Dec 302014
 

Financially speaking this has been the best year for me so far. Here’s a 2014 year end review and some updates about what’s been going on in my personal life.

Braces Removed

Earlier this year I decided to get braces for financial reasons. According to my research people with very straight teeth make more money than the average person. The total cost was $2,000 but I think this will turn out to be a great investment in the long run. So here’s an update. A couple of weeks ago I got them removed!

14-12-braces-food

My teeth look great and I’m more confident about my smile 😀 which, according to science, should help me earn more money. 😉 The only issue now is I have to wear a retainer pretty much all the time which makes me sound kind of funny when I talk lol.

Stock Markets Climb

Last year in 2013 the U.S. stock markets gained 30% so many investors decided to sit out in 2014 because they thought stock prices were overvalued. But the Dow in the U.S. gained 9% this year, and up here in Canada the TSX gained about 7%. These 2014 gains are on par with average historical stock market returns. This just goes to show that we should not try to predict future market performance using information from the previous year.

Buy stocks for the profitable companies they represent. For example, I posted my analysis for Dollarama, and explained with logical reasoning why this recession-proof business should outperform going forward. I also blogged about investing in Time Warner, and 21st Century Fox and discussed why these are excellent long term investments.

Today, Dollarama shares are up 34% from when I bought them. Both Time Warner and Fox shares have also returned double digits from my purchase price. No wonder my net worth has been growing like a weed. 🙂 It’s no big deal really. I’m not a stock picking wiz or anything. 🙄 Investing simply works for anyone who follows the basic principles of buying great companies at decent valuations! 😀

Oil Price Slump

Unfortunately, not everything is up this year. The one area of my portfolio that suffered lower prices was oil companies. Luckily I’m well diversified so the impact wasn’t that bad. The important thing is to hold onto large cap energy producers like Suncor and Canadian Natural Resources. Despite the oversupply of oil in the world Suncor shares are still worth more today, $37/share, than when I purchased it last year at $28/share. Large companies don’t get hurt as much when the sector in general underperforms.

Tim Hortons Resolution

Many of you have asked me what I plan to do with my 20 shares of Tim Hortons now that Burger King is buying them. There are usually a few options for shareholders when their company is being taken over. My 3 options, specifically in this case, are:

  1. Cash Tender – To receive $88.50 CAD for each common share of Tim Horton Incorporated tendered.
  2. Stock Tender – To receive approximately 3.0879 common shares of Holdings (to be renamed later) for each common share of Tim Horton Incorporated tendered.
  3. Cash & Stock Tender (Default Option) – To receive $65.50 CAD plus approximately 0.8025 of a common share of Holdings (to be renamed later) for each common share of Tim Hortons Incorporated tendered.

I am going with the default option number 3. I purchased Tim Hortons share for about $50 each back in 2013. Option 3 basically gives me an immediate 30% return on my investment, plus I’ll receive shares in the new holding company, which is a nice bonus. 🙂 I also don’t have to worry about taxes because the transition will take place in my Tax Free Savings Account.

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Aug 262014
 

Looks like a merger is on the menu for Burger King 🙂 It’s currently in talks to merge with Canadian company Tim Hortons and move its headquarters up here to Canada 😀 Tim Hortons is a quick service coffee chain that has a strong Canadian identity. Here’s a drive thru window at a typical Tim Hortons.

14-08-canadian-tim-hortons-drive-thru

Last year I blogged about buying some Tim Hortons shares and how investing in the coffee industry is the best idea ever! Thankfully my investment paid off because each share today is worth about 62% more than when I purchased them. Tim Hortons’ performance has beaten the overall stock market index in both Canada and the U.S. 🙂

If the acquisition is successful Burger King and Tim Hortons would continue to operate as individual franchises. You won’t find Timbits in your Whopper, and you won’t be offered fries with your coffee, haha 😆

The merger would benefit both companies. Right now Tim Hortons sells most of its coffee in Canada because it faces tough competition in the U.S. from Starbucks and Dunkin’ Donuts. But Burger King is already established in the U.S. and also has locations in Latin America and Europe, so Tim Hortons can use those valuable business channels to expand its brand awareness, and gain better access to global markets. Meanwhile Burger King would benefit from the high margin coffee business and also save money via tax inversion.

Tax inversion is when a U.S. company that has large overseas markets moves its main corporate office into a lower tax country. This allows the company to reposition itself as a foreign corporation so it can return foreign profits to stockholders without double taxation. This means if the merger is successful Burger King will get to pay a lower income tax, which will leave more after tax profits for its shareholders 😀

14-08-tax-inversion

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Apr 052014
 

Remember last year when I explained how investing in coffee businesses was an awesome idea? Well good news, because it looks like the daily grind is paying off 😉 One of those companies, Tim Hortons (THI), recently increased its dividends from $0.26 to $0.32 per share!

That’s a 23% dividend increase! Holy hamburgers! That’s amazing eh (゜∀゜) I only bought 20 shares of Tim Hortons at $50 per share, so all it took was just $1K of my personal savings to make this happen. Ain’t it great that we don’t need a ton of money to start investing 🙂 The first payment under the new increased rate was distributed last month. Here’s a look at what that dividend payment looked like for me.

Capturetim Tim Hortons

If you buy your doughnuts or coffee from Timmy’s I would like to say thank you on behalf of all Tim Hortons shareholders 😀 Without loyal customers like you, this company would not exist today. I look forward to receiving another $6.40 in June, and so on and so forth until the dividend is raised again! Aw yiss 😀 Collecting passive income is so exciting \(^_^)/

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Jan 242013
 

In the US alone the entire coffee industry is valued at $20 billion a year.  In the quick service business, companies like Starbucks and Tim Hortons have such loyal customers that people are willing to sacrifice a part of their busy morning lives and wait in long lineups to get their cup of joe. In the past I couldn’t help but notice how many people I see everyday walking around with Starbucks coffee cups in their hands, and I thought hey if I were Starbucks, I could have just made some money from these folks. Well it’s time I stopped missing out. It is time to take action! So earlier today I bought 20 shares each of Tim Hortons and Starbucks 😀

2013_buy_sbux_thi

Starbucks for example had $13.3 billion in sales last year, from which they made $1.4 billion in profit. Out of that profit, they paid about $535 million to shareholders as dividends.

In other words, for every $4.00 cup of coffee they sell, it costs them about $3.60 to make, so they end up keeping about 40 cents as pure, after-tax profit. Makes good sense so far right? Out of this 40 cents, about 15 cents is paid to their shareholders (like myself) in cold hard cash (goes straight into my trading account) and the remaining 25 cents of the profit is used to further invest in the business such as establishing new locations, for example.

Starbucks has about 743 million shares in total, and I now have 20. Which means I own about 0.0000027% of the entire company :0) That means every time I see someone buying a cup of coffee (let’s say for $4) I know that they just gave me 0.0000004 cents in passive income (dividends,) or if I still remember how to do my scientific notations (4×10^-7) I know that doesn’t sound like much and I can’t really buy anything with 0.0000004 cents but think about all the billions of cups of coffee Starbucks serves around the world every year 😀 It all adds up! Anyone who buys just 1 stock of Starbucks today can expect to receive at least $.72 in dividends this year. Not to mention, Starbucks has a history of increasing dividends :0)

Starbucks dividend distribution history:

  • 2012 – $0.72 per share
  • 2011 – $0.63 per share
  • 2010 – $0.57 per share
  • 2009 – $0.51 per share
  • 2008 – $0.41 per share
  • 2007 – $0.38 per share

As you can see even during the great recession this company still managed to grow their business and give increasingly more dividends back to their owners. Starbucks is currently working on plans to open up another 3,000 stores in the Americas in the next 5 years, not to mention their other plans for the Asian markets. This tells me that their dividends are safe and their business outlook is strong, otherwise why would a company choose to expand if they don’t think they can get more sales? Think about how big Starbucks will become in 2020. That’s why I’m getting into the business now and holding it for the long term.

With three big names in the coffee service business all working for me I now collect altogether $155 a year in dividends from them 😀

if coffee is your daily grind you have 3 to choose from

To all those fabulous people who are regular customers of these fine franchises. Thank you so much for your business and for mocha me very happy (^-^)Your continuous support will bring me one step closer to financial freedom.

Disclaimer: I have 40 shares of MCD, 20 shares of THI and 20 shares of SBUX 🙂 Long all the stocks.

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Random Useless Fact: Despite living in Canada and even hosting the 2010 Winter Olympics, Vancouverites are notoriously bad for driving in the snow for some reason.coffee can give you the energy to drive to work