Banks and Ratios

Banks and Ratios

The reason to look at company ratios is that the stock price for a company tells you very little. The price of a stock certainly does not tell you if the stock is cheap or expensive. For example a stock price of $10 on one stock could be an expensive price, but a stock price of $20 on another stock could be a cheap price. It is like all stocks have their own currency and you will need a common frame of reference in order to tell how cheap or expensive a stock is. My Spreadsheet is here.

The method I like best to check for a good stock price is dividend yield and this against the historical median dividend yield. Of the big banks that I follow, the Bank of Nova Scotia comes off well in this test. Actually all the banks do because their prices have fallen lately.

My next favourite test is using the Graham Price. Of the big banks I follow, the Royal Bank is relatively lower with the current Price/Graham Price Ratio some 25% below its historical median P/GP Ratio.

In this entry I am just looking at mostly just the Canadian Banks that I follow. Of course it is not complete without CIBC and Canadian Western Bank but I really have no motivations to start to follow these banks. I have 3 bank stocks already of BMO, RY and TD. My son owns BNS. I thought it might be fun to look at a small Canadian bank, so I have Nation Bank.

I do not think I would ever buy CIBC (TSX-CM, NYSE-CM) or Canadian Western Bank (TSX-CWB, OTC-CBWBF). I will include similar data for these banks where I can find it. I try to get the right information, but I cannot guarantee anything.

One of the most common ratios to look at is the P/E Ratio. When dealing with P/E Ratios, the lower the P/E ratio the better the relatively price is. Below is the 10 year low, median and high median P/E Ratios for each bank I follow. Basically what this chart tells you is that investors are willing to pay relatively more money for TD Bank shares than for other banks. Last year when I looked at this data, RY was tied with TD Bank.

Bank	Symbol	Low P/E	Median P/E	High P/E
Bank of Montreal	BMO	10.07	11.34	12.10
Bank of Nova Scotia	BNS	10.64	11.63	12.50
Royal Bank	RY	10.51	11.44	12.68
National Bank	NA	9.04	10.62	11.89
TD Bank	TD	11.40	12.63	13.69

So what is the relatively cheapest bank today? Currently National Bank has the lower P/E. In the last column I am comparing the Historical Median P/E with the Current P/E. This shows that National Bank has dropped the most from its median. The National Bank has fallen a lot recently. If you want one of the big 5, BNS has also dropped a lot from its median value.

Bank	Symbol	Price	2016 EPS Est.	Curr P/E	M/C
Canadian Western Bank	CWB	$22.45	$2.65	8.47
CIBC	CM	$90.27	$9.58	9.42
Bank of Montreal	BMO	$74.41	$6.99	10.65	-6.13%
Bank of Nova Scotia	BNS	$56.33	$5.91	9.53	-18.05%
Royal Bank	RY	$70.74	$6.84	10.34	-9.60%
National Bank	NA	$38.70	$4.78	8.10	-23.76%
TD Bank	TD	$52.43	$4.75	11.04	-12.61%

The next most common ratio is the Price/Book Value per Share Ratio. For Price/Book Value per Share Ratio, the lower the P/B Ratio is, the more book value you get for your money. Theoretically, the book value is the difference between assets and liabilities and therefore is the potential value a company is worth or the breakup value of the stock for the shareholders.

When valuing a stock, the lower the P/B Ratio is, the better the stock price is on a relative basis. The 10 year median P/B Ratios for our banks are below. From this it is obvious that historically, investors were willing to pay a relatively higher price for Royal Bank shares than other shares. It could also say that the Bank of Montreal offers the best deal when it comes to Book Value per Share.

Last year, except for National Bank, all the 10 year P/B Ratios for these banks were higher. On a relative basis, investors were still willing to pay a relatively higher price of the Royal Bank shares and Bank of Montreal was still the best deal with it come to Book Value per Share.

Bank	Symbol	P/B Ratio
Bank of Montreal	BMO	1.57
Bank of Nova Scotia	BNS	2.07
Royal Bank	RY	2.16
National Bank	NA	1.79
TD Bank	TD	1.67

At present all the banks P/B Ratios are below their 10 year P/B Ratios. CWB's price is below is book value. Of the banks I follow, BMO has the lowest P/B Ratio and the Royal Banks is the lowest relative to its 10 year P/B Ratio as its current P/B Ratio is some 17% lower than the 10 year P/B Ratio.

Bank	Symbol	Price	BVPS	Current P/B	M/C
Canadian Western Bank	CWB	$22.45	$23.73	0.95
CIBC	CM	$90.27	$53.76	1.68
Bank of Montreal	BMO	$74.41	$56.31	1.32	-15.83%
Bank of Nova Scotia	BNS	$56.33	$29.30	1.92	-7.14%
Royal Bank	RY	$70.74	$39.52	1.79	-17.13%
National Bank	NA	$38.70	$23.54	1.64	-8.17%
TD Bank	TD	$52.43	$33.79	1.55	-7.08%

For dividend paying stocks, the Dividend Payout Ratios are important. For the DPRs, lower ratios are better ratios. For Banks the DPR for EPS is the most important one. When looking at these ratios, it would appear that Canadian Western Bank has the best ones, that is the lowest ones.

The problem with cash flow is that for banks they tend to be volatile and often negative. Also note that I got the CFPS for CWB and CM from a site. I do not know if the site calculates CFPS like I do. Why I caution is because different sites give different values for CFPS.

Bank	Symbol	DPR for EPS	DPR for CFPS
Canadian Western Bank	CWB	36%	32%
CIBC	CM	52%	46%
Bank of Montreal	BMO	49%	89%
Bank of Nova Scotia	BNS	48%	24%
Royal Bank	RY	45%	18%
National Bank	NA	44%	11%
TD Bank	TD	48%	11%

When Shares are issued for Stock Options, you want a company that issues around the same relative number of shares for its industry. Of course, the lower the number of shares issued for stock options, the less money comes out of the earnings for shareholders. In the value column, I am putting in the value of the stock options at the end of the calendar year rather than the book value of these shares.

In 2015 Royal Bank has one of the lowest percentages of their shares issued for stock options purposes. However, it was only the third lowest when it came to the cost of these stock options. It has the same position as last year. Also for 2015 National Bank has the highest percentage of their shares issued for stock purposes. This was the same as for 2014. All the banks issues less shares and a lower percentage of their shares in 2015 compared to 2014.

Bank	Symbol	Shares	% of o/s Shares	Value 2014
Bank of Montreal	BMO	0.843	0.13%	$ 68M
Bank of Nova Scotia	BNS	1.828	0.15%	$112M
Royal Bank	RY	1.190	0.08%	$ 89M
National Bank	NA	1.060	0.31%	$ 46M
TD Bank	TD	3.300	0.18%	$163M

For the 10 year Price/Graham Price Ratios, the lower the ratio the lower the relative price of the underlying shares. Here again, this chart shows that investors are willing to pay a relatively higher price for Royal Bank stock than for other bank stocks. It also shows that generally the National Bank has a relatively lower stock price.

Bank	Symbol	Low	Median	High
Bank of Montreal	BMO	0.77	0.90	1.05
Bank of Nova Scotia	BNS	0.91	1.02	1.21
Royal Bank	RY	0.99	1.17	1.40
National Bank	NA	0.80	0.89	1.05
TD Bank	TD	0.87	0.99	1.08

So on a relative basis what stock is cheaper? BMO has the lowest P/GP Ratio for the stocks that I follow. The Royal Bank has relatively the lowest P/GP Ratio compared to the 10 year median value being some 23% lower. CWB has the absolute lowest P/GP Ratio.

Bank	Symbol	Price	Graham Price	P/GP Ratio	M/C
Canadian Western Bank	CWB	$22.45	$37.19	0.60
CIBC	CM	$90.27	$103.64	0.87
Bank of Montreal	BMO	$74.41	$94.10	0.79	-12.14%
Bank of Nova Scotia	BNS	$56.33	$62.42	0.90	-11.53%
Royal Bank	RY	$70.74	$77.99	0.91	-22.48%
National Bank	NA	$38.70	$51.36	0.75	-15.34%
TD Bank	TD	$52.43	$60.09	0.87	-11.87%

For dividend yields, the higher the dividend yields the better the relative price of a stock is. Here is the 5 year median and historical average and historical median dividend yields based on my spreadsheets for our banks. The BMO seems to be giving the best dividend yields.

Bank	Symbol	5 Year	Hist. Ave	Hist. Med
Bank of Montreal	BMO	4.46%	5.60%	4.56%
Bank of Nova Scotia	BNS	4.10%	5.20%	3.86%
Royal Bank	RY	3.92%	4.97%	3.92%
National Bank	NA	4.08%	6.12%	3.89%
TD Bank	TD	3.71%	3.52%	3.47%

The best test of whether or not a stock is cheap or expensive is to compare the current dividend yield to the Historical Median Dividend yield. Except for BMO, all the banks I follow have higher dividend yields than the historical median.

The higher the dividends yield the better and in this category, the winner is the National Bank at 5.58%. National Bank is also the one which is the highest compared to the historical median. It is some 43% higher than the historical median dividend yield. Of the big 5 banks, Bank of Nova Scotia is a high yield and is some 29% above its median.

Bank	Symbol	Price	Dividend	Yield	M/C
Canadian Western Bank	CWB	$22.45	$0.92	4.10%
CIBC	CM	$90.27	$4.60	5.10%
Bank of Montreal	BMO	$74.41	$3.36	4.52%	-0.98%
Bank of Nova Scotia	BNS	$56.33	$2.80	4.97%	28.77%
Royal Bank	RY	$70.74	$3.16	4.47%	13.96%
National Bank	NA	$38.70	$2.16	5.58%	43.48%
TD Bank	TD	$52.43	$2.04	3.89%	12.13%

The problem with the above chart is that I have different years of data for different banks. Here is the 5 year median, historical average and historical median dividend yields going back to 1988 for all banks. From this chart you can see that the TD Bank pays out relatively a lower dividend yield that the other banks. The historical median dividend yield is probably the best measure, and it is clear that the Bank of Montreal pays out the best yield.

Bank	Symbol	5 Year	Hist. Ave	Hist. Med
Bank of Montreal	BMO	4.46%	5.33%	4.38%
Bank of Nova Scotia	BNS	4.1%	5.20%	3.86%
Royal Bank	RY	3.92%	4.43%	3.78%
National Bank	NA	4.08%	6.12%	3.89%
TD Bank	TD	3.71%	3.27%	3.33%

What bank is now giving the best yield? National Bank still has the highest yield and the highest difference from its median. The BNS also is still showing a high yield compared to its median.

Bank	Symbol	Price	Dividend	Yield	M/C
Canadian Western Bank	CWB	$22.45	$0.92	4.10%
CIBC	CM	$90.27	$4.60	5.10%
Bank of Montreal	BMO	$74.41	$3.36	4.52%	3.09%
Bank of Nova Scotia	BNS	$56.33	$2.80	4.97%	28.77%
Royal Bank	RY	$70.74	$3.16	4.47%	18.18%
National Bank	NA	$38.70	$2.16	5.58%	43.48%
TD Bank	TD	$52.43	$2.04	3.89%	16.84%

On my other blog I wrote yesterday about Enghouse Systems Ltd. (TSX-ESL, OTC-EGHSF)... learn more. Tomorrow, I will write about Rogers Sugar Inc. (TSX-RSI, OTC- RSGUF)... learn more.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Rebalancing Portfolios

Every year I read articles about how and why you should rebalance your portfolio like this article from Advice for Investors.

I must confess that I have never rebalanced my portfolio. I do not rebalance re a balance of bonds and stocks, or even stocks within categories. I never had a balance of bonds to stocks. When I started I had more bonds. You could get a Canadian Savings Bond at over 19% so there was easy money in Bonds and GICs.

As I have said, I used to Bonds but I have not had any for quite a few years. I got bonds and GICs where interest rates were really high. I sold my last bond in 2007, which was a 30 year bond with rates of 10%. I might buy bonds in the future when interest rates improve. I will have to wait and see.

In my trading account I have always had more financials and utilities than any other category. I have had a minimal amount of resources. I generally do not look at resource stocks as long term investments. Most of my investments have been short term for resource stocks. I look at stock buying as a way of buying future income.

Since I have to withdraw money each year from my RRSP and RRIF I do have cash and near cash (GICs, Investment Savings Account) to last me 5 years with expected dividends included in my calculations. I built my RRSP account similar to my trading account. With my Locked in RRIF, I received several large amounts to invest, so I invested into stocks that were at good prices at those times.

I do take notice of what I have in my portfolio when I buy new stocks. However, to my mind a cheap or reasonably price stock beats out doing some rebalancing when I was buying stocks. I am doing some buying when I take money from my RRSP or RRIF accounts at the year-end or use my line of credit to buy stocks for my Trading Account.

I am building my TFSA account from scratch and I am not taking into account what I have in other accounts. Mostly what I have in the TFSA account are newer and smaller companies than in other accounts.

I do sell companies occasionally because I have to raise money in my RRSP and RRIF accounts because of withdrawals. But what I have been doing is to sell the stocks with the lowest yields.

On my other blog I wrote yesterday about Transcontinental Inc. (TSX-TCL, OTC-TCLAF)...learn more. Tomorrow, I will write about Enghouse Systems Ltd. (TSX-ESL, OTC-EGHSF)... learn more tomorrow.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Stock Purchases

I put more money into my TFSA in January 2016. I am putting the maximum I can into this account. I put in an extra $4500 because the Tories increased the maximum for TSFAs in 2015 to $10,000. The Liberals have now lowered the maximum to $5500 in 2016. Therefore I put in $10,000 recently into this account. Also, when I move money from my RRSP and RIF accounts in December, there is some money to buy more shares in stocks and therefore increase my dividend income from my trading account.

For my TFSA account, I purchased Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I had $11,148 in my TFSA to buy stock. GS is relatively below the median and it gives out special dividends all the time. I also wanted to try out a high yield, low capital gain stock.

I have recently reviewed Metro Inc. I bought Metro in 2004. I have earned 19.92% per year on this stock. Of this 18.17% per year is capital gain and 1.75% per year in dividends. When I bought this stock, I was earning 1.87% in dividend yield. Today, I am earning 7.92% on my original stock price.

However, of the money I earned, 92.6% is in capital gain and 7.4% is in dividends. This means unless I sell stock, I only get some 7.4% of the return to spend.

When I looked at GS in October 2015, the 5 and 10 year total return was 9.84% and 8.36% per year with capital gains at 1.83% and 2.09% per year and with dividends at 8.02% and 6.26% per year. On this stock you would get to keep a lot more of the return in dividends to spend.

Of course the market has gone down since I have made my purchase of GS. GS was at $19.73 when I bought it and I noticed it was $16.55 today. When I last looked at Metro, the stock price was $39.37. Today its price is $39.70. The stock market has been treading down recently. Metro has done better than the TSX and GS has done worse.

For my trading account, I will be purchasing more Manulife Financial Corp. (TSX-MFC, NYSE-MFC) stock. This is a stock I already have in this account. The dividend is decent at just over 3%. The stock is considered cheap using dividend yield testing and the historical median dividend yield. I already own this stock in this account.

I had a bit more money in my Trading Account so I bought another 100 shares of Barrack Gold Corp (TSX-ABX, NYSE-ABX). Resources will not stay down forever.

On my other blog I wrote yesterday about Bank of Nova Scotia (TSX-BNS, NYSE-BNS)...learn more. Tomorrow, I will write about National Bank of Canada (TSX-NA, OTC-NTIOF)... learn more.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Go for Income

If you are thinking of retiring on dividend income or another stream of income, you perhaps should concentrate on what income you need rather than the amount of money in your portfolio. When I stopped working to live off my dividend income there was a big difference in gross income before and after this move. However, there was no difference in my net income. And it is net income that matters. Here I am talking about income after taxes.

I talked about taxes on Dividends in one of my blogs of last year. Bottom line you have to earn more than $49,000 in dividends for federal taxes to kick in. In Ontario, where I live you cannot avoid the Ontario Health Premium. In Ontario all you pay prior to $49,000 of dividend income is the Ontario Health Premium.

Another consideration is that if you are building a portfolio of dividend stocks like I did, my dividend income was always increasing. I had no year when my dividends did not increase. They also increased more than the rate of inflation. However, the increases did vary from year to year ranging between 5% and 23%.

Even in the most recent bear markets of 2000 and 2008, my overall dividend income went up. Yes, I had stocks that cut their dividends and stocks that kept their dividends flat. Example of flat dividends was the banks. However, other stocks increased their dividends. Over all my dividend income went up. For example in 2009 my dividends increased by 14.9% and in 2010 my dividends increased by 5.3% and in 2011 my dividends increased by 9.2%.

The value of my portfolio was a different matter and was quite volatile. My portfolio value over the long term has gone up, but it was going up then down then up constantly. The swing in value was small at times but very large at other times. In a blog entry in 2014 I talked about losing 30% of the value of my portfolio in 2000 and 2008 problems, but I did recover well. See my entry on 2000, 2008 and Recovery.

So I concentrated on getting the income I needed, not on the value of my portfolio. I have always had a budget so I knew what income I would need. If you have RRSP or RRIF accounts taxes are more complicated than just dividends. Basically you pay tax on RRPS and RRIF withdrawal amount like they were salary. They are fully taxable.

When I stopped working I had half my money in a trading account and half in RRSPs. My taxes were less because after quitting work I still had dividend income, but took for my RRPS half of what I was getting in a salary when I worked. I do wish they had TFSA when I was saving for retirement. I am paying tax at a higher rate taking money from my RRSP than when I was funding my RRSP.

However, as time goes on the amount you have to take from RRIF accounts increases as do the taxes you pay. I think that if you are not paying tax at the top rate, the TFSA is better than RRSP account.

In another post I talked about starting off using the 4%, 8% rule, then changed my mind about this because of the 2000 and 2008 recessions. See the blog entry Retiring using 8%, 4% Rule. I also wrote about this subject again, Retiring using 4% Rule.

On my other blog I wrote yesterday about Toronto Dominion Bank (TSX-TD, NYSE-TD)...learn more. Tomorrow, I will write about Bank of Nova Scotia (TSX-BNS, NYSE-BNS)... learn more.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Update Notes

When I review stock price and dividends each month, I also take the opportunity to look at a bit closer at some of the stocks I cover. These some of the stocks I looked at more closely. Also note my spreadsheet shows dividends that have declared.

Automodular Corp. (TSX-AM.H, OTC-AMZKF)

The stock price has gone up a bit. It seems like they have not yet found something to do. For some reason TD Waterhouse is showing this stock as having a dividend of $0.25 annually. However, they are not granting any dividends at this time.

Bombardier Inc. (TSX-BBD.B, OTC-BDRBF)

Andrew Walker of Motley Fool still seems to be positive about this stock with another report at the end of 2015. At least Bombardier is selling planes as this article in the Financial Post talks about.

It is hard to know what will happen to this firm. There is a possibility it would go bankrupt. This is when investors lose big time as generally their investment is worth zero.

Husky Energy Inc. (TSX-HSE, OTC-HUSKF)

Both the TD Bank and G&M still say that the dividend has decreased from $1.20 to $1.18. I cannot find any evidence of that. There is been nothing new from the company since they announced that future dividends will be paid in shares and not cash. In their latest news release they said that they will continue to review dividends on a quarterly basis with the objective of return cash to shareholders.

TransAlta Corp (TSX-TA, NYSE-TAC)

I have had this company since 1987. I have worried about this stock for a while. The dividend yield is over 14%. Usually when this happens, that is dividend yields get very high, it is because the market expects a dividend cut. Matt Smith of Motley Fool suggests just that.

The company, at present, is not saying anything. Some analysts think that the dividend will be cut, but most seem to think it will not. But, who knows. It certainly is not a good sign when dividend yield rises so high.

Atlantic Power Corp. (TSX-ATP, NYSE-AT)

The news for this company is all about insider buying like this recent report by Eric Jhonsa on Seeking Alpha. Another item is about the company being the biggest gain on the NYSE on Wall Street Point.

This article in Insider Monkey talks about hedge fund holdings. Some have dropped this firm and others have upped their holdings significantly. They suggest because of this that you should do some analysis on this stock and possibly include it in your portfolio. According to an article in American Trade Journal short positions in this stock have dropped.

Perhaps this stock is now doing better?

Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)

An article on Yahoo Finance talks about the third quarterly report from this company. Total sales are still lower and EPS is still negative. However, they increased sales per store by 2.5% (because they are fewer stores.) Kenneth Chan of Van City Buzz asks is Le Chateau is on a Death Watch? He does not think it can survive using its current business model.

Newfoundland Capital Corp. (TSX-NCC.A, OTC-n/a)

This stock pays a dividend twice a year. For the last few years the dividends have been at $0.09 payable in January and $0.06 payable in September. Last year the dividend declared in December 2014 for $0.09 was payable on January 30, 2015. This year the December 2015 dividend declared is being paid on December 30, 2015. This dividend is for $0.09.

Sites have updated annual dividend to $0.18 annually. However, at this time of the year sites usually increase the annual dividend to $0.18 and then lower it to $0.12 annual around September. I have kept my annual dividend on this stock at $0.15 annual (a $0.09 and a $0.06 dividend each year.) It is hard to know because the company has not said so if they are changing their dividend policy. I am currently assuming that the dividend $0.09 is the one that is generally paid in January, so I am keeping the annual dividend at $0.15 until I know differently.

There was also a report in the Herald Chronicle about this company having a very good third quarter with profit higher by some 57%. There is an article by Glen Korstrom in the Business Vancouver saying that radio stations are doing better than TV stations since the CRTC has rules that cable providers must give subscribers more freedom to choose individual channels to watch.

Savaria Corporation (TSX-SIS, OTC-SISXF)

This company Savaria Corporation expects 2016 to be a record year. They provide solutions for mobility. With the number of aging people around I can see that as a growth industry.

I see more and more people using walkers. A number seem to be younger than me. I do exercise 5 days a week, doing Tae Bo from some YouTube videos. I clear a space in front of my computer to do this. I remember once seeing a video of a woman who was getting people off of walkers by getting them to exercise. She started them off exercising sitting in a chair. It was quite interesting. As I understand it with balance and muscle tone, you use it or lose it. Apparently we start to lose muscle tone and balance after 50 if we do nothing.

Unfortunately, the stock price still looks quite high. This stock had very high yields in the past, so by dividend yield the current price seemed high. So I looked at other indicators.

The 5 year low, median and high Price/Earnings per Share Ratios are 13.04, 15.98 and 18.91. The current P/E Ratio is 22.04 based on a stock price of $5.51 and 2015 EPS estimate of $0.25. The P/E Ratio for 2016 is 19.00 based on a stock price of $5.51 and 2016 EPS estimate of $0.29. This suggests that the stock price is relatively expensive.

I get a Graham Price of $2.93 for 2015 and $3.16 for 2016. The 10 year Price/Graham Price Ratios are 0.93, 1.17 and 1.42. The P/GP Ratios would be 1.88 for 2015 and 1.74 for 2016. The 10 years ratios are reasonable ratios. A P/GP Ratio of 1.74 is a high one by any standard. So this stock price testing suggests that the stock price is expensive.

The 10 year Price/Book Value Ratio is 1.85. This is a reasonable P/B Ratio. The current P/B Ratio is 3.60 a rather high ratio and it is some 94% above the 10 year ratio. This also suggests that the stock price is relatively expensive.

Looking at P/S Ratio testing and P/CF Ratio testing does not give any better results. There are a lot of reasons to like this stock. It has good growth and a strong balance sheet. It is something probably to put on a hit list and go for it when the price moderates. All stocks have good prices at different times and bear markets happen on a regular basis. However, the economic expansion since 2008 has been long and slow. It is hard to know when we will hit another hard landing in stocks.

On my other blog I wrote yesterday about Bank of Montreal (TSX-BMO, NYSE-BMO)...learn more. Tomorrow, I will write about Royal Bank of Canada (TSX-RY, NYSE-RY)... learn more.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

How did I do in 2015

I have a portfolio mainly of dividend growth stocks. I am currently taking out money each year for living expenses. I have little in resource stocks. The breakdown of portfolio is Financials (29.53%), Utilities (22.17%), Industrials (18.67%), Consumer (15.21%), Real Estate (6.01%), and Resources (1.14%). The rest is mostly in cash and near cash (GICs, Investment Savings).

My total income increased by 8.9% last year. The increase in my dividend income was 7.6% last year. I have GICs in my RRSP/RRIF accounts so my dividend increases and my total income increased will be different. My 5 year median total income growth is 8.93% and my 5 year median dividend growth is 9.23%.

I spent 85% of my total income in 2015. The 5 year median of what I spend of my income is also around 85%.

I did my budget for next year and the biggest increases I can see is for Household internet/cable/phone combo, taxes and food. Household internet/cable/phone combo has gone up by 4.4% per year over the past 3 years and my food budget has gone up 7.3% per year over the past 3 years. I expect my taxes to go up around 4.2%. This is because I have to take more and more out of my RRSP/RRIF accounts.

The TSX went down by 11.77% in 2015 from 14744.70 at the end of 2014 to 13009.95 at the end of 2015. My portfolio when down by 5.76% this is including the money I took out. My actual portfolio fell 8.53% as I took out 2.76%.

Over the past 5 years my portfolio is up by 35.09% or 6.20% per year. This is looking at the total value of the portfolio in 2010 and 2015 so does not include the money I took out. If you include what I took out my portfolio has total return of 9.43% per year over the past 5 years. Over the past 5 years the TSX is down by 0.65% per year (13443.22 at the end 2010 and 13009.95at the end of 2015).

Over the past 10 years my portfolio is up by 63.44% or 5.03% per year. If you include the money I took out, my total return would be 8.05% per year. Over the past 10 years the TSX is up by 1.44 % per year (11272.26at the end 2005 and 13009.95at the end of 2015).

For those interested in S&P 500 statistics, this index was down just 0.73% over the past year. Over the past 5 years, the S&P 500 is up by 10.20% per year. Over the past 10 years, the S&P 500 is up by 5.05% per year.

Well, I do not think I have done badly.

On my other blog I wrote yesterday about Calian Technologies Ltd. (TSX-CTY, OTC-CLNFF)... learn more. Tomorrow, I will write about Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Kathleen's Art Show, Toronto

The Women's Art Association of Canada is having an art show for their members called "Beloved" starting on January 5, 2016 to February 1, 2016. My friend Kathleen Gabriel is included in this show.

The show is at the Women's Art Association, Dignam Gallery at 23 Prince Arthur Avenue. Phone is 416-922-2060. This Gallery is near the St. George Subway Station, Bedford Exit.

The Opening Reception is on Friday January 15, 2013 between the hours of 5:30 and 7:30 pm.

The show is open to the public on Monday to Thursday between the hours of 9 am to 3 pm by appointment, 416-922-2060.

On my other blog I am today writing about Bird Construction Inc. (TSX-BRD, OTC- BIRDF) ... learn more...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Something to Buy January 2016

There is always something to buy in the stock market. On Tuesday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.

The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.

For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.

However, no system is perfect. But if you are interested in buy a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.

Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See my spreadsheet here to see what stocks are showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). As in other spreadsheets, you can highlight a line or a number of lines for better viewing.

In the following notes I am only going to list stocks showing as cheap using the historical high dividend yields (P/Hi) and historical median dividend yields (P/Med).

I follow 18 stocks in the consumer discretionary category. Of these stocks, only Dorel Industries (TSX-DII.B) is showing as cheap by the historically high dividend yield. Seven (or 39%) are showing cheap by historical median dividend yield. They are Canadian Tire Corporation (TSX-CTC.A); Dorel Industries (TSX-DII.B), High Liner Foods (TSX-HLF); Leon's Furniture (TSX-LNF); Magna International Inc. (TSX-MG), Reitmans (Canada) Ltd. (TSX-RET.A) and Thomson Reuters Corp (TSX-TRI). Nothing has changed from last month.

I used to have 19 consumer discretionary stocks. However, Chesswood Group (TSX-CHW, OTC-CHWWF) has been reclassified from a consumer discretionary company to a Financial Services company. It has completed the sale of its Acura Sherway new car dealership and has been transformed into a focused North-American specialty finance company.

I follow 10 Consumer Staples stocks. None are showing as cheap by the historically high dividend yield. Two stocks (or 20%) are showing cheap by historical median dividend yield. These are Jean Coutu Group Inc. (TSX-PJC.A) and Loblaw Companies (TSX-L). This is the same as for last month.

I only follow two Health Care stocks and both are US stocks. They are both cheap by the historical median dividend yield. The stocks are Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT). This is the same as for last month.

I follow 12 Real Estate stocks. Melcor Developments Inc. (TSX-MRD) is showing as cheap by the historically high dividend yield. Five stocks (or 42%) are showing cheap by historical median dividend yield. They are Artis REIT (TSX-AX.UN); FirstService Corp (TSX-FSV), Granite Real Estate (TSX-GRT.UN) H & R Real Estate Inv. Trust (TSX-HR.UN) and Melcor Developments Inc. (TSX-MRD). H & R is new to this list for January.

I follow 6 Bank stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or .67%) are showing cheap by the historical median dividend yield. These stocks are Bank of Nova Scotia (TSX-BNS); National Bank of Canada (TSX-NA); Royal Bank (TSX-RY) and Toronto Dominion Bank (TSX-TD).

I follow 13 Financial Service stocks. See comments above about Chesswood Group. One is showing as cheap by the historically high dividend yield and that is Home Capital Group. Nine (or 69%) stocks are showing cheap by the historical median dividend yield. These stocks are AGF Management Ltd (TSX-AGF.B); CI Financial (TSX-CIX); DirectCash Payments Inc. (TSX-DCI); Equitable Group Inc. (TSX-EQB), Gluskin Sheff + Associates Inc. (TSX-GS); Home Capital Group (TSX-HCG); IGM Financial (TSX-IGM); Power Corp (TSX-POW) and TMX Group Ltd. (TSX-X). Equitable Group has been added to this group.

I follow 5 Insurance stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are Great-West Lifeco Inc. (TSX-GWO); Manulife Financial Corp (TSX-MFC); Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF). There is no change from last month.

I follow 34 Industrial stocks. One (or 3%) is now showing as cheap by the historically high dividend yield. This stock is Hammond Power Solutions Inc. (TSX-HPS.A). Finning International Inc. (TSX-FTT) is no longer showing cheap.

Fourteen Industrial stocks (or 41%) are showing cheap by historical median dividend yield. These stocks are Ag Growth International (TSX-AFN); Bird Construction Inc. (TSX-BTD), Canadian National Railway (TSX-CNR); Finning International Inc. (TSX-FTT); Hammond Power Solutions Inc. (TSX-HPS.A); HNZ Group Inc. (TSX-HNZ.A); Methanex Corp. (TSX-MX), Mullen Group (TSX-MTL); Pason Systems Inc. (TSX-PSI); Pulse Seismic Inc. (TSX-PSD). Russel Metals (TSX-RUS); SNC-Lavalin (TSX-SNC); Toromont Industries Ltd. (TSX-TIH) and Transcontinental Inc. (TSX-TCL.A). Changes are because I am now following Bird Construction and for Methanex I was reporting the dividends in US$ not in CDN$ as I should have.

I follow 8 Tech stocks. None are showing as cheap by historical median dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are Absolute Software Corporation (TSX-ABT); Calian Technologies Ltd (TSX-CTY), Computer Modelling Group Ltd. (TSX-CMG) and Evertz Technologies (TSX-ET). Computer Modelling is new to this group.

I follow 10 Energy stocks. Five Stocks or (50%) are showing as cheap by the historical high dividend yield. They are Canadian Natural Resources (TSX-CNQ); Encana Corp. (TSX-ECA), Ensign Energy Services (TSX-ESI); Husky Energy (TSX-HSE) and Suncor Energy (TSX-SU). Encana is new to this group.

There are six stocks (or 60%) showing cheap by historical median dividend yield. They are the five above and Cenovus Energy Inc. (TSX-CVE). This has not changed from last month.

I follow 2 Material stocks. None are showing as cheap by the historically high dividend yield. One is cheap by historical median dividend yield and that is Teck Resources Ltd. (TSX-TCK.B). This has not changed from last month.

I follow 8 of the infrastructure type utility companies. None are showing as cheap by historical high dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are AltaGas Ltd (TSX-ALA); Enbridge Inc. (TSX- ENB) TransCanada Corp (TSX-TRP) and Veresen Inc. (TSX-VSN). Last month I had TransCanada in twice instead of inserting Enbridge and TransCanada.

I follow 12 of the power type utility companies. One is showing as cheap by the historically high dividend yield and that is TransAlta Corp. Three stock (or 25%) are showing cheap by historical median dividend yield. These stocks are the one above plus ATCO Ltd (TSX-ACO.X) and Fortis Inc. (TSX-FTS). This has not changed since last month.

I follow 5 of the Telecom Service type utility companies. One stock is showing cheap by the historical high dividend yield and that is Shaw Communications Inc. (TSX-SJR.B). Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are BCE (TSX-BCE); Shaw Communications Inc. (TSX-SJR.B); Telus Corp. (TSX-T) and WiLan Inc. (TSX-WIN). Telus has been added to the list this month.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Dividend Stocks January 2016

Remember that I will be blogging in this spot on Tuesdays and Thursdays in 2016. I realize since I updated this list as of December 31, 2015, the stock market has fallen. However, the Canadian Market has not fallen much and it should have a minimal effect on this spreadsheet.

The theory is that you should use the dividend yield to see if a dividend stock is selling at a stock price that is relatively cheap. A stock price is considered cheap if it is selling at a dividend yield higher than the historical high yield or higher than the historical average yield or historical median yield. See my spreadsheet at dividend growth stocks that I just updated for January 2016.

On this list,

• I have 11 stocks with a dividend yield higher than the historical high dividend yield,
• I have 52 stocks with a dividend yield higher than the historical average dividend yield
• I have 69 stocks with a dividend yield higher than the historical median dividend yield and
• 69 stocks with a dividend yield higher than the 5 year average dividend yield.

When I did my list last month,

• I have 11 stocks with a dividend yield higher than the historical high dividend yield,
• I have 49 stocks with a dividend yield higher than the historical average dividend yield
• I have 65 stocks with a dividend yield higher than the historical median dividend yield and
• 64 stocks with a dividend yield higher than the 5 year average dividend yield.

When I did my list in January 2014,

• I had 9 stocks with a dividend yield higher than the historical high dividend yield,
• I had 45 stocks with a dividend yield higher than the historical average dividend yield and
• 39 stocks with a dividend yield higher than the 5 year average dividend yield.

Someone complained that I did not update the Enbridge Income Fund as increasing their dividends last month because the company had announced the increase. However, sites do not generally update dividend information until it affects the next dividend to be paid. For this company there was still one monthly dividend to be paid before the increase kicked in. I see no reason for me to do anything different from this.

Of the stock that I follow none have cut their dividends. I am keeping an eye on TransAlta Corp. (TSX-TA, NYSE-TAC) as it looks quite vulnerable to a dividend cut

I have added Bird Construction ((TSX-BDT, OTC-BIRDF) to my list of stocks that I am tracking. This is the first time in over a year that I have been able to review a new stock. I had to drop a number of stocks between 2014 and 2015 because of take overs. I had hoped to replace them, but I never had enough time. I am hoping that putting out 5 blog entries a week instead of 7 will give me time to add to my list some new stocks.

In other changes, for Magna International Inc. (TSX-MG, NYSE-MGA) and Methanex Corp. (TSX-MX, NASDAQ-MEOH) I realized I was using stock price in CDN$ and dividends in US$. Both these companies pay dividends in US$. I have fixed my spreadsheet. For this test to be valid, currencies must be the same.

If you had one share of each stock, total dividends last month would be $144.54. This month dividends would be $146.54. Of the stock that I follow 4 stocks has raised their dividends since last month. Dividends raises are denoted in green. Those stocks are

Allied Properties (TSX-AP.UN, OTC-APYRF)
Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF)
Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF)
Savaria Corporation (TSX-SIS, OTC-SISXF)

I am showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). See these fields on the right side of the file. You can highlight a particular stock using your cursor to highlight the appropriate line.

There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical median dividend yield are probably the best bet.

The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution. Do not forget that I have all the stocks I follow on this spreadsheet and some are much better investments than others.

You should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.

Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. These companies have generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield.

Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.

The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.

See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. I have an entry on my introduction to Dividend Growth. You might want to look at my original entry on Dividend Growth Stocks. I have also written about why I like Dividend Growth companies.

On my other blog yesterday, Monday, January 4, 2016 I wrote about Metro Inc. (TSX-MRU, OTC-MTRAF) ... learn more...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.