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August 17, 2010, 5:00 am

Use The Loonie’s Strength To Invest In the Eagle Market

by: The Financial Blogger    Category: Investing Ideas,Investment, Market and Risk,Trading


I actually like what is going on in the markets right now as I believe there is a huge opportunity for us to make money over the long term. While many investors thing the stock market is sick, I’d say it is just another rough patch to ignore.

The good side of things is that our Canadian dollar is still pretty strong (fluctuating between $0.95 and $1.00 US) and the US stock market hasn’t recovered as it should have (keep reading to know why).

This should give you 2 great reasons to think about investing in the US stock market:

Our dollar is strong

The fact that our dollar is strong compared to US money is really good news. We presently benefit from the good reputation of our economy (thanks to our Canadian Banks 😉 ). This brings more foreign investors to invest in Canada (either in our stock market or via Canadian bonds, government and corporate). We also host several major players in the oil and gold industries. Since China and India are still very hungry for these resources, our Canadian dollar has remained at a higher level than usual.

However, I think that once the concerns about the US economy are resolved, our dollar will start going down again. The US has a more diversified economy and was built with strong companies with a lot a liquidity and positive cash flows. Sooner or later, this will have an impact on their economy and it will recover from their housing-bubble-credit-swap mess.

In the meantime, it gives you a great opportunity to convert strong Canadian dollars into weak US dollars and buy US stocks. And this leads me to my second point:

US Stocks are being ignored

Since the credit crunch in 2008, there is a cloud of fear over the head of the US stock market. People seem to think that all companies have the H1N1 virus and we best kept our distance from them.

After further analysis, I have realized there are several interesting plays to make on the stock market. If you just take into consideration their PE ratios, you will notice that some US stocks are just ignored by most investors:

CompanyTickerPrice (Aug 13th 2010PE RatioDividend Yield
Colgate PalmoliveCL$77.0218.382.75%
DiageoDEO$69.1518.162.56%
Hewlett PackardHPQ$40.1411.410.80%
Johnson & JohnsonJNJ$58.5212.093.69%
MedtronicMDT$35.9912.892.50%
M&T BankMTB$85.1918.343.29%
Procter & GamblePG$59.99173.21%

As you can see, you can probably find great investing opportunities with some companies providing serious dividend payouts as well. If you are looking for a long term investment such as inside an RRSP, I think that some US investments couldn’t hurt ;-).

If you are not completely decided as to which stocks to buy, you can also consider US index ETFs or mutual funds (you can look at this article for more small portfolio investment ideas: investing a $1,000 or less). But take one that is not hedged against the currency to make sure to benefit from the future Canadian dollar drop (it may happen faster than we think if you agree with the idea that we are about to burst the Canadian housing bubble soon…).

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July 20, 2010, 5:00 am

Everything you need to know about Income Trusts

by: The Financial Blogger    Category: Canadian Dividend Stocks,Investment, Market and Risk,Trading

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For years, any top dividend list has had many income trusts at the very top. If you look at the most recent one that was published, the top 5 stocks were in fact trust units. But the Canadian government announced changes to this structure that will affect those companies as well as the investors involved in these funds. We have received many comments and emails about Trust Units, the upcoming changes and how it will impact the investments in those companies. So we did some research and will do our best to answer these and additional questions as well.

What are Income Trusts?

Income trusts are capital structures that are designed to pass on cash flows to their investors. This differs from traditional businesses because corporations generally do not keep much capital.  Income trusts also avoid taxation since the taxes are paid by the investors who will receive the dividends. Because of that structure, trust units generally pay high dividends. They avoid the “double taxation” that affects almost any other company. Double taxation represents the fact that a company will be taxed on its profits and then the individual receiving the dividend will also pay income tax on those gains. They were created mainly to spur growth in Canada’s energy sector as this helped give shareholders an incentive to invest in these funds. Since the Federal government saw natural resources as an important driver for Canada’s economy, getting capital investments was a key to accelerating the development. It’s safe to say that these measures have been a huge success. Not only did these funds attract capital but many other companies realized they could increase their company’s value by 15-20% simply by converting to an Income Trust.

What is happening to these trust units?

Because of the favourable tax treatment, an increasing number of Canadian corporations started converting their structures to become “Income Trusts”. This of course had a major impact on the revenues of the Canadian government as it was an efficient way to diminish taxes paid out. That attracted attention from the government. But when BCE, one of largest telecommunications companies in Canada announced its intention to convert, it became too much for the government. Finance minister John Flaherty announced changes in the treatments of trust units that would be rolled out over 4 years. These changes applied to any company that became a trust unit after 2007 but others had 4 years to adapt to the new rules. As the January 1st 2011 deadline gets closer, many of the Income Trusts are converting to more traditional structures.

How big of a problem were these Income Trusts?

In 2002, 79% of the money raised in IPOs in Canada was for Income Trusts. All of these corporations would end up paying little to no taxes to the federal government. It is easy to understand why this could not continue for very long. The federal government estimated it had lost $300 million in the previous year in taxes and the amount lost by provincial governments was similar.

Are the changes a mistake by Ottawa?

Of course many would say that they are but in the end, every Canadian would have been affected if the government had left the rules as is. With larger companies such as Air Canada & BCE converting, the government was going to receive less income and would need to add or increase other taxes to compensate. In my opinion, this was not a mistake. It’s sad for all of us Income Trust investors but still right.

Are all trusts affected by these changes?

No, real estate income trusts and mutual fund income trusts are not affected.

Do all trusts have to convert into a traditional structure?

No, they can remain as is. The main objective of these changes is to eliminate the tax benefits. Thus, income sent out to shareholders will be taxed at a 34% rate (31.5% starting in 2011) at the corporate level. Individuals will also be eligible for dividend tax credits, which is the same as with regular dividends. Many income trusts have confirmed they would remain in that structure.

Will the dividends change?

It really depends on each corporation. In general, corporations are simply reducing their payout to account for these taxes. For example, Daylight Energy Ltd (DAY-U) recently convered into a non Income Trust, its new ticker is DAY. It also reduced its payout from 0.08$ to 0.05$ per month. But is far from the majority. Of the 33 trusts that initially announced they would convert into a traditional corporation, 23 confirmed they would not diminish their payouts.

Will the prices of these securities dip?

That is very unlikely. Why? Because the rules are known and most of these securities already have the new rules priced in. In the month following the announcements, the trust index dropped by 17.8%. That is when it was dangerous to hold them. These days, you will simply see your monthly inflows take a hit.

Is there anything good for the Income Trusts?

Yes, it is far from being terrible news. One of the reasons why many income trusts converted into a corporation early is that as Income Trusts, they were very restricted when they wanted to issue shares. That made it difficult to increase their size even when good opportunities existed. As corporations, the trusts will have more flexibility.

What do I need to do as a shareholder?

Nothing. No matter if the trust unit converts or not, you can hold on to that security. The corporation is the one that needs to take action to pay the proper amount of taxes.

Conclusion

In conclusion, you should expect the dividends from these corporations to drop when the new rules take effect or earlier if the company changes to a traditional model. However, the stock price should not be affected.

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July 5, 2010, 7:14 am

TSX 60 Ex-Dividend Date, Dividend Yield, and YTD

by: The Financial Blogger    Category: Canadian Dividend Stocks,Investment, Market and Risk,Trading

We are July already! The month of June was quite rough on the market and on the TSX 60. I guess it could be a good timing for dividend stock shopping!

We are currently finishing our Market review for the month of June along with our dividend stock review. They will be both available in our next newsletter (to be sent next week). Make sure to register (in the right column) if you want to receive update on the market and dividend stock review.

Here are the Ex-Dividend date, dividend yield and ytd of the TSX as of this morning :

TickerNamePriceDividend YieldReturn MTD
YLO-UYellow Pages Income Fund5.9413.47-3.33
ERF-UEnerplus Resources Fund22.949.42-0.52
PWT-UPenn West Energy Trust20.518.780.38
COS-UCanadian Oil Sands Trust26.87.46-4.11
AET-UARC Energy Trust19.996-4.34
TATransAlta Corp19.745.88-5.14
BCEBCE Inc315.61-0.94
CMCanadian Imperial Bank of Commerce/Canada66.055.27-7.92
SLFSun Life Financial Inc28.175.11-8.54
TTELUS Corp40.474.943.64
BMOBank of Montreal57.874.84-8.36
HSEHusky Energy Inc25.544.7-2.22
POWPower Corp of Canada/Canada25.514.55-5.58
NANational Bank of Canada554.51-3.79
SJR/BShaw Communications Inc19.574.51.67
TRPTransCanada Corp35.934.453.43
FTSFortis Inc/Canada27.164.12-1.67
BNSBank of Nova Scotia48.354.05-3.9
RYRoyal Bank of Canada50.913.93-7.57
RCI/BRogers Communications Inc34.743.68-5.57
TDToronto-Dominion Bank/The68.513.56-3.25
ENBEnbridge Inc49.473.443.19
MFCManulife Financial Corp15.413.37-13.57
TRIThomson Reuters Corp38.343.132.93
CVECenovus Energy Inc27.462.91-4.97
SCShoppers Drug Mart Corp332.73-7.51
ECAEnCana Corp32.452.56-3.7
BAM/ABrookfield Asset Management Inc23.462.34-7.09
LLoblaw Cos Ltd38.512.18-1.04
BBD/BBombardier Inc4.9923.31
WNGeorge Weston Ltd72.12-2.97
BVFBiovail Corp20.021.9930.25
CPCanadian Pacific Railway Ltd56.751.9-1.99
FMFirst Quantum Minerals Ltd54.221.89-2.92
SAPSaputo Inc30.691.894.53
CNRCanadian National Railway Co60.561.78-0.53
MRU/AMetro Inc41.91.62-1.87
SNCSNC-Lavalin Group Inc42.441.6-7.8
TLMTalisman Energy Inc16.061.56-9.78
CTC/ACanadian Tire Corp Ltd54.931.53-5.99
THITim Hortons Inc34.041.53-1.45
SUSuncor Energy Inc31.111.29-5.76
TCK/BTeck Resources Ltd31.611.27-11.84
CCOCameco Corp22.351.25-10.62
IMOImperial Oil Ltd38.731.14-4.68
MG/AMagna International Inc68.411.11-4.8
NXYNexen Inc20.820.96-9.47
ABXBarrick Gold Corp45.950.912.52
CNQCanadian Natural Resources Ltd34.940.86-4.54
YRIYamana Gold Inc10.340.6-8.93
KKinross Gold Corp17.30.59-4.42
IMNInmet Mining Corp42.720.47-14.9
POTPotash Corp of Saskatchewan Inc90.910.47-11.82
GGoldcorp Inc43.950.42-4.24
IMGIAMGOLD Corp17.660.36-1.45
AEMAgnico-Eagle Mines Ltd61.070.3-1.9
ELDEldorado Gold Corp17.940.28-0.55
AGUAgrium Inc52.370.22-8.67
GILGildan Activewear Inc29.820-5.66
RIMResearch In Motion Ltd51.110-20.44

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July 2, 2010, 10:17 am

Best Stock Picks for 2010 Contest: Can I Make Worse Stock Picks?

by: The Financial Blogger    Category: Investing Ideas,Investment, Market and Risk,Trading


Oh boy, oh boy, oh boy! This is not my year to make the right stock picks! See how things can go sideways even with good companies?

First: Goldman Sachs Lawsuit

What can you expect from a good financial stock when the company is being sued by the Federal government? Nothing but a severe plunge! While I still think that Goldman Sachs is a great company and that they will bounce back (I would buy more of them if I had liquidity right now!), I really picked the wrong time to choose it as a good investment pick in 2010 😉

Second: Research In Motion Investors Disappointment

While Investors were astonished by RIM for several years, they all seemed to turn their back on this amazing company and prefer Apple’s gadgets. I actually have an iPod and will probably buy an iPad eventually so I have nothing against Apple’s iDepartment. However, I still think that the best tool to work with is a Blackberry. The income and revenues are increasing but nothing seems to be enough for investors now that they have found their next flavour of the month!

Third: Manulife Going Down To Hell

I thought that the problems were over with Manulife and I had figured it was a good gamble for this year. Unfortunately, this is not the best pick either… investors seem to be reluctant to give Manulife credit for their operations… hopefully the wind will turn during summer time!

Fourth: Emerging Market On The Sideline

My best pick so far is also negative… man! It’s a bit depressing but I still have faith in emerging markets. They can surge at any moment and this is the kind of stock that can make me gain a few positions in our contest in no time.

So How Did It Go for the Others?

Take a look at the result so far at Q2: only 1 positive portfolio: Dividend Growth Investor at 6.39%!. You can click on each blog to view their comments about their stock pick experience so far this year:

BlogBest Stock Picks for 2010Ytd
Intelligent SpeculatorUNG
JJN
SOHU
GOOG
-19.06%
Wild InvestorBAC
VALE
CAT
SLB
-7.60%
The Financial BloggerRIM
MFC
GS
VWO
-22.65%
Four PillarsDZZ
GLL
DGZ
HIG
-20.11%
Where Does All My Money GoFUN
HAT
ADD
CAR
-14.16%
Dividend Growth InvestorO
KMP
ED
PM
6.39%
Million Dollar JourneyHE.TO
MFC.TO
CVE.TO
QLT.TO
-23.65%
My Traders JournalUUP
DVY
UCO
SSO
-11.90%
Zach StocksBX
AGO
ICE
SLV
-17.24%

Looking to trade other stocks ? Try these introduction videos about:

How to trade Crude

How to trade Futures

How to trade Stock

How to trade Forex

How to trade Gold


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April 1, 2010, 5:00 am

Best 2010 Stock Picks Contest Q1 Results

by: The Financial Blogger    Category: Investment, Market and Risk,Trading


No April’s fool post today, just our stock picks contest Q1 results… I thought of writing something weird to make you laugh but didn’t come with something better than my Primerica post from last year… I promise to be original and come up with something good for next year 😉

In the meantime, I can’t tell you how disappointed I am with my stock picks for 2010. I’m obviously not in a good position to date as many of my fellow bloggers are enjoying better returns. On a positive note, none of my stock picks are negative and I am really proud of this!

RIM is regaining investor confidence as they are showing better results of late and many industry analysts believe the best is yet to come from the Blackberry maker. I just can’t help it, I’m a sucker for this small phone. I consider it as my 3rd child now 😉

 

Manulife did a great job too and investors have started to think that investing in an insurance company is not a bad idea. The company was also wise enough to stay away from more bad news which bodes well for Q2.

Goldman Sachs is showing strong numbers but the US market is still shy. I guess we will have to wait until the second half of the year to see the stock climb.

Emerging markets are have gone sideways for a while with small fluctuations. International concerns regarding Dubai World, Greece, Portugal and Spain didn’t help more fragile economies either. Let’s hope to see some strong numbers coming out of China and India!

Here are the overall results for everybody. Since I had a few readers that were kind enough to contribute, I have decided to include their picks and returns in the second chart. If you want to learn more about other blogger’s stock picks, you just have to click on their name and you will go directly to their stock pick descriptions:

BlogBest Stock Picks for 2010Ytd
Intelligent SpeculatorUNG
JJN
SOHU
GOOG
-1.27%
Wild InvestorBAC
VALE
CAT
SLB
9.30%
The Financial BloggerRIM
MFC
GS
VWO
2.87%
Four PillarsDZZ
GLL
DGZ
HIG
-1.01%
Where Does All My Money GoFUN
HAT
ADD
CAR
5.45%
Dividend Growth InvestorO
KMP
ED
PM
9.58%
Million Dollar JourneyHE.TO
MFC.TO
CVE.TO
QLT.TO
-11.83%
My Traders JournalUUP
DVY
UCO
SSO
5.78%
Zach StocksBX
AGO
ICE
SLV
2.55%

And Congrats to Bryan who is beating everybody here with a marvelous 76%! (thx to ISCO which is up by 288%!)

NameStock PicksYield to date
BryanRHIE
ISCO
BTIM
ACTC
76.00%
ChrisTBT
C
VZ
GE
8.46%
MattEQT
ETP
VVUS
C
3.72%
1st MillionASIA
CAGC
ITC
PEGA
17.50%

Looking to trade other stocks ? Try these introduction videos about:

How to trade Crude

How to trade Futures

How to trade Stock

How to trade Forex

How to trade Gold

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

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