Investing

Investing Idea - Dividend Growth

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[OP]
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Dec 14, 2010
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llpresident wrote: Rod, thoughts on POT?
I posted some thoughts around 6 months ago:

investing-idea-dividend-growth-1587815/36/#post24778347

Earnings and cash flow are estimated to continue to deteriorate. I haven't done a deep research on it, but it's hard to partner with a company that fluctuate so much with commodity price and that are not looking good from an earnings and cash flow perspective - it masks if the deteriorating performance is simply cyclical or if fundamentals are affected. For this reason, POT (or AA) are not on my list, as they don't meet my goals for consistency and predictabilty of income.

Rod
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Jun 7, 2013
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Rod, any thoughts on CM (CIBC) or CPG (Crescent Point Energy Corp)

Thanks
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ChipsAway wrote: Rod, any thoughts on CM (CIBC) or CPG (Crescent Point Energy Corp)

Thanks
CIBC has the lowest earnings growth rate from the big 6 banks, so I don't like it. I prefer to invest in 3 big banks (RY, TD, BNS) and 3 smaller banks (NA, LB and CWB).

Estimated earnings for CIBC are lower than all these 6 banks above, except CWB (although CWB earnings are estimated to decline by 11% this year, it's estimated to increase by 14% next year). CIBC is estimated to increase earnings by 1% this year and by 2% next year.


I also don't like CPG, and they don't look in good shape, including dividends:

Image

Cash flow also are declining, which is very concerning in such capital intensive industry:

Image

I believe there are better options in the market, specially if the goal is oriented towards growth and safety of income.

Rod
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rodbarc wrote: CIBC has the lowest earnings growth rate from the big 6 banks, so I don't like it. I prefer to invest in 3 big banks (RY, TD, BNS) and 3 smaller banks (NA, LB and CWB).

Estimated earnings for CIBC are lower than all these 6 banks above, except CWB (although CWB earnings are estimated to decline by 11% this year, it's estimated to increase by 14% next year). CIBC is estimated to increase earnings by 1% this year and by 2% next year.


I also don't like CPG, and they don't look in good shape, including dividends:

Image

Cash flow also are declining, which is very concerning in such capital intensive industry:

Image

I believe there are better options in the market, specially if the goal is oriented towards growth and safety of income.

Rod
Thanks Rod...I sold CIBC today, it goes up a lot than drops back down (makes no sense) In addition, what would you recommend other than CPG? I was thinking maybe (ECA) - Encana ..What are your long term opinions on the banks in general - do you see a market correction coming?
[OP]
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ChipsAway wrote: Thanks Rod...I sold CIBC today, it goes up a lot than drops back down (makes no sense) In addition, what would you recommend other than CPG? I was thinking maybe (ECA) - Encana ..What are your long term opinions on the banks in general - do you see a market correction coming?
The only company in the same sub-sector that I like is CNQ. Cash flow sustains dividends even in this environment, and earnings should strongly recover next year. ECA has a worse graph than CPG. There are only a few leaders in the energy sector, and I rather stick with them giving the goal of consistency, predictability and growth of income. Betting on recovery of companies like CPG or ECA might be nicely rewarded - IF they survive the current challenges and turn around. That's more risk than I want to endure. When the goal is safety of income, these risky companies don't make the cut. And if the goal is a quick buck or capital gain, then I rely on my trading models for that.

My trading models signaled that a correction is due - I hope it comes soon, so I can deploy more capital to these high quality business that will become even more attractive from a valuation perspective. And perhaps be able to add to other companies that are current overvalued. In general, when I'm investing for the long term, it makes no difference if a crash is coming or not. Every business is evaluated separately, and should only be purchased if the price makes sense. A crash helps to drive everything cheaper. But I wouldn't wait for it, as soon as I have capital to deploy, I'll search for a business to deploy it according to my goals. I personally don't hold cash to invest later, I deploy whatever I got, since more dividends and HELOC room would be available next month again for further deployment.

"Be socks or stocks, always buy quality merchandise on sale". - Warren Buffet.

The same way that everyone cheers on Amazon Prime Day and on many deals from RFD, they should welcome and embrace a correction, which allows them to partner with great business for a much better price - the same capital can be used to buy more shares, which will generate more dividends.

Rod
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Rod, the FAST graphs you're using, is it basic or premium? Or is there any free version by any chance.
Thinking about the basic $10USD/month... but not sure if I can justify the cost considering I really don't have a big portfolio.
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Nov 30, 2015
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Toronto, ON
I have a reasonable size portfolio and I had the typical rfd pay for nothing when there is free stuff mentality.

This is not one of those times. If you are a value investor this tool is worth every penny and much much more. Keep in mind you can cancel after one month if you would like so you could potentially sign up every quarter and pay a month to bring down the cost.

Thanks again to Rod for pointing us to it.
boyohboy wrote: Rod, the FAST graphs you're using, is it basic or premium? Or is there any free version by any chance.
Thinking about the basic $10USD/month... but not sure if I can justify the cost considering I really don't have a big portfolio.
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TheyCallMeTheBatman wrote: Thoughts on Hydro One or BMO, Rod?
Hydro One just went public recently, and my criteria is to have at the very least 5 years of operating results for a growth company or 10 years of operating results for the rest. - hence, not on my list. A little research shows that last Q1 results met expectations, but it was lower year-over-year due to some one-time impact items.

EPS this year is estimated to be flat, but it looks promissing for FY17 and FY18, as they have a massive plan to replace their old electricity infrastructure.

Although they've shown to be stable with good organic growth (it accounts for 98% of Ontario transmission network), I'm not clear if management wants to deliver growth by capital appreciation or if it will be done by steady increasing of dividends (that's part of the reason why I like some history on earnings and distributions before deciding to partner with them). In sum, there's a good estimate of growth ahead, I'm just not sure in what form.

BMO has the 2nd worse earnings growth rate after CIBC, so until management proves that they can do better consistently, I will stick to the 3 other big banks and 3 smaller banks for a bit of growth.

Rod
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boyohboy wrote: Rod, the FAST graphs you're using, is it basic or premium? Or is there any free version by any chance.
Thinking about the basic $10USD/month... but not sure if I can justify the cost considering I really don't have a big portfolio.
There's no free version as far as I know.
I use basic subscription, simply because I get the Fundamentals graph / content from premium via portfolio123. I firmly believe an investor must have a way to easily get fundamentals metric if one wants to manage a diversified portfolio. I need a portfolio123 membership anyway for my trading models, so the fundamentals graphs provided (same source as FAST, both from CapitalIQ) meet my needs. If one won't model trading, then one should get a premium FAST membership - or do their due-diligence manually, which can be very time-consuming.

I see that cost as a MER for my individual stocks - a declining MER, because it's a fixed amount of dollars to be paid for my ever growing portfolio. I wouldn't be able to achieve the same total returns on a such diversified portfolio if I didn't use it, so the tool pays itself quickly.

Alternatively, keep an eye on the credit card churning opportunities that jerryhung always posts in his thread, it's enough to pay premium and have some money left to be invested. :)

Rod
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Would ECI.to,emera or even dollarama be a good bet at it's current price?
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rodbarc wrote:
I believe there are better options in the market, specially if the goal is oriented towards growth and safety of income.

Rod
Rod, one of the reasons I sold CPG was the heavy dilution of existing shareholders due to their Drip plan. The monster yield offered before they cut the dividend was to me an illusion. Shares did not come from cash but in the form of new shares. In 2012 the number of shares outstanding was 278 mil. This years its up to 492 mil - highly dilutive obviously. So you can see why the Drip had to be suspended; it was simply unsustainable. Another example of similar dilution that I see is Versesen (VSN) that has a big dividend being paid through new shares. Husky went from a cash dividend to a stock dividend before cutting it altogether.

What is your view on DRIPs or stock dividends? Are there any companies you avoid because of a misuse of a Drip program? Do you see Drips as real income or just an illusion that investors are being paid for owning shares in a company?

My preference is a Drip program that purchases shares from the open market, just like everyone else. My broker does that if the company does not have a program. What I don't like are the Drips that issue new shares from treasury. The issue of new shares compound over time (e.g. CPG). This is why you sometimes see companies with increase profits but decrease in EPS due to dilution.
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Nov 9, 2013
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taeyang987 wrote: Would ECI.to,emera or even dollarama be a good bet at it's current price?
ECI - overvalued imo, although it's more of a growth stock than a value stock (I'm bias towards value). I'd say fair value is around $15.00
EMA - slightly overvalued, fair value (by my estimate) is about $40.00
DOL - Another growth stock, greatly overvalued, fair value would be around $83.00

Out of the three, the only ones that I would consider buying would be EMA. ECI's earnings have been up and down and it's dividend is inconsistent as well. DOL has solid earnings, but like I said I'm bias towards value and so I wouldn't really think about investing in it, unless the price was very attractive. However all are over priced, so even though I'd consider buying EMA and possibly DOL, I'd wait until they were at a better valuation (undervalued) before committing money.
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Thank you for taking the time to evaluate each stock.
which stock do you currently have the most money in at the moment?
Also are the stocks on the list in your 1st page still up to date?
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Nov 9, 2013
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taeyang987 wrote: Thank you for taking the time to evaluate each stock.
which stock do you currently have the most money in at the moment?
Also are the stocks on the list in your 1st page still up to date?
Currently my largest CAD holding is BOS which is at just over 7%. If you want to see all my CAD holdings you can find them listed here, which is current as of May 2016 (why-i-index-1734449/2/#post25867697).

My largest USD holding is VLO which I don't think is on Rods list. My most recent buy was adding to my CJR.B position and often I wonder if I'm getting sucked into a value trap by chasing yield.

He updated his list last in March of this year.

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