Month: November 2015

Dividend Raise: Plaza Retail REIT (TSE: PLZ.UN)

Uncategorized

On November 16th, 2015, Plaza Retail REIT (TSE: PLZ.UN) announced it’s 13th consecutive annual distribution increase since they began paying dividends in 2003. The annual dividend payment has been increased 4.0% from $0.25 to $0.26 per share, starting on January 2016. This increases my 12-month forward dividend income by $2.60 on the 260 shares I own of PLZ.UN.

We have more than tripled our distribution over the last 13 years; as our initial 8 cents per unit distribution has grown to 26 cents per unit. No REIT in Canada has such a track record of distribution increases and it confirms our ability to grow the business and deliver results to our unit holders.

Image

The most relevant financial highlights of the Nine Months ended September 30, 2015 to a dividend growth investor would be:

  • Funds from operations (“FFO”) were $22.5 million, up 4.9% from $21.5 million in 2014.
  • Adjusted funds from operations (“AFFO”) were $21.6 million, up 6.1% from $20.3 million in 2014.
  • FFO and AFFO per unit of $0.240 and $0.230, respectively, were up 2.1% and 3.1%, from $0.235 and $0.223 in 2014
  • FFO and AFFO payout ratios were 78.2% and 81.6%, respectively, compared to 76.4% and 80.6% in 2014

Dividend Stock Analysis: TransCanada Corp (TSE: TRP)

Stock Analysis

During TransCanada’s investor day on November 17th, 2015 – TRP announced that it will be increasing its common share dividend at an average annual growth rate of 8% to 10% through 2020; this certainly caught my attention. There’s nothing I like more than when a reputable dividend grower announces a specific dividend growth plan.

Back when I first started this blog, about 6 months ago (when I knew barely anything about investing and DGI in general), I did a short analysis on TransCanada, and I decided I’d revisit this company to see how it’s valuation and dividend compares to that time.

After the cross-border oil pipeline Keystone XL was rejected by Obama this past month (seven years after it was proposed), TransCanada announced they would spend $13 billion in small to medium sized projects which would come into service over the next three years while reviewing their options for larger projects, including the Keystone XL pipeline.

Four days after Obama had rejected the Keystone XL, TRP won a contract to build a $500-million (U.S.) natural gas pipeline in Mexico and announced a $427.9-million expansion of its Alberta gas network.

According to CIBC Investor’s Edge:

TransCanada Corporation (TransCanada) is an energy infrastructure company. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. Its natural gas pipeline network transports natural gas to local distribution companies, power generation facilities and other businesses across Canada, the United States and Mexico. Its existing liquids pipeline infrastructure connects Alberta and the United States crude oil supplies to the United States refining markets in Illinois, Oklahoma and Texas, as well as connecting the United States crude oil supplies from the Cushing, Oklahoma hub to refining markets in the United States Gulf Coast. Energy includes its power operations and the non-regulated natural gas storage business in Canada.

Valuation

TransCanada Corp. (TSE: TRP) is currently trading at $42.48, down 25.6% YTD; 22.18% of which has been lost (stock price) in the past six months. TRP has a 52-week range of $40.68 – $59.50; meaning shares are down 28.61% from their 52-week high and 4.42% above their 52-week low.

TRP has a trailing P/E of 18.01; a 20% discount to it’s 5-year average of 21.7, and a 34% discount to the S&P/TSX COMP’s P/E of 26.5. TRP has a forward P/E of 15.9, an 18% discount to it’s 5-year average of 19.4, and a 39% discount to the S&P/TSX COMP’s forward P/E of 26.0. The Trailing P/E is looking quite good in relation to it’s average, and is below a P/E of 20, which satisfies requirements for ownership. The forward P/E is lower than the trailing P/E which shows that despite falling oil prices, this Canadian pipeline company is expecting to increase earnings. In fact, annual revenue is expected to increase 10.7% for 2015 and 14.9% in 2016. This results in EPS expectations of 2.47 for 2015 and 2.65 in 2016; trailing EPS currently stands at 2.36. With these expectations, TRP shouldn’t have a problem increasing the dividend 8 to 10 percent, at least through the end of 2016.

Thomson Reuters has placed a mean 12-month price target of $57.50 on the stock. This would represent a 39.3% gain in capital appreciation. They also have a Thomson Reuters Analyst Buy Recommendation, broken down as such: 1 Strong buy, 8 Buy, 6 Hold. Their 12-month high price target is $68.00 a share, and their low is at $45.00 a share.

Dividend

TransCanada Corp. pays an annual dividend of $2.08 CAD per share, representing a 4.90% yield. However, the 5-year yield average sits at 3.78%. TRP currently yields 1.12% more than on average in the past 5 years. Unfortunately, this dividend represents a payout ratio of 86.34%. While this is a little high in my books, due to their expected earnings increase and the number of projects they have, combined with their new dividend growth plan, I believe the dividend is indeed quite safe.

Dividend Growth

The 5-year yield growth rate sits at 4.78%; while this is a tad low, at least the company has consistently increased dividends for 15 years straight. The average 10-year yield growth rate is not much higher, at 5.17%. TRP appears to be set on doubling the average growth rate of their dividend with their recent announcement, which will definitely catch investors’ eyes.

Yield-on-Cost

Yield-on-cost is the lifeblood of the dividend growth investor. Without a decent yield-on-cost due to slow dividend growth rates or measly starter dividend yields, the DG investor loses a great deal of power over other investment methodologies.

Given TransCanada’s 4.90% dividend yield and it’s current 5.17% 10-year average dividend growth rate, the 10-year YOC for TRP is 8.11% – a great yield in my eyes.

However, with their new dividend growth expectations of 8 to 10 percent, the YOC will most definitely be even higher. While their new DGR is planned for the next 4 years, it won’t completely alter the 10-year average DGR, however it will skew it upwards.

As a fun exercise, let’s find out what the YOC would be if the 10-year average DGR was either 8% or 10%.

Considering TRP currently yields 4.90%, if it’s 10-year average DGR were 8%, the 10-year YOC for TRP would be 10.58%. Now, with a 10-year DGR of 10%, the YOC would be 12.71%. 

From this we can deduce that TRP’s consistent dividend increases will bear a 10-year YOC of somewhere between 8% and 13%.

Conclusion

TransCanada Corp. (TSE: TRP) is a long-term Canadiand dividend grower with 15 years of consistent increases. Despite the ongoing drop in crude oil, this pipeline company has kept strong results and offers double it’s average dividend growth going into the future.

TRP currently yields 4.90%, which is 1.12% more than it’s 5-year average. The current 5-year average DGR is 4.78%, but the dividend will now be increasing from 8% to 10% through 2020. TRP boasts a  P/E of 18.01; a 20% discount to it’s 5-year average of 21.7, and a 34% discount to the S&P/TSX COMP’s P/E of 26.5. TRP has a forward P/E of 15.9, an 18% discount to it’s 5-year average of 19.4, and a 39% discount to the S&P/TSX COMP’s forward P/E of 26.0. Thomson Reuters has an average rating of BUY on this stock and has set a mean 12-month price target of $57.50. This would represent a 39.3% gain in capital appreciation.

 

What do you guys think of TRP? Let me know in the comments, I’d really appreciate it!

Recent Purchase: Alaris Royalty (TSE: AD)

Purchases

On November 9th, I purchased 60 shares of Alaris Royalty (TSE: AD) at $24.80, with a trading cost of $6.95 for a total investment of $1,494.95. My stake in AD has added $97.2 to my 12-month forward dividends, which now hovers around $1060, which comes to roughly $88 per month.

I figured with the way the market’s been working lately, it didn’t matter exactly what Alaris Royalty’s Q3 earnings results would be, but they’d probably negatively affect the stock price. Investors are so fickle. Considering this, I waited for earnings to come in and watched the share price plummet between 4% and 6% through the trading session. It was a ripe time to pick up some shares and so I did.

According to CIBC Investor’s Edge:

Alaris Royalty Corp. (Alaris) is a Canadian company that provides alternative financing to a range of private businesses in North America. The Company earns its revenues by providing capital to private businesses (Private Company Partner). Alaris provides long-term equity capital to companies for whom traditional private equity capital or debt is not typically available or attractive, namely, privately held companies whose owners want to retain long-term control of their businesses. The Company has around 12 Private Company Partners, such as LifeMark Health Limited Partnership, LMS Limited Partnership, End of the Roll Carpet & Vinyl, KMH Cardiology Limited Partnership, Solowave Design LP, Labstat International LP, Agility Health LLC, SCR Mining and Tunnelling L.P., Sequel Youth and Family Services LLC, S.M. Group International LP/Le Groupe S.M. International S.E.C., Kimco Holdings LLC and PF Growth Partners LLC.

At the time of purchase, Alaris Royalty had a yield of 6.50%. The company has a 5-year yield average of 5.39%. AD has increased their dividend 63.64% since going public and starting to pay a dividend in 2009, from $0.99 to $1.62. For the year of 2015, they have increased their dividend from $1.47 to $1.62, which is an increase of 10.2%.

2009 0.99
2010 0.93
2011 1.04
2012 1.17
2013 1.345
2014 1.47
2015 1.62

Alaris Royalty has a 5-year average dividend growth rate of 12.72% and no 10-year growth rate considering the stock has only been available for 5 years. AD increased their dividend three times in the last twelve months for a total increase of 13% as well as its tenth consecutive dividend increase since April 2010.

The Corporation’s annualized payout ratio is at approximately 82% today without considering any revenue from KMH. The conclusion of the KMH strategic process will only improve that number which supports the continued strength and sustainability of the monthly dividend.

Alaris Royalty currently trades at a trailing PE of 13.8, while the 5-year average PE is 23.6. This trailing PE represents a 42% discount relative to the 5-year average. It’s also a 49% discount to the S&P/TSX Index’s PE of 27.0. Thomson Reuters Stock Report has a 12-month mean price target of $34.00, which s a 36.8% upside to it’s current price.One analyst has a Strong Buy rating on shares of AD, while the other eight analysts have a Buy rating.

October 2015 Dividend Income

October 2015 Dividends

Dividends

October represents my seventh month of receiving dividends. It’s been a slow journey but I see things are beginning to take off. I purchased shares in one company, Whitecap Resources, for the month of October. I’m hoping to start picking things up a little bit in the month of November before the end of the year. I’m excited to reach a monthly average of $100 in passive income.

October was a great month of dividends for me, though that $100 in dividends appears to still be beyond my grasp.

October 2015 Dividend Income

Tax-Free Savings Account
D.UN $8.40
HR.UN $4.95
*PGF $0.00
DRG.UN $6.67
AAR.UN $3.90
BNS $16.10
T $14.70
PLZ.UN $5.42
Non-Registered Taxable Account
G $1.70
ZWU $7.02
T $14.70
CNQ $9.20
Total
$92.76

Monthly Dividend Income

Passive Income Paying Necessities

From my previous dividend income post for June, I announced that my monthly necessities add up to $290. Considering I received $92.76  in dividends this month, that means my passive income had paid off 31.99% of my necessities. Nearly a third of my necessities were paid for by dividends this past month. That’s quite stellar but there is a lot of spending on discretionary which I would like to focus on cutting back on. Perhaps budgeting will be a bigger part of my life in 2016.

Total 2015 Dividend Income

In total yearly dividend income for 2015, I’ve now totaled $408.07 in dividend income. I can now say I’ve made over $400 in passive income! I’m sure there are billions of people who’ve never even tried. I’m set to achieve my goal of $500 before the end of the year in passive income. That is – while I sit on the couch, eat some fish, or play video games – I’m still being paid. Two months left to muster another $90 or so in dividends.

Total Dividend Income 2015

 

Recent Purchase: Fortis Inc. (TSE: FTS)

Purchases

On November 2nd, I purchase 40 shares of Fortis Inc. (TSE: FTS) at $37.86, with a trading cost of $6.95 for a total investment of $$1,521.35. My stake in FTS has added $60 to my 12-month forward dividends, which now hovers around $960 CAD.

According to CIBC Investor’s Edge:

Fortis Inc. (Fortis) is a Canada-based electric and gas utility company. The Company serves more than three million customers across Canada, the United States and the Caribbean. Fortis owns non-regulated hydroelectric generation assets in Canada, Belize and Upstate New York. Its non-utility investment is comprised of hotels and commercial real estate in Canada. It operates in two segments: non-regulated generation and non-utility assets. Its Regulated Electric & Gas Utilities in the United States comprise of Tucson Electric Power Company, UNS Electric, Inc., UNS Gas, Inc. and Central Hudson Gas & Electric Corporation. Its Regulated Gas Utilities in Canada include FortisBC Energy Inc.), FortisBC Energy (Vancouver Island) Inc. and FortisBC Energy (Whistler) Inc. Its Regulated Electric Utilities in Canada include FortisAlberta, FortisBC Electric and Eastern Canadian. Its Regulated Electric Utilities in the Caribbean include Caribbean Utilities Company, Ltd. and Fortis Turks and Caicos.

At the time of purchase, Fortis had a yield of 3.96%. The company has a 5-year yield average of 3.54%. While CIBC Investor’s Edge claims Fortis has a low payout ratio of 62.04%, their web site says otherwise, putting the payout ratio at just above 90%. Fortis is Canada’s golden dividend grower – boasting over four decades of dividend growth, a length unmatched by any other company on the Toronto Stock Exchange (TSE).

Dividend-Q4-2015

Fortis has a 5-year dividend growth rate of 4.24% and a 10-year growth rate of 9.01%. If we take the 10-year dividend growth rate into consideration, the 10 year yield-on-cost would be 9.37%; definitely nothing to scoff at. Fortis has held up pretty well the past interest-rate sensitive year, dropping 3.49% YTD. Compared to Canadian Utilities (CU), who dropped 15.01% and Atco Limited Ltd (ACO.X), who dropped 20.81%, Fortis’ share price is doing very well; and it also has a larger dividend than both of these companies.

Fortis currently trades at a trailing PE of 18.3, with a forward E of 18.2. The 5-year average PE is 20.2, so shares are trading a 9% discount relative to trailing PE. Forward PE is also at a 3% discount with a 5-year average of 18.8. Thomson Reuters Stock Report has a 12-month mean price target of $43.00 on shares of FTS, which would represent a 13.3% share price increase. Seven analysts recommend Buying shares of FTS while three recommend holding.

According to their recent Q3 2015 results, “Fortis’ net earnings attributable to common equity shareholders were $151 million, or $0.54 per common share, and $145 million, or $0.52 per common share, on an adjusted basis”. Their EPS of $0.52 beat analyst estimates of $0.46 by 12.55%. Fortis’ annual revenue has a forecasted growth of 24.7% for 2015 and a 28.9% increase through 2016.

Fortis also announced dividend guidance in the quarter, targeting annual dividend per common share growth through 2020 of 6% based on a 2016 dividend of $1.50. While this is a decent bit lower than the 10-year growth rate of 9.01% listed above, I love knowing that there is a dividend growth plan in place, and one of four years is a great way to stand comfortable while holding onto these shares.

Dividend Raise: Telus (TSE: T)

Dividend Raises

My favourite Canadian stock, Telus, just recently announced a 5% increase to their dividend. The new quarterly dividend is now $0.44, up from $0.42. This new dividend is payable on January 4th, 2016 with a record date of December 11, 2015. This is a 10% increase from last year’s $0.40 quarterly dividend.

A lot of other very relevant info from CBC concerning Telus’ 3rd quarter earnigs:

Revenue was up 4.2 per cent from last year, rising to $3.15 billion from $3.03 billion in last year’s third quarter.

Both net income and adjusted net income were up about 2.8 per cent, rising to $365 million and $398 million respectively.

The adjusted income amounted to 66 cents per share, which was up 3.1 per cent from last year and better than estimates.

Analysts had estimated 64 cents per share of adjusted net income and $3.16 billion of revenue.

Despite reporting better than expected earnings per share, Telus’ share price has plummeted a few percentage points. It appears as though Telus’ growth is beginning to slow. However, as quoted in the article, they’re making “generational investments” so we’ll see where those go. Regardless, I’m very happy to hold on to my Telus’ shares and wouldn’t mind adding more if they drop more, despite it being my largest position.

As mentioned in my previous Telus Dividend Raise article, I had a lot of trouble picking between Telus and Rogers. It looks like my capital would have appreciated much more greatly if I had forked my money over to Rogers; even Bell, for that matter. However, I still believe in the long-term prospects of Telus.

YTD each company’s stock price has appreciated or depreciated like so:

Telus -0.91%

BCE 6.59%

Rogers 16.16%

Considering Rogers appears to be turning things around with their recent increase in wireless subscribers, up 15.6% from a year ago as well as free cash flow increasing 8.4% to $660 million – it may soon be a time to potentially buy shares in this company as well, which also has a good track record of increasing dividends.

WCP

Recent Purchase: Whitecap Resources (TSE: WCP)

Purchases

On October 22nd, I purchase 120 shares of Whitecap Resources (TSE: WCP) at $12.43, with a trading cost of $6.95 for a total investment of $1,498.55. My stake in WCP has added $90 to my 12-month forward dividends, which now hovers around $900 CAD.

According to CIBC Investor’s Edge:

Whitecap Resources Inc. is engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids in Western Canada. The Company’s activities are concentrated primarily in Northwest Central Alberta and Southwest Saskatchewan. In May 2014, the Company acquired certain strategic light oil assets focused primarily in Whitecap’s Pembina Cardium / West Central core area, as well as at Boundary Lake in northeast B.C.Concurrent disposition of certain Nisku natural gas production and related facilities located in the Pembina area to Keyera Corp.

On the day of this writing (November 1st), Whitecap Resources trades at $11.61 a share. The annual dividend yield is 6.46%, paid monthly. The monthly dividend payments were a great bonus to owning this stock as it’s very encouraging to see money coming in monthly from your investment decisions.

WCP’s 5-year yield average is 2.24%, so it’s flown up quite a bit as the company has increased their dividend payments every year since 2013 and with the stock price dropping 20% in the past one year, although the stock is up 1.49% YTD despite consistent concerns in the energy sector.

WCP trades at a very healthy P/E of 13.7, however the forward P/E currently stands at 38.7. The payout ratio is also quite high at 90.14%

Thomson Reuters Stock Report has a $16.00 price target on WCP stock, which would represent a 37.5% increase from the current price. There are 4 strong buy ratings and 13 buy ratings.

Annual revenue is expected to come in 3.4% lower for 2015, but rise 18.7% throughout 2016.

Archives




Finance Blogs

Disclaimer

My publishings on dividendbeginner.com references an opinion and is for information or entertainment purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. I am not responsible for any decisions you make concerning finances, taxes, or investments. You must perform your own research and always take caution when extending capital.