Thursday, 18 July 2013

Vacation at last...

I've got a couple weeks lined up in the States - Disney's Vero Beach Resort, Boone Hall, Smithsonian Museums and some shopping inbetween. I'm back August 2nd.

I updated my portfolio to include yesterday's transactions.

My current portfolio allocation:

Portfolio


Portfolio






Cash
8.8%

Cash
8.8%
Consumer Discretionary
1.9%

Canadian
45.9%
Consumer Staples
33.6%

American
32.8%
Energy
8.6%

European
12.5%
Financials
12.6%


100%
Health Care
7.1%



Industrials
15.0%



Information Tech
2.5%



Materials
---



Real Estate
---



Telecommunications
10.0%



Utilities
---




100%



Wednesday, 17 July 2013

New Purchases - BP and Reckitt Benckiser


Today I went a little crazy.  All transactions below were done in my Tax Free Savings Account (TFSA).

1. I decided to sell my 400 shares of Leon’s Furniture because Canadian consumers are maxed out on debt and I cannot see LNF growing substantially over the next decade. When bloated real-estate values come down, I think furniture sales will follow suit. Plus, it did not increase it’s dividend in January 2013.

Capital Loss = $314.03 over 1.5 years
            Dividends Received = $254.85
            Decrease in Annual Dividends = $160

2. I decided to sell my 25 shares of Caterpillar because I was paying a 15% dividend withholding tax. If CAT dips below $83 again, I will buy shares in my RSP, where I have added new funds (there is no withholding tax in an RSP).

            Capital Gain = $79.35 over 3 months
            Dividends Received = $11.05
            Decrease in Annual Dividends = $51

3. I decided to sell 90 shares of TEVA because they just lost a very large patent case which might cost them a lot of money. The stock just ain’t going anywhere and there is a 15-20% dividend withholding tax.

            Capital Gain = $21.55 over 2 years!
            Dividends Received » $160
Decrease in Annual Dividends = $90

4.  I bought 100 shares of BP. There is no dividend withholding tax on UK stocks held in a TFSA.

            Total Cost = $4274.95 ($42.75 per share)
            Increase in Annual Dividends = $216

5. I bought 200 shares of Reckitt Benckiser (RBGLY). Again, there is no withholding tax on UK stocks held in a TFSA. I don’t think shares are necessarily cheap, but I do like the potential growth of the company.

            Total Cost = $2841.95 ($14.21 per share)
            Increase in Annual Dividends = $81.40 (assuming USD to GPB = 1.52)

Before these transactions, my forward 12-month dividends were $5,081.83. They now stand at $5,078.23.

Saturday, 13 July 2013

A Look at Walgreens


I first bought shares of WAG in 2010 for $29.00 (2.41% yield) and added more in June 2012 for $30.21 (3.64% yield). I hold 300 shares at an average cost of $29.40.

My analysis below included this weeks dividend increase of 14.5%.

Average Dividend Yield Analysis*

WAG:US
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2000
$45.75
$22.06
$0.03375
$0.03375
$0.03375
$0.035
$0.1363
0.62%
0.30%
2001
$45.29
$28.70
$0.035
$0.035
$0.035
$0.03625
$0.1413
0.49%
0.31%
2002
$40.70
$27.70
$0.03625
$0.03625
$0.03625
$0.0375
$0.1463
0.53%
0.36%
2003
$37.42
$26.90
$0.0375
$0.0375
$0.04313
$0.04313
$0.1613
0.60%
0.43%
2004
$39.51
$32.00
$0.04313
$0.04313
$0.0525
$0.0525
$0.1913
0.60%
0.48%
2005
$49.01
$39.66
$0.0525
$0.0525
$0.065
$0.065
$0.235
0.59%
0.48%
2006
$51.60
$39.55
$0.065
$0.065
$0.0775
$0.0775
$0.285
0.72%
0.55%
2007
$49.10
$35.80
$0.0775
$0.0775
$0.095
$0.095
$0.345
0.96%
0.70%
2008
$39.00
$21.28
$0.095
$0.095
$0.1125
$0.1125
$0.415
1.95%
1.06%
2009
$40.69
$21.39
$0.1125
$0.1125
$0.1375
$0.1375
$0.50
2.34%
1.23%
2010
$40.20
$26.26
$0.1375
$0.1375
$0.175
$0.175
$0.625
2.38%
1.55%
2011
$47.11
$30.34
$0.175
$0.175
$0.225
$0.225
$0.80
2.64%
1.70%
2012
$37.75
$28.53
$0.225
$0.225
$0.275
$0.275
$1.00
3.51%
2.65%
2013


$0.275
$0.275
$0.315
$0.315
$1.18


2014


$0.315
$0.315
$0.315
$0.315
$1.26


Stock prices are per calendar year.
13y ave
1.38%
0.91%
Dividends are recorded in the quarter they were paid.
5y ave
2.56%
1.64%







3y ave
2.84%
1.97%







5y
$49.18
$76.88







3y
$44.36
$64.05






Super Cheap
$35.95


The table shows the 3 year average dividend yield to be 2.84% ((2.38% + 2.64% + 3.51%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.26, one would have to pay $44.36 for a 2.84% dividend yield.

Buying the stock at its low in 2012 would have earned you an initial yield of 3.86% because the dividend increase to $1.10 came before the stock hit a low of $28.53. Using the current annual dividend, that corresponds to a stock price of $32.68. The table above shows slightly different numbers, as it does not consider if the stocks low price occurred before or after the dividend increase.

Graham Price

WAG’s 2010, 2011 and 2012 EPS were $2.12, $2.94 and $2.42. 3Y Ave EPS = $2.49.
WAG’s BV is $20.08.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $33.56

Cyclically Adjusted Price to Earnings Ratio

WAG’s 10Y Ave EPS = $1.94
CAPE = Stock Price / 10Y Ave EPS = $191.30 / $8.53 = 25.1
A CAPE below 20 is good.

Conclusion

ADY, Graham Price and CAPE indicate that WAG’s current price of $48.76 is high.

The recovery in stock price from 2012 lows would indicate that investors are warming up to the Walgreens + Alliance Boots merger/acquisition/relationship (not sure what to call it at this point). The reconciliation between Walgreens and Express Scripts is also an important factor.

2013 and 2014 EPS are estimated at $3.16 and $3.50, respectively.