Jul 202015
 

Experts worry that the recent interest rate cut in Canada will lure people to rack up even more debt. Bankruptcy trustee Doug Hoyes warns, “the more debt you have, the greater your chances of going bankrupt. It’s simple math.” He predicts bankruptcy numbers will “skyrocket when interest rates rise and people are saddled with ballooning debt payments.” Yikes. That doesn’t sound good. 😐

Anyway, last week I borrowed $1,420 from the bank to purchase 100 shares of Corus Entertainment (CJR.B) for $14.20/ share in my non-registered account. Normally I wouldn’t buy a stock with 100% borrowed money but with credit this cheap how can I say no? 😀 Besides, the dividend from CJR.B is twice as much as the interest I pay on the margin loan so it’s totally sustainable as long as the dividend doesn’t get cut, lol. 🙂

CJR.B Dividend Payout History

15-07-corus-dividend-payment-history

Corus is a large media company in Canada that operates both TV networks and radio stations. It owns brands including YTV, Treehouse, Nickelodeon Canada, W Network, OWN Canada, and Movie Central (including HBO Canada and Encore Avenue.)

I also had about $800 US in cash sitting in my RRSP from accrued dividends so earlier this month I also bought 8 shares of Johnson & Johnson (JNJ) at $98 US per share for a total of $784 + commission. The company makes consumer, pharmaceutical and medical products. Household names like Band-Aid, Listerine, Motrin, Splenda, and Tylenol, are all part of the Johnson & Johnson family.

Earns Johnson and Johnson

This is one of the largest conglomerates in the world with 265 operating businesses and a market cap of $277 billion. That’s more than the entire GDP of Greece, lol. No offence to the Greeks. And if you’re a citizen from Greece reading this post, you should probably stop reading and go pay your debts. Hah, just kidding. 😉

15-07-july-stock-buy-corus-jnj

Both Corus and J&J are not cheap in terms of valuation, but they are not too expensive either. Corus is making 8 times free cash flow and J&J has a P/E ratio of 17.6 times. The reason I decided to buy these stocks is because I believe they would be great additions to my dividend growth strategy. Both names are dividend growers. I just had to wait for a good time to pick them up.

Corus recently missed its quarterly earnings and dropped quite a bit, which some believe is oversold. I think this is good point to start accumulating a small position of 100 shares. Plus the 8% dividend yield is very nice and super tax friendly. 🙂 Johnson and Johnson share price hasn’t moved much over the last couple of years but it has a long term record of steady gains. So I think now would be a good time to jump in before it potentially starts climbing again. It currently has a dividend yield of 3%.

JNJ Dividend Payout History

YearAnnual dividend per share
2006$1.41
2007$1.62
2008$1.80
2009$1.93
2010$2.11
2011$2.25
2012$2.40
2013$2.59
2014$2.76
2015$2.88 estimate

With dividend growth stocks the important metric isn’t the dividend yield, but rather it’s the rate of dividend growth over time. 🙂

The biggest headwind to Corus is that the regulator CRTC wants to impose a pick-and-pay model next year which could hurt revenues of Canadian entertainment companies. Netflix and other fast growing competitors are another risk to watch out for. The CEO of Corus seems to be pretty confident in its financial future though, and says the dividend is safe. 🙂 The biggest problem Johnson & Johnson has is the strength of the US dollar right now. But foreign exchange headwinds tend to be more temporary than systemic so JNJ is still a viable long term hold me thinks.

Thanks to the new addition of these two stocks in my portfolio my dividend income is now $140/year higher! 😀

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Random Useless Fact

15-07-modified-foods-gmo

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RICARDO
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RICARDO

Congrats on those buys LI. Personnally, I sold off JNJ a few years ago with a nice profit on the stock and exchange rate. I would consider it again around the $90US level as that, in my opinion. would leave a good potentilal upside. I find the value of the stock to quite “high” in that it takes a lot of money to buy very few shares. Add to this the exchange rate which is not in our favour right now and I just find it a little bit too much of a stretchfor me at this time. Another “and” is if our CDN$ appreciates then it can wipe out some of the value on a sale, WHen will our $ apprecaite? Some time in the future. Your guess is as good as mine. If our dolar goes down then you are making money if you sell. JNJ is a great company so I still look at them just about every day to see if they hit a slippery slope. I sold JNJ and bought KMI. Just that move doubled my dividends. Held in an RRSP so NO tax consequences. Personnal taste as to the entertainment industry. I have held… Read more »

roadmap2retire
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roadmap2retire

Nice purchases, FI35.
Media is really an interesting aspect of investing – and as us bloggers know – content is king. If I remember correctly – you also bought some Time Warner or Fox recently didnt you? I dont really own any media companies per se, but I like the fact that BCE has been growign their media division over the years.

Cant go wrong with that JNJ either. Keep that dividend growing month after month!

R2R

ps: Interesting pics about selecting breeding…although that chicken looks like its on roids 😉

Tawcan
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Nice buys. We bought some CJR.B before the recent price drop so might consider adding more the average down the price.

Wow those chickens really “beefed” up. 😀

beth
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beth

I am watching JNJ because I think they may drop soon. They are heavily promoting a new hepatitis drug in the US and there have been some serious side effects occurring that will either force the drug to be removed from the market or to restrict the number of people it can be prescribed to. If the FDA makes an announcement or if JNJ withdraws voluntarily it will drop and be a bargain. These side effects will affect Gilead (which everyone seems to be buying) as well as the JNJ and Gilead drugs are taken together for Hep C.

Stephen
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I also own some JNJ, keeping it for the steady dividends, don’t expect much appreciation out of it though. I’m up maybe 2% on a good day.

DivHut
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Thanks for sharing your recent buys with us. I’m familiar with dividend stalwart JNJ but not CJR though I wouldn’t buy any stock on margin no matter how low the borrowing rates are relative to the dividend received. I guess I just don’t like the idea of leverage/debt. At current levels why not consider the Canadian banks instead such as BNS, TD or RY?

vivien
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vivien

can u elaborate more on exit strategy? Once u hit the million dollar in overall net worth what will be the process wrt converting assets into dividend portfolio after debts repaid?

Gradual or immediate?
Will u keep your day job n maintain current standard of living?
How will u approach your prenup?

Giselda
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Giselda

Good luck with CJR.B – I suspect Warren Buffet would label it a cigar butt…

Not Working
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CJR.B : I don’t like it either nobody knows where the bottom is.
JNJ : Consolidation but at least you bought at the bottom of it. anything under 96.50 i would worry for another drop

Good luck 🙂

Dan
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LI, have you not considered buying Corus debt instead of the equity?