Portfolio Value Update - August 2018

Hello guys! It’s time to share my monthly update about my investment portfolio and dividend income. To be honest, it felt like the month of August was a bit stretched. For me, it didn’t pass as fast as the other months. I was counting the days to finally write this post. August was a great month. My wife and I celebrated our birthdays. We did a few cosmetic renovations around the condo. Daughter started fourth grade and newborn girl turned three months. I also published four blog posts, which is a lot, because usually I post once or twice per month. So I’ve been pretty active on my blog as well. Anyway, let’s talk the stock market. 

Portfolio Value

As of August 31, 2018 my investment portfolio balance stood at $63,463.74. That’s an increase of $2,938.70 from last month. This was the best performing month of all time. The main increase came from the buyout of Enercare (TSX:ECI). When the takeover was announced in the beginning of August, my ECI position went up by $2,000. The rest of the value increase came from my monthly contribution and dividends.

Dividends

In August, I received $260.18 in dividends vs $224.79 for the same period a year ago. That's an increase of $35.39 or 15% on year-over-year basis. My total year-to-date dividend income is $2,056.53. Last year, it took me ten months to exceed $2,000 in dividends. That’s the power of compound growth! Also, I just wanted to let you know that when I receive dividends from companies that pay quarterly, I split them in three parts and report them on monthly basis. It’s just the way I prefer to do.

Contributions

Every month I transfer $700 of fresh capital to my TFSA account. I plan to keep that pace until the end of the year. Next year I will adjust my contributions, depending on 2019 TFSA limit.

Transactions

August was probably the busiest month for capital relocation. I liquidated my Enercare position and bought Canadian Utilities (TSX:CU), Fortis (TSX:FTS), and Brookfield Property (TSX:BPY.UN). A few days later I sold Magna (TSX:MG) and bought Laurentian Bank (TSX:LB). In total, I relocated around $10,000 from one stocks to another. You can always refer to my previous posts to read more about those transactions.

Performance Charts

Thank you for your time and I’m looking forward to read your updates.

My Largest Holding: Killam Apartment REIT

Hello guys! For the past few months, Killam Apartment REIT has been leading the way as my top portfolio holding. Killam is in rental business. The REIT owns residential properties in six Canadian provinces. You may want to consult the company’s website if you want to see their rental properties.

I started to invest in Killam last year when the stock was trading under $13. I purchased 290 shares of KMP between February and May of 2017. At that time it was probably my 5th biggest holding. However, the stock has outperformed all of my other stocks and became number one. This year alone, the stock is up 23% and continues to trade at all time high.

So what should I do with the stock? Can it go higher? Should I trim my position and re-enter at pullback? These are the questions that are going into my head. So let’s evaluate the stock and decide what to do with it.

It’s current P/E ratio is 8.9x which is slightly higher compared to industry average of 8.5x. It’s current P/B ratio is 1.2x, inline with industry average. So based on these metrics alone, I wouldn’t say that the stock is expensive. It looks expensive on the chart, but it could easily go up another 10% from here. I’d put a price target of $17 for this year. I think this company should be traded at a premium because of the high quality properties and sound fundamentals. In fact, I’m ready to invest more money in it if the stock pulls back. They have exciting developments coming along in 2019 and 2020 so that also could be the catalyst for the stock to go higher.

Here are a few high-rises to be developed in 2019-2020. These buildings look very nice and occupancy rate is usually higher in newer buildings.

Let me know what would you do if this was your top holding. Would you let it run further?

New Buy : Laurentian Bank of Canada (LB.TO)

Well, August turned out to be a busy month for me. As you already know, I sold Magna shares on August 8th, and received around $2,250 from the sale. Also, my monthly contribution of $700 was on the way to my TFSA account and the amount got posted today. 

So today I had a bit over $3,000 to play with and I decided to buy a bank. I had enough money to buy 64 shares of LB.TO for $47.37 per share. Why Laurentian Bank and not TD, RY or BNS? Well, my decision was purely based on valuations. The Laurentian Bank is the cheapest dividend paying stock compared to other banks. Laurentian is currently trading at P/E ratio of 8.4x and 10% discount to its book value. The current dividend yield is 5.41% and the payout ratio is 44%. How sweet is that?

Here’s the valuation of other Canadian Banks:

Banks	P/E Ratio	P/B Ratio	Dividend Yield %
Royal Bank (RY.TO)	13.2	2.1	3.69
TD Bank (TD.TO)	13.7	2.0	3.45
Bank of Nova Scotia (BNS.TO)	11.2	1.6	4.26
Bank of Montreal (BMO.TO)	13.3	1.7	3.69
Laurentian Bank (LB.TO)	8.4	0.9	5.41

Here’s the chart for the last three years. It’s certainly lagging behind, compared to other banks, but I feel like the stock price is turning around. At some point, it will have to catch up with other banks. Based on its 5 years average, the stock has at least 20% upside potential. 

Your thoughts and critics are welcome. Do you hold Laurentian? Would you buy it here?

Recent Sale: Magna (MG.TO)

Magna released its earnings report today and the stock tanked 8%. The report wasn’t bad at all, but the outlook is not as rosy as it used to be. Their bottom line will be impacted by US tariffs on metal, so I decided to sell my shares and wait for a better entry point.

I invested in Magna two years ago when the stock was trading at $54. Last month the stock was trading at $80 and I was thinking of getting out because of high valuations. When the stock dropped to $70 this morning, I decided to get out and lock my profit. My capital gain is 30% from two years of holding the stock. Had I sold the stock last month, my profit would have been much higher.

I think today’s drop is only the beginning. There’s more downside. The stock could easily drop another $10 from here. If the stock gets back under $60, I will be buying it again. But for now I will be watching it from the sidelines and will invest the money in something else.

Investment summary:

Bought 32 shares for $54 per share

Sold 32 shares for $70.50 per share

Return on investment 30% or $513

If you own Magna, let me know what you plan to do. Lock in profits or buy more?

I Sold my Enercare Shares and Bought Three Companies

Good day guys, last week I sold my Enercare (ECI.TO) shares, but didn’t have a chance to write about the transaction. Brookfield Infrastructure offered $4.3 billion to buy the company. I decided not to wait until the deal is approved and closed. So I sold all of my 215 shares for $28.86 per share. I received around $6,200 from the sale, or 64% return on my investment, excluding the monthly dividends I was receiving for the past 6 years.

The cash from proceeds is already invested. Here’s what I bought:

• 60 shares of Canadian Utilities for $32.15 per share 
• 50 shares of Fortis for $42.38 per share 
• 80 shares of Brookfield Property Partners for $26.08 per share 

The two utility companies are new positions for me. I mentioned in my previous posts of my intention to increase utility exposure because utility stocks are down and they are great businesses to own. Last month, I bought another utility company – Emera, and I plan on adding more maybe in August or September.

Brookfield Property is the stock I already own so I added 80 more shares to have a full position. I love the company. They have great assets around the world. My total investment in Brookfield Property is around $4,000 which is about 6% of my portfolio weighting.

Portfolio Value Update - July 2018

Portfolio Value
The month of July is now in the past and it’s time to report my monthly progress. As of July 31, 2018 my investment portfolio balance stood at $60,525.04. That’s an increase of $1,803.98 from last month. It was the second best performing month, but most importantly, I achieved a new milestone. I finally crossed the 60K mark in my TFSA account.

The main increase came from stocks appreciation, followed by fresh capital allocation and dividend income. There were three stocks in particular that pushed my portfolio higher:

Alaris Royalty (AD.TO) was up by 17%
First National (FN.TO) was up by 6%
Morneau Shepell (MSI.TO) was up by 6%


Dividends
In July, I received $277.31 in dividends vs $227.97 for the same period a year ago. That's an increase of $49.34 or 21% on year-over-year basis. My total year-to-date dividend income is $1,796.35, already surpassing dividend income of 2015.


Contributions
Every month I transfer $700 of fresh capital to my TFSA account. I plan to keep that pace until the end of the year. Next year I will adjust my contributions, depending on 2019 TFSA limit.


Transactions
I made one purchase in July. I bought 23 shares Emera (EMA.TO) for $42.65 per share. Please refer to my previous post for more details about that purchase.


Charts

Thank you for your time and I’m looking forward to read your updates.