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Model Portfolio - Consumer Staples Sector

I allocated 5% of the income generation of the overall portfolio to Consumer Staples. This ends up looking like a fairly narrow sector but I'm not sure if that is because I just don't really think about the consumer staple sector all that much or if it is because in Canada it really is that narrow. So since we are looking for 5% of our $3500 yearly income to come fron the Consumer Staples sector we need $175 in income.

I have decided to use 2 companies in this sector, both with the same weight and both grocery stores. What is more of a consumer stapel than groceries? The first company I chose is Loblaws and the second company I chose is Sobeys. Loblaws has been getting beat up recently as it has had some problems preparing itself for the move that Walmart is going to make into the grocery business. Sobeys has done better recently but both of these companies are potentially in for a tough fight with Walmart.

Currently Loblaws pays $0.84 a year in dividends and Sobey's pays $0.56 a year. So in order for each company to pay $87.50 a year (half of the $175 allocated to this sector) the following number of shares are required (rounded to the nearest share):

Loblaws: 105 (105 * 0.84 = $88.20)
Sobey's: 157 (157 * 0.56 = $87.92)

In my next post on the Model Portfolio I will discuss the Industrials sector.

Disclaimer: This model portfolio is intended for illustrative purposes only and should not be used as a guide for building your own portfolio. Before making any investment decisions you should do your own homework and consult with the appropriate financial professionals. I am not a financial professional.
category: Model Portfolio posted on Friday October 27, 2006 at 17:59:18 by: 0xCC

Evaluating Our Cell Phone Plan

We currently use Bell Mobility for our cell phones. Recently Bell decided that they needed to generate a little more revenue so starting October 1 they
raised their system access fee (SAF). The fee went from $6.95 to $8.95. That is a $2 increase on $6.95 or a 28.77% increase. Our monthly cell phone bill is normally in the $58 range. Adding $2 to each account (m and I both have a cell phone so each pay the SAF for a total increase of $4/month) means a 6.89% increase to our monthly bill.

Even before I became aware of the increase to the SAF I was evaluating our cell phone usage and how much we were paying for the convenience of our cell phones. Convenience is really what it is for us, we originally got the cell phones because m was working in downtown Toronto and was taking the Go train every day. The Go train is a commuter train that doesn't have an entirely reliable schedule. So in order to make sure we could communicate with each other in case the train either doesn't leave downtown on time or gets held up on the way to the station that I pick her up at we got the phones (of course we weren't forward-thinking enough to get the phones before we had some pretty stong motivation to make sure we could talk to each other on the road, there was one particular evening where for some reason m got on the bus instead of the train and then she got off at the wrong stop and ended up walking about 5k while I was driving around trying to find her. Within two days we both had cell phones). Now m works less than a 5 minute drive from where I work and we basically us the phones about 2 minutes a day to see when the other person is ready to leave work. Since m is a teacher we don't actually use the phones that much over the summer which is what actually prompted me to take a closer look at our overall cell phone usage.

I rounded up all of our cell phone bills from September 2004 to August 2006 and took a look at the number of minutes that we used and the amount of each bill. The highest number of minutes we used was about 132 and the lowest was 2. The average was around 65 minutes. The highest cost of our bill was $61.63 and the lowest was $56.81 with an average of $58.56. So on average we paid 90 cents per minute of cell phone use with a high of $29.33 per minute and a low of 51 cents/minute. So armed with this knowledge (and with the fact that we are not very heavy cell phone users) I took a look at the various pay as you go plans available. Most of these plans offer rates in the 10-40 cent a minute range and don't have any system access fees.

I looked at three main carriers: Telus, Bell and Virgin Mobile. Here is how the offerings stack up:

Telus: 25, 33 or 40 cents a minute if you purchase 50, 25 and 10 dollars of time respectively. The 25 and 33 cent plans (50 or 25 dollars) have 60 day expiry periods and the 40 cent plan (10 dollars) has a 30 day expiry. There is also a 75 cent a month 911 emergency access charge. Finally, if you start with the 50 or 25 dollar plans you can keep the 25 or 33 cent rates by topping up your account before it reaches $0. Details here.

Bell: Each call is 30 cents a minute for the first 2 minutes and 5 cents per minute for every minute after that. There is also a $1/month 911 emergency access fee and I can't seem to find anything obvious about an expiry time for the minutes but knowing Bell it is probably 60 days. As I mentioned most of our calls are 1-2 minutes and are just quick checks to see if we are on track to be finished work at the same time so this probably isn't a good plan for us. Details here

Virgin Mobile: There are basically two pay as you go plans with Virgin Mobile, a 10 cent a minute plan for 40 cents a day and a 25 cent for the first five minutes a day and 15 cents a minute after that plan. There are no other fees (except taxes obviously) and minutes expire after 60 days although this isn't easy to find on the website (I can't find it anywhere but I haven't looked too hard). Details here.

We haven't made the switch yet but I think in the next couple of weeks we will be moving to a Virgin Mobile pay as you go plan. This should reduce our current cell phone bill of around $60/month (this is after the recent SAF increase Bell has decided to throw at its customers) to around $15-$20 a month. I will probably end up moving that $40 in 'savings' to an increase in our bi-weekly mortgage payments.

In closing I would just like to say thank you to Bell Mobility for giving me the kick in the ass I needed to take a serious closer look at our cell phone usage by increasing their system access fee. If they didn't increase that fee I probably wouldn't have bothered to take a close as close a look at our cell phone usage and really figure out that a pay as you go plan was probably our best option.

Oh, one last thing. I am a little bit late on this posting (I should have posted on Sunday) so look for the next model portfolio posting on Friday and then another posting on Sunday or early next week.
category: Personal Finance posted on Wednesday October 25, 2006 at 19:39:32 by: 0xCC

Model Portfolio - Energy Sector

I allocated 10% of the income generation of the overall portfolio to Energy, the same as the REIT sector and the Pipelines and Utilities sector. Just like the other two sectors this means that of our $3500 yearly income $350 should come from Energy. In the last few years Energy has had a very nice run on the TSX, it now makes up between 20% and 30% of the of the TSX on a market weight basis. There are a number of energy companies to pick from on the TSX, everything from a large company like Petro Canada that does everything from taking the oil out of the ground to refining oil to selling gas at retail gas stations (a company like this is called an 'integrated' company because it does everything) to a small company with not much more than a piece of land and a dream of finding oil.

I have decided to use 3 companies in this sector, each with different weightings. The first company I chose is Encana (ECA), a big natural gas company whose stock has been having a rough ride lately but it should do well as natural gas prices come back. The next company is Bonavista Energy Trust (BNP.UN) and the third company I chose is Canadian Oil Sands Trust (COS.UN). I chose to give a 35% weighting to Encana, a 40% weighting to Bonavista and a 25% weighting to Canadian Oil Sands. This means that Bonavista will have to pay $140/year, Encana will have to pay around $122.50/year and Canadian Oil Sands will have to pay around $87.50/year.

Currently Bonavista pays $3.96/year per unit. Encana pays $0.40/year per share and Canadian Oil Sands pays $1.20/year per unit. So in order to meet the income requirements I have set up for each of these companies in the model portfolio the following number of shares are required (rounded up to the nearest share):

Bonavista: 36 (36 * $3.96 = $142.56)
Encana: 307 (307 * $0.40 = $122.80)
Canadian Oil Sands: 73 ( 73 * $1.20 = $87.6)

In my next post on the Model Portfolio I will discuss the Consumer Staples sector.

Disclaimer: This model portfolio is intended for illustrative purposes only and should not be used as a guide for building your own portfolio. Before making any investment decisions you should do your own homework and consult with the appropriate financial professionals. I am not a financial professional.
category: Model Portfolio posted on Sunday October 15, 2006 at 08:00:00 by: 0xCC

Model Portfolio - Pipelines and Utilities Sector

I allocated 10% of the income generation of the overall portfolio to Pipelines and Utilities, the same as the REIT sector. This means that of our $3500 yearly income $350 should come from Pipelines and Utilities. On the TSX there are a few pipeline companies. The more recognizable ones are Enbridge (which is actually a combination of a pipeline and utility company), Trans Canada (which is also a pipeline and utility combination). I have decided to include both of these in the model portfolio. I also chose to add a third company to the model portfolio in this sector, Emera which is mostly a power company that provides electricity to parts of Nova Scotia and Maine. The other small part of their business is fuel distribution and energy asset management (I think this is like Direct Energy in Ontario, they install furnaces and water heaters and do maintenance on them).

So since I am looking for $350/year out of this sector each of these three companies will have to pay $166.55/year. Enbridge (ENB on the TSX) currently pays a dividend of $1.15 a year, Trans Canada (TRP on the TSX) pays $1.28 a year and Emera (EMA on the TSX) pays $0.89/year. So the shares required for each stock to generate $116.55 a year are as follows (rounded to the highest whole share):

Enbridge: 102 (102*1.15 = $117.30)
Trans Canada: 92 (92*1.28 = $117.76
Emera: 131 (131*0.89 = $116.59)

In my next post on the Model Portfolio I will discuss the Energy sector.

Disclaimer: This model portfolio is intended for illustrative purposes only and should not be used as a guide for building your own portfolio. Before making any investment decisions you should do your own homework and consult with the appropriate financial professionals. I am not a financial professional.
category: Model Portfolio posted on Sunday October 08, 2006 at 08:52:06 by: 0xCC