Wednesday, May 19, 2010

Sold Kraft

I just sold the shares of Kraft (NYSE: KFT) that I purchased in January. A couple of reasons for the sale:
  • Kraft announced its next dividend payment, and still no sign of an increase.
  • Integration of Cadbury still likely to pose problems. The way things are being handled are raising questions, with bad sentiment about a plant in the U.K. that executives promised would stay open and which is being closed.

But the most important one is this: With the current situation in the world markets, I think there may be better opportunities coming. So I'll need some cash available to take advantage of any unreasonably low prices that are likely to present themselves. And I feel that Kraft is my holding that was least likely to grow in the next couple of months.

I should make a small profit with this sale. I'll know tomorrow when the exact exchange rate for the sale is known.

Friday, May 14, 2010

H&R REIT Announces Distribution Increases

The well-known real estate income trust, H&R REIT (Toronto: HR.UN), today announced as part of its 1st-quarter results that it will start increasing back its distributions. From the current $0.06 per month, distributions will slowly increase each quarter until it hits $0.0875 per month in the second quarter of 2012.

This is great news. The distributions were cut in half (from $0.12 per month to $0.06) in January 2009 when financing for The Bow (a big office tower in Calgary) became difficult during the financial crisis. But although that string of increases shows that situation is improving, it does not (yet) brings the distributions back to the pre-crisis level. But it is a nice reward for those who had faith in the future.

I own about 100 units of the trust in my DRiP portfolio. This year's increases will add about $7.50 to my dividend income.

Monday, May 10, 2010

The Importance of Staying Invested

When I looked at the financial news this morning, my first thought was: "Good thing I stayed invested in the markets."

After all, last week's deterioration of the Greece situation had hit the markets hard -- which probably drove many investors to cash out, thinking that a second bear market was coming. These investors will have lost out on this morning's jump/recovery, and are probably kicking themselves.

If I've learned one thing about investing in the last couple of years, it's that the behaviour of the markets is unpredictable. To paraphrase a famous value investor (Benjamin Graham): "Mr Market is somewhat neurotic. His moods can fluctuate anywhere between incredible optimism and overwhelming depression." And he can swing from one end to the other very quickly.

So what can one do to avoid missing out on a big boost like today's? One has to stay invested. Have a plan, and follow it.

Friday, May 7, 2010

Sell in May and Go Away?

There's a popular saying within investor circles: "Sell in May and Go Away." It is meant to reflect the belief that the stock markets doesn't perform well during the summer months, as a lot of traders are away on vacation.

Personally, I do not subscribe to this saying. Statistics have proven that associating a specific period of the year with over- or under-performance is inconclusive at best. Some years it works, other years ait doesn't. A good example is last summer -- someone who went away during the summer 2009 missed out on the 10% run on the S&P 500 over the month of August.

But with the current troubles in Europe regarding Greece (and other countries on shaky financial grounds), one has to wonder. Are we due for a big correction? Will the worldwide financial markets be destablized again? Should we move to a more defensive position?

I obviously don't have answers to these question. All I can do is have a solid plan, and be ready to take advantage of any irrational weakness. Long-term wins thinking the race over short-term emotions.

Wednesday, May 5, 2010

Telus Increases Dividend

One of my DRiP holdings, Telus Corp (Toronto: T and T.A), has announced yesterday that the company was increasing its quarterly dividend to $0.50 (up 5.3% from the previous $0.475).

This is a surprise, as the company had failed to increase its dividend in November. But a nice surprise it is. This brings the yield on non-voting shares (T.A) to 5.5%, which is quite high. There is still a lot of uncertainty in the telecom sector, as the impact of new entrants in the market is a big unknown.

I'm not the only one to have been pleasantly surprised by the move -- the shares have jumped 4% on the news this morning.

Tuesday, May 4, 2010

Net Worth Update

As of May 1st, my net worth was $119 075 (up 3.4% from $115 128). If I exclude house-related assets and liabilities, my net worth was $80 860 (up 4.8% from $77 165). My tax return explains some of this gain, but good control of expenses also helped.

Assets ($181 711, up 1.6% from $178 923)
  • Bank Accounts $3 483 (up 21% from $2 889)
  • Emergency Funds $2 259 (up 80% from $1 257)
  • RRSP Accounts $54 594 (up 1.6% from $53 732)
  • Non-Registered Investments $24 836 (up 2.9% from $24 141)
  • Home $96 330 (stable)

Liabilities ($62 635, down 1.8% from $63 794)

  • Credit Cards $4 456 (down 13% from $5 104)
  • Mortgage $58 115 (down 0.4% from $58 367)
  • Line of Credit $0 (stable)


  • Debt / assets: 0.345 (down from 0.356)
  • House value / total assets: 0.530 (down from 0.538)

I've paid some attention to my credit cards this month, starting to pay down a no-interest financing plan that will come due this summer. I plan on paying it off and closing that account in July at the latest.

Summer is coming, and with it the continuation of our home renovations. We will be replacing another set of windows this year, an expense of about $3 500. I am also continuing our landscaping project in the back yard, but that is more work than money -- only a few hundred dollars worth of expenses there. There will also be some scraping and repainting of the sidings of the house -- again a lot of work with some some expenses.

All-in-all, life is good. :o)

Saturday, May 1, 2010

RRSP Purchase: Procter & Gamble

This week, I added to my current position in Procter & Gamble (NYSE: PG) within my RRSP, doubling my ownership in the company from 50 to 100 shares. My initial position was purchased in June 2009 for $52.50 per share, while my resent purchase was at $62 (both prices are in USD). Because of the 10% rise in the CAD vs the USD, however, the difference in the prices between my initial and my new purchases is only about half of what it is in USD.

Why did I add to my stake in the company? It had just reported its 3rd-quarter results, and the earnings per share were down by a minuscule $0.01 from last year's ($0.83 vs $0.84). Sales rose, but so did expenses (notably in the form of marketing and taxes). And there was a charge due to retiree health-care payments. The stock took a dive, going down by 2-3% on the news.

One has to wonder where have those sellers been living for the last year, to react so drastically to the news. The company has repeatedly said that it was ramping up marketing and adjusting product mix to recapture customers that moved to lower-priced products during the recession. To me, such a small decrease in EPS is quite a feat from the company.

On top of that, the commpany has announced a 9.5% dividend increase just a week ago. Although a dividend increase is not a reason to purchase a company, it does show that management is confident that things are on track. Furthermore, the dividend is quite secure with a reasonable 58% payout ratio.

So, for me this was a classical "buy on a pull back" situation. I expect to hold my shares for a long time, enjoying my dividend increases for years.