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Thursday, November 7, 2013

Could Canadian Tire be a good fit to my portfolio and what happen on the day that Derek Foster open the blinds and other things

Not too long ago, I invested in CT Real Estate Investment Trust (CRT.UN). Its sexy 6.5% dividend yield is what appeal me. But also, fact that Canadian Tire is generating about 90% of its cash in term of property renting or whatever it is, well, that was also quite appealing. Because see, I am dangerously in need of big dividend yield AND conservative business, steady, easy. 

Canadian Tire alone as stock is a little boring for young and fresh investor like myself because what we want first is the money, we want to big yield, so we are willing to jump on anything among the way that promises that. And 6.5% is an impressive yield knowing that blue chips usually pay a lot less than that. Big yields are always pretty sexy and impressive at first,  but I guess you learn, by reading this very precious blog, that yield is not everything. So I try to invest in blue chips and I did very well with CNR, SJ, TRP among other. And I also did bad on various other stocks but that's another story and anyway, I wrote about those other stories before.

The most recent newsletter of Derek Foster make me realize in what a f mess I was in. Want to make a living out of dividend? GOOD LUCK BECAUSE YOU'LL NEED SOME. With all my efforts, I am only at 6 500+ in dividend income. But why is it so low in regard of the thousands invested? One major problem that young people are facing in today economy is that good quality stock only now pay a very little dividend yield. A safe and reasonable dividend is anywhere below 6%. After 6%, you are dealing with stock players like Just Energy Group Inc. (JE). The dividend yield of JE is more than 11%. That is not really reasonable. I am a mega fan of Just Energy and I probably always be just in regard of the personable story of its founder Rebecca MacDonald. But I know too much on how many problems represent a high dividend yield. Usually, when a company like JE decided to decrease its dividend distribution, its stock value decrease as well. That is what happen to me with Colabor Group Inc. (GCL).GCL decrease its dividend and following what, its stock money value decreased as well. 

But a cut in the dividend distribution doesn't always = to a loss in the value of the stock. This was a long long time ago, but back in the times, PGF had declared a dividend cut and following what, I rush to sell my stocks. But following the news, the stock price remains the same. So those things are a bit unpredictable. No one can really know what will happen to the value of a stock following a dividend cut, but most of the time, the price stock will decline in value.

Ok, well, what all this blablabla really about?

Well, 2 days ago, I realize that I would have to work very very hard to be able to retire from my dividend in a very shocking way. It all happen following the reading of Derek Foster latest newsletter.

In that paper, Derek explains that before 2006, before the income trust begin to be heavily tax, well before, it was easy to make money from dividend. And even before that, the stock market was a gold mine. It appears to me that it was a lot easier before than now. Derek Foster doesn't even hold any of the stocks he talked about in his Stop working book that was first published... in 2005. That was one year BEFORE the bullshit happen to what use to me the most extraordinary cash maker of Canadian history, what I used to call my ".UN investments". I had just a little invested and cash was coming OH MY GOD. It was HOT.

But came 2006 and after that the crash of 2008 and than suddenly Derek Foster got scared and sell ALL of his portfolio. He later came himself an idiot for doing so, but he's been doing even better ever since...

This mean that our mentality have to change. We need to stop focusing big time over dividend yield. Small investors like myself who don't have a lot of cash to invest really have to do it the right way. Because you don't get a second chance. When you lose money on the stock market, the money is loss forever, there's nothing you can do about it. Did I loss money on stock market? Oh yeah! And did I make some? Yeah yeah. 

Being in a circular bear market shit is certainly not helping. Me and Derek Foster, we have exactly 10 years apart. Derek is 10 years older that I am. If I would have invested 10 years ago is stocks, maybe I wouldn't be writing this shitty blog right now. I would had grow fabulously rich! But I was too. young 10 years ago and worst, I didn't have any money. When I complete school, if had about 15k in my bank account, but its all what I had to start my adult life on. 

I think the worst part is that the Stop Working book of Derek Foster is selling a dream that is no longer possible. And believe it or not, I only understood that about 2 days ago. The worst is to sell a dream, an impossible dream.

But the dream is possible. I mean, you just have to look at my very own situation to understand. The dream is not impossible, but FFF difficult!!! OH YEAH!!

Growing up, I never been money oriented, and I still the same now. But I looking to do the best I can with what I have. And we should do all the same. No one was there for me when I was getting those hours cut at this job, or being laid off from this job, going to court against my employer on another occasion etc. No one was there. And its what you have to understand that while facing money problem, no one will be there for you too. We live in a world that is shit. That is why you have to make the commitment to be stronger than your enemies and one big part of the game is get richer than they are. And trust me, even at not even 100k net worth, I am a lot richer than a lot of people that piss on me.

Saving money, investing, none of those things are difficult. Is just a matter of finding your way. One reason I am not leaving Derek Foster alone is that - even if he build up an impossible or FFF dificult dream in the Stop Working, he help to explain how, at least to go somewhere. PPL, CDL.A, ENF, ENB, PGF, TIM, and a few other are Derek Foster stocks. I had build the roots of my portfolio making several thousands on PPL and a bunch of other. I got my shares of Methanex way back at something like $15. And now my margin is left at 18k... Like this portfolio cannot to be vain. It went through all a series of unforgettable stock crash, Japan tsunami, etc, etc. Like remember how many things we went through and survive?

Well it was all because of the blue chips I hold. And in order to remain healthy, I need to invest more and more on blue chips. That's the lesson of the day I wanted to share. There's no way you'll make your way by only buying stuff that pay a yield of 6%+. The dividend dream is vanity, its a blush on your eyes. But time to see clear now. 

The dividend income will be small at first but in a decade of so, it could worth a LOT more. What is the trouble to wait a decade or two to be able to get all of your live just for you?

But before that, a good stock to hold would be Canadian Tire. The company is doing great and has increase its dividend yield of 25%.

Do it like a cowboy and hold to it.

STOP WORKING, but LATER. :)

8 comments:

Anonymous said...

Canadian Tire is a bluechip, but not a recession proof stock. Their items are so expensive and they have lot of competion (Walmart, Home deport, etc). Think something people keep buying daily/weekly/monthly in any situation. One example, Saputo. Canada largest milk and cheese maker. Low yield, but it grows really fast.

agentfang said...

I bought First National recently. Yield is 6.14%.

https://www.google.com/finance?q=TSE%3AFN&ei=hDR9UrC6EcKdiQLJmgE

Another one is A&W @ 6.32%, I am considering adding this one.

https://www.google.com/finance?q=TSE%3AAW.UN&ei=hjR9UviwNsWXiQLRMQ

Anonymous said...

So in other words 'get rich slow' with dividends works just as well..

Joske said...

AW.UN ,dividend payout is the same
as profit per share ,no room for
dividend increase .

Anonymous said...


At this point I guess you could just dump all your savings into a couch potato ETF portfolio and forget about it.

Depressing :(

roman said...

Think who created the stock market and why??? plus the options later on??? Rules of thumb for every winner must be a loser there are few winners but much more losers. Do not waste your youth on stock market unles you leave the money sitting there for 20 or 30 years.

Anonymous said...

maybe you should look at something like the 'Beating the TSX (BTSX)' approach developed by David Stanley?

Anonymous said...

Well, DG, the lights are S-L-O-W-L-Y coming on. Its very difficult to retire soley on a dividend income. I would say currently impossible at 40 or 50, unless you figure you'll live off the grid & hunt your own food. Our buddy Rich/Poor Dad talks about multiple streams of income. Some nay-sayers talk about "mastery" of the stream. When you retire somewhere around 60+ you will have CPP based on what you've contributed over the LIFETIME of employment. Its better to have an early (yes, those summer youth jobs count) + consistent employment history. Then you get a bit of OAS. Company pension if fortunate. Then what you've invested- savings, RRSP's, or anything else that provides income ie. property, business etc. I've mentioned in the past the Sask. Pension plan especially for job-hoppers, unstable work enviornments, contract employees. Then if needs be, what equity ie. housing, you can turn into cash. Its not a sprint, its a marathon--I take that back, its a triathalon.

 

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