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Wednesday, February 24, 2010

Debts and dividend: The 100 000$ assets strategy for 2010 in review

I really like to move on with this. In the previous post, I talk about a:
100 000$ in assets + 30 000$ in debts formula.

I want to elaborate more on my strategy.

We’ll start with the debts:

8 517.94$ at 4.75% = 404.60$ in annual interest
4 817.03$ at 3.5% = 168.60$ in annual interest
4 436.21$ at 3.9% = 173.01$ in annual interest
3 587.13$ at 8% = 286.97$ in annual interest
10 000$ at 4.75% = 475$ in annual interest

Total of debts: 31 358.31$
Total in annual interest rate: 1 508.18$

As you can see, my latest loan, my RSP loan, is set at 4.75%. It’s a bit high, but it’s been set up for 5 years. I could got a lower interest rate at only 3.25%, but it was only available with a one year loan and with a 10 000$ loan, it would had made too much for me in monthly payments. So I prefer this set-up, especially knowing that I will not face any penalties if I decide to reimburse earlier than 5 years or if I make any extra payments among the way. Great!

So this mean that overall, I am exceeding the 30 000$ in debts. I now have exactly 31 358.31$ in debts. Am I playing safe? Well, at this point, I have reached what I consider as being the maximum that I can hold in debts. After this RSP loan, I am not looking to increase more my level of debts. This is being safe. I know my limits. Ok.

As for the interest rate, annually it make an amount of 1 508.18$. That’s quite some money. But…. Remember our annual dividend earning? We are going to update it become some new stocks and units had recently join the gang. Here it is, our annual dividend income:

Sprott Inc. (SII): 505 stocks x 0.10$ + (let’s suppose Sprott Inc. will provide a special dividend like last year) = 126.25$
Bank of Nova Scotia (BNS): 105 stocks x 1.96$ = 205.80$
Methanex Corporation (MX): 103 stocks x 0.62$ = 63.86$
Fortis (FTS): 104 stocks x 1.12$ = 116.48$
Pembina Pipeline Income Fund (PIF.UN): 413 units x 1.56$ = 644.28$
Just Energy Income Fund (JE.UN): 423 stocks x 1.24$ + the 2010 special dividend =
Yellow Pages Income Fund (YLO.UN): 429 units x 0.804$ = 344.92$
Bell Aliant Regional Communications Income Fund (BA.UN): 100 units x 2.904$ = 290.40$
Pengrowth Energy Trust (PGF.UN): 106 units x 0.84$ = 89.04$
Enbridge Income Fund (ENF.UN): 304 units x 1.152$ = 350.21$
Corby Distilleries (CDL.A): 100 stocks x 0.56$ = 56$
Davis + Henderson Income Fund (DHF.UN): 100 units x 1.836$ = 183.60$
= 3 077.56$
+ let’s add 100$, supposing the DRIP system will provide an extra income of 100$
= 3 177.56$

And 3 167.35$ - 1 508.18$ = 1 669.38$

Ok, I have more than 30 000$ in debts, in the deep red… but even at this time, my current annual dividend income provide me enough to cover up the cost of interest. So I am a winner all the way when it comes to outside of RSP dividend and debts. I am saying outside of RSP dividend become we will soon have a RSP dividend income, check it out, it’s coming soon! The only thing that disturb me is the 100$ fee that will make me TD Waterhouse pay for investing inside RSP. There’s no management fee at 25 000$. But less than 25 000$, the management fee is of 100$, which I find very extraordinary annoying. That’s why I haven’t been set-up for the RSP at TD Waterhouse yet. But at the same time, I just cannot wait to place more trades!!!

Anyhow, you now have an overall picture of my debts vs dividend kind of deal and you now know the reason why I am not in a major rush to pay off my debts.

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