Feb 212015
 

Last month I blogged about investing in German real estate through a Canadian REIT called Dream Global. I chose this investment for its strong foothold in the European economy and for the consistent high yield. Normally dividends from foreign investments are taxed. However because I’ve bought DRG.UN in my Tax Free Savings Account it wasn’t really clear what would happen. Well yesterday I received new confirmation in my brokerage account so I thought I’d post an update. Thanks for the reminder, Bricks. :)

Each Dream Global unit currently pays out $0.066667 per month. Since I purchased 180 shares in January I received $12 in distributions this month. As it turns out there doesn’t seem to be any withholding tax on these payments. :) Below is a history of my TFSA transactions for 2015 so far. As we can see near the end of January I initiated a buy order for Dream Global REIT. And then on Feb 13th, when the company paid its investors, I received $12.00 in my account. :D

15-02-dream-global-purchase-drip

If there had been any foreign with-holding tax it would have been deducted from my account on the same day as I received the DRG.UN distribution. For those who are curious, The abbreviation “TXPDDV” is simply TD’s transaction code used to describe money earned from a combination of different sources including dividend, interest, foreign dividend, capital gains, or return of capital. This is an administrative code used for tax purposes on a T3. In an unregistered account this “TXPDDV” designation means that tax factors have not yet been applied and is frequently misinterpreted as an indication that tax has already been paid. However in a registered account, such as a TFSA or RRSP, there are no T3 tax slips associated with these types of distributions. I called TD Direct Investing earlier today to confirm and that’s what one of their associates told me. So yay. :) I should have invested in this company sooner. 8.7% annual yield on DRG.UN and no tax!

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Jan 292015
 

A couple of months ago my investment in Tim Hortons came to an end as the company was purchased by Burger King and I realized a profit of over 100% in less than 2 years. In the end I was given some shares of the new holding company, and a handsome payout of $1,700 in cash. If you also bought some Tim Hortons after reading my previous post about why I decided to invest in the world of coffee then congrats on your gains! :D

So I’ve been itching to invest the new $1,700 in my TFSA. But the problem was TINA. The stock market in general is grossly overvalued relative to historical price to earning ratios. The Canadian real estate market doesn’t look any cheaper, and the capitalization rates (expected return on rent) in most cities here are embarrassingly low at the moment. Furthermore, Canada’s economy just suffered a net loss of 11,300 jobs last month, which pushed up our unemployment rate to 6.7%. :(  All major banks in this country have lowered their Prime lending rates to 2.85% in an attempt to encourage more economic growth. In times like these it may be prudent to hold off on investing in Canada.

So does that mean there’s nothing worth investing in right now?

Nein! :D By thinking outside the box I have found a solution to still put my extra cash to good use.

15-01-investing-german-real-estate

Dream Global REIT (TSX: DRG.UN), formerly Dundee International Real Estate Investment Trust, is an investment trust that basically buys office and retail buildings in Germany, and then rents them out to make money. Its portfolio consisted of 279 properties, comprising approximately 15.8 million square feet. Dream Global enables investors like us to diversify our holdings, as major pension plans and other large institutional investors have done, by incorporating international commercial real estate into our portfolios. :)

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Dec 262014
 

I finally sold my shares of Potash Corp./Saskatchewan Inc a couple of days ago. I first bought this company in 2012, and when it dipped in price earlier this year I bought some more to average down. I got rid of this stock now because I don’t want to risk it dropping in the new year. Overall I only made a $129 profit on my investment of $2260. Not the greatest win I’m afraid, but better than a loss. :)

Here are the details of my transactions.

June 26th,  2012
I bought 45 shares of POT on the Toronto Stock Exchange. The earnings of the company looked good, and the dividend was stable. Potash Corp provides fertilizer and other services to help grow the food we all eat. I thought the fundamentals for farming is strong so I bet $600 of my own money on it, and borrowed some money on margin.

Purchased 45 shares at $43.74 per share.
Total number of shares owned = 45
Average cost per share = $43.74
Total investment = $1968.30 ($600 of my own money. The remaining ~$1370 from a bank loan.)

Jan 21st, 2014
After a potash producing cartel in Russia unexpectedly pulled out of the global market the price of potash mining companies around the world, including POT, fell sharply. Instead of selling my stock at a loss I decided to double down on my investment and picked up another 45 shares with $1660 from my savings.

Purchased 45 shares at $36.90 per share.
Total number of shares owned = 90
Average cost per share = $40.32
Total investment = $3628.80 ($2260 of my own money. The remaining ~$1370 from a bank loan.)

Dec 24th, 2014
Sell everything. I don’t see any catalyst in the near future that would give POT shares a boost so I’ve decided to take my winnings and move on.

14-12-swing-trade-potash-sell

Gross Proceeds: Total = $3933.80 
Sold 90 shares at $41.72 each = $3754.80
Dividends: $179

Expenses: Total = $1545
Margin loan principle: $1370
Margin interest at 4.25%/year: $145
Trading commission: $30
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Net Proceeds: $2388.80
Principle Investment: $2260

Total Profit = $129 or 5.7%

This the longest time I’ve held onto a stock for swing trading. It technically isn’t even a swing trade anymore lol. I plan to use the money from selling my POT shares on better opportunities in the new year. :)

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Random Useless Fact:
When choosing a baby name, put an important title in front of it and see if it still works.

Nov 062014
 

How Midterm Elections Affect the Stock Market

Imagine if you knew an investment strategy where the historical odds are almost 100% in your favor! :D Well here’s how. :) Since 1942 there has been 18 midterm elections, not counting the one that just happened earlier this week. Every single time the S&P 500 has gone up after one year following each of those elections. The average stock market gain over the 12 month period following all 18 elections was 16%. :) If we only look at what happened after just 6 months following the midterm elections, once again 18 out of 18 times the S&P 500 rallied, and on average by 15%. Chart below for details. (source)

14-11-midterm-election-stock-performance

As we can see, the chart shows the percentage change of the stock market index after 3 months, 6 months, and 12 months following each midterm election. The only negative change is after the 3 month period following the 2002 midterm when the S&P 500 dropped 8.7% as shown in brackets. Every other time the stock market has gone up. :) This indicator has been very consistent because regardless of which party wins in the house or the senate the results of a midterm election adds certainty to the political landscape. And certainty gives confidence to the financial markets. :)

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Oct 192014
 

Overreaction leads to market turmoil

Over the last several weeks investors saw a 10% correction in the Canadian stock market, and a 9% correction in the U.S. Someone with a $100,000 portfolio invested in index funds could have just lost $10,000. Ouch. :| Is this market sell off justified or is it simply an overreaction to some recent bad economic news? First, let’s review what those news are.

  • The Canadian dollar has dropped to a 5 year low
  • Germany’s economy is weaker than expected
  • The rest of Europe is still in a mess of unemployment and stagnation
  • Last week the Athens Stock Exchange in Greece tumbled more than 6% in one trading day.
  • ISIS is causing havoc in the Middle East
  • Ebola fears

I currently own shares in the Bank of Nova Scotia (BNS.) It’s one of the largest companies in the country and has been around for over 180 years. Over the last month the price of this stock fell 8%. Instead of asking where the stock will go from here, we should instead be asking does all the recent bad news justify an 8% drop in value for one of the largest banks in Canada? My answer is absolutely not. :P It’s important to remember that when we buy a stock we are literally owning a part of that company. This means we, as stakeholders in Scotiabank, are still entitled to split the $6.5 billion profit that the company makes every year, regardless of how the price of BNS shares performs in the short term.

14-10-overreaction

 

A lower loonie will likely spur economic growth and will not hurt Scotiabank’s profitability. Europe’s stalled economy is nothing new and Canadian banks don’t lend that much to Europeans anyway. The media has succeeded in sensationalizing the threat of Ebola in the U.S. Yes it’s a terrible disease, and there’s an outbreak in Africa. But Ebola will not hinder businesses in the U.S. and Canada from continuing to rake in profits. Literally more Americans have been married to Kim Kardashian than have died from Ebola – both a terrible fate. :(

For the intrinsic value of Scotiabank to actually fall by 8% substantial circumstances would need to be met, such as major accounting fraud or a 10% national unemployment rate, that would legitimately jeopardize the company’s ability to make money. The recent news is relatively trivial so an 8% correction of BNS shares seems like an overreaction. Imagine selling our stocks now only to see the markets rebound next month and regain all its losses. :|

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