the moneygardener

dropping the weight of consumer debt

themoneygardener@gmail.com (MG (moneygardener)) — Sun, 21 Feb 2010 19:41:00 +0000

I've held a dirty little secret for the past 4 years and I am going to come forward with it now.

Consumer debt is probably one of the worst items that can appear on the balance sheet of someone trying to grow their net worth and achieve financial freedom. Money that was borrowed to purchase a car, vacation, furniture, or some other asset other than an investment or a home; and the interest associated with it will drag you down hard. The problem is that when it comes to vehicles, it is almost unavoidable to take on consumer debt unless one pays cash upfront which is not really wise considering the time-value of money. If you can find a very low financing rate I would argue that you are better off going that route instead of paying cash because of what you could do with that money investment-wise in the meantime.

In early 2006 we purchased a vehicle and financed it over 60 months. This has been a drag on our net worth and monthly cash flow ever since. The problem with vehicles is that they are essentially money pits and whether you buy them with cash, finance or lease them you can't really win. We've made the decision to now use some extra funds to pay off the vehicle before it is due in order to save the monthly payment's impact on our cash flow while my wife enters maternity leave next month. This move will not save us any interest, but it will allow some more flexibility within our budget and create a spike straight to our net worth as that debt line will vanish into thin air.

Shoppers Drug will be ok

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 12 Feb 2010 00:05:00 +0000

Well back in the summer I exclaimed Shoppers Drug Mart should increase their dividend! They did just that today as they hiked their payout 5%. Apparently this was in line with their earnings growth this year and makes their pay out ratio of 33% 'sector leading'. That is a higher pay out ratio than US chain Walgreen (WAG), which we own, at 27%, however WAG increased their dividend by 22% in 2009.

Shoppers Drug Mart's earnings growth has been slowing over the past few years however I fully expect them to return to double digit earnings growth in the next few years. They run an excellent business, their new stores are very well located and laid out, and they are in the sweet spot of demographic trends in Canada. More of us popping pills, trying to look younger, and getting lazy about big box stores will help this chain succeed going forward. While Shoppers is currently languishing because of an unresolved Ontario government issue and weaker earnings performance recently, I believe they will pull through this to be a part of the future of dividend growth in Canadian investments. I would consider anywhere south of the current level to be a reasonable entry point for the stock. At a P/E of 13-15x the stock looks like pretty good value considering their market position and potential earnings growth ahead.

first trades of 2010 - chips & heavy oil

themoneygardener@gmail.com (MG (moneygardener)) — Thu, 11 Feb 2010 02:17:00 +0000

So I made my first few trades of 2010 today:

Bought Intel (INTC) for my wife's RRSP.
- trading at just 12x 2010 forecasted earnings
- yield is over 3% and dividend was just raised recently
- good dividend growth history
- dominate their industry in an oligopoly
- turn over should increase with Microsoft's Windows 7 looking good
- we are light in the tech. sector in all of our portfolios
- financially sound company with low debt and loads of cash

Bought Canadian Oil Sands Trust (COS.UN) for our non-registered portfolio
- looking to increase exposure to resources in this portfolio
- good way to get paid on the fate of oil with large potential capital appreciation in the future
- distributions (interest income) will become dividends next year and they have large tax pools to offset some tax
- well positioned company in a politically sound country
- I believe oil prices will be strong for the next 20 years, China will be a good customer
- Potential buyers should crop up over the years
- Will add to position from time to time when it looks attractive for the long term

Colgate & UPS provide raises

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 05 Feb 2010 03:16:00 +0000

Consumer products firm Colgate Palmolive (CL) has hiked it's dividend by 20%, citing a positive outlook. They have doubled their dividend since 2004.

Global shipping firm UPS (UPS) has raised it's dividend by 4.4%. That is their first raise since the end of 2007. UPS expects to earn $2.70 - $3.05 for 2010. The shares are currently trading at 20x these 2010 earnings, which seems like a rich valuation.

freight and food make investors richer

themoneygardener@gmail.com (MG (moneygardener)) — Wed, 27 Jan 2010 01:14:00 +0000

CN Rail (CNR) has increased it's dividend by 7% to $0.27 per common share. That marks 14 consecutive dividend increases since the company went public in 1995. CN's 4th quarter revenue and adjusted earnings were both down from 2008.

Canadian grocer, Metro (MRU.A) has increased it's quarterly dividend by 23.6%! Metro now yields 1.7%. Adjusted fully diluted net earning were up 8% in the first quarter of fiscal 2010.

net worth update, jan '10

themoneygardener@gmail.com (MG (moneygardener)) — Sat, 16 Jan 2010 03:32:00 +0000

It's time to report my bimonthly net worth. I report my net worth on the moneygardener or around the 15th of May, July, September, November, January, and March.

Net worth results for the 2 Months Ended January 15, 2010:

Debt/Asset ratio dropped to 0.46 from 0.47 (record low)
Net Worth gained 3.0% (record high)
Total Assets rose 1.8% (record high)
Total Liabilities rose by 0.4%
House Value/Total Assets fell to 61.7% (record low)
Non-Registered Portfolio grew 5.3% (record high)

Our net worth growth keeps chugging along since bottoming out in March of 2009. Savings have still been a bit depressed but I see this picking up in February and March. We are still doing all the right things by living well within our means, saving regularly for investments in our future, and holding and adding to shares of dividend growing corporations.

Fortis powers dividend up

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 15 Jan 2010 02:50:00 +0000

For the 37th consecutive year, Canada-based power distributor Fortis (FTS) has hiked their dividend. This increase came in at 7.7% from $0.26 to $0.28 per share.

This holding of mine represents a good example of how dividend increases and a timely purchase can add up to a profitable situation over time.

I purchased Fortis at an attractive price during the credit crisis and my adjusted cost base (ACB) is $21.73/share. Due to the fact that Fortis has been increasing their dividend regularly and that the share price has risen, my yield on cost (the yield that I am receiving on my intial investment) is 5.2% while the actual yield on Fortis shares today is only 3.9%. So someone purchasing Fortis shares today will receive 3.9% of their total investment in cash annually while I am garnering 5.2% of mine.

2009 net worth results

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 01 Jan 2010 15:51:00 +0000

Well, with 2009 becoming a distant memory it's time to look back at how net worth held up here and with our usual suspects.

First off our net worth rose about 33% for 2009 calendar. That sounds much better than it truly is though, as our net worth was actually at a higher level in May of 2008 than it was in March of 2009. A milestone for 2010 would be to see our house value get to the point where it makes up 50% of our total assets. It currently sits at about 62%.

The Maritime Super-Blogger, at Million Dollar Journey posted a 29% increase in net worth over 2009 reaching the $400,000 mark. The 30 year old is 40% of the way to his goal of a $1,000,000 net worth by age 35.

Tim at Canadian Dream increased his net worth by 39% in 2009. During the year he focused on building his market investments. His net worth stands at $304,500.

If any other bloggers have calculated their net worth increase for 2009 please drop me a comment with your results or a link to your blog, and I will post your results with a link in a follow up post to this one.

climbing the ladder

themoneygardener@gmail.com (MG (moneygardener)) — Thu, 31 Dec 2009 15:18:00 +0000

Canada's, The Globe and Mail published an article recently called Financial Tips As You Climb The Financial Ladder. It was written by Larry MacDonald and it offers some financial advice for those in their 30's and 40's.

Many of my favourite financial blogs are actually mentioned in the article including Triaging My Way To Financial Success, The Dividend Guy, Michael James on Money, and Thicken My Wallet.

the moneygardener was also called out in #7 for the dividend hound that I am...

You are in your thirties or forties, moving up to higher levels of income in your career. Your children are growing up and you are making good progress paying down liabilities such as the mortgage. Overall, it's becoming easier to put money aside and invest for future needs, particularly retirement. Here are 10 financial tips to consider for this stage of life.

top 6 consumer goods stocks for 2010

themoneygardener@gmail.com (MG (moneygardener)) — Wed, 30 Dec 2009 20:55:00 +0000

I don't normally do this but I can't help linking to this article by TheStreet.com. The Street is touting 6 names as the Top 6 Consumer Goods Stocks for 2010, and by George I own 4 of them.

Scotts Miracle Gro (SMG)
Clorox (CLX)
Procter & Gamble (PG)
Phillip Morris (PM)
Johnson & Johnson (JNJ)
Pepsico (PEP)

The article does provide some good insight into the expected fortunes of these six firms as they move into 2010. With the exception of SMG they are all great dividend raisers as well. I agree that these are 6 very good companies to own shares in for the long term, especially if they can be acquired at reasonable value.

got Husky-er

themoneygardener@gmail.com (MG (moneygardener)) — Sat, 26 Dec 2009 05:40:00 +0000

No, I didn't eat too much fruitcake and apple pie this holiday season, I just bought myself a gift on Christmas Eve in the form of 52 more shares of Canadian oil and gas firm Husky Energy (HSE) at $29.63/share. I've been looking to boost my portfolio exposure to oil and gas and after looking at a few option,s I came back to Husky for reasons not limited to the following:

After Husky shares had fallen from a high of around $52 in 2008 and the company's cut their dividend, they haven't bounced back as much as I expected given the rebound in oil prices. I now don't see a lot of downside for the shares as they price of oil feels firm now that the economy is out of the hole it was in.
The stock has also underperformed many other oil and gas stocks and the valuation seems reasonable at just $4 above it's multi-year low
I think Husky will be quick to raise their dividend back up once their earnings catch up to the price of oil. Husky is now paying $1.20/share in dividends, while their EPS in strong-oil years past has been in the $4-$5.50 range. I think we have some high-oil price years ahead of us...
The current yield of 4% offers some in pocket return with little risk of downside to the share price as the great recession moves further into history

Husky now makes up 7.4% of our non-registered portfolio.

Happy Holidays!

themoneygardener@gmail.com (MG (moneygardener)) — Thu, 24 Dec 2009 02:14:00 +0000

Wishing you the best of the season from the moneygardener, and a successful 2010!

2009 Was A Great Year to Be A Stock Market Investor!

While cowards fell by the wayside, the S&P 500 index has risen 24% for the year and has nearly doubled since the March low
Some of the equities that we own are trading at or near their all time highs
Leveraged investments into the heart of the late 2008 / early 2009 plunges have been paying mostly stable dividends and interest rates have remained low
All signs are pointing to an improvement in dividend growth in line with general economic activity
Our net worth has exploded over 30% while we've been doing a poor job of saving money
All financial media outlets are preaching caution with your money, your mortgage, and your life.......the most bullish sign yet!

Australian Red Wine Roundup (moneygardener recommends)

Wolfblass Red Label Cabernet Merlot 2008
Rosemount Shiraz Cabernet 2008

Leon's purchase

themoneygardener@gmail.com (MG (moneygardener)) — Sat, 21 Nov 2009 01:19:00 +0000

Today I purchased a chunk of Canadian furniture chain Leon's (LNF). The stock is so illiquid that I could see my 170 share purchase add to the running total for the day and I saw a chart blip with my name on it on Google Finance. I bought the shares at $9.88 and I will get the $0.20 per share special dividend that Leon's is paying out in December. I have to admit that I have been looking at the stock for a few years and I was surprised to see the valuation it has changed hands at in the last few months. The special dividend did catch my attention but I do think the shares are good value at 12.5x depressed earnings. Several retail stocks with inferior balance sheets to Leon's have much higher multiples in hopes of recovery. I think Leon's stock has room to run and management has navigated through tough times before.

I will be holding for the long term, with these as my primary reasons for purchase:

'Go to' name in Canadian furniture & appliances with large, well located, and well laid out new stores
Always generate return on equity north of 15% and very low debt level
Yielding 2.8% and have a solid history of dividend growth
Conservative, family run, shareholder friendly business with room to grow with potential expansion in under-serviced markets in Western Canada

This now makes up 2.2% of my portfolio.

Sysco, Intel, Leon's dividend news

themoneygardener@gmail.com (MG (moneygardener)) — Wed, 18 Nov 2009 01:58:00 +0000

Food distribution powerhouse SYSCO (SYY) has raised it's dividend by 4% to $0.25 per share. This marks SYSCO's 160th quarterly dividend. As far as I can see SYSCO has raised their regular dividend every year since I was born in 1979.

I recently bolstered my position in SYSCO on June 15 of this year when the stock traded at $22.82. The stock now trades at $27.35 and yields 3.7%.

Another notable dividend raise came from chip maker Intel (INTC) who raised their dividend by 12.5% on November 16. That stock now yields 3.1%.

Leon's Furniture (LNF) issued a special dividend of $0.20 per share to celebrate their 100th year of business. Congrats to Leon's shareholders. I wish I had purchased Leon's during the downturn when it traded at $8.00, as I believe that it is a great Canadian business. The stock is trading at $10 per share with a yield of 2.80, a P/E of 12.5 and a debt/equity ratio of only 0.36. Sales and earnings have been down pretty significantly lately due to their sensitivity to the downturn.

net worth update, Nov 09

themoneygardener@gmail.com (MG (moneygardener)) — Sat, 14 Nov 2009 18:37:00 +0000

Debt/Asset ratio dropped to 0.47 from 0.48 (record low)

This is a measure of our financial health. Total debts divided by total assets. So currently for every $1 of assets that we have, we have $0.47 of debt. Back in May of 2006 our debt/asset ratio was a whopping 0.77. What is your debt/asset ratio?

Net Worth gained 3.3% (record high)

Net worth is probably the best barometer of one's financial health. The recent financial crisis caused our net worth to drop by about 14% at one point. Since then our net worth has rebounded 37%. How has your net worth fared in 2009?

Total Assets rose 1.3% (record high)
Total Liabilities shrunk by 0.9%
House Value/Total Assets fell to 62.8% (record low)

I like tracking this because it shows us how diversified we are. Our asset base is made up 62.8% by the value of our humble abode.

Non-Registered Portfolio grew 3.4% (record high)
Net Worth Calendar Year to Date Gain/Loss: +27%

2009 is shaping up to be a great year for our net worth. The year began amid the credit crisis and our net worth has grown leaps and bounds since then as the market has risen.

ADP dividend up 3%

themoneygardener@gmail.com (MG (moneygardener)) — Thu, 12 Nov 2009 19:50:00 +0000

Automatic Data Processing (ADP) reported better than expected fiscal first quarter earnings and hiked their dividend 3% to $0.34/share per quarter. This is the 35th year in a row that ADP has raised their dividend. Mounting unemployment in the U.S. continues to have an impact on ADP's revenues, as fewer workers for their clients means less fees to ADP.

ADP has forecasted EPS for fiscal 2010 to come in at about $2.37 per share. The stock is currently trading at 18.3x that forward earnings number and yielding 3%. The current dividend pay out indicates a pay out ratio of 57% on estimated 2010 earnings.

The stock is up 8% since I started a position in ADP inside my wife's RRSP. An interesting thing to note is that this stock seems to have really taken off despite the fact that US unemployment is at best flattening out. Could this be an indicator of the next 6 months to one year? Time will tell. If the job market turns up slower than expected, or stays at depressed levels, ADP could suffer.

* My wife owns shares of ADP in her RRSP.

Telus fails to raise dividend

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 06 Nov 2009 13:51:00 +0000

Canadian telecommunications firm Telus (T.A) has failed to raise it's dividend for the first time in several years. Telus left it's quarterly dividend at $0.475/share for payment on January 4, 2010, the fifth straight quarter of this payment amount.

Some analysts believe that Telus is viewing 2009 as a year of investment in their business and they will resume dividend growth in 2010. Telus is striving to get ahead of the competition as they compete with Bell (BCE) and Rogers (RCI.B) among others including new potential entrants in Canada.

Telus announced earnings today that beat analysts estimates but were still virtually flat from last year at $0.88/share. They also lowered their full year sales and earnings outlook. The best analysts can say is that things don't seem to be getting any worse in the wireless area.

Rogers results look good

themoneygardener@gmail.com (MG (moneygardener)) — Tue, 27 Oct 2009 12:46:00 +0000

Given the slow advertising market lately the results reported today from Canadian telecommunications company Rogers Communications (RCI.B) (RCI (NYSE)) looked pretty good.

Earnings per share were up 12%
Wireless revenue up 7%
Overall revenue up 2%

Roger's Canadian exclusivity on the Apple iPhone helped these results. This tailwind will be taken away now as competitors get the phone as well. Once advertising picks up again Rogers earnings should continue to grow. They are well positioned in the Canadian market and have gobbled up a lot of Bell Canada's customers over the last few years. I think this is a good company to hold for the long term as they have pretty consistent cash flow coming from a stable product. They have also been friendly to shareholders in the past with stock buybacks and dividend increases.

My wife owns Rogers shares in her RRSP.

Inter Pipeline raises distributions

themoneygardener@gmail.com (MG (moneygardener)) — Wed, 21 Oct 2009 14:17:00 +0000

Inter Pipeline Fund (IPL.UN) has announced a 7.1% increase to their distribution level. They are raising their pay out from $0.07 per unit per month to $0.075. They have a confident outlook for their business.

This bodes very well for shareholders, me included, especially as their forced conversion to a tax paying corporation looms in 2011. They previously stated that they would keep the distribution level constant going into this conversion. I guess they have one upped that today.

bought ADP

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 09 Oct 2009 12:46:00 +0000

This week I started a position in Automatic Data Processing (ADP) within my wife's RRSP. I've had my eye on ADP shares for a few years and I decided to take the plunge now, even though the shares are not at bargain basement levels.

I wrote about ADP last year here.

My reasoning for buying into this company for the long term:

ADP is the dominant industry player and the class of their field
They have a great earnings and dividend growth history
They earn a high ROE and have low debt
The company is experiencing a flat earnings period due to a sharp drop off in jobs and economic activity, but I believe they will accelerate out of this well
I like their potential to grow outside of the US, Canada, and Europe in the coming years
Feels like a good time to buy this company when unemployment is high, even though the stock has had a bit of a run from it's March lows

ADP is due to to raise their dividend, however their current pay out ratio sits at 50% of earnings.

why McDonalds is a good investment

themoneygardener@gmail.com (MG (moneygardener)) — Tue, 06 Oct 2009 20:00:00 +0000

Grab some shares of McDonalds (MCD) now and you might not have to work there in retirement.

You can say what you want about how morbidly unhealthy the food is, or how they market to kids, but they do know how to grow the value of your investment. The fast food icon, which is actually the world's sixth most valuable brand, and the second most valuable food related brand, second only to Coca-Cola, has been around forever and is showing no signs of going away. What makes McDonalds shares such a good place to have your money invested? Let me count the ways...

1. The Food Tastes Good
Ok, I happen to believe that Brussels sprouts taste good as well but you can't pull up to a shiny window and order a 6 pack of sprouts with dipping sauce. The taste of McDonalds food appeals to many convenience seeking people, and they adapt their menu well to cultural tastes in any country they operate. It's quick, it's predictable, it's convenient, and it satisfies.

2. They Market To Kids & Adults Don't Really Mind
Oh, what a bonus for a two year old to get a free toy out of a drive through trip to the golden arches. Perhaps Mom & Dad will feel better getting the optional apple slices instead of fries with their happy meal. They have play gyms inside their stores, they sponsor kids sports, they give loads to charity, they are armed with a team of on-staff cartoon characters including Ronald and whatever movie Disney is pumping this month. McDonalds is basically a well-honed marketing machine that neither 'Super Size Me' nor 'The Subway Diet' can stop.

3. The Fundamentals
Mmmm, the dividend growth, just makes my mouth water. They've raised their dividend each and every year since 1976. They just recently raised it by 10%, at a time when other company's CEO's are eating Quarter Pounders and liking it, to cut costs wherever they can. McDonalds annual sales growth has been very consistent, their EPS growth over the long term has been great, and they generate returns on equity in excess of 15% most years. All this while maintaining a moderate debt level of $0.76 per $1.00 of equity.

4. The Future
The key to this companies future lies in management and adaptation. They've proven in the past that they are able to adapt to changing tastes and customer preferences. As they move through the developing world I am confident that quality of life improvements will go hand in hand with the need for convenient food that the kids like too.

Buy McDonalds in any economy. This is not a recession stock. Don't let that analyst with Big Mac sauce on his tie fool you.

Walgreen recovering from the flu

themoneygardener@gmail.com (MG (moneygardener)) — Mon, 05 Oct 2009 19:53:00 +0000

From the moment that I saw Dr.Oz receiving a flu shot from a Walgreens representative on his new daytime show, I knew that only good could come of it.

A combination of cost cutting, the H1N1 flu, and the recession coming to an end in the US seems to have Walgreen (WAG) up and at 'em again. The US drugstore chain beat expectations handily in their fiscal fourth quarter thanks in part to $0.07/share in savings from their Rewiring For Growth initiative.

Their September sales report also looked very strong as sales came in over 10% higher and sames store sales clocked in at an increase of 5.3%. Those are very strong numbers and probably reflect the extra emphasis on flu season this year in addition to the cost initiatives.

2009 turned out to be an extremely rare year for Walgreen, as they failed to grow their earnings per share. Walgreen has grown their EPS each year smartly from $0.76/share in 2000 to $2.17 in 2008 and it fell to $2.02 in 2009. Analysts are expecting great things from this stock in 2010 as the average estimate is for $2.32, which is a 15% rise. Applying a P/E of 16x, which is more than warranted due to Walgreen's stellar history and current market presence, you get a share price of around $37, which is about one dollar below where the shares trade today.

The street has made an about face on Walgreen stock as the shares change hands for almost twice what they went for back March. Ah.....opportunity missed.....

portfolio update Q4 2009

themoneygardener@gmail.com (MG (moneygardener)) — Fri, 02 Oct 2009 00:31:00 +0000

It has been quite a while since I updated my progress with my non-registered stock portfolio. the moneygardener blog was really born as a journal for this portfolio, so I like to summarize every now and again. Here are some of the key metrics that I track:

*All results to October 1, 2009
Return, (including dividends) Year To Date = +16.9%
S&P 500 Return To Date (no dividends) = +14.0%
XDV (Canadian Dividend ETF) (no dividends) = +26.5%

Current Yield = 4.4% ($8.75 per day)
Yield On Cost = 3.9%
One Year Dividend Growth Rate = 24.7% (includes purchases)

My one year dividend growth rate is in serious risk of going negative on November 1 as I am now starting to have tough comparables. Husky Energy (HSE), Yellow Pages Income Fund (YLO.UN), Manulife Financial (MFC), and General Electric (GE) have all cut their dividends over the past year. This will put pressure on my one year dividend growth rate from November 1 to at least May 1, assuming no more cuts come.

Average Portfolio Savings Per Month Last 12 Months = $893
Portfolio Value = $73,264
Leverage Ratio = 24.5% (percentage funded by HELOC)

My goal is to grow this portfolio to $175,000 with a leverage ratio of 0% by February, 2014. This will be very difficult, but not impossible, given the credit crisis' impact as well as another upcoming maternity leave. We are currently not meeting our goal of saving $1,000 per month but we are coming close.

Top Performing Stock Versus Cost = Royal Bank of Canada (RY) +28%
Worst Performing Stock Versus Cost = Bank of America (BAC) -53%

Overall this portfolio is still underwater including dividends, although there is a good chance that I could poke my head above water sometime in late 2009 or early 2010.

dividends, a love story

themoneygardener@gmail.com (MG (moneygardener)) — Mon, 28 Sep 2009 16:33:00 +0000

They're a bird in the hand, and they're worth fussing over. Although they don't require getting your hands dirty.

They're a friend when you're in trouble, and they'll give you a raise.

Why not get paid while you're sleeping?

are you overweight real estate?

themoneygardener@gmail.com (MG (moneygardener)) — Wed, 23 Sep 2009 15:13:00 +0000

Thicken My Wallet posted an interesting piece today on asset allocation. I contributed to his article and he used my concept of tracking the ratio house value / total assets.

You can find the article here.