Nov 232015

Discounted Reinvest Plan 👌

Stocks that pay dividends often offer a Dividend Re-Investment Plan (DRIP) for its shareholders. I’ve written about how that works in previous posts. It basically means instead of receiving cash distributions, investors can choose to reinvest the dividends by automatically buying more shares or units of the same stock.

Normally when we buy an investment we can expect to pay the market price for it. But there’s a guaranteed way to purchase certain stocks at a discount to the market price every time. :)

Today I will demonstrate this example with one of my holdings, Smart REIT, which I blogged about a couple months ago. Currently Smart REIT (SRU.UN) pays a distribution of $0.1375 per unit every month.

The distribution date for this month was on November 16th. The average TSX market price of SRU.UN over the 10 business days prior to this date was used to determine the DRIP price for existing investors who wish to reinvest their distributions.

The average price of SRU.UN over the 10 trading days preceding the monthly distribution date was about $31.32. This is the market price that most investors would have to pay. However, when my Smart REIT distributions re-invested, I was able to purchase a new unit this month via DRIP for only $30.44, as shown in my portfolio activity below.


$30.44 is 97% of the average price on the market over the 10 business days. 😀 This 3% discount is the bee’s knees and saved me 88 cents! Wow! 💰

DRIP Purchase Discounts

DRIP discounts are very effective at retaining investor loyalty. :)

Unitholders who elect to participate (in the DRIP program) will see their monthly cash distributions automatically reinvested in units of SmartREIT at a price equal to 97% of the average TSX market price over the 10 business days preceding the monthly distribution date.” ~Smart REIT’s website.

While everyone else pays the market price to acquire SRU.UN, existing investors who DRIP can pick it up for cheaper. Other companies like Enbridge and Sun Life Financial offer DRIP discounts too. Some REITs such as Allied Properties even offer discounts up to 5% to its investors! Imagine purchasing new shares and units of our favorite companies that we already own, and paying less than market price for it every time with no commissions or fees. :) Great Scott! Over time this should give us a significant leading edge over other investors who don’t DRIP and only purchase stocks at market price.

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Nov 202015

Investing in Energy Infrastructure – TransCanada Corporation

Pipe dreams can come true. We just have to find the right pipeline company to make it happen. :) In today’s post I’ll explain how to earn a tangible profit in the stock market with minimal effort and risk. And the best part is we don’t need any savings to do this. 😉 I actually use this strategy a lot for my retirement planning. It’s known as the Stable Leveraging technique.

The purpose of stable leveraging is to use credit in a low-interest rate environment to harness the high yielding potential and long term stability of energy infrastructure companies in order to make some easy money. And it only takes a few minutes to set up if we already have a discount brokerage account.


How does Stable Leveraging work?

We simply use borrowed money to invest in common shares of pipeline companies. Then we use the earned dividends from the investment to pay off the interest incurred from the loan until the economic situation changes.

This investment philosophy is very different than “I have $X. What should I invest it in?” because Stable Leveraging assumes we have no money to begin with and therefore puts the risk of investing on both the borrower, and the lender.

What do we need to make the stable leveraging strategy work?

  1. A publicly traded, large-cap, blue-chip, dividend growth stock in the pipeline sector that’s been operating for at least 50 yrs.
  2. This stock must also be trading at a discount relative to its peers, and its own historic P/E ratio.
  3. A reliable source to borrow cheap money from, that costs at least 1 percentage point less than the pipeline stock’s yield.
  4. A 10 year investment horizon minimum, and the stomach to deal with market fluctuations.
  5. An exit strategy.

These 5 criteria are the essential ingredients to pulling off this maneuver successfully with minimal risk. 😉 One company that foots the bill is TransCanada Corporation.


Earlier this week I purchased 100 shares of TransCanada Corp (TRP) using 100% borrowed money. I will use my example to demonstrate the advantages of implementing stable leveraging. TransCanada is publicly traded on both Canadian and U.S. stock exchanges. 😉


I paid commission of $9.99 to make this trade, so the total cost is $4,209.99. For the purpose of this post I’ll use $4,200 to make the calculations look cleaner and to make the strategy simpler to explain and understand.

I used my margin account at TD to borrow about $4,200 to buy 100 shares of TRP at $42 per share. The rate of interest I incur on this borrowed money is 4.25%, which would be the same as anyone else using TD’s services. But since I borrowed the money to invest, my 4.25% annual interest rate is tax deductible which makes my effective after-tax cost 3.0% per year on the $4,200 loan.

I used the loan to purchase 100 shares (for $4,200) of TransCanada Corp, which at the time, had a dividend yield of 5.0%. Since these dividends are eligible for the Federal Dividend Tax Credit, my after-tax dividend yield is 4.8% per year.

Since my effective cost of borrowing is currently 3.0%, and I’m earning 4.8% on my TRP investment, the difference between the two (1.8%) is how much I take home each year. 1.8% of $4,200 is about $75. It’s not much, but it’s $75 of passive income nonetheless. The balance of my loan will remain at $4,200. The principal does not get repaid. Dividends are deposited into my account, and interest payments are withdrawn automatically. :)

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Nov 052015

The Marijuana Industry

More and more investors are noticing the high market potential of cannabis. 😀 It’s easy to see why. Data suggests that the budding marijuana industry is one of the fastest-growing in North America. In 2013, the total revenue of the legal pot industry in the U.S. totaled $1.5 billion. By 2014, revenue jumped to $2.7 billion. It’s expected to reach $3.5 billion this year, and then up to $4.5 billion in 2016.

Those aren’t particularly large numbers. By comparison, the beer industry in the U.S. is about $100 billion a year. But the weed industry has a lot more potential for growth. Nearly half of the states in America have already legalized marijuana for medical use. And a handful of them even approved it for recreational use. :)


The problem with investing in pot companies in the past was simply that the market wasn’t big enough, and the industry’s future was too uncertain. Banks and venture capitalists were reluctant to financially back cannabis companies due to legal issues and the high-risk nature of a largely unregulated substance. :(

However, ever since Colorado and Washington legalized the recreational use of pot in 2012, there has been a great amount of pressure for more states to do the same. Next year voters in at least 7 more states will consider the decriminalization of marijuana.

Funding for marijuana start-ups now is more abundant compared to a few years ago. Dooma Wendschuh is an entrepreneur who makes distilled marijuana extracts. At an investor summit in Denver earlier this year, Wendschuh says he was “besieged by millions of dollars” worth of unsolicited offers to invest in his company. A quick look at his profit margins will explain why. He produces the extracts for only $2, and sells them for $35. 😼 “If you make it, it will sell. It’s unreal,” Wendschuh explains. The industry is slowly losing its stigma and is becoming a more legitimate market for a wider range of investors and financiers. :)

Investing in Pot

What got me interested in this market was Justin Trudeau’s victory last month in the election. I’m not just blowing smoke here.😆 His Liberal Party campaigned on the promise to legalize cannabis on a federal level. Since he has a majority government I’m expecting policy changes to get passed through parliament relatively quickly. The federal and provincial governments will have to work together on new marijuana legislation, so I guess you can call it a joint venture. 😜


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Oct 192015

The Match Company Gets Ready To Go Public!

Do you know what popular dating sites, OkCupid, Tinder, and Plenty of Fish have in common? Well, they are all part of the Match Group of internet dating services which is owned by a single parent company, IAC/InterActiveCorp. This American media and internet business has over 150 brands across 100 countries. :) Recently The Match Group has found some deep-pocketed suitors on Wall St., such as JPMorgan, and Bank of America Merrill Lynch to help it go public.


Once the IPO goes through, Match will be listed on the NASDAQ exchange under the $MTCH stock symbol. It hopes to raise at least $100 million with its initial public offering. Aside from the 4 dating services already mentioned, it also owns about 40 other brands in the online dating space. :) The Match Group products are particularly popular in North American and European markets, and reach more than 190 countries world wide.

Should You Invest in Online Dating?

I’m not usually one to be interested in IPOs. But this one caught my attention because of how fast the online dating space has grown over time. The National Academy of Sciences researched thousands of people who got married between 2005 and 2012 and discovered that more than 33% of those marriages began with online dating. And those people may be slightly happier than couples who meet through other means. Match services have been quite popular with millennials. I’ve used a couple of these sites myself in the past. I talked to this one girl online, but we just didn’t click.

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Oct 102015

New Purchase: Royal Bank of Canada Stock 🍁

September has historically been a bad month for the stock market, and this year was no exception. This is why I didn’t invest aggressively last month. However now that it’s October, I decided to get back into buying more equities. :)


So after looking through my watch list of different companies, I’ve decided to invest in shares of Royal Bank of Canada. 😀 I usually don’t keep disposable cash lying around so last week I borrowed $4,000 from my TD margin account and transferred the money into my TFSA to buy 55 Royal Bank shares (RY.TO) at $71.30 each.


I know purchasing about $4K worth of stocks with no money down sounds a bit risky, but I think I’ve made the right decision here. 😀 The stock pays me a 4.43% dividend yield, which happens to be more than the 4.25% interest I’m being charged for the margin loan. As long as I plan to hold the stock until my retirement and can service the cost of the loan, then I don’t see any downsides to financing this entire purchase with debt. :)

Royal Bank Stock Analysis


After doing some research and analysis on this company here are some reason why I chose to buy this stock.

  • It can print currency. Due to fractional-reserve banking, all chartered banks can create new money through lending. This license to manipulate the money supply in the market has many unique advantages.
  • Safety and stability. RBC is currently the largest company in the country, worth $106 billion by market capitalization. An economy of scale offers RY a competitive edge against smaller rivals. Even if Canadian banks run into solvency problems in the far future, the CMHC or other Crown corporations will probably step in to bail them out. In the U.S. the government’s TARP program in 2008 transferred $431 billion to struggling U.S. banks.
  • Growing profits. Royal Bank continues to deliver earnings growth year after year. According to stock analysts the estimated earnings in 2017 will be around $7.35 per share, which would make RBC 19% more profitable than last year’s actual earnings.15-10-royal-bank-stock-earnings-growth
  • Attractive valuation, relative to historical averages. The P/E ratio is used to determine how much investors are willing to pay for a stock. A high ratio signals that buyers are willing to pay a premium for the shares. But lately the trailing P/E ratio of Royal Bank (Blue line below) is at the lowest it’s been in years! This P/E compression won’t last forever so right now looks like a good time to start accumulating a position.15-10-ry-royal-bank-price-to-earnings-ratio-historical
  • Growing dividends. According to its investor’s relations, RY has increased dividends by more than 400% since the year 2000. It increased dividends almost every year, except during the financial crisis period.
  • Protection against rising interest rates. RBC holds about $463 billion in net loans. If it can charge even 0.25% more interest on average, then that’s an additional $1.16 billion of revenue every year, minus loan lost provisions. A rising interest rate environment benefits all banks. The more interest homeowners pay for their existing mortgages over the next 25 years, the more money Royal Bank can make from those loans. :)
  • Potential split soon. The stock tends to split 2:1 when each share reaches around $80 to $90. The most recent split was in 2006, and then in 2000 before that. The share price is currently around $74 today. Stocks splits create more demand since each share becomes more affordable to own for new investors.

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