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TD Waterhouse Steps Up (Finally)

Finally one of the big discount brokers in Canada has made a move to bring cheaper trades to more than just active traders and higher net worth households.

TD Waterhouse is now offering $9.99 flat rate commissions to households with $100,000 in assets with TD Waterhouse. Active traders can get commissions as low as $7 per trade. These rates appear to be effective as of September 4, 2007.

This should put some pretty big pressure not only on the smaller low cost brokers like E*Trade and QuestTrade but it should put some pretty heavy pressure on the other big brokerages (BMO Investorline, RBC Direct, ScotiaMcLeod Direct and CIBC's Investor's Edge). Now Canadians are finally starting to enjoy the same cheap trades that investors in the US have been enjoying for pretty close to a decade.

Even though the cheaper commissions may be out of reach for a lot of people ($100,000 is pretty steep especially if you are contributing to a pension through work) I suspect that the way the brokerages are going to compete now is by lowering that "total asset" number. I suspect that the smaller brokerages (i.e. not the ones connected to the big five banks) will drop their limits almost right away (I know E*Trade has a $50,000 per person limit to get the $9.99 trades which is now equal with TD Waterhouse so they are probably going to have to do something in the next month or so) and I also suspect that the big brokerages will almost exactly match TD Waterhouse before the RRSP season.

All in all very positive news for the smaller investor in Canada and even if the cheap trades don't apply to you yet this is still good news because I think it signals the beginning of the end of $29 discount brokerage trades in Canada.

category: Personal Finance posted on Thursday August 30, 2007 at 09:08:22 by: 0xCC

Royal Bank Reports

Royal Bank reported earnings today. While their income increase wasn't as strong as TD's it was still a very nice 19% higher than the year ago quarter. It seems as though all of their divisions reported strong results. However, these results probably don't reflect any impact (if there is any) of the recent credit crunch.

Of course, once again there was one particular aspect of the Royal Bank's earnings release that caught my eye. They increased their dividend. They actually increased their dividend more on a percentage basis than TD did yesterday. The dividend is going from 46 cents to 50 cents, an increase of 8.69% (even though the press release says it is 9%). Just like TD this is the second dividend increase for Royal Bank in the last year. If you had held Royal Bank stock one year ago (or more precisely if you were a shareholder of record on October 26, 2006) you would have been paid a dividend of 40 cents on November 24, 2006. Now in 2007 if you are a shareholder of record on October 25 you will receive a dividend of 50 cents on November 23 (RBC makes this really easy to figure out by providing this table on their website). That is a 25% increase in one year. That most definitely beats inflation and also soundly beats the increase in salary in my day job over the last year.

Royal Bank is the single largest holding in our portfolio. Before making any investment decisions you should do your own homework and consult with your financial adviser to make sure the choices you make are appropriate for your unique situation.
category: Finance posted on Friday August 24, 2007 at 17:45:00 by: 0xCC

TD Reports

Despite all the theatrics in the market over the last few weeks companies are still trudging along and they still report their earnings. TD Bank reported their earnings today. The headlines look pretty good, income increased just over 38% over the year ago quarter and above analyst's expectations ($1.51 or $1.60 per share depending on what you want to exclude from their earnings vs. expectations of $1.36 and a year ago income of $1.21, according to Reuters).

Of course, the thing that really caught my attention is the fact that they raised their dividend. The dividend went from 53 cents to 57 cents, a 7.54% increase. The last time they increased their dividend was only two quarters ago when it increased from 48 cents to 53 cents or 10.41%. So if you had held this stock at the beginning of September in 2006 you would have been given a dividend of 48 cents on October 31, 2006. Now a year later if you are a shareholder of record on October 3, 2007 then on October 31, 2007 you will get a dividend of 57 cents. The increase in dividends over the last year (and if I were to go back one more quarter this number would be even more impressive because the dividend was 44 cents in July 2006) has been 9 cents or 18.75%. I think this is not quite in line with the average dividend increase (which I suspect is closer to 10% yearly) but it does show how being a dividend oriented investor that looks for companies that not only pay dividends but have a strong history of raising their dividends can really pay off in the long term.

We own TD bank (as of April of this year) in our portfolio. Before making any investment decisions you should do your own homework and consult with your financial adviser to make sure the choices you make are appropriate for your unique situation.
category: Finance posted on Thursday August 23, 2007 at 18:00:00 by: 0xCC

Negative On The Year

For the first time in probably 5 years or more our portfolio is worth less here in the second half of August than it was on January first (after adjusting for deposits and withdrawals). In other words we would have been better off sticking our cash in our PC Financial savings account than keeping it in the market. It's a good thing I'm not too concerned about the actual value of our portfolio.

What am I concerned about? The income or portfolio generates. The nice thing about focusing about the income our portfolio generates is that in general the dividends and distributions that companies pay out isn't impacted by the gyrations of the market. So while the market has been having its little temper tantrum in the last month or so the companies that pay out dividends and distributions have been continuing running their business and generating cash and paying out part of that cash to investors.

So far this year our portfolio has produced just over 80% of the total income that our portfolio generated last year. We are only 231 days into the year or 63% into the year. In terms of net income (income - margin interest paid) we have already exceeded last year's income (as a side note, in general we only use margin on a temporary basis to buy stocks that are trading at a bargain when we don't have cash in our accounts. Last week provided a couple opportunities that we jumped on and used margin for but basically up until the beginning of August or so we weren't using any margin).
category: Finance posted on Monday August 20, 2007 at 06:00:00 by: 0xCC

Remember That Feeling

If you are the kind of person that watches the market on a fairly regular basis then I suspect you were watching the market fairly closely this week. On Thursday in particular you were probably keeping a fairly close eye on the market. I know I was.

Before the market opened I was thinking that there would be a fairly good chance that I would be able to buy some stocks at a pretty good price. I waited until the market actually opened to get a feel for how brutal the carnage was going to be and about 10 minutes after the market opened I put in a few limit orders. By late morning one of those orders had been filled. The other orders were on the "who would be dumb enough to sell me this stock at this price" side of things but I figured if the markets weren't being rational then maybe some one would. By early afternoon it appeared as though the market wasn't going to give me any more good deals. But then things turned again.

I watched my list of 50 or so stocks go from having a couple in the list with green arrows beside them to all of them going red. And going further red, and further red. This was not an ordinary day. I don't think I have seen a single day like that since I really started investing around 2001 or so. I could feel the air getting squeezed out of my lungs. I was finding it difficult to really take in what I was seeing. Most of the stocks that I was looking at were down around 3% to as much as 7% on the day. And this was after the markets had been sliding for a couple of weeks already and a lot of these stocks had already lost 5% or more from their highs. I was conflicted as I watched the stocks continue to decline. I knew that I wasn't going to be selling any of my stocks but the value of my portfolio was shrinking before my eyes. On the other hand, there were some potentially great deals out there. Most of the Canadian bank's yields were in the 3.5% range or higher. Some high-quality REITs had yields over 6.5%. In the end I only ended up buying one stock yesterday, Russel Metals. I missed buying some Bank of Nova Scotia by about 10 cents and I missed buying some Royal Bank by about 50 cents.

I think the important thing to take away from a day like Thursday, if you were like me and you were watching the carnage fairly closely, is that feeling. The feeling of "I can't believe the stocks are trading so low but I am really scared to do any buying right now because I have no idea how much lower they are going to go." Only time will tell if Thursday was the bottom but I really hope it was and if it was I will have wished that I bought more than I did.

There are a couple of other lessons in a day like yesterday. The first is that it is good to be up to date on your homework. You should know which companies you are interested in and at what price you are interested in those companies. If you have a long-term plan and you have an understanding of how individual stocks fit into that long term plan than days like yesterday could help to give a little boost to your long term plan. The second lesson is that there really shouldn't have been any surprise that we saw a day like we saw yesterday. The markets seemed to be a little bit ahead of themselves and I know that I had been expecting some sort of pull-back in the markets for almost a year now. So the lesson is that eventually the market will come back to reality (and that works in both directions). When it does come back to reality it is good to be ready with not only a list of companies that are interesting to you but also the cash to buy those companies. I missed out on the second part of that. I should have had a good amount of cash available to pick up the stocks that I knew I wanted to buy. But because of the recent job switch and house purchase I didn't have that much cash available and in fact I have used a little bit of margin to fund the purchases I made. If I had been regularly funding our investment accounts I should have easily been able to cover the purchases I made. I'll be ready for the next opportunity.
category: Finance posted on Friday August 17, 2007 at 16:40:05 by: 0xCC

Getting Even Closer...

Ok, I know I said that I would have been posting some more articles by now because things would have settled down for me by this time. Well, it didn't quite happen the way I expected (does anything?). Just yesterday I finally got the majority of my office at home put back together and I expect that today I will be putting the rest of it together and getting it more functional.

So, what has happened in the last 5 months? As I have mentioned there has been a lot happening. I resigned from a company that I had worked at for almost a decade, I started a new job in a city over 100km away from my other job, we bought a house close to my new job, we sold a house and we moved. For over 4 months I had a commute of about 90 minutes one way (if traffic was good, it could be close to two hours if traffic was bad). Now that I'm not spending 3 hours driving every day and we have made the big move and we are almost totally unpacked I hope to have a little bit of time to actually be able to post some articles on a regular basis here. As I mentioned before I have a couple of what I think will be week-long series planned as well as a couple of shorter articles almost ready to go.

So stay tuned, I hope that in the next week or so I should be posting one or two of the shorter articles. Before the end of the month I should be posting at least one of the longer series.
category: General posted on Sunday August 05, 2007 at 11:03:19 by: 0xCC