Wednesday, October 2, 2013

Interview with Gord


My name is Gord. I am a high school teacher, husband and father of three small children aged 1, 2.5 and 5. While I enjoy my job, it can be all-consuming during the school year, so my motive for investing is to someday have the freedom to work part time or retire early so that I have more time to spend with my family. I tend to invest monthly in (mostly) blue-chip dividend paying companies with the money that is left over after the mortgage, childcare and other expenses are paid.

What prompted you to start investing? Did anything inspire you?

I started out by investing small amounts in mutual funds based on my banks advice. I watched my money stagnate and/or depreciate over several years. That was the real inspiration for me to start investing. I thought I must be able to do better than what my bank was doing with my money. So, I decided to take ownership of my investment decisions and I have been investing on my own for about 8 years now.

If someone was just starting out, what would you advise as a first move?

Educate yourself. Remember that no one else will care nearly as much about your money as you so you need to understand how to invest it well. Find an investment approach that resonates with you and learn as much as you can about it. For example, The Globe and Mail has an online section called Strategy Lab where they profile and follow four investing approaches (Dividend, Growth, Index and Value Investing. This could be a good place to start.

Do have any favourite investing books?

While not a book, Drip Primer has an excellent, succinct overview of the main investing approach that I use (DRIP investing). It is the first place I would recommend for new DRIP investors.

Derek Foster's "Stop Working" was the book the inspired me to change my investing approach to dividend investing (and specifically DRIPs - Dividend Reinvestment Plans). I am however skeptical of the financial specifics he reports and his stock recommendations are now dated, but his overall strategy is a sound approach.

The Little book of Big Dividends (by Charles B. Carlson) is another favourite. It has an excellent introduction to dividend and DRIP investing, although it is US based.

What sort of account are you using for stock trading? Are you using a trading account, RRSP, TFSA? Why?

I have direct ownership in most of my investments and these are purchased through a transfer agent (i.e. Computershare or Canadian Stock Transfer Company). These aren't trading accounts, but rather agents that let you buy more of a stock in relatively small amounts commission free on a quarterly or monthly basis. For a list of these stock and minimum purchase amounts, see: DRIP primer site. The advantage of using a transfer agent (other than commission free purchases) is the compounding effect that can be gained by reinvesting your dividends; the "DRIP". In these accounts all of the dividend paid can be reinvested, down to the 1000th of a share, vs. a synthetic DRIP offered through a broker which only reinvests whole shares and pays out the remainder of your dividend in cash.

I also have a trading account, RSP and TFSA with TD Waterhouse. The few companies I own that I can't traditionally DRIP, like Corus (CJR.B) and Power Financial Corp. (PWF) are in my trading account, being synthetically DRIP'ed. I also keep a small amount of my portfolio in index funds (TD e-series) in my RSP account, following a "couch potato" investing strategy.

My long term plan is once I have a substantial position in a company to move it from the transfer agent to my TFSA. I am starting with those that have no dividend tax credit, like Real Estate Investment Trusts (REITs). Every year I move the maximum I can into my TFSA.

How do you determine what to invest in? Does any particular site or business news program influence you?

A valuable site for information on DRIP stocks is here. There is an active community of both novice and experienced investors that share ideas. From here I've met a subset of investors that I correspond regularly with to share ideas and do "group buys" of some DRIP stocks. For example, Dundee REIT can be purchased monthly from the transfer agent (Computershare) but requires a minimum purchase of $1000. Several of us will pool our money to meet the minimum. One person makes the purchase and then transfers the appropriate number of shares, through the transfer agent, to each member of the group buy.

There are a several well-written Canadian blogs I follow, such as this one, which I get ideas from. Another one of my favorites is The Connolly Report , the only subscription site I use. He writes a very conservative value-approach to dividend investing (which I refer to every time I get tempted by an obscure stock with a high dividend payout). One other author I follow for advice is The Globe and Mail's John Heinzl.

Where do you generally get your info on stocks you invest in? Do you use any investment tools or specific sites?

I use the Globe and Mail's Watchlist application. It is an excellent free application that is fairly customizable. For example, I have my portfolio set up to show metrics that are important for my approach, like 5yr dividend growth, payout ratio and return on equity.

I own and track about 35 stocks; mostly Canadian and a few US. Some I only have a very small position in, others make up the core of my portfolio. It is from this list that I look for buying opportunities each month.

Do you use any system or program to track your stocks and options?

I use a Google Drive spreadsheet I created to track my stocks, including their return, adjusted cost base and dividends earned. It's free and highly customizable.

Do you trade options?

I don't do options trading. It requires a level of sophistication I'm not comfortable with yet.

How would you categorize the type of stock you invest in?

They are rather conservative, mostly blue chip and all dividend paying. I focus on stocks that increase their dividend payment over time (or have a high, stable dividend). This amounts to a relatively small pool of Canadian companies so I try to look for buying opportunities within this group, where a company's stock price had decreased recently but the company itself is still solid. For example, this summer the price of BCE and Telus dropped substantially under the threat of Verizon entering the Canadian market, so I purchased BCE at a discounted price.

Do you have any plans for the next 5, 10 years?

I have a very small portion of my portfolio invested in the US. There are whole sectors in Canada that you can't find quality dividend paying companies, like Consumer Products. For those sectors I plan to diversify into US dividend payers.

Did the 2008/2009 crash affect you? Did you change anything about how you were investing because of it?

Yes it affected me! I had been sitting on the sidelines, educating myself about DRIP investing and looking for the right time to jump in. As a conservative investor I remember how afraid I was at the time to "pull the trigger", but in retrospect this was as good a point of entry as you could ask for. My only regret is I didn't invest more.

Do you mind saying what stocks you are invested in? Are all your stocks dividend payers?

Sure, and all of my stocks are dividend payers.

My core Canadian portfolio consists of: RioCan (REI.UN), AGF Management (AGF.B), Sun Life Financial (SLF), Telus (T), Power Financial (PWF), Firm Capital (FC), Bank of Nova Scotia (BNS), Bank of Montreal (BMO), Manulife Financial (MFC), Aberdeen Asia-Pacific Income Investment Company (FAP), Exchange Income Fund (EIF), Reitmans (RET.A), Enbridge (ENB), BCE (BCE), Dundee International REIT (DI.UN), Corus Entertainment (CRJ.B), Fortis (FTS), Suncor (SU), National Bank (NA) and Artis REIT (AX.UN).

My US portfolio includes: PepsiCo (PEP), McDonald's Inc. (MDC), Genuine Parts (GPC), Johnson & Johnson (JNJ), Hasbro Inc. (HAS) and Proctor & Gamble (PG).

On my other blog I am today writing about The North West Company (TSX-NWC, OTC-NWTUF)...continue...

No comments:

Post a Comment