Canadian Dividend and Value Investor

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.