Thursday, January 29, 2009

TransAlta Increases Dividends, Pfizer Cuts

TransAlta has just released their Q4 results and announced a 7% increase of their dividends, from $1.08 to $1.16 annually. This is another company that I own in my DRiP portfolio, so this is good news for me. It's alway nice when I get a pay raise, even if this will have a minimal impact on my 2009 dividend income (about $1). The point is that the dividend is growing, and will probably keep growing in the future.

However, another company that I own and DRiP, Pfizer, announced earlier this week that it was buying Wyeth and cutting its dividend by 50%. Normally a cut like that would hurt, but my position in Pfizer is so small (3 shares) that it will have very little impact (about $1.30) on my overall dividend income. I don't plan on selling that position, but I will wait and see how the merger goes before I put any more money into the company.

Wednesday, January 28, 2009

Home Renovation Tax Cedit - Quebec vs Canada

I finally found some details regarding the home renovation tax credit annouced by the Quebec finance minister last week. And there we go, Canada's finance minister annouced his budget yesterdy, which also includes home renovation tax credits. How do they compare to each other?

Quebec's Home Renovation Tax Credit
  • 20% of amounts exceeding $7 500, up to a maximum credit of $2 500 (for renovations of $20 000 or more)
  • The renovations have to be performed by a "qualified contractor", so self-performed renovations are out.
  • See the details here.

Canada's Home Renovation Tax Credit

  • 15% of amounts exceeding $1 000, up to a maximum credit of $1 350 (for renovations of $10 000 or more)
  • The renovations cost are eligible, as well as the associated expenses (building permits, professional services, equipment rentals and incidental expenses). It also includes renovations such as painting the house, laying new sod, etc.
  • See the details here.

At first glance, when comparing the two, the federal program seems to target modest spendings by house-owners while the provincial program looks like it targets bigger renovations. Also, Quebec's plan totally exclude any self-performed renovations, which seem to be allowed in Canada's program.

Since I was planning on continuing the replacement of our windows in phases of about $3 000, as well as perform some renovations myself (such as painting the exterior of the house and setting up a vegetable garden in the back yard), Canada's program is much more interesting to me. I may step up some of the renovations in 2009 to take advantage of the programs, but not by too much.

Do you have renovation plans for 2009?

Friday, January 16, 2009

Renovation Tax Credit in Quebec

Earlier this week, the Finance Minister of Quebec annouced a new tax credit on renovations performed during 2009, to help stimulate the economy. According to the press release, the tax credit be 20% of the amount of renovations, up to a maximum of $2 500, on renovations that exceed $7 500.

You can read the press release here (it is only available in French as I write this, but I'm using the English link, so hopefuly they will translate the press release).

The press release is a bit ambiguous. Is it 20% of the whole amount, or 20% of whatever exceed $7 500? If it's the first, then I may be encouraged to speed up some of the renovations we are currently planning. The second would make it too much of a burden to our finances for me to consider it -- I would stick to my plan and keep doing it bit by bit.

Are you considering renovations in 2009? Does a program like that encourage you to speed up your plans?

Tuesday, January 13, 2009

My DRiP Portfolio

I often mention my DRiP portfolio, but I realized the other day that I've never taken the time to list the companies that it contains. Well, now is the time to fix that omission:
  • Bank of Nova Scotia (Toronto: BNS) -- 19%
  • Bank of Montreal (Toronto: BMO) -- 5 %
  • Aberdeen Asia-Pacific Income Inv. Co. (Toronto: FAP) -- 17%
  • Canadian General Investments Limited (Toronto: CGI) -- 6%
  • Telus (Toronto: T.A) -- 5%
  • Fortis (Toronto: FTS) -- 10%
  • TransAlta (Toronto: TA) -- 2%
  • Enbridge (Toronto: ENB) -- 3%
  • TransCanada Corp. (Toronto: TRP) -- 6%
  • Imperial Oil (Toronto: IMO) -- 2%
  • Suncor (Toronto: SU) -- 1%
  • Pengrowth Energy Trust (Toronto: PGF.UN) -- 1%
  • H&R REIT (Toronto: HR.UN) -- 5%
  • RioCan REIT (Toronto: REI.UN) -- 1%
  • Johnson and Johnson (NYSE: JNJ) -- 16%
  • Pfizer (NYSE: PFE) -- 1%
  • 3M Company (NYSE: MMM) -- 2%

(You will notice that the total is over 100% -- that's because of rounding errors.)

So I have a total of 17 companies in my DRiP. Most of these are Canadian, because those were the easiest to start and send money to, but as you can see I have started adding some U.S. companies to the mix. I plan on adding more of these, essentially in sectors that are not represented in the Canadian stock market. My prime targets for expension of my portfolio are Pepsi (NYSE: PEP) and Procter & Gamble (NYSE: PG).

My companies (I like saying that) are divided by sectors as follow:

  • Financials (BNS, BMO) -- 24%
  • Fixed Income (FAP) -- 17%
  • Technology and Telecom (T.A) -- 5%
  • Energy and Pipelines (FTS, TA, ENB, TRP) -- 21%
  • Oil & Gas (IMO, SU, PGF.UN) -- 4%
  • Real Estate (HR.UN, REI.U) -- 5%
  • Health (JNJ, PFE) -- 17%
  • Industrial (MMM) -- 2%
  • Others (CGI) -- 6%

So, you can see that this is not exactly a balanced portfolio (although it isn't too bad). I am overweight in financials and energy, but that's a common theme in Canadian markets, while I am underweight in consumer products (which is completely absent) and industrials.

But since I look at all my portfolios when assessing my diversification, the goal is not to keep a balanced DRiP portfolio, but rather to keep a balanced overall portfolio. I hold more consumer products and industrials in my RRSP accounts, as well as additional fixed income products. That allows me to optimize my taxes, since foreign dividends and interests are taxed less favourably than Canadian dividends. Eventually, I will hold some of my companies in a self-directed TFSA account, for the same reasons.

Monday, January 12, 2009

Financial Goals for 2009

After reviewing my 2008 goals last week, it's now timeto turn ahead and establish some goals for 2009. In this article, I will focus on my financial goals and the related objectives, and the means I will take to attain them.

First, let me define what I mean by "goals and related objectives":
  • A goal is the statement a desired result.
  • An objective is a quantifiable measure to evaluate progress.
  • A mean is a way that is used to reach an objective.

Financial Goal 1: Increase my Net Worth

  • Description: That's fairly straightforward and general -- I want to be richer at the end of the year than I am right now.
  • Objectives: At the end of 2008, my net worth was standing at $70K. I would like to increase it by $15K to $85K by the end of the year.
  • Means: Regular deposits to my RRSP and to my DRiP portfolio, occasional deposits to my TFSA (emergency fund), continued debt reduction (mostly house-related, since I have little personal debts remaining).

Financial Goal 2: Increase my Dividend Income

  • Description: Although I reinvest all the dividends I receive, it is nice to see the amount coming in from those investments increase.
  • Objectives: For 2008, I received ans reinvested about $400 from my DRiP portfolio. Just by leaving those investments alone, this should rise to $700 because all the money added during 2008 will have a full year to generate more dividends. That's nice, but I would rather see my dividend income rise to $850.
  • Means: Regular purchases made within my DRiP portfolio.

Financial Goal 3: Reorganize my Investment Accounts

  • Description: I've been using that same brokerage account (Disnat) for almost 10 years, and my needs have evolved since. I also opened an account with Canadian Shareowner Investments (CSI), that I now use very little. Simplifying my accounts would be good.
  • Objectives: I will investigate, select and open a new brokerage account that will meet my current and future needs. This does not preclude keeping my current brokerage account open. I will also close my CSI account.
  • Means: Analyze my needs, research other discount brokers, open and close accounts.


Thursday, January 8, 2009

BMO Adds a Discount on Reinvested Dividends

On Monday, Bank of Montreal announced that they would start offering a 2% discount on reinvested dividends, starting with their next dividend payment at the end of February.

Since BMO is one of the companies that I own in my DRiP portfolio, I will be benefitting from that discount. But what does it means when a company offers such a discount? What are the implications?

Well, it is fairly simple. When a company annouces such a discount, it is usually because it is a low-cost way for them to issue new shares to raise more capital. If you read the annoucement linked above, you may notice the part of the text where it says "the Bank has decided to issue shares from treasury". Issuing share from treasury is simply another way to say that they are creating new shares.

Although companies cannot raise a lot of capital this way, it is just one more way for them to do so. Bank of Montreal, for example, has in the last couple of months announced that they were issuing common shares, preferred shares and notes (debt) to raise more capital (and thus prop up their balance sheet). Combined, these issues allowed it to raise 1.6 G$.

So the discount on reinvested dividends is not a surprise, although this is just a drop in the overall issuance bucket.

Wednesday, January 7, 2009

Net Worth Update for 2008

As of January 1st, my net worth is $70 716 (up 1.4% from $69 761). If I exclude house-related assets and liabilities, my net worth is $46 338 (up 1.7% from $45 557).

If I compare this to last year, my net worth went up by $12 658 from $58 058, an increase of 22%. If I exclude house-related assets and liabilities, my net worth went up by $7 194 from $38 944, an increase of 19%.

Not bad at all, considering that the sotck markets took quite a hit starting in September. That had no negative effect on the value of our house, so that part helped keep up the overall number.

Assets ($136 390, up 0.5% from $135 692)
  • Bank Accounts $4 785 (up 32% from $3 632)
  • Emergency Funds $3 378 (up 0.7% from $3 354)
  • RRSP Accounts $31 861 (down 3.1% from $32 889)
  • Non-Registered Investments $10 400 (up 7.5% from $9 668)
  • Home $86 100 (stable)

Liabilities ($65 873 (down 0.1% from $65 932)

  • Credit Cards $4 086 (up 2.4% from $3 992)
  • Mortgage $55 230 (down 0.2% from $55 350)
  • Heat Pump Loan $6 492 (down 0.7% from $6 545)
  • Line of Credit $0 (stable)

Christmas shopping has kept my credit card debt fairly stable (it had risen last month due to some important car repairs). This should go down again this month, although a refill of the heating oil tank might limit that decrease somewhat. Municipal tax season is also approaching, so available cash will be somewhat tighter. Bank accounts were higher at the end of the month due to a 3-pay month. Otherwise, my net worth would have decreased.

A second payment for the windows has just been done, but I used cash to pay for my part of it, so the line of credit will remain at 0. Next payment will be in May, and at that time we will probably put in the order for the second part of the house (another $3 000). We are also planning some other home renovations for this year. The chimney needs some attention, and I'm not sure how much that will cost. The roof will also need to be reshingled soon, although it hasn't sprung any leak yet.

Tuesday, January 6, 2009

2008 Review: Goals

The year 2008 is now over, and it is time to review how it went. This may take a coupleof posts, since a lot went on during that year.

First, I will evaluate how I did regarding the goals I had set last year. Let's see how I did on each of my goals.

Goal 1 - Lose some weight: I wanted to lose some weight, with the objective being to go from 210 pounds down to 195. I failed miserably, as my weight at the end of the year was 220 pounds. The year started well in this regard, as I begun exercising regularly at home, spending 30 minutes or more on the treadmill every day. Things were going well, until I hurt myself to a foot while clearing snow (we had a lot of snow in Quebec last winter). It took some months before I could walk without feeling any twinge, and by that time I started procrastinating. So things got pushed back again and again. -- Failed.

Goal 2 - Increase my passive income: The objective here was to increase income from my DRiP portfolio generated from $130 in 2007 to $450 in 2008, through additional purchases. This was an ambitious objective. I ended the year with about $400 generated by my DRiP portfolio, which is still reasonable. I added $7 000 in new money to the portfolio, but because I decided to invest more in growing dividend payers instead of income trusts, the increase in passive income was not as big as planned. Over the long term, I expect this will result in a better performance from my portfolio. -- Partial success

Goal 3 - Increase my net worth: The stated objective was to increase my net worth by $20 000, like I had in 2007.My objective is to increase it by $20 000, like I did in 2007. Again, this was an ambitious objective, and the troubles in the stock market made that very difficult. Still, I managed to increase my net worth by over $12 000, which is still quite an accomplishment. -- Partial success

Goal 4 - Blog more often: The stated objective was to write one article every week. Well, I was not that regular, but I still improved on the number of posts I did over the year, with a total of 34 posts. -- Failed

So, I failed to achive my 2 non-financial goals, but did fairly well with my 2 financial goals. I'll have to do better in 2009!