I have never been a big supporter of the idea that buying a house is a good investment. What people often forget is the hidden costs that they pay in addition to the purchase price. When you start factoring the house insurance, property tax, maintenance costs and other ongoing ownership costs the returns aren’t that great. There are also significant one time buying and selling costs for things like appraisals, bank fees, property transfer tax, legal fees and real estate commission.
I’m going on memory, but I read an article a while ago that said on average a person will buy and sell a property about 5 or 6 times in their life. This works out to over $100,000 in closing costs for the average person over the span of their life. When you start factoring in these expenses you soon find out that a house isn’t that great of an investment.
I’m not saying no one should buy a home, but from a financial standpoint there are better investments out there. I think buying a house can force people into better saving habits through their mortgage payments, but I don’t have problems when it comes to saving money,
… Continue reading I Bought A Condo – Excitement & Worries
I’ve been very busy over the past few weeks. Since my last post I’ve bought a condo and sold off a large portion of my portfolio. I plan to utilize the Smith Maneuver (Million Dollar Journey has some good articles on the topic here). Part of this process means selling all of my investments and using the proceeds to come up with a large down payment. I expect the whole process to take around 2 months as I have some DRIPs that have to be transferred and make selling quickly difficult. I started this process by selling the following shares on June 20, 2014.
As you know from my past few posts I’ve been reading Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth. One thing that surprised me a bit was his comments about inflation. The author pointed out that the 60 year average inflation rate in the United States is 4.1%. The book was written 8 years ago in 2006 and has a US focus, so I decided to do some of my own research to see if this figure was still accurate.
What is inflation?
Before I dive into the results, I want to explain what inflation is. Investopedia defines inflation as
“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.” […] “As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.”
The Bank of Canada website has an inflation calculator that you can play around with to get an idea of how inflation affects your purchasing power. Here are a few of my results:
… Continue reading How To Combat Inflation With Dividend Growth And Protect Your Purchasing Power
Finding the right dividend growth candidates to invest in can be very time consuming. There is so much information out there that it can become overwhelming. Today I’m going to talk about how I use Value Line’s Investment Survey reports to quickly see if a stock I’m interested in, warrants further research and potentially my money.
Most public libraries will have free access to these Value Line reports, but the Value Line website also provides free copies of these reports for companies in the the Dow 30. Coca-Cola [download the PDF file here to follow along. In this download, I’ve highlighted the areas on the report that I focus on.
You’ll find dividend yield in the top right hand corner of the report.
I typically like to see a dividend yield of at least 2.5%,
… Continue reading How I Use Value Line Reports to Quickly Assess A Dividend Growth Stock
“Financial strength is the key requirement of a high-quality stock. [...] Remember, you’re buying a piece of a business here, one that you want to live with for a long, long time.” (Miller, 2006)1
I recently read Lowell Miller’s The Single Best Investment: Creating Wealth with Dividend Growth. I would make this book required reading if I were teaching a course on dividend growth investing. What I like about this book is that it gives specific criteria to look for when trying to find a good dividend growth candidate. While the version I read was written in 2006, a lot still applies today.
The concept of the book is that high quality + high current dividends + high growth of the dividend = high total returns. A key element of a high quality company is financial strength. Today I’ll be sharing a few of the author’s different ways to identify financial strength.
As a long term investor it is important to me that the company still exists in 10 years, 20 years, 30 years … well you get the idea. For a company to stand the test of time they have to be able
… Continue reading Financial Strength: A Key Element in High Quality Dividend Growth Stocks
A few months ago I transferred 18 shares of Pepsi from my traditional DRIP held with Computershare to my Questrade margin account and then into my RRSP account with Questrade. What I thought was a fairly standard transfer almost turned out to be an expensive lesson. When I transferred the shares into Questrade, I was charged $200 by Questrade. I made a bit of a stink about it and Questrade eventually returned the $200. Ultimately it made me realize that I needed another broker so that I could complete these types of transfers without fees in the future.
Related article: What Is A Dividend Reinvestment Plan (DRIP/DRP)?
My original intention was to consolidate the DRIP Pepsi shares with the shares already in my RRSP. Computershare (Pepsi’s transfer agent) will not charge you to transfer shares out of a DRIP, unlike a discount broker which will usually charge you a fee. Because I wasn’t actually selling any shares just transferring I didn’t think there would be any fees. A few years ago when I was more active with my DRIP investments I did these transfers numerous times without fees. Apparently,
… Continue reading Why I Opened A TD Direct Investing Account
As a way of tracking my progress towards financial freedom I total up the dividends I receive each month. The end goal is to have my dividends cover my expenses. This is a long term goal, so I have a lot of years to go, but I find it encouraging to see my dividend income steadily rise over time. This reminds me that I’m on the right track and to stick with it. Here are the results for March and April.
My dividend income for March 2014:
March Canadian Dividend Income
Well it is official, I’m married! For those of you that have planned a wedding before you’ll understand why I haven’t posted very much in the past few months… I’ve been busy. With the honeymoon over I’m hoping to get back into a more regular posting regime.
Creating Wealth with Dividend Growth by Lowell Miller, READ IT!
Our wedding was a great success and I couldn’t be happier, but we were both ready to relax by the time we landed in Hawaii for our honeymoon. We decided on the Big Island because we wanted to go night diving with Manta Rays (Great dive, I highly recommend it). Beyond the dive we had no other concrete plans for our 10 days in paradise. We ended up doing more activities than I initially expected, but a large part of the trip was relaxing on the beach or by the pool. During this time we actually had time to read again, what a novelty! Being the investing nerd that I am, I read Lowell Miller’s, The Single Best Investment: Creating Wealth with Dividend Growth (2nd edition).
For those of you that haven’t read this book, I highly recommend it. I
… Continue reading I’m Married!
Credit card arbitrage is when you use a low promotional balance transfer or deposit rate from a credit card and use the money to earn income at a higher rate. This sounds good in theory, but in my opinion for most people the limited returns don’t compensate enough for the added risk and extra time and effort. In today’s low interest rate environment it is difficult to find the higher rates needed to make it worth your time. Let’s take a look at a live example.
Right now (April 12, 2104) in Canada Rate Supermarket is offering a $100 promo when you sign up for either a MBNA cash back card, or a MBNA platinum card that offers a 0% balance transfer for 12 months.
Initially the 0% offer sounds great, but there are a few caveats.
While there is no annual fee, MBNA will charge you a 1% balance transfer fee (min charge $7.50) when you make the request, so the 0% offer is really 1%.
The second thing to consider is that you have to make the minimum payments each month otherwise they’ll up the interest rate to around 20%. The minimum payment is
… Continue reading Credit Card Arbitrage
As a way of tracking my progress towards financial freedom I total up the dividends I received each month. The end goal is to have my dividends cover my expenses. This is a long term goal, so I have a lot of years to go, but I find it encouraging to see my dividend income steadily rise over time. This reminds me that I’m on the right track and to stick with it. Here are the results for the month.
My dividend income for February 2014:
Canadian Dividend Income