Apr 242012
 

I recently updated my Dividend Subsidizing Hedge Fund thanks to a reminder from a reader. I’m receiving more subsidies now in all categories. The biggest WIN is that my monthly electricity bill is now 100% subsidized by the utility industry and its partners. This means I don’t have to pay another dime of my hard earned money to pay for my electricity usage ever again (or at least for the foreseeable future.)

I have been slowly buying shares of energy distributors over the last few years, and now I finally have enough of their stocks to receive the dividends needed to fully fund all my electricity needs. It took 3 years and over $8,000 of my personal savings but it’s totally worth it (^o^) My most expensive electricity bill ever was $28, but for most months it’s under $25. To be safe I’m going to assume I spend $30 every month on electricity. However I also get $30 of dividends a month from companies in the business of providing electricity to people’s homes. This $30 dividend is kind of like a rebate, because I’m basically getting a 100% refund from the same group of people whom I just paid. If I became unemployed tomorrow, I don’t have to worry about not having power at home since my electricity bill will technically be paid for, by its own industry.

Here are the companies paying my hydro-electric bill right now.

Just Energy (JE.TO)
They sell electricity to residential and commercial clients. They currently have a dividend yield of a jaw dropping 9.75% and is traded on both the Canadian and US stock markets. Some of their products are sourced from renewable energy like wind, hydro, or biomass. I have $1920 worth of stocks in this company.

Enbridge (ENB.TO)
A pipeline company that mainly distributes gas but is also in the business of alternative energy and power transmission. Its dividend yield at 2.89% may not be as high as other utility companies but most of its growth comes from its appreciating stock price, which is up over 50% since I bought it in 2009. I currently have $1520 worth of Enbridge shares.

SNC Lavalin (SNC.TO)
A world class engineering company that makes dams, bridges, reservoir, power stations, etc. SNC doesn’t provide electricity to people, but they work closely with BC Hydro, and other utility companies. They are an essential part of the energy infrastructure in this country and around the world. And part of the reason our electricity bills keep going up is because companies that make electric generators like SNC are charging more to build and maintain them. There dividend is 2.41%, and I own $5265 worth of shares in this company.

My stock holdings in those 3 companies above provide me with $360 of dividend income per year. As long as everyone else in society is paying their electricity bills on time these companies will continue to make money, and continue to distribute dividends, which means I’ll continue to receive enough funds to cover my own hydroelectric usage.  Unfortunately there is no direct way to invest in the equity of BC Hydro (my actual electricity provider) otherwise I would. This is the bane of government operated services. There’s no competition and no way for investors to benefit if the company performs well. On the other hand, a crown corporation does keep electricity prices predictable, and makes society more stable, so I can’t complain too much.

Mar 042012
 
February was a pretty average month. There were no unexpected expenses and I didn’t overspend on my budget. Starting March, the income for my part-time job will be reduced by half because they’ve cut my hours due to the school’s scheduling. Which means I can spend some extra time sleeping, or doing something equally productive ┐(‘~`;)┌  The big rally in the stock markets in Feb and my savings are the main reasons for the positive movement in my net worth.
*Side Income:
  • Part-Time Work = $800
  • Dividends = $200

*Discretionary Spending:

  • Eating Out = $100
  • Others = $100
*Net Worth: (MoM)

  • Assets:
  • Cash = $4,000 (+$1,900)
  • Stocks = $72,500 (+$700)
  • RRSP = $21,600 (+$100)
  • Home  = $248,000
  • Liabilities:
  • Mortgage = $207,900 (-$300)
  • Margin Loan = $18,700 (+$2,000)
  • Bank Loans = $3,700 (-$1,700)

*Total Net Worth = $115,800 (+2.39%

My biggest mistake was to buy SNC-Lavalin in 2011. I should have waited until now.  Earlier this month my portfolio’s value dropped by more than $1,000 within one opening session from this one company alone. This is why we should never put all our eggs in one basket. My swing trade on HVU.TO from early February is also losing money for the time being, but I’m not concerned about that trade for now as I expect it to be volatile, and have already put in place an exit strategy. SNC is of bigger concern at this moment because I’ve got over 100 shares, and if they continue to make poor decisions I will continue to lose money. But they are the largest engineering company in the country so I’m still relatively confident they can turn this thing around \(^_^)/  Overall,  the month went okay.

* Numbers are rounded to the nearest $100.
Feb 292012
 

Last year I invested heavily into 2 engineering firms. Most of that money went into SNC-Lavalin (SNC.TO) which is in Canada but with projects all over the world. The other is a large German company called Siemens (SI:NYSE.)  I chose SNC because of it’s strong balance sheet, large market cap (over $5 billion,) and its long track record of being in business for over 100 years. My other choice was Siemens because of its massive sales which resulted in over €6 billion in profit last year, it’s relatively low P/E ratio of 10, and I happen to like using their products. I don’t actually know how they pronounce Siemens in Germany, but it’s probably not the same way I make it sound like in English

Unfortunately earlier this month a couple of SNC executives left the company and then there were news reports about them conducting unethical business practices in Libya. Then yesterday SNC said its net income for 2011 will probably be 18% lower than a previous forecast. Part of this comes from an unexplained $35 million in expenses which they didn’t even know about. So right when they released this news yesterday, in literally a single day, my SNC stocks fell by 20%  ( ゚ Д゚)!!!

Either SNC will continue to spiral down or this minor setback is the perfect opportunity to buy some more. Judging by what those helpful financial analysts are saying, nobody knows yet what’s going to happen. SNC currently has a dividend yield over 2% and I bought it for the long run, so I don’t plan to sell it any time soon. They are 1 of the 10 largest engineering firms in the world and I hope they can make a comeback one day. Siemens on the other hand is doing pretty well, up 4% so far this year.

Today’s Lesson: Even large, blue-chip companies can have dramatic downswings and you can lose 20% of your money in one day. Buy an index fund if you can’t stomach this kind of volatility.

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Switching topics now, my recent Stock to Cash giveaway contest ended today. Everyone made a great effort. I’m sure you all had some complicated formulas to calculate your predictions. But in the end there can only be one winner. Matthew came close. Just 28 cents off the mark which puts him in 2nd place. But the winner of the contest is R.

 

So congratulations Mr/Ms R!!! I have emailed you about how to claim your cash prize of $14.03 CAD. You have until the end of day on March 7th to get back to me. Thanks to everyone who participated. Since only 11 people entered, each person’s chance of winning was actually pretty good, for a giveaway contest. Maybe next time more people will join in.

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Hey this is a leap year. They say strange things can happen on February the 29th. We got a few centimeters (1 inch) of snow in Vancouver today which is unusual for late February, but I didn’t see anything else out of the ordinary.

image source: http://megustamemes.tumblr.com/