Canadian Dividend and Value Investor

rick@dilorenzo.com (Rick) — Thu, 15 Oct 2009 19:31:00 +0000

Just a post of current holdings..

RPI.UN
TO.UN
TO.A
SCU.UN
YLO.UN
QSR.UN
HLR.UN
VIC.UN
CTD.UN
HR.UN
MPT.UN
ATP.UN
BPF.UN
SRV.UN
EAT.UN

I sold holdings like BAM.PR.J and SQP.UN. I still hold YPG.PR.B but will likely sell it too. The 2 preferreds (BAM & YPG) have appreciated in value to levels where distributions yields are now too low to keep on holding. While SQP.UN has now 'popped' high enough where I no longer wanted to hold it anymore.

Holdings like HR.UN, CTD.UN, VIC.UN, I'm no longer acquiring, just holding now. I tend to do a "buy and hold" mentality in most situations of high yield dividend or distribution stocks. So I sometimes stop acquiring a stock once it's yields are no longer attractive enough. I bent my rules when I sold the preferreds and SQP.UN, but they were mostly speculative purchases anyways (which did well) and didn't fit my overall model long term.

I'm currently acquiring (small monthly purchases)...
Inside RRSP - TO.A, RPI.UN

Outside RRSP - TO.UN

I made a purely speculative (high risk) small purchase of ZNN at $4.00 and $3.84 at different times this year. I don't plan to acquire more.

I also continue to maintain holdings in Index Funds (XIC/XIN/XSP)

I am also holding Sentry Select Diversified Income Fund. It used to be SDT.UN but it converted into a mutual fund (blech) but I continue to hold it for it's distributions. It's appreciated significantly though so I'm no longer acquiring more, but will hold what I have.

Most holdings are up. Holdings that have fallen the most are probably HLR.UN and QSR.UN. I still like QSR.UN at it's current price though. Allthough I'm being careful not to acquire too much more of QSR as I don't want it to be too significant a percentage of total holdings (i.e. keep diversified).

You may note a tendency to have a lot of Incume Trusts (.UN's) in my RRSP. I currently like them. Yes I know they're all going to convert to corp's sometime between now and 2011.

Yellow Pages Income Fund

rick@dilorenzo.com (Rick) — Thu, 05 Feb 2009 16:05:00 +0000

Yellow Pages Income Fund (YLO.UN) hit a new all-time low today of $4.68 based on practically no new news.

There were 2 analyst comments made on Tuesday which might have affected the recent sell off.

http://www.stockchase.com/Company-sl--slq-ID-slv-Yellow--Pages--Income--Fund.php

Based on that current price, it's now at at 25% distribution rate.

On February 12th we'll hear from YLO.UN fourth quarter and year end results. If those results don't show a significant risk to their distribution and pay-out ratios, the share price will probably rebound much higher than today's price. The $4.68 price today is the market factoring in it's current belief that YLO's distribution is going to be cut significantly.

I find it's current price very attractive.

They do have a lot of "goodwill" on their books, which could lead to non-cash losses if those are get written down. But it shouldn't have a material impact on their cash flow. The current depressed economic atmosphere may of course reasonable be expected to hurt their revenue, but their pay-out ratio gives them some degree of a buffer.

Remember, irregardless of it's name (Yellow Pages), it does receive a significant portion of it's revenue from online/internet activities. It's not strictly the hard-physical paper directory people think of when they think of The Yellow Pages.

Investment strategy for your TFSA?

rick@dilorenzo.com (Rick) — Fri, 23 Jan 2009 17:42:00 +0000

There's been a lot financial porn written about Tax Free Savings accounts, and how you can earn interest "tax free".

ING Direct says this in some of their advertising promos...

...let you save without paying tax on the interest you earn. This means that soon all Canadians will be able to save up to $5,000 every year without being taxed on interest earned. This is great news for savers. And we're very excited!

But depending on your age, current holdings, and investment horizon (when you think you'll want to spend the money) this might not be the right strategy.

I'm using the TFSA to hold individual stocks. In particular some income funds, that are yielding around 12% in distributions, with possible future growth. I'm not saving money to then spend it in a few years on a new house or other large purchase. Instead I'm using the TFSA as an investment vehicle for my future retirement.

With the stocks being so cheap currently, why would you want to hold GICs, bonds or other fixed income low-yielding investments in it? Heck, put the $5000 in either XIU or XSP (Index funds). Something that will actually grow at a reasonable rate, especially given the current market prices.

If you put $5000 per year in your TFSA, and it grew at 12% per year, then in 20 years you'll have about $400,000. That's more savings than some people nearing retirement now have in their RRSPs!!

If you were playing it 'safe' and instead had that money sitting in some "high interest" earning vehicle at 3% then after 20 year's you'd only have about $140,000.

Hmm.... $400,000 or $140,000...I'll say thanks, but no thanks, to that 'high interest' savings option.

Some may think 12% yearly return is unrealistic, alright, bring it down a notch and say you earn 9% a year in a broad-market low-MER index fund. After 20 year's that's still about $280,000 built up versus the $140,000 3% interest earning option.

The only reason I'd go with the lower return interest earnings that the banks are offering is if you felt you needed that money in the short term. If you were say already elderly and about to retire, or if you were going to make a large purchase in the short term and would need to withdraw the money in the next few years.

Anyways, there's a very good discussion on this topic taking place at http://www.financialwebring.org/forum/viewtopic.php?t=109217

November and December were great months

rick@dilorenzo.com (Rick) — Wed, 07 Jan 2009 19:08:00 +0000

Past two months were fantastic with great buying opportunities.

I'm fairly happy with just about all the purchases I made there. VIC, SRV, BPF, EAT, YLO etc. I don't know if I'll see share prices that low in the future though. I'm hoping they might fall back down. Right now I'm making monthly purchases based off of my monthly RRSP deduction from my salary, and based on dividend streams from current investments.

As mentioned on the Financial Webring Forum I also made some preferred share purchases of BAM.PR.J and YPG.PR.B (YPG being the parent company of YLO). These preferreds due to what I believe was tax-loss selling fell to absurdly cheap prices which made their tax-efficient yields approach 12% which is crazy in my opinion for what I feel are low-risk tax-efficient investments. That doesn't even include the future capital growth (since these are retractable preferreds meaning they'll be bought back in the future at $25.00 per unit). Also thanks to Hymas for some of his educating postings on the forum's preferred thread. Although I'm not a subscriber to his newsletter I do read his blog and forum postings. I usually ignore preferred's as I'm much more interested in common shares for future growth. But couldn't help reading some of the outrageous price activity that occurred on some with these 2 in particular. Since then their prices have rebounded back up, so no new purchases planned but will keep holding these 2 for their safer income streams.

I made a small purchase of Strongco (SQP.UN) today at $1.41. This company over-extended itself in 2008 and got squeezed by their creditor's into suspending their dividends. They took a loss in their last quarter (paper-loss only though with them doing write-downs on their inventory, still cash-positive). I think it's a good purchase based on my belief that by 2nd quarter of 2009 they'll get back into black, and eventually have earnings of 50 cents per share or more for the 2009 year. So at their current share price it's very enticing. I don't expect them to do well in 4th quarter 2008 or 1st quarter of 2009, but I think that lowered expectation is already baked into their cheap share price.

It's raining money!

rick@dilorenzo.com (Rick) — Tue, 18 Nov 2008 20:37:00 +0000

It's been a fantastic month to save money with some of the bargains out there in the current crashed market.

Priszm is still a good bet, with prices around floating under $2.00 per share today you're looking at over 30% yearly distribution on any purchased you make.

Other individual income trusts I like...

VIC.UN at $6.50 you're getting a 24% yearly distribution and they're giving out a 'bonus' top-off distribution in December over and above their regular monthly distribution

YLO.UN (Yellow Pages Income Fund)at $6.85 that's over 17% a year cash distribution returns. This Canadian income trust owns AutoTrader, Canada411.ca, yellowpages.ca and several other websites. Over time it's starting to get a significant portion of it's revenue online versus the printed yellow page directories. They continue to have growth and have already increased their distributions once this year.

Casual restaurants like BPF.UN (Boston Pizza), SRV.UN (Jack Astor’s,Alice Fazooli’s, etc) and EAT.UN (East Side Mario's, Casey's, etc) also have their share prices at attractively low levels giving you 17%, 24% and 22% annual cash distributions at their current prices. I don't think BPF.UN or SRV.UN will lower their distributions, rather I think there will be future distribution increases in 2009.

There are so many other good income trusts out there trading at very low share valuations. My only hope is the share prices stay low for a continued period to give me time for month by month share purchases.

Remember, buy low, sell high. i.e. buy stock in companies (that look solid with future growth) when their share prices are crashing as they are now. Don't follow the crowd. When I hear people talking about taking their money out of the market and putting it into savings accounts *after* the market has already crashed I always cringe inside. They're doing the reverse, as they bought when the share prices were high and are now selling when they're low. Unless you are really confidant that the downward price trend, selling in the middle of a crash is in most cases unwise.

Warning - I'm not qualified to give investment advice. The above is for entertainment purposes only ;-)

Priszm Income Fund

rick@dilorenzo.com (Rick) — Fri, 17 Oct 2008 15:16:00 +0000

Priszm just announced their third quarter, and there is some positive news in that their turn around has remained on track, with their dividend pay out ratio still being attractive.

Their share price prior to that had hit an all time low of $1.25 which to me looked like a great buying opportunity. The price is rebounding up now with the third quarter results.

Some additional good news is that Priszm has been executing share buybacks while their share price has been fairly depressed.

Priszm Income Fund (TSE:QSR.UN)

rick@dilorenzo.com (Rick) — Wed, 01 Oct 2008 15:22:00 +0000

Priszm Income Fund (TSE:QSR.UN) is a Canadian income trust that has an interest in KFC, Pizza Hut, and Taco Bell restaurants in Canada.

Priszm started to lose money in 2007 and went through a restructure exercise where they suspended distributions for awhile, started selling money losing restaurants, and then restarted distributions eventually but at a lower rate.

In 2nd quarter of 2008 they started to see a turn around. Same store sales growth (SSSG) returned to positive territory. They shifted from a net loss to a net profit position. They stated they're going to continue to sell poor performing locations and focus on multi-branded restaurants (i.e. combined KFC/Taco Bell locations where they have two restaurants in one)which continue to show stronger SSSG over traditional one-brand restaurants. This turn around was positive in that it also took place during a period of economic hardship.

Another strong sign is they've issued an announcement in August 2008 that they intend to start purchasing back shares. Perhaps they are using the cash from the sales of their poor performing locations to do this share repurchase. Using the cash this way, or investing it into more multi-branded locations would both be positive use of cash they receive from their restaurant sales.

Now with the recent market crash in September, Priszm's share price is trading around $2.80 today (Oct 1st 2008). With their distributions set at 5 cents per month (60 cents per year) that gives you a 21.43% yield.

All of the above makes this an attractive investment opportunity to me. I'm continuing to purchase Priszm Income Trust units while their price remains under $3.00.

But there are some cavaets.
(1) While QSR.UN used to be perhaps a Small Cap years ago, it's market capitalization has now shrunk to perhaps a Micro Cap. This being such a small company, the average daily trading volume is low. So it makes it difficult to purchase or sell a large amount at one time without experiencing price volatility.

(2) QSR.UN has only just recently returned to profitability. They only have the one 2nd quarter 2008 positive results under their belt. It may be too early to tell if that quarter was an optimistic blip on their previous downward trend, or if it was truly the start of a company turn around.

Index Funds - SP/TSX, MSCI EAFE, SP 500

rick@dilorenzo.com (Rick) — Tue, 30 Sep 2008 18:21:00 +0000

On the index fund side of my investment philosophy I favour using the following ETFs provided by iShares in Canada.

XIC - Tracks the SP/TSX Capped Composite Index (Domestic Canadian exposure)
XIN - Tracks the MSCI EAFE Hedged to CAD Dollars (International exposure)
XSP - Tracks the SP 500 Hedged to Canadian Dollars (USA Market exposure)

These are classified as ETFs (Exchange Traded Funds) and are purchased as you would a stock (commission fee). Depending on your commission cost, ETF's are more efficient when making lump sum purchases greater than $5000.00 at a time (roughly).

If you are making smaller monthly purchases, then an alternative would be using index mutual funds, although they have higher on-going costs (MERs) they have lower purchase costs (ones I list have no commissions or 'loads' if held over 90 days)

The index mutual fund counterparts I prefer to the ETFs above are

TD Canadian Index - Tracks the SP/TSX Composite Index
TD International Index Currency Neutral - Tracks the MSCI EAFE Hedged to CAD Dollars
TD U.S. Index Currency Neutral - Tracks the SP 500 hedged to Canadian Dollars

Since mutual funds carry higher expense ratios it makes sense to routinely shift from the mutual funds to ETF equivalents whenever the higher MER cost on the mutual funds becomes greater than the commission cost you'd incur by making the move.

If you are restricted from purchasing TD based mutual funds, there's a chart at http://www.bylo.org/idxfunds.html listing other equivalent companies that offer low-MER index funds. Currently though, the TD efunds generally have the lowest MERs (Management Expense Ratios) and that's why I prefer using them when possible.

I've split my index portions equally between SP/TSX, MSCI EAFE and SP 500. This is a simplified coach potato type balance that gives some preferential weighting towards Canada since it's the country my retirement dollars would be based in.

Investment Philosophy

rick@dilorenzo.com (Rick) — Mon, 18 Aug 2008 17:27:00 +0000

Every investor, even unknowingly, has one.

Are you investing for the short, medium or long term?
Are you growth or value orientated ? Do you know the difference?
How do you feel about risk? Aggressive or conservative?
Have you lived through market downturns, if so how did you react? what happened?

I can't answer these questions for you, as the answers are different for each individual. But I can answer them for myself, and show you my own philosophy.

I'm investing for the long term (20+ years)
I'm more value then growth orientated
I'm fine with the moderate to high risk that comes with investing mainly in a diversified equity portfolio.

I believe in low cost/expense investment and avoid any complicated or high fee/expense investments. Any mutual fund that has a MER (Management Expense Ratio) higher than 1% is too much for me. Which ends up meaning mutual funds I invest in are index related versus actively managed.

At least half of my portfolio is kept in low-cost index funds that don't attempt to beat the market, but simply match the market.

The other half is in individual equity stocks (over 5 but under 15)that I feel will be consistent in delivering profits to shareholders in the form of dividends or distributions.

You can think of the first half of the portfolio being orientated towards John Bogle's teachings while the second half partially leaning towards Benjamin Graham.