Thursday, 26 December 2013

Recent Buys and Sells


I have several transactions to report on.

1. Purchased more GreenStar Agriculture

December 19: I bought 1,500 more shares of GRE @ $0.8666/share including commission (6.92% dividend yield). It is unlikely that I will add to this position as it is quite risky and accounts for 2.2% of my portfolio.

+$90.00 to my forward 12-month dividends

2. Sold some SNC-Lavalin

December 23: I sold 100 of my 350 shares of SNC @ $47.68 ($47.58 after commission), for a profit of about 33% ($1,200 CAD including dividends) over 15 months. Shares are held in a TFSA so there is no tax to be paid.

Some of the reasons I reduced my position are:
a. SNC seems to be on the track to recovery, but uncertainty remains;
b. It looks like it will take a while before EPS start to increase at a reasonable pace;
c. Because the lack in growth of EPS, the dividend is unlikely to increase much, which I deem unacceptable for a stock that yields less than 2%; and
d. SNC accounted for over 10% of my portfolio. It now accounts for 5.75%.

-$92.00 to my forward 12-month dividends

3. Sold Vodafone

December 24: I sold my 300 shares of VOD @ $38.81 ($38.78 after commission), for a profit of 51.6% ($4,185 including dividends) over an average period of 17 months. Shares are held in TFSA so there is no tax to be paid.

Some of the reasons I sold VOD are:
a. I’m uncertain as to the direction the new company is heading;
            b. I’d have to pay a dividend withholding tax on my new VZ shares; and
c. VOD appears to be fully valued and I replaced it with a stock that I believe to be undervalued (Ensco).
             
-$499.20 to my forward 12-month dividends

4. Bought Ensco

December 24: I bought 200 shares of ESV @ $56.32/share including commission. ESV is a global provider of offshore drilling services to the petroleum industry.

The reasons I bought Ensco are:
            a. Graham price = $69.98;
b. Cyclically Adjusted Price to Earnings Ratio (CAPE) = 13.8;
            c. EPS are forecasted to grow at 20% per year over the next two years;
d. P/E = 10;
e. 54% payout ratio;
f. 5.33% dividend yield;
g. It is a British company, so no dividend withholding tax in my TFSA; and
h. I wanted to increase my exposure to the energy sector.
           
Before purchasing ESV, I had a hard look at OXY and CVX but decided on ESV due to its compelling valuation. It should be noted that only recently has ESV started to increase its dividend.

+$600.00 to my forward 12-month dividends.

Conclusion

With the above transactions, my forward 12-month dividends stand at $5,408.20.

I am now sitting on $28,000 in cash and will be looking to make some wise buys. Cannot wait for Mister Market to come on down to The Price Is Right.

Merry Christmas Everyone!

Friday, 20 December 2013

A Look at Occidental Petroleum Corp


Below is my analysis of OXY (Occidental Petroleum Corp), which is an international oil and gas exploration and production company, and has a subsidiary, OxyChem, a major North American chemical manufacturer.

Average Dividend Yield Analysis*

OXY:US
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2003
$21.49
$13.59
$0.125
$0.13
$0.13
$0.13
$0.52
3.79%
2.40%
2004
$30.38
$20.98
$0.13
$0.1375
$0.1375
$0.1375
$0.54
2.59%
1.79%
2005
$44.90
$27.09
$0.1375
$0.155
$0.155
$0.155
$0.60
2.22%
1.34%
2006
$55.45
$40.95
$0.18
$0.18
$0.18
$0.22
$0.76
1.86%
1.37%
2007
$79.25
$42.06
$0.22
$0.22
$0.22
$0.25
$0.91
2.16%
1.15%
2008
$100.04
$39.93
$0.25
$0.25
$0.32
$0.32
$1.14
2.85%
1.14%
2009
$85.20
$47.50
$0.32
$0.32
$0.33
$0.33
$1.30
2.74%
1.53%
2010
$99.57
$72.13
$0.33
$0.33
$0.38
$0.38
$1.42
1.97%
1.43%
2011
$117.89
$66.36
$0.38
$0.46
$0.46
$0.46
$1.76
2.65%
1.49%
2012
$106.68
$72.43
$0.46
$0.54
$0.54
$0.54
$2.08
2.87%
1.95%
2013


$0.54
$0.64
$0.64
$0.64
$2.46


2014


$0.64
$0.64
$0.64
$0.64
$2.56



10y ave
2.57%
1.56%

5y ave
2.62%
1.51%







3y ave
2.50%
1.62%







5y
$97.83
$169.89







3y
$102.50
$157.74






Super Cheap
$67.55



The current yield on OXY shares of 2.75% ($2.56 / $93.09) is higher than the 3 and 5 year average dividend yields of 2.50% and 2.62%, respectively.

Buying the stock at its low in 2003 would have earned you an initial yield of 3.79%. Using the current annual dividend, that corresponds to a stock price of $67.55 today (see “super cheap” price in the table above).

Graham Price

OXY’s 2010, 2011 and 2012 EPS were $5.61, $8.16 and $5.71. 3Y Ave EPS = $6.49.
OXY’s BV is $53.08.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $88.06

Cyclically Adjusted Price to Earnings Ratio

OXY’s 10Y Ave EPS = $5.44
CAPE = Stock Price / 10Y Ave EPS = $93.09 / $5.44 = 17.5
A CAPE below 20 is good.

Conclusion

OXY increased EPS from $2.06 in 2003 to $5.71 in 2013. That’s an increase of 2.77 times over 10 years. Not stellar, but not bad either. 2013 and 2014 EPS are estimated at $7.17 and $7.60, respectively.

Although the stock price is above the Graham price, it is selling at a discount relative CAPE as well as the 3 and 5 year average dividend yields.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.

Wednesday, 18 December 2013

CVS Caremark Increases Dividend


Today, CVS Caremark increased its dividend from $0.90 to $1.10 per year, or 22%. While CVS shares currently yield 1.61%, my YOC is 2.09%.

I bought CVS shares in March 2013 as they dipped below my super cheap price of $56.34.

As of today, my dividend increases for 2014 are:

Company
2014 Div. Increase
$$$ Increase
CVS Caremark
22.2%
$20.00 USD
Enbridge
11.1%
$36.82 CAD
Telus
5.9%
$12.00 CAD
Vodafone*
8%
$34.00 USD
Total

$102.82

            * Based on GBP to USD = 1.54

My forward 12-month dividends stand at $5,309.40.