CRTC Strikes Down BCE-Astral Deal

 

In a move that nobody saw coming, the Canadian Radio-television Telecommunications Commission rejected BCE's bid for Astral media, stating that BCE would be too large and control to much of the market. What does this mean for shareholders of either company (I happen to have shares in both companies)?

Bell is obligated to pay a $150 million break fee if the deal falls through; which will happen unless BCE tries to appeal the decision. This comes out to about $3 per share is Astral.

Astral media will probably take a hit in market price since BCE may not be buying all the shares for $50 a pop anymore. However, it is believed that Astral will continue to look for a suitor because it's speculated that Ian Greenberg, the CEO plans to retire and he has no known successor. Since everybody still thinks that Astral intends to sell, that may keep the market price afloat. The only issue here is that the list of potential buyers is significantly shorter; larger companies like Rogers would run into the same competition issues as BCE did. Cogeco has been the name that I've seen thrown around as a potential suitor. If worse comes to worse and there's no buyers, then it is believed that Astral will just sell off its assets piece by piece.

So what does this mean or me personally? Back when the deal was announced, my profits jumped. I decided to hold on to the shares until the deal was sealed so that I could get the premium. When the deal was showing signs of faltering I decided to keep holding Astral stock because I honestly thought that the worst thing that could have happened was that the CRTC approved the deal but with changes; not outright kill it.

As of writing, Astral just took a 15% nosedive. This triggered my stop limit and I sold out for a mere 3% gain (not including dividends accumulated for holding the stock for well over a year). Astral still has solid fundamentals but with a takeover looking slim, I think the price will sink for the time being. When it gets even more depressed, I would not hesitate to jump back in at a lower price point.

- the Paperboy

Recent Market Plays October 2012

Hey guys, remember back in April when I said that I would be using some money to "play the market" as opposed to sticking to the tried and true dividend approach? Well Kinross soared for a couple days in early October so I took the chance to finally get out of that. It took me 6 months but I netted a 6.67% (including two dividend distributions) return so it didn't turn out too badly for me. I'm going to continue on with the experiment and maybe try and jump back into Kinross later because it seems to be dropping again. Or I could go into something else such as Silver Wheaton; we'll see how cheap the precious metals can get. Due to me closing my position with Kinross, expect my overall dividend yield to increase since Kinross paid a pittance in terms of dividends, however, the expected dividends received will be lowered as well.

To offset that, I grabbed some more shares of Reitmans. The clothing company is having a bit of trouble right now but the majority of retailers are having problems getting stuff off the shelves. The company is sitting on a lot of cash so it'll be able to pay off upcoming debt and hopefully be able survive to see better days in the economy. Awhile back, it teamed up with Toys 'R Us to have the toy store carry its clothes for expecting mothers. This shows that the company is trying to get an edge wherever it can. While the price is a little depressed, I'm able to get a higher yield and get more shares via my DRIP. This also gets me closer to that goal of $2200 in expected dividends.

October far from over and I recently stumbled onto some funds. Hopefully I'll be able to grab some more stocks and continue to build my portfolio. If not, I'll throw everything into my bond ETF and wait until the prices are acceptable. All part of the plan right?

-the Paperboy

Recent Market Plays September 2012

Today I finally made a move and purchased more shares of LIF.UN.TO. This allowed me to average down and bring my overall yield up. I still have my eye on RET.TO and some other stocks because I still have a little bit of cash left so maybe I'll be able to get that done before the end of the month.

-the Paperboy

Recent Market Plays August 2012

Not much has happened in terms of building my portfolio. I've managed to squirrel away some funds but none of the stocks that I have my eyes on are at an attractive price in my opinion. I've been sitting on this cash for a couple weeks now and I feel that I'm losing out because I'm waiting. Because of this, I dumped it all into CLF which is an ETF for Canadian government bonds. The money will earn me more interest there than it would sitting in a savings account.

When the right prices come along all I have to do is sell some units of CLF in order to fund the purchase of the new position. There are disadvantages to this, the obvious one being the commission fees involved with the plan. However, if the ETF is held long enough, the extra interest earned will negate the commission fees and I'll come out on top. The issue with this is that I don't know exactly how long I'll be holding the money in CLF. Quite the dilemma but I may have found the solution to it.

Recent Market Plays July 2012

In the month of July, I managed to increase my position in the Canadian Oil Sands. As you may know, the company has recently increased it's dividends distribution so getting more on the cheap is nice. The purchase resulted in a position large enough for my synthetic DRIP to kick in so I'll start seeing some commission-free shares headed my way soon. Somehow I managed to scrounge up enough cash to be able to buy some more shares but I haven't found the right price on anything yet. I'm looking to increase another one of my positions so that I can get another DRIP going but I'm probably going to be doing it in August seeing as there's only 2 trading days left.

I have my eye on a couple of them but if nothing becomes attractive then I'll follow my plan and let the money sit in a bond ETF until I find a deal. The higher yield should offset the commission fees if held in the ETF for long enough. Of course I could always enroll in a Pre-Authorized Cash Contribution so that I automatically add cash to the ETF without having to pay commission. I plan to look into that when I have the time because I think that it will help me execute my plan more efficiently.

-the Paperboy

Canfor Slashes Dividends...Again

I really should follow my own advice. Yesterday Canfor announced that it will distribute $0.05 in dividends for the quarter. This is an enormous drop from the $0.22 that it was previously distributing This was 2 cuts in consecutive quarters and last time I said that I would be willing to let go of my position is need be. After the announcement, the stock price took a nosedive and now I'm pretty deep in the red for this one. On top of that, this pulls me further away from my goal of $2200 in dividends (which seems very unlikely now that more than half the year is over) and I'm now DRIPing a company that I don't actually want due to my own laziness. Things look grim but I'm not super worried; I know stuff like this happens and will continue to happen throughout my investing career so for now I'm going to sleep on it so I can decide my next move.

Don't get me wrong, I do plan to sell it like I said before, but maybe I'll be able to recuperate some of my losses if I wait for the initial sell-off to finish... or I may be delusional and clearly I should be cutting my losses. However I feel that I should be a little more patient and see what happens in a couple days because selling now is a knee-jerk reaction and from what I read, those are the worse reactions to have.

So Canfor has not only taught me to keep on top of my investments in terms of news of the company, but also to follow-through quickly when I have made a decision; if I sold my position after my post on the first cut, then I would have avoided this mess but instead I held on and now I'm paying the price. This was a very expensive lesson... almost as bad as paying for tuition. Almost.

-the Paperboy

Recent Market Plays: June 2012

Not much happened in June because if you recall, I'm out of gas. I did however sell some units of a bond ETF to finance an increase in my CIBC position in my TFSA account. That worked out according to plan and I intend to keep putting all the money I have into bond ETFs until stock prices become attractive. That way I can collect a higher interest rate than if the money was parked in a high interest saving account while still being flexible enough to be able to jump into stocks when I feel the price is right. Sure, I have to pay a commission fee for the transaction but if I have to sit on cash for a long time because everything is too expensive, then I could be missing out on the extra income that a bond could provide. Also I'm thinking about using Claymore's service of allowing unitholders to buy shares via their PACC (Pre-Authorized Cash Contribution) which would allow me to get shares without paying the commission fee.

I plan to use it to transfer money into a bond ETF and when it's a sizable amount or when prices are attractive, I can sell some units to buy shares. This also puts me in a position where I have to dedicate an amount of my income to investing and will hopefully prevent me from blowing all my money away (if you've been following my journey into budgeting, you'll know that I need all the help I can get). I'm still looking to unload some ETFs and I seem to have amassed enough to make another purchase so look for those two things in July.

-the Paperboy

BCE/Astral Deal Getting Closer to Closing

Awhile back, shareholders of Astral Media had a vote on whether or not to accept the offer that BCE made to acquire Astral. The result was 99.8% of shareholders accepted the offer. This is good news because that was one more hurdle that was cleared in the acquisition.

The next step was to get approval by the Quebec Superior Court. This went smoothly as well and the deal is expected to be closed in the second half of the year. When a more specific date is determined, shareholders will receive information explaining how to deposit and obtain payment for their shares of Astral.

I previously mentioned that Bell intends to pay in the form of cash & BCE shares; which is fine by me. In fact, I'd rather get all BCE shares if I could, that would increase my position in Bell and increase my overall dividend yield. I'd also avoid the fees associated with using cash to purchase shares (which I would do with the cash received as payment).

Recent Market Plays: May 2012

The last week was horrible for the stock market and people point to the fear of Greece exiting the Eurozone. This resulted in stocks getting slaughtered... which was great news! I jumped on an opportunity to get in on Rogers earlier in the month and last week I made a couple more moves.

I increased my position in Weston and added another member of the Big Five to my portfolio; The Bank of Montreal. As I mentioned before, I ran out of cash with the Rogers move, so to fund the plays I had to sell an ETF (which I was planning to eventually do). The ETF didn't pay any dividends so as a result my yield should be higher for the next dividend progress report. The downside was that I had to sell it at a loss, but I considered the opportunity cost of sitting on an ETF that generated nothing when I could have BMO giving me 5% annually so I took the hit. I can also use the loss to offset future gains so it's not all bad.

Now I'm really strapped in terms of cash. I'll have to find more money somehow because I feel that some bargains may be headed our way if the economic outlook becomes bleak again. Worse comes to worse I can keep selling my ETFs at a loss to get better positions.

-the Paperboy

Rogers Communication Position

Today I picked up some shares of Rogers Communications. During the first quarter, the company announced the acquisition of Saskatchewan Communications Network (subject to CRTC approval) and an increase of 11% in dividends. However, Rogers has been effected by a highly competitive environment where it not only competes with the other "Big Three" telecoms, Telus and BCE, but new entrants like Wind are offering consumers lower prices. The industry is also "maturing" meaning that growth will be hard to find and will slow down dramatically.  

Canfor's Complicated Structure & Dividend Woe

Oh Canfor, why do you do this to me? Yesterday, the company announced they will be distributing a dividends of 22 cents (compared to 25 cents in the previous quarter). A little background on Canfor will help grasp a better understanding of the situation.

Canfor Pulp Limited Partnership (CPLP) is what owns two pulp mills and one paper & pulp mill. Canfor Pulp Products Inc. (CPPI) use to own 49.8% of CPLP (CPPI is what currently have a position in). Canadian Forest Products Ltd. (CFP) controlled the remaining 50.2%. Under the terms of the Exchange Agreement made back in January 2011 from all parties involved, CFP exercised its right to essentially exchange its 50.2% interest in CPLP for a 50.2% direct interest in CPPI in early March of this year. This resulted in CFP having a controlling interest in CPPI (with the remaining 49.8% of shares being owned by the old shareholders - like me) while CPPI took 100% control of CPLP. Confused yet? I sure was. Basically this is what happened:

Fully Contributed

Today I finally did something I was meaning to do since January 1st 2012. I recently transferred my position in CIBC over to my TFSA account and now it's collecting me dividends tax-free. With that transfer and all the other transfers I already made, I had leftover contribution room of $459.96 - not quite enough to buy another holding.

I didn't want that room to go to waste (although it would be carried over to the next year) so I just topped off the rest in a TFSA savings account. It took me 4 months but I've finally fully contributed to my TFSA. Now all I have to do it set up my DRIPs because the amount of money that would accumulate in the account would not be enough for me to buy shares manually and I'd rather have my money reinvested as soon as possible than to have it sit there for a year until I can pump in another $5000.

Next goal for my TFSA? Eventually I would like to get all of my positions in the TFSA DRIPing so that I can set them on autopilot and while they collect more shares for me, I can focus on the non-registered account. When it gets to the point where what I'm getting back in dividends is substantial, I'll turn the DRIP off and consciously decide when and where to put the funds (I like to call it "manual DRIPing"). No strict deadline for this one because of the annual $5000 contribution limit, but I can speed things up by increasing my positions in companies I already own rather than transferring stock over from my non-registered account. The only issue with that is I need to find some cash so I guess we'll see how much of that I have when December rolls around.

Slowly but surely, I'm putting the pieces of the money-generating puzzle together, and I'm positive that in the long run this dividend approach will reward me.

-the Paperboy

Recent Market Plays: April 2012

Awhile back I decided to use a small portion of my funds to "trade" as oppose to invest. The logic was that by using a fraction of my portfolio to satisfy the need to "do something," I would leave the majority of my portfolio alone so that it can carry out my long term financial plan of using shares of solid dividend paying companies to build wealth.

So a few weeks ago, I bought gold in the form of Kinross Gold. As Warren Buffett put it in his annual Chairman's Letter to shareholders,

[I]f you own one ounce of gold for an eternity, you will still have one ounce at its end.

I believe this view that gold doesn't produce anything so it won't be able to generate any value. However, I wanted to do some trading and the volatility of precious metals make them great for "playing the market."

I don't know what will happen with this little experiment of jumping in and out of stocks rather than investing for the long haul; I may make some extra profit for a little bit or I may get burnt. Most likely though, I won't get demolished but I'll probably under-perform the benchmark and my dividend paying strategy. I'm interested to see how it goes. As of writing, Kinross is in a bit of a nosedive but Kinross pays a tiny dividend so I don't feel too bad about doing this.

BCE Buys Astral Media

Yesterday, it was announced that BCE Inc. was going to acquire Astral Media for $3.38 billion. This is a play from Bell to expand its french-media content so that it has a stronger presence in Quebec. If the deal goes through, Bell will own all of Astral Media's assets including all the pay and specialty television services, radio stations and out-of-home advertising activities (such as the advertisements seen in the majority of bus shelters in my hometown of Toronto).

TFSA Position Transfer

Since the new year started, I haven't made any moves in terms of investing. However, I transferred my positions in CLF and SLF into my TFSA. My SLF is currently on a DRIP so I'll be receiving shares every quarter instead of cash. This is great because since it's in my TFSA, it would take too long to amass enough funds to purchase more shares on my own because there is a limit to the amount of cash I can add to the portfolio. I plan to eventually get CLF to DRIP as well, continuing with the line of thinking that I have with SLF. Right now the interest (interest because CLF is a government bond ETF, not the stock of a public company) received from CLF will just sit there and collect dust (not what I want to be collecting) instead of helping me with the power of compounding. This is the opportunity cost that I have to pay (at least until I can get more funds into the account and have more money to work with).

Transferring my position resulted in a negligible amount of capital gains in CLF but a substantial amount of capital loss in SLF which I can't use to deduct capital gains taxes. I could have simply sold my shares and moved the funds over to the TFSA to repurchase, resulting in the the capital loss becoming deductible, but then I would have to wait 30 days before repurchasing the shares or it would be considered a superficial loss and would not be eligible. Who knows where the stock could be in a month? Besides, I'm already sitting on the sidelines with some funds; I don't need more money collecting a pittance in a savings account.

-the Paperboy

Financial Goals for 2012

Time has been flying by for me these past couple of days. We are already past the half way mark for January. My portfolio has been recovering nicely since we rang in the new year. While this is good news, I've been having difficulty deploying funds because I can't find attractive entry points. The issue is that a mere couple months ago, all the stocks that I keep an eye on were much cheaper. It can be argued that some of them are still at a nice valuation but I'm going to take a page out of my girlfriend's book on shopping, I just saw them on sale - there's no way I'm going to buy them for more than I know I can get them for.

Now that 2012 is in full swing, I'm sitting on some cash that I transferred from my TFSA savings account to my TFSA margin account and waiting for the right time to pounce. I guess that's how it goes sometimes, when you want to invest, there's not enough money and when you have some cash, there's nowhere to put it. Along with investing in my TFSA margin account, I have some other goals for the year that I'll hopefully be able to accomplish.

Corus Dividend Hike

Earlier this week, Corus Entertainment announced that the company will be increasing dividends by 10% this year after announcing a $9.1 million in profit in the first quarter (higher than the $90.7 million from the previous year).  Revenue from the radio division has dropped and advertising revenue is weaker than last year but the specialty channel business more than made up for the decrease. Things should start to pick up once other companies feel comfortable enough to start using a more liberal marketing budget. The hike is not a surprise to me since Corus has been increasing dividends on an annual basis for at least the last 5 years earning it a spot on the Canadian Dividend Aristocrat list (a great starting point for investment ideas by the way). Corus has been distributing dividends since 2003 and hasn't looked back since. I recently increased my position in Corus and I couldn't have done it at a better time. I'll be holding my position for the forseeable future so keep the hikes coming!

-the Paperboy

DRIPing with Questrade

I recently received dividends from my position Sun Life Financial and the amount was high...too high. In fact, the distribution was high enough to cover one share of SLF which means the DRIP that I set up wasn't actually set up. I contacted them through their online chat to see what was going on. Turns out that I wasn't enrolled in the DRIP (this was probably because I filled out two DRIP forms when I went in to their offices; they may have misplaced one). No problem though because the agent enrolled me in the DRIP and even bought a share for me and reimbursed me the commission charge. Great service although it did take awhile before I was connected to an agent.

One thing to note for people who plan to use DRIPs with Questrade is that they buy all the additional shares on the open market and not directly with the company. This means that all the discounts that the companies offer on their DRIPs will not be applied. The discount was a large incentive for me to start DRIPing so I'll have to reevaluate whether or not it's worth it for me. For now I'll just let my SLF DRIP run.

-the Paperboy

Investing 101: Reading Stock Quotes II

Let's talk about what to do with all that money that you've worked so hard on saving up. In this section titled Investing 101, I'll go over different terms and ideas that every investor should know.* Hopefully the information provided will help give you a general idea of how things work and build a foundation for you to go and further educate yourself. Welcome to class. Today's topic? Reading stock quotes (again).

Reitmans Position

Reitmans was founded in Montreal in 1926. The company operates 968 stores across Canada under 7 names: Reitmans, Smart Set, RW & Co, Thyme Maternity, Penningtons, Addition-Elle and Cassis (although I read somewhere that the company plans to close down the 22 Cassis stores and reopen them under the other names). Reitmans also recently launched an online store and has a quick ratio of 3.32 (MRQ) which is more than enough to cover its debt. The high payout ratio of 93.19% (TTM) is a concern but the company has been very consistent with dividends distributions. I opened a position in Reitmans today after it fell almost 7%. My entry point gives me a 5.55% yield which isn't too shabby. Retail stocks have been taking a beating lately but I'm always happy to pick things up cheap. I'm currently overweight in the financial sector so having more exposure to the service sector is nice. Besides, I shop at RW & Co so I might as well get some of that money back right?

-the Paperboy