Scotiabank: Higher Earnings, No Dividend Increase

Third quarter earnings are out for Scotiabank.

Well, there you have it. I was hoping to get a dividend increase from Scotia, but alas I'll have wait some more. Dividend

Earnings rose to $0.98 per share, with net income over the $1B mark for the third quarter. So this is another good quarter for the bank.

I'll remind myself that one of the reasons that had me select this bank for my first-ever DRiP company was because management is prudent and disciplined. The obviously thought they'd wait until the details on the new international financial rules are known -- and what their impacts will be -- before raising the dividend.

Scotiabank, When Will You Give Me a Raise?

Bank of Nova Scotia (TSX: BNS) is the first company that I acquired in my DRiP portfolio, 4 years ago. I see it as a strong company that's quite good at making money (it is a Canadian bank, after all). It has held up well through the financial CDO melt-down in 2008 and through the following recession. A great company.

However, the last time the quarterly dividend was raised was for the payment of July 2008, when it went up from $0.47 to $0.49 per share. So for 6 straight quarters, the dividend has remained the same. This was understandable, since earnings were somewhat impacted by the financial melt-down and then recession. At the height of the troubles, the dividend payout ratio rose as high as 70% of earnings. This ratio was at 50% before things started going sour, and is now at 54% based on earnings from the last 4 quarters.

Another thing to consider is the status of Scotiabank as a dividend achiever -- a company that has raised its dividend every year for at least 5 years. This is important because many indexes (and index funds) use such criteria when deciding which companies to invest in. According to Scotia's web site, the bank has increased its dividend 37 out of the last 39 years.

Things have improved a lot in the last year, and although there is still some uncertainty (as regards to the new international regulations for banks), we are certainly out of the deep end. It would certainly encourage investors to see some positive sign. Even a small increase in the dividend would be seen as a sign of confidence.

So, Scotiabank, will you give me a raise now? Or will you wait some more?

What do you think?

(Scotiabank will announce details of its third quarter results on August 31, 2010 at 7h30 AM EDT.)

Good News from ING Direct Canada

There were recently some additions to ING Direct Canada, with new products being added. I thought I'd share this.

First, ING Direct now offer low-fee mutual funds in Canada. Although the selection is quite small (only 3 funds are offered), this adds another low-cost option for investors. All funds are diversified, with different profiles based on risk tolerance (Balanced Income, Balanced, Balanced Growth). This is straightforward index investing, with assets spread across 4 indexes (Canadian Bonds, Canadian Stocks via the TSX 60, US Stocks via the S&P 500, and International Stocks via the MSCI EAFE) with only the proportion invested in each index changing based on the fund selection. MERs are only 1%, and there are no other fees. A variety of account types can be opened (non-registered, RSP, RIF and TFSA).

Second and more important, ING Direct has announced that it will soon offer no-fee checking accounts (called Thrive). Basically, all transactions (bill payments, cheque writing, email money transfers). The account even has a small NSF protection of $250 built-in. Canadian Capitalist has a good review of the products, and Million Dollar Journey ran a comparison with PC Financial no-fee checking account, which is the reference right now in Canada.

I've looked closely at ING Direct's Thrive accounts, and the only drawback that I can see is that after the first 20-cheque booklet, you have to pay a fairly steep price for new paper cheques ($10 for 20 cheques) while they are free at PC Financial. Everything else is free, including EMT (email money transfers), which cost $1.50 at PC Financial.

But PC Financial is not available in Quebec, whereas Thrive will be!

So I signed up for the preview for the account, which will start on September 14th. Although at first I was disappointed with the cost of additional cheques (cheques for my current day-to-day account cost about half of what ING will ask for), I figured I could use this account to pay for many of my online bills, which will reduce the strain on the number of transactions in my main account.

RRSP Purchase: Manulife

Right before going on vacation, I put in an order for 250 shares of Manulife (TSX: MFC) in my RRSP account. This was when the tough earnings news came out. Turns out I was a bit early, paying $13.80 per share (the shares now stand around $12.25 per share).

In such situation (what I see as a fire sale), I'm usually early to buy -- it's just the way it works for me. If I wait too long for the price to drop some more, I often end up not buying. So that $1 I paid over the current price is fine with me. I'm looking at holding the shares for 1 to 3 years, at which time I think the company will have recovered from its current difficulties. In the mean time, I'll collect the dividend (over 4% yield right now) and reinvest it (synthetic DRiP through my broker).

Net Worth Update

As of August 1st, my net worth was $126 412 (up 5.6% from $119 661. If I exclude house-related assets and liabilities, my net worth was $85 336 (up 8.2% from $78 839). That's an amazing and unexpected increase, due to a combination of a 3-pay period month and a general the rise of the markets.

Assets ($187 623, up 3% from $182 169)

• Bank Accounts $4 466 (up 21% from $3 699)
• Emergency Funds $2 265 (up 28% from $1 763)
• RRSP Accounts $55 371 (up 4.6% from $52 936)
• Non-Retirement Investments $26 865 (up 7.8% from $24 911)
• Home $98 430 (up 2.2% from $96 330)

Liabilities ($61 211, down 2.1% from $62 508)

• Credit Cards $3 822 (down 20% from $4 790)
• Mortgage $57 353 (down 0.4% from $57 608)
• Line of Credit $0 (stable)

Ratios

• Debt / assets: 0.326 (down from 0.343)
• House value / total assets: 0.525 (down from 0.540)

I jusat realized that I had forgotten to report another increase to the estimated value of our house in May, as my insurer reassessment came in. The increase is $2 100 and was already taken into account for the value of my assets, but was not reported correctly on the corresponding line. I've made the adjustment starting this month.

My "debt reduction" drive has paid, since my credit cards are almost $1K lower than they were last month. I've closed one credit card that I had taken specifically for 0% financing of our mattress last year. A bad move, since that company had a $35 annual fee attached to it -- something that the salesperson failed to tell me at the time. I've black-listed that store for future purchse.

I moved back some money to my emergency fund to restore it to what it was in May. Last month I had mentioned moving some money to my daily bank account at the end of the month to pay back a credit card financing plan.

The shows I went to during the Summer festival were great. Santana was magical and Black Eyed Peas were awesome. :o)