGUF)... learn more. Tomorrow, I will write about Calian Group Ltd. (TSX-CGY, OTC-CLNFF)... learn more on Friday, January 13, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Tuesday, January 10, 2017

Yield and Cost Coverage

In my review of Bank of Montreal (TSX-BMO, NYSE-BMO), I looked at what dividend yield or cost coverage you might have if this stock was purchases 5 to 30 years ago. In that post I talked about how well I did with the stock that I purchased for my Trading account.

My dividends since 1987 covered the cost of my stock in 1987 and in my subsequent purchases by 173%. However, according to the table below, stock bought some 30 years ago (in 1987) with a median price, the purchase price would be covered by 643%. However, investors do tend to buy a stock over a period of time rather than all at once.

Dividend growth stock can deliver great returns over the longer term. For this stock which I bought in 1983 some 34 years ago, I am making a dividend yield of 47.8% on my original purchase price of $7.37. The following table shows that if you had bought this stock from 5 to 30 years ago before 2017 what your yield or cost of purchase price would be covered if you paid a median price for this stock.

Yield Cost Covered
Yield if held 5 yrs. 6.11% Cost covered if held 5 years 28.00%
Yield if held 10 yrs. 5.25% Cost covered if held 10 years 45.09%
Yield if held 15 yrs. 9.85% Cost covered if held 15 years 112.01%
Yield if held 20 yrs. 13.91% Cost covered if held 20 years 178.50%
Yield if held 25 yes 32.80% Cost covered if held 25 years 451.74%
Yield if held 30 yes 44.28% Cost covered if held 30 years 642.92%

In the above table the yield after 10 years is lower than the one after 5 years because some 10 years ago (2007) the stock hit a peak that was not again matched until 2013. If you had purchased the stock at the lowest in that year your current yield would be 5.79%. Better, but if you had waited until the following year (2008), your yield would 6.95% and in 2009, 8.84%. Some years are just not good years to buy particular stocks.

However, if this stock was bought at the current price $97.81 with the dividend of $3.52 with the continuing dividend increase at 4.35% (the increase for 2016), then in 5 to 30 years times the dividend yield would be as shown in the table below.

In this table if you buy the stock at a $ 97.81 and held it for 5 years you would have a yield of 4.45%, an increase of 23.7%. If you hold the stock for 30 years, you would have a dividend yield of 12.91%, an increase of 258.7%. This is assuming at the growth in dividends is at 4.35% per year over these periods of time.

Div. Yield 4.45% earning in 5 Years at IRR of 4.35% Div. Inc. 23.73%
Div. Yield 5.51% earning in 10 Years at IRR of 4.35% Div. Inc. 53.08%
Div. Yield 6.82% earning in 15 Years at IRR of 4.35% Div. Inc. 89.40%
Div. Yield 8.43% earning in 20 Years at IRR of 4.35% Div. Inc. 134.34%
Div. Yield 10.43% earning in 25 Years at IRR of 4.35% Div. Inc. 189.94%
Div. Yield 12.91% earning in 30 Years at IRR of 4.35% Div. Inc. 258.73%

The combination of yield and dividend growth can really make a difference. In the above table with 4.35% dividend growth starting at 3.60%, in 30 years' time the yield on the original purchase price (that is $97.81) would be 12.91%. If you had bought this stock 30 years ago, the yield on your original purchase price (that is at $7.91 in 1987) your current yield on that $7.91 purchase price would be 44.28%.

My purchase price in 1983 (including commission) was $7.37 with a yield of $6.65%. I am now earning $3.52 on that $7.37 cost which is a yield of 47.76%. For my original purchase I started at a higher yield (6.65% compared to current one of 3.60%) and my dividend growth was higher (5.95% compared to current one of 4.35%).

On my other blog I wrote yesterday about Royal Bank of Canada (TSX-RY, NYSE-RY)...learn more. Tomorrow, I will write about Rogers Sugar Inc. (TSX-RSI, OTC- RSGUF)... learn more on Wednesday January 11, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Thursday, January 5, 2017

Something to Buy January 2017

There is always something to buy in the stock market. On Tuesday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.

The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.

For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.

This system does not work well for old Income Trust companies. These companies had quite high Dividend Yields which will probably never be seen again. So I started a column called VT (for Valid Test) and this applies to checking stock price using dividend yield. If not a valid test I use N to show this. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield.

However, no system is perfect. But if you are interested in buying a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.

Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See Something to Buy January 2017 Spreadsheet to see what stocks are showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). As in other spreadsheets, you can highlight a line or a number of lines for better viewing.

In the following notes I am only going to list stocks showing as cheap using the historical high dividend yields (P/Hi) and historical median dividend yields (P/Med).

I follow 21 stocks in the Consumer Discretionary category. None of these stocks are showing as cheap by the historically high dividend yield. Nine (or 43%) are showing cheap by historical median dividend yield. They are Canadian Tire Corporation (TSX-CTC.A, OTC-CDNAF), DHX Media Ltd. (TSX-DHX.A, OTC-DHXMF), Dorel Industries (TSX-DII.B), Goodfellow Inc. (TSX-GDL, OTC-GFELF), High Liner Foods (TSX-HLF, OTC-HLNFF), Leon's Furniture (TSX-LNF); Magna International Inc. (TSX-MG), Newfoundland Capital Corp (TSX-NCC.A) and Reitmans (Canada) Ltd. (TSX-RET.A). There is no change from last month.

I follow 12 Consumer Staples stocks. There is one company showing as cheap by the historically high dividend yield and that is Empire Company Ltd. (TSX-EMP.A, OTC-EMLAF). Three stocks (or 25%) are showing cheap by historical median dividend yield. These are Empire Company Ltd. (TSX-EMP.A, OTC-EMLAF), Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF) and Loblaw Companies (TSX-L, OTC-LBLCF). There is no change from last month.

I only follow two Health Care stocks and both are US stocks. None of these stocks are showing as cheap by the historically high dividend yield. They are both cheap by the historical median dividend yield. The stocks are Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT). This is the same as for last month.

I follow 12 Real Estate stocks. None of these stocks are showing as cheap by the historically high dividend yield. Three stocks (or 25%) are showing cheap by historical median dividend yield. They are Artis REIT (TSX-AX.UN); Granite Real Estate (TSX-GRT.UN) and Melcor Developments Inc. (TSX-MRD. FirstService Corp (TSX-FSV) was taken from this list.

I follow 7 Bank stocks. There is no company showing as cheap by the historically high dividend yield. Four stocks (or 57%) are showing cheap by the historical median dividend yield. These stocks are Bank of Nova Scotia (TSX-BNS); Barclays PLC (NYSE-BCS), Home Capital Group (TSX-HCG, OTC-HMCBF) and National Bank of Canada (TSX-NA). Toronto Dominion Bank (TSX-TD) has been taken off this list.

I follow 14 Financial Service stocks. None are showing as cheap by the historically high dividend yield. Eight (or 57%) stocks are showing cheap by the historical median dividend yield. These stocks are Accord Financial Corp (TSX-ACD, OTC-ACCFF), AGF Management Ltd (TSX-AGF.B), Alaris Royalty Corp (TSX-AD, OTC-ALARF), CI Financial (TSX-CIX), Equitable Group Inc. (TSX-EQB, OTC-EQGPF), Gluskin Sheff + Associates Inc. (TSX-GS), IGM Financial (TSX-IGM) and Power Corp (TSX-POW). There is no change from last month.

I follow 5 Insurance stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are Great-West Lifeco Inc. (TSX-GWO); Manulife Financial Corp (TSX-MFC); Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF). There is no change from last month.

I follow 34 Industrial stocks. Because I have so many and Industrial is not very descriptive, I have divided my Industrial stocks into 4 separate categories under Industrial. They are Construction, Industrial, Manufacturing and (Business) Services.

I have 6 Construction stocks. None are cheap by the historically high dividend yield. Two stocks or 33% are showing as cheap by historical median dividend yield. They are and SNC-Lavalin (TSX-SNC, OTC-SNCAF) and Stantec Inc. (TSX-STN, NYSE-STN). Bird Construction Inc. (TSX-BDT, OTC-BIRDF) has been deleted from this list. Stantec Inc. (TSX-STN, NYSE-STN) has been added. Bird Construction has just lowered its dividend.

I have 3 stocks I have left with the sub-index of Industrial. None are cheap by the historically high dividend yield. Two stocks or 67% are showing as cheap by historical median dividend yield. They are Finning International Inc. (TSX-FTT, OTC-FINGF), and Russel Metals (TSX-RUS, OTC-RUSMF). There is no change.

I have 9 Manufacturing stocks. There is one company showing as cheap by the historically high dividend yield. Five stocks or 56% are showing as cheap by historical median dividend yield. They are Canam Group Inc. (TSX-CAM, OTC-CNMGA), Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF), Hammond Power Solutions Inc. (TSX-HPS.A, OTC-HMDPF), Intertape Polymer Group Inc. (TSX-ITP, OTC-ITPOF) and PFB Corp (TSX-PFB, OTC-PFBOF). There is no change from last month.

I have 16 Services stocks. None are showing as cheap by the historically high dividend yield. Three stocks or 19% are showing as cheap by historical median dividend yield. These stocks are Canadian National Railway (TSX-CNR, NYSE-CNI), Pason Systems Inc. (TSX-PSI, OTC-PSYTF) and Transcontinental Inc. (TSX-TCL.A, OTC-TCLAF). There is no change from last month.

I follow 7 Material stocks. None are showing as cheap by the historically high dividend yield. One stock or 16% are showing as cheap by historical median dividend yield. That stock is Methanex Corp (TSX-MX, NASDAQ-MEOH). There is no change from last month.

I follow 9 Energy stocks. One Stock or (11%) is showing as cheap by the historical high dividend yield. It is Ensign Energy Services (TSX-ESI, OTC-ESVIF) There are three stocks (or 33%) showing cheap by historical median dividend yield. They are Canadian Natural Resources (TSX-CNQ, NYSE-CNQ), Ensign Energy Services (TSX-ESI, OTC-ESVIF); and Suncor Energy (TSX-SU, NYSE-SU). There is no change from last month.

I follow 8 Tech stocks. None are showing as cheap by historical high dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are Calian Technologies Ltd (TSX-CTY, OTC-CLNFF), Computer Modelling Group Ltd. (TSX-CMG, OTC-CMDXF), Evertz Technologies (TSX-ET, OTC-EVTZF) and MacDonald Dettwiler & Assoc. (TSX-MDA, OTC-MDDWF). Absolute Software Corporation (TSX-ABT, OTC-ALSWF) has been removed from this list.

I follow 8 of the Infrastructure type utility companies. None are showing as cheap by historical high dividend yield. Two stocks (or 25%) are showing cheap by historical median dividend yield. They are AltaGas Ltd (TSX-ALA, OTC-ATGFF) and Enbridge Inc. (TSX-ENB, NYSE-ENB). Veresen Inc. (TSX-VSN, OTC-FCGYF) is no longer on this list.

I follow 12 of the Power type utility companies. None are showing as cheap by the historically high dividend yield. Two stock (or 17%) is showing cheap by historical median dividend yield. Those stocks are ATCO Ltd (TSX-ACO.X, OTC-ACLLF) and Fortis Inc. (TSX-FTS, OTC-FRTSF). There is no change from last month.

I follow 5 of the Telecom Service type utility companies. No stock is showing cheap by the historical high dividend yield. Two stocks (or 40%) are showing cheap by historical median dividend yield. These stocks are Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR) and Telus Corp (TSX-T, NYSE-TU). WiLan Inc. (TSX-WIN, NASDAQ-WILN) has been deleted from this list.

On my other blog I wrote yesterday about Bird Construction Inc. (TSX-BDT, OTC-BIRDF)... learn more. Tomorrow, I will write about Bank of Montreal (TSX-BMO, NYSE-BMO)... learn more on Friday, January 6, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Tuesday, January 3, 2017

Dividend Stocks January 2017

First I want to point out that not all of the stocks I follow are great investments. I follow a diverse selection of stocks. There are some that I would never invest in personally. I follow a number of resource stocks even though I personally have little invested in this area. I follow what I find interesting and with resource stocks, I think it is important for Canadians to know what is happening in the resource area. On the other hand I do follow of good number of great dividend growth stocks.

The theory is that you should use the dividend yield to see if a dividend stock is selling at a stock price that is relatively cheap. A stock price is considered cheap if it is selling at a dividend yield higher than the historical high yield or higher than the historical average yield or historical median yield. See my spreadsheet at dividend growth stocks that I just updated for January 2017.
  • I have 2 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 32 stocks with a dividend yield higher than the historical average dividend yield
  • I have 59 stocks with a dividend yield higher than the historical median dividend yield and
  • 59 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list last list in November,
  • I have 2 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 33 stocks with a dividend yield higher than the historical average dividend yield
  • I have 64 stocks with a dividend yield higher than the historical median dividend yield and
  • 60 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list in January 2014,
  • I had 9 stocks with a dividend yield higher than the historical high dividend yield,
  • I had 45 stocks with a dividend yield higher than the historical average dividend yield and
  • 39 stocks with a dividend yield higher than the 5 year average dividend yield.
If you had one share of each stock, total dividends last month would be $153.06. This month dividends would be $151.83. Of the stock that I follow 5 stocks has raised their dividends since last month. Dividends raises are denoted in green. Those stocks are shown below.

Allied Properties REIT (TSX,-AP.UN, OTC-APYRF)
Bank of Montreal (TSX-BMO, NYSE-BMO)
Granite REIT (TSX-GRT.UN, NYSE-GRP.U)
National Bank of Canada (TSX-NA, OTC-NTIOF)
TECSYS Inc. (TSX-TCS, OTC-TCYSF)

Of the stocks that I follow 1 company has decreased their dividends. That company is Bird Construction Inc. (TSX-BDT, OTC-BIRDF).

Manitoba Telecom's (TSX-MBT, OTC-MOBAF) dividend has been suspended. As part of the plan of arrangement pursuant to which, among other things, BCE will acquire all of the issued and outstanding common shares of MTS, they do not expect to declare or pay any more dividends to shareholders prior to closing. Their last dividend was declared on May 11, 2016 and paid out to shareholders on July 15, 2016.

The Stock Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF) has changed its TSX symbol to CTU, the OTC symbol remains LCUAF. Herschel H. Segal has changed his multiple voting shares of TSX-CTU.B or Class B shares into Class A shares so there will be only one Class of Shares under the CTU symbol.

Teck Resources Ltd changed its symbols from TSX-TCK.B and NYSE-TCK to TSX-TECK.B and NYSE-TECK. TransForce Inc. changed its name and symbol from TransForce Inc. to TFI International and TSX-TFI to TSX-TFII. Kombat Copper Inc. (TSX-KBT, OTC-PNTZF) is now Trigon Metals Inc. (TSX-TM, OTC-PNTZF).

Most of my stocks started out as Dividend Payers. Currently 15 stocks are not paying any dividends and this would be some 10.14% of the stocks that I follow. Three of these stocks never had dividends, so 8.11% of the stocks I follow have suspended their dividends. The three stocks that never paid dividends are Ballard Power Systems Inc. (TSX-BLD, NASDAQ-BLDP0, Blackberry Ltd. (TSX-BB, NASDAQ-BBRY) and Kombat Copper Inc. (TSX-KBT, OTC-PNTZF).

I am showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). See these fields on the right side of the file. You can highlight a particular stock using your cursor to highlight the appropriate line.

There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical median dividend yield are probably the best bet.

The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution. Do not forget that I have all the stocks I follow on this spreadsheet and some are much better investments than others.

You should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.

Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. These companies have generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield. I also started a column called VT (for Valid Test) and this applies to checking stock price using dividend yield. If not a valid test I use N to show this.

Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.

The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.

See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. I have an entry on my introduction to Dividend Growth. You might want to look at my original entry on Dividend Growth Stocks. I have also written about why I like Dividend Growth companies.

The last stock I wrote about was about was Metro Inc. (TSX-MRU, OTC-MTRAF)... learn more . The next stock I will write about will be Bird Construction Inc. (TSX-BDT, OTC-BIRDF)... learn more on Wednesday, January 04, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

Thursday, December 29, 2016

Budget Items

I know that the Canadian government is saying that inflation is low, however I do wonder about this. For some items it is not true. What the Bank of Canada says for inflation per year is as show in the table below.

Years Total Inflation Core Inflation
3 1.71% 2.18%
5 1.44% 1.78%
10 1.67% 1.76%

I live in Ontario where the cost of Electricity has been a problem of awful government policies for years. My Electricity has gone up for me by 22.2% between 2015 and 2016. My increases over the past 3, 5 and 10 years are at 6.23% per year, at 3.60% per year and 4.77% per year.

I find that food is also raising much higher than what is said to be the inflation rate. In 2016 I spent 17.5% more on food than in 2015. My increases over the past 3, 5 and 10 years are at 11.7% per year, at 7.1% per year and 4.7% per year. Since I generally buy fresh rather than pre-packaged food, the changing CDN$ to US$ could be a big factor. Our dollar is declining against the US$ and we do get fresh food in non-summer months from the US.

Cable, Internet and Phone also seem to be an area where prices are rising quickly. These bills were up by 9.4% in 2016 compared to 2015. My increases over the past 3, 5 and 10 years are at 9.2% per year, at 2.2% per year and 5.7% per year.

I would think that these items would be core items in anyone's budget. The food inflation will affect my budget much more than the other items. I spend just over 10% of my budget on food, just over 1% of my budget on electricity and for the Cable, Internet and Phone combo I spend just under 3% of my budget.

On my other blog I wrote yesterday about Methanex Corp. (TSX-MX, NASDAQ-MEOH)... learn more. Tomorrow, I will write about Magna International Inc. (TSX-MG, NYSE-MGA)... learn more on Friday, December 30, 2016 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Thursday, December 22, 2016

Portfolio Size

I started this entry because of a question from a reader.

In connection with portfolio size the quick answer is to go with what you are comfortable with. Also, you need to be able to track your stock. You need to review all your stocks at least once a year. Some stocks you might want to review more often if they are cyclical or volatile. I have 50 that I own, but I track 150 stocks. I can do this quite comfortably at the present time.

Most analysts and people who talk about portfolio size feel that around 20 stocks that are diversified is the right size portfolio.

You are going to have losers. These are the ones you will lose money on. You may not lose all your money, but could lose 50% to 90% of a stock's value. A recent stock going off the rails that comes to mind is TransAlta Corp. (TSX-TA). The initial drop was around 50%. It is now down some 84% since its top in August 2008.

Part of the reason I have 50 stocks is that I opened Trading Accounts at different times. I got my trading account first, then an RRSP account, then a US account, then a Locked-In RRSP account and finally my TFSA. There is some overlap, but I could not have complete overlap because stocks I liked were not at reasonable prices when I need to do some buying. I feel that it is more important to pay a reasonable price for your stocks. If you overpay for a stock at the start you could do poorly with it over the long term even with a great stock.

One question to ask yourself about your portfolio is, can I go off and leave it and not worry? Can I leave my portfolio alone for a month or 6 months and not worry? I can. I feel that nothing much will happen to it in the long term.

However, problems in the short term are a different matter. You should not be worried about your investment in the short term or you got the wrong things in your portfolio. It is not that I do not indulge in short term investments. I do because it is fun and I do not do it with enough money to damage my portfolio.

I remember talking to an acquaintance I know when the market was crashing at the end of 2008. She said that she had taken 2 days off of work to sell stuff from her portfolio. She lost a lot of money. To me the crash was just been there done that time to focus on something else.

You may want to focus on dividend payments, not value of your portfolio. The last two bear markets I lost just over 30% of the value of my portfolio. However, my dividend income did not decline. Since I have mostly great stocks the value of my portfolio recovered quite nicely.

I sold nothing because of the crash. I wrote about this a number of times. The first entry compared my portfolio to the TSX in Recovery from Bears where I looked to see how well my portfolio recovered from bear markets. I wrote about Me and CDZ on how my portfolio compared to the Dividend Aristocrat Index ETF of CDZ. I also wrote I about my Bear Market Income.

On my other blog I wrote yesterday about FirstService Corp (TSX-FSV, NASDAQ-FSV)... report learn more. Tomorrow, I will write about Colliers International Group Inc. (TSX-CIGI, NASDAQ-CIGI)... learn more on Friday, December 23, 2016 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.