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Can we talk about investing again?

kuba

TRIBE Member
Stocks question.

If the dividend payout ratio is 88%, doesn't that signal the dividend may be cut sooner or later because the company is paying out too much of its earnings in a dividend?

OR can it mean the company's stock price is severly depressed and once the price goes up, the yield goes down, and the payout ratio will decrease?

I have $10K to invest in my son's RESP and so far he's holding RY.to and WTW, looking to buy Genivar and KO for more yield and stability, but am concerned Genivar's payout is too high (as is its yield).

Also another question re: dividends.

Should I always buy the # of shares required where the annual dividend payment will always drip me an extra share? Especially in an RESP port where I'm looking to maximize the # of shares instead of generating dividend income?

Example KO is trading at $37 per share and pays $1.02 per share annually. If I dump $1500 into KO and get $1500/37 or 40 shares, then that'll give me approx $41 per year payout, which if I drip it means I'll add to my position automatically.

Is this a good strategy? Or am I going about dividends the wrong way?

Help me tribe investing massive! Looking at stanimal!
 

derek

TRIBE Member
i'd look at index funds. individual stocks on that sum of money just doesn't make sense imo. i don't even own any in my own portfolio.
 

kuba

TRIBE Member
I do not believe that super high quality stocks such as KO, Mcdonalds, sbux etc will do worse than the index, plus I'm after dividends.

@kyfe because of the 7% yield and at a 52 week low and I'm a believer in infrastructure stocks like this and snc lavalin as our world crumbles (someones gotta fix our shit).
 

kuba

TRIBE Member
Also @derek, $10K isn't a LOT but it's an RESP and by the end it will hopefully by 20x that with regular contributions, CESG money, and growth and yield. My goal by 16 years is $180K, $3000/yr added. At year 12 I switch to safer things like index/bonds/GICs.
 

kuba

TRIBE Member
<by the way index investing is a sure fire winner vs mutual funds aka MER hogs, so I don't disagree with the idea and it isn't off the table>
 

stanimal

TRIBE Member
kuba, as you are focused on dividend stocks, be aware that dividends on US stocks are subject to 15% withholding tax that is not returnable.

The only exception to this is if you are holding US stocks in your RRSP, no taxes on dividend payouts with be withheld or owed.
 
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doughboy

TRIBE Member
Probably not what you're looking for since you already seem to be leaning towards stocks/dividends and the RESP program (which sucks btw), but you would be naive to leave gold and silver out of the equation.

Gold Return vs. The Stock Market

NOTE: I'm talking about physical ownership of these metals. Not gold stocks or gold mining companies, but the actual physical asset.

... and while gold has outperformed stocks over the past 10 years (as well as most other 10 year periods in the past), silver has done one better and even outperformed gold over the same period.

Why Silver Will Outperform Gold 400% &mdash; The Moneychanger

While you won't get a bunch of handouts via the government as you would with the RESP program, you aren't tied down to their rules either. For all the benefits you get from it, the RESP program can be a nightmare when it comes to withdrawing and using the money as there are conditions and terms to how/when/where the money can be used.
 

kuba

TRIBE Member
I'm not discounting told but someone wise once told me to never have more than 10% of your port in gold.

Also, Central Fund of Canada - Home Page is a wonderful way to invest in gold, not in a gold company, and still make it sheltered.

There aren't nightmares with RESPs. The rules are simple:

Goes to any accredited school, can take out the money.
Doesn't - you can roll it into RRSPs but pay back the CESG.

See?
Simple.

only problem is you get taxed on your withdrawls so my son better not get too ambitious and earn good coin while in school!
 

doughboy

TRIBE Member
I took a quick glance at it, but the problem with Central Fund of Canada is you don't actually hold the physical metals yourself,
you just hold a share in the fund.

This only gives you a claim to the real gold/silver and in most cases, it's unknown how many ounces of physical silver/gold are
being kept on hand to back the shares. If you think it's 1:1, think again.

Among physical silver and gold investors there is a saying which rings true when it comes to EFT's and any other investment vehicle
that attempts to mimic the price of these precious metals: If you can't hold it in the palm of your hand, you don't own it.

So... if you want to invest in silver/gold you should stick to physical bars and coins that are either stored safely in your house or
off-site in a secure vault (no, your bank's safety deposit box doesn't count).

As for the nightmares with RESP... yes, the rules are simple, I just don't think they're necessary. BTW... I have the same issues
with the RRSP/RRIF programs and their restrictions too.

What if my child wants to travel overseas and obtain a post-secondary education in Europe or Asia? What if they want to take
that money and invest it in a business or use it to take a trip for a year?

Although I agree with saving for your child's education, I don't like how the government attaches strings to these programs.

I have no clue what choices my daughter is going to make about her education 10-15 years from now and the RESP program has
too many restrictions which, in my opinion, do not outweigh its benefits.

As such, the educational needs of my children are being met without the government looking over my shoulder telling me what I can
and cannot do with the money when it's needed.
 

wickedken

TRIBE Member
Just split your money among CN, Enbridge and one of the Banks. The worst risk is which bank you choose. By the time you kid is ready to go to school you will likely have tripled your money.
 

Agent Smith

TRIBE Member
Stocks question.

If the dividend payout ratio is 88%, doesn't that signal the dividend may be cut sooner or later because the company is paying out too much of its earnings in a dividend?

OR can it mean the company's stock price is severly depressed and once the price goes up, the yield goes down, and the payout ratio will decrease?

I have $10K to invest in my son's RESP and so far he's holding RY.to and WTW, looking to buy Genivar and KO for more yield and stability, but am concerned Genivar's payout is too high (as is its yield).
The dividend payout ratio is defined as dividends/net income. It is independent of equity price. 88% is high, but like anything does not mean anything without context. It is essentially signalling that the company either: 1) does not have the avenues to invest the capital that would return sufficient shareholder value, or 2) already has surplus funds to cover growth initiatives. If the industry is very stable with minimal growth opportunities, then a high dividend payout ratio is not a bad thing.

Also another question re: dividends.

Should I always buy the # of shares required where the annual dividend payment will always drip me an extra share? Especially in an RESP port where I'm looking to maximize the # of shares instead of generating dividend income?

Example KO is trading at $37 per share and pays $1.02 per share annually. If I dump $1500 into KO and get $1500/37 or 40 shares, then that'll give me approx $41 per year payout, which if I drip it means I'll add to my position automatically.

Is this a good strategy? Or am I going about dividends the wrong way?

Help me tribe investing massive! Looking at stanimal!
In my opinion, you are focusing too much on individual assets, and not enough on asset allocation. Endless bounties of research have debunked the concept of stock pickers. A more effective strategy would be selecting the appropriate asset allocation percentages between value/growth stocks, large/small cap, fixed-income/equity and domestic/foreign equities that meet your growth objectives.
 

kuba

TRIBE Member
What if my child wants to travel overseas and obtain a post-secondary education in Europe or Asia?
Then she can take the funds and pay for the education. Simple.

What if they want to take
that money and invest it in a business or use it to take a trip for a year?
Registered Education Savings plan is obviously not for this - then she should save up money to do this (or you should).

I believe that the 20% gift to the account far outweighs any risks you mention but you're obviously free to choose otherwise.

If she doesn't go to school, roll that RESP into your RRSP.

However that all said re: gold bars, I dunno, not a big fan personally and I don't know if it is 1:1 but since I choose to invest in the RESP then I'd rather buy the gold fund I mentioned.

Good debate!
 

kuba

TRIBE Member
In my opinion, you are focusing too much on individual assets, and not enough on asset allocation. Endless bounties of research have debunked the concept of stock pickers. A more effective strategy would be selecting the appropriate asset allocation percentages between value/growth stocks, large/small cap, fixed-income/equity and domestic/foreign equities that meet your growth objectives.
So are you saying ETFs vs individual stocks? Then how the hell do I know which ETFs I should pick? All the ones I like are at 52-week highs!
 

2canplay

TRIBE Member
Despite what most say about index funds, if you actually apply yourself you can indeed beat the market. If you are interested in doing a little work on the side, maybe on average an hour a week, you can get good returns by just buying low. As well, I find little utility in investing in something like ry, or other names like it for 10% a year. If you can find time and patience, spend some time finding a beaten down stock, invest in the business and wait a couple of years. You can drop 30% of your dough down on something and aim for 200% returns on that stock - much better risk reward. Just takes a bit of homework and patience.

I wouldn't advocate this approach if it wasn't consistently profitable. I've been at it for 18 years now. Admittedly, I've done much better over the last 5 than the first 5 as I've gotten the hang of what to avoid (ie, sometimes you can catch a falling knife).

Anyway, good luck. Just thought I'd throw in another approach.
 

kuba

TRIBE Member
Bought RY for $42, today $61.

It was a beaten down stock when I bought it.

200% returns is not what I'm after because the chances of a massive drop are equally there. This is for an RESP. Blue chips need only apply, those with good dividends.
 

Mrs. Pink

TRIBE Member
what do you guys think about this?

The Walton group of companies specializes in the acquisition, finance, concept planning and development of raw land in high growth regions across North America. As of April 2012 Walton has acquired over 68,000 Acres of land in Calgary, Edmonton, Toronto, Ottawa, Phoenix, Dallas, Austin, Atlanta, Washington DC and Charlotte.

They are seeking investors to fund purchase of land. Basically they flip 100 acre plus lots they pick up. They hold them for a couple years, then sell em off to developers. I'm interested...but thought i'd look here to see what your thoughts would be on this.
 

2canplay

TRIBE Member
Bought RY for $42, today $61.

It was a beaten down stock when I bought it.

200% returns is not what I'm after because the chances of a massive drop are equally there. This is for an RESP. Blue chips need only apply, those with good dividends.
Yeah, most people think this way (thankfully)
 

derek

TRIBE Member
Banks misleading on mutual funds - Canada - CBC News

Canadians already pay some of the highest mutual fund fees in the world, but poor transparency from some financial institutions may be costing customers even more, a CBC investigation has found.

A Marketplace report looked at Canada’s Big 5 banks — CIBC, Royal Bank, Toronto-Dominion Bank, Bank of Montreal and Scotiabank — and found most offer little clarity on how the fees work and how much they cost.

Financial consultant Preet Banerjee told Marketplace host Erica Johnson that investor advocates want more openness, but the banks won’t oblige.

“We want full disclosure,” he said. “Of course there’s a lot of resistance from the industry, because if people start comparing fees, that means fees will go down. If fees go down, profits go down.”

Not that Canadian banks are just scratching out a profit. The Big 5 reported a combined profit of almost $28 billion in 2011-2012, and a chunk of that comes from Canada’s notoriously high mutual fund fees.

Canadians’ investments can take a major hit with management expense ratios (MER), the percentage deducted for administering the fund.

The median MER in Canada is around 2.5 per cent, one of the world’s highest.

A 2011 report by U.S. investment research firm Morningstar gave Canada an “F” for its mutual fund fees, the only country out of 22 to get a failing grade.

‘Patently false’ investment advice

As part of its investigation, Marketplace used hidden cameras to record investment advisers at different banks and analyze the quality of information given to clients.

Financial consultant Preet Banerjee says Canadians need to 'push back' and fight for lower bank fees. (CBC)
After reviewing the information from each bank, Banerjee said only one representative gave a clear explanation of fees. An investment adviser at TD Bank was clear about costs, but that proved to be the exception.

A counterpart at BMO said fees are “the least part to worry about,” a claim Banjeree disagreed with.

“If you have a fund that has an MER of 2.5 per cent, that’s going to consume almost 50 per cent of the potential value of the portfolio over 25 years,” he explained. “When you frame it that way, it becomes very clear that fees are a big deal.”

He also blasted a CIBC representative who said that “in the long run, [mutual funds] always go up.”

“That’s not true at all,” Banerjee said. “There have been a lot of funds that lost so much money, they got shut down. Saying that [they always go up] is patently false.

“It’s disingenuous to say that you don’t have anything to worry about. You have to explain the risks associated with these investments,” he said.

CIBC responded to Marketplace’s findings with a written statement, saying, in part, that the “isolated example you have brought to our attention is not aligned to our usual practices.”

Watch Marketplace's episode, Busting The Banks, Friday at 8 p.m. (8:30 p.m. in Newfoundland and Labrador).

TD, Royal and Scotiabank also responded with general statements, saying customers are always provided with the necessary documentation on mutual fund fees.

But that information is often too complex for the average investor, says money coach Melanie Buffel.

“The bank language that’s used, it’s really to separate people who are in the know from people who aren’t,” she said. “So if I go on about asset allocations and MERs, and I use a lot of weird language, a lot of customers will just nod and say, ‘OK.’”

Regulators to the rescue?
Banerjee agrees the banks aren’t transparent enough, but worries that no change is coming.

“I think there needs to be a much higher level of discourse between the financial advisers and the clients, [but] who is going to push for that?” he asked. “The industry isn’t really going to do that, are they? Because the more in the dark people are, the better for them.”

The Canadian Securities Administrators (CSA), an association of the provincial and territorial regulators, is pushing for more clarity.

In 2011, the CSA required banks to provide a new document called “Fund Facts” for each class or series of mutual funds. CSA guidelines state each “Fund Facts” document should be “in plain language, no more than two pages double-sided and highlights key information important to investors.”

An email from the Ontario Securities Commission also stated that the CSA is preparing new requirements which, if approved, will provide more detail to clients about the costs of investing, and that it hopes to publish those requirements in 2013.

Even if those changes come, both Banerjee and Buffel say Canadians need to educate themselves to avoid not getting all the information they need from banks.

“If you don’t understand the language that’s being spoken at you, you need to educate yourself and ask good questions,” Buffel advised. “Sometimes the financial advisers are a little uncomfortable about those questions because they’re opening up and being more transparent about the fees, but that’s what a good consumer asks for.”

Banerjee also encourages unhappy bank customers to “vote with their wallets.”

“Canadians love to gripe about fees, but ultimately don’t do anything about it,” he says. “Consumers have to push back and … either negotiate for a lower banking fee package or move your business to alternatives which do offer cheaper banking fees.”
 

stir-fry

TRIBE Member
I recently made a move to a self-directed portfolio and took my money away from the financial advisors at Dundee Wealth management. I have been with them for roughly 12 years and after doing research on MERs, I realized that they were sucking me dry of my investment potential.

Using advice from the canadiancouchpotato site, I am in the process of building my own portfolio with a mix of etfs and td e-series mutual funds. The combined MER of my portfolio is going to be less than 0.5 compared to the 2.5+ mer funds that Dundee had me in.
 

octo

TRIBE Member
a lot of customers will just nod and say, ‘OK.’”
that's me.

a few months ago i opened up a TFSA with my insurance company. i deposited the minimum $300 that they required. buying that product from them saved me $600/yr on my car insurance.

i told them i wanted to use the TFSA to invest. i don't even know what i bought into.

i just remember her telling me that since i didn't know much i should "play it safe and invest in low risk, low return, majority (80%) in canada"

i said "no, what's the next level?"

she said "what would you do if your portfolio dropped 15%, sell off, stay put or buy more"

i said " buy more, what the next risk level after that?"

she said "what would you do if your portfolio dropped by 25%, sell off, stay put or buy more"

I said "i'll jump out a window. what's the next risk level after that?"

i finally ended up with i think 40% canadian stuff and 60% foreign money markets. i got zero info or explanation about anything. bitch didn't even know how to use the debit machine to take my money and had to read the fucking manual!! i didn't care. i just did it to save money on my car insurance.

i got my first statement the other day. from mid november to the end of dec 2012 my $300 had turned into $306. yippee! go greece!

how can i find someone that will explain investment products to me? the people at my local TD where I have my RRSP don't really seem to know their heads from their ass.
 
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