Wednesday, 28 August 2013

BNS Increases Dividend


On August 27, Bank of Nova Scotia increased its dividend for the second time in 2013, from $0.60 to $0.62 per year, or 3.3%. The first increase being from $0.57 to $0.60, for a total 2013 dividend increase of 8.7%.

I have updated my portfolio page to reflect this increase.

As of today, my dividend increases for 2013 are:

Company
2013 Div. Increase
$$$ Increase
BNS
3.3%
$10.00
CSX
7%
$6.00
Empire Co
8.3%
$13.20
Enbridge
11.5%
$34.19
Intel
---
---
JP Morgan
26.7%
$64.00
Norfolk Southern
4%
$4.00
North West Co
7.7%
$32.00
Reckitt Benckiser*
7%
$5.70
Saputo
9.5%
$20.40
SNC Lavalin
4.5%
$14.00
Target
19%
$14.00
Teva
15%
$59.00
TransForce
---
---
Vodafone*
7%
$19.26
Walgreen Co
14.5%
$48.00
Total

$343.75
            * Based on GBP to USD = 1.52

At the end of 2012, my forward 12-month dividends were $3,598.76. With new purchases and dividend increases, they now stand at $5,441.82.

Wednesday, 21 August 2013

New Purchase - Target

I originally purchased 50 shares of TGT back in December 2012. Today I added another 50 shares as my analysis, posted August 17, 2013, shows the price is attractive relative to the average dividend yield.

First purchase: 50 @ $60.65 (+ $9.95 commission); initial dividend yield 2.37% (now yielding 2.84% with the 2013 dividend increase)

Today's purchase: 50 @ $66.00 (+ $9.95 commission); initial dividend yield 2.60%

My average cost per share, including commission, is $63.52 $63.42.

50 shares of TGT will add $86.00 to my forward 12-month dividends, which now sits at $5,431.82.

Monday, 19 August 2013

Options Trade - Intel


I sold a call on my 200 shares of Intel today, because one, they did not increase the dividend, and two, I'm not all that attached to the information technology sector:

2 INTC January '14 $21 call @ $2.18 (+ $12.45 commission)

Scenario 1

The option expires worthless, and I get to keep $436 in premiums ($423.55 net of commission). This would reduce my entry price on Intel from $20.77 to $18.65.

Scenario 2

My shares get called away, and I receive $4,200 minus a commission of $53.

Profit = $4,200 - $4155 (my cost) - $53 + $423.55 = $415.55

$415.55 / $4155 = 10% return (+ roughly 4.3% in dividends) over a span of 14 months

Scenario 3

The shares get called before the call expires.

Scenario 4

I buy to close the call.

Saturday, 17 August 2013

A Look at Target


On the threat of increasing interest rates, REITs are severely being punished – almost pulverized; psychology at its best. Yesterday, I was looking at DLR, HCP, O and OHI, wondering when the bleeding was going to stop. REITs are not my priority, but current valuations cannot be ignored, especially in a period when most stocks are pricy.

Should the market continue its descent, I would also like to add to other existing positions, such as BP, Reckitt Benckiser, Rogers, Target and Telus.

Below is my analysis of TGT.

Average Dividend Yield Analysis*

TGT:US
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2001
$41.74
$26.00
$0.06
$0.06
$0.06
$0.06
$0.24
0.92%
0.57%
2002
$46.15
$24.90
$0.06
$0.06
$0.06
$0.06
$0.24
0.96%
0.52%
2003
$41.80
$25.60
$0.06
$0.06
$0.07
$0.07
$0.26
1.02%
0.62%
2004
$54.14
$36.63
$0.07
$0.07
$0.08
$0.08
$0.30
0.82%
0.55%
2005
$60.00
$45.55
$0.08
$0.08
$0.10
$0.10
$0.36
0.79%
0.60%
2006
$60.34
$44.70
$0.10
$0.10
$0.12
$0.12
$0.44
0.98%
0.73%
2007
$70.75
$48.85
$0.12
$0.12
$0.14
$0.14
$0.52
1.06%
0.73%
2008
$59.55
$25.60
$0.14
$0.14
$0.16
$0.16
$0.60
2.34%
1.01%
2009
$51.77
$25.00
$0.16
$0.16
$0.17
$0.17
$0.66
2.64%
1.27%
2010
$60.65
$48.23
$0.17
$0.17
$0.25
$0.25
$0.84
1.74%
1.38%
2011
$60.97
$45.28
$0.25
$0.25
$0.30
$0.30
$1.10
2.43%
1.80%
2012
$65.80
$47.25
$0.30
$0.30
$0.36
$0.36
$1.32
2.79%
2.01%
2013


$0.36
$0.36
$0.43
$0.43
$1.58


2014


$0.43
$0.43
$0.43
$0.43
$1.72


Stock prices are per calendar year.
12y ave
1.54%
0.98%
Dividends are recorded in the quarter they were paid.
5y ave
2.39%
1.50%







3y ave
2.32%
1.73%







5y
$71.98
$115.01







3y
$74.09
$99.32






Super Cheap
$61.57


The current yield on TGT shares of 2.51% ($1.72 / $68.58) is higher than the 3 and 5 year average dividend yields of 2.32% and 2.39%, respectively.

Buying the stock at its low in 2012 would have earned you an initial yield of 2.79%. Using the current annual dividend, that corresponds to a stock price of $61.57 today (see “super cheap” price in the table above).

Graham Price

TGT’s 2010, 2011 and 2012 EPS were $4.00, $4.28 and $4.28. 3Y Ave EPS = $4.19.
TGT’s BV is $25.76.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $49.26

Cyclically Adjusted Price to Earnings Ratio

TGT’s 10Y Ave EPS = $3.21
CAPE = Stock Price / 10Y Ave EPS = $68.58 / $3.21 = 21.4
A CAPE below 20 is good.

Conclusion

TGT increased EPS from $1.51 in 2002 to $4.28 in 2013. That’s an increase of 2.8 times over 11 years. Not stellar, but not bad either.

Although the stock price is above the Graham price, and above a CAPE of 20, it’s selling at a discount relative to the 3 and 5 year average yields.


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