Jun 282011

The dividend reinvestment plan (drip) offered at most brokers is a tool for investors, it takes company dividends paid to shareholders and automatically buys more shares for them. For example if today you bought 100 shares of Bank of America for $10 per share, you would have 100 x $10 = $1000 worth of stocks in BoA. This means your ACB is $1000. Then let’s say they offered a special dividend of 10 cents per share to shareholders. Since you own 100 shares, you would get $10. This money would then buy you exactly 1 more share of the company, assuming it’s share price is still $10. Congrats, now you have 101 shares at $10 each, so your portfolio is now worth 101 x $10 = $1010.

But wait, if these stocks are held in a non-registered account please don’t forget to adjust your ACB. You should recalculate your ACB as if the share(s) bought with the DRIP was using your own money. In this example, think of it like you bought 1 more share using $10 from your pocket on the same day you received the dividend. So your ACB is now $1010.

Which means if you sold all our holdings, 101 shares. You don’t have to pay any taxes at all, even though it appears like you made $10 in profit, or a 1% return. You already paid taxes on the $10 dividend, don’t make the mistake of paying another tax on a $10 capital gain. Some investors overlook this small detail and pay double tax; once when they receive the dividend, and once more when they sell the equity. Luckily most discount brokerages will do the math for you and adjust your ACB so you don’t have to. If this sounds like too much information then consider only DRIP your RRSP and TFSA accounts, or other tax deferred vehicles like the 401K in the US.

For simplicity’s sake I’ve left out commission fees and any tax liabilities in the above example.

Jun 222011

The Canadian Loonie edged up higher today. As of right now you can trade 1 Canadian dollar for 1.028 US dollar. And the US based S&P; 500 is trading at a discount compared to the Canadian S&P;/TSX Composite index so I decided to take this opportunity to buy some US stocks because it’s like taking money that’s worth more to buy assets that are worth less (in terms of relative valuation to Canadian equities.)

I went with over¬†139 shares of Intel Corp (INTC-Q.) They design and manufacture microprocessors. The computer you’re using to read this post probably has an Intel chip in it. They are trading at 10 times earnings, with a nice dividend of just under 4%. They are a recession proof company (everyone uses computers), a leader in their field, and still have growth potential.

Another one I bought today is KKR & Co (KKR-N.) They buy/sell and manage assets and provide financial services to their clients. They are only trading at 8 times earnings, very cheap, they understand the capital markets very well and I believe they can find ways to make a profit in economic uncertain times like now. Plus the 4.5% dividend is pretty nice.

Of course both securities I’ve bought are in my RRSP brokerage account so the dividends wont get hit with any US with-holding tax. And I’ve bought enough of both to take advantage of re-invested dividends (DRIP.)

Jun 142011

A few tricks I’ve learned to save money when driving.

1) In a multi-lane street, drive in the lane that has the least amount of cars. Preferably drive in a lane, where there are no vehicles behind you. This way you can time your stops and goes. If there is a red light 200 meters away, you don’t have to keep pushing the gas until the 100 meter mark and then break. Instead, just coast from 200m away, and no one will honk at you for drifting at 15 KM/hr.

2) Gas up on weekdays, like Tuesdays, after 8pm. Gas stations tend to raise prices right before or during weekends. Plus they drop prices in the evenings because there is less demand at that time. I never fuel up during the middle of the day, not only do you wait longer in line, but you’re paying more for the same amount of gas. Timing is key.

3) Avoid driving in rush hour. The best time to drive efficiently is a weekend morning. Whenever I visit my family on a long weekend, I always leave at 5:30AM. Usually it’s bright enough outside so I don’t need my headlights, but there’s also very few cars on the roads/highway at that time. So less stopping and going means better fuel economy.

Jun 062011
  • Discount Brokerage = $100

Discretionary Spending:
  • Eating Out = $50
  • Others = $90

*Net Worth:
  • Assets:
  • Cash = $4,500 ( -$3,100 MoM)
  • Stocks = $48,100 ( +$4100 MoM)
  • Home  = $243,000 
  • Liabilities:
  • Mortgage = $210,700 (-300 MoM)
  • LOC Balance = $0
Total Net Worth = $84,900 ( +1.56% MoM)

I put some more money into the  stock market despite it’s downward trend. Energy stocks are lower now. Looking to buy some NYSE:CAT if it can get below $100/share. My silver coins have also lost value, but this makes a great time to buy more I guess. 

* Numbers are rounded to the nearest $100.