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
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.
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. 😉
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
|Year||Annual dividend per share|
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! 😀
Random Useless Fact