Jul 5, 2015

4 Recent Buys and 1 Sale

During the past week I was able to execute quite a few plans from my recent "shopping list". I opened 3 new positions, wow, that is actually a big amount of new positions in a week. Anyways, I'm now brand new shareholder in Royal Bank of Canada, Enbridge and Omega Healthcare Investors. I added a couple of shares to my ONEOK position. But also I closed out one position: Pengrowth Energy.

Buy in CAD
Royal Bank of Canada (RY.TO)
Shares: 8
Per share (incl. fees): 76,48
Total 611,84

Royal is no less than the biggest bank in Canada by market capitalization. Currently 63% of revenue comes from Canada and 19% from the US. Personal and commercial banking is naturally company's core business, bringing in about 51% of earnings. But they have been diversifying towards other business segments, which include capital markets(24%), wealth management(11%), insurance(8%) and investor and treasury services(6%). Royal reported solid growth numbers for the second quarter ended April 30, 2015. Net income was $2,502 million (up 14% from $2,201 million in Q2 2014).

The bank didn't cut, but did froze its dividend from 2008 to 2010. After that dividend has risen for 4 consecutive years. Now the yield stands at 4,0% with payout ratio of 48%. Dividend growth rate 3-yr shows 10,9%. This is probably slowing down though. Last increase was just 2,6%, but they have a habit to raise dividend twice a year. About valuation, P/E 11,8 (ttm) seems reasonable enough.

There some basic numbers about the bank. I don't have much to complain. Dividend rise streak could be longer, but I like that they didn't cut dividend during financial crisis, even though they froze it. I'm going with these shares to next ex-dividend date. Hopefully I have capital later this year to add more shares.

Buy in CAD
Enbridge Inc (ENB.TO)
Shares: 5
Per share (incl. fees): 58,35
Total 291,75

I'm in process to switch my Canadian holdings from NYSE to TSE. So, after selling my PGH shares in NYSE I was to buy them back in TSE, or? No, I decided to switch to company which looks more solid and interesting to me: Enbridge.

Oil and gas prices continue to crawl putting energy companies under pressure. But pipeline companies less so. Enbridge is looking 10-12% earnings growth through 2018, and dividend annual growth rate of even 14-16%. That is huge, if they are able to carry that out. In general I like low payout ratio, but with this one I need to adapt to a high one, as company sees no problem in 85% payout. Full year guidance for EPS is $2.05 to $2.35, and forward 12-month dividend $1.86, so they are hovering above 80% payout ratio.

However, it seems that the company has been able to manage that high payout. According to Michael Weber's Canadian Dividend All-Star list Enbridge has been rising dividend for 19 consecutive years. With 3-yr dividend growth rate of 12,6% and current yield 3,2%.

But perhaps most interesting part of Enbridge is its renewable energy portfolio. From company's website:
"-14 wind farms (2,065 MW gross capacity);
-Four solar energy operations (150 MW gross capacity);
-Five waste heat recovery facilities (34 MW gross capacity);
-A geothermal project (23 MW capacity).   

Together, our renewable projects represent more than 2,200 MW of green power capacity – that's enough to meet the electricity needs of nearly 750,000 homes – based on gross generation figures."

Really like the sound of that. Like it or not, green energy is coming, and energy companies need to adapt. It seems to me that Enbridge is in front row in that sense. This is a small opening position for me, and I'm looking to buy more ENB before next ex-dividend date.

Buy in USD
Omega Healthcare Investors Inc (OHI)
Shares: 5
Per share (incl. fees): 33,92
Total 169,60

Well, at least I'm not alone with this healthcare REIT. Is there still somebody in DGI community who doesn't have OHI?:-) Share price is crawling in 52-week low sending yield well above 6 and P/FFO below 13. Still company is expecting decent growth in FFO and dividend going forward. If that will be realized, then I think it's clear that the company is currently undervalued. But there is always that "if" which investors must consider. Dave Fish's US Dividend Champions list shows 13-year dividend increase streak and 3-yr DGR of 9,2%. This was a small opening position (should have bought more right away) and I'm looking to buy more very soon.

Buy in USD
Shares: 2
Per share (incl. fees): 39,43
Total 78,86

Another pipeline company purchase! But this time a natural gas focused play. One buy in energy space would have been enough, but I felt that I must average down here. If ENB's share price hasn't taken so massive hit, then OKE's surely has. This company is way down from 52-week high of $71, and not least because dividend growth guidance moving forward was reduced from 12-15% to 4-8%. Still, combine that with yield of 6,2% OKE should bring in some serious cash. I must consider this to be one of my riskier investments though. This was a tiny addition to existing position. Just to pump out a bit more dividend in August and lower down cost basis.

Sale in USD
Pengrowth Energy Corp (PGH)
Shares: -150
Per share: 2,52
Total (fees deducted) 377,64

Sold out my position in this one. There is a lot of potential in this company with their project Lindbergh starting to bear fruit. But it's still pretty straightforward oil company, and highly dependent on oil price. The company slashed dividend by 50% early this year. PGH's share price is near 10-year low, so naturally it was a bad time to sell. But I didn't want to wait when/if price begins to raise again. I sold my shares with a sturdy loss, but on a positive side can be said that I'm able to deduct this from profits I made with some Finnish stocks earlier this year. 

There is one more newcomer in my portfolio! I'm speaking of course about Baxter spin-off Baxalta (BXLT). Should be very interesting to see how these two companies start rolling forward. I have updated my portfolio page to reflect all these changes.

What do you think about these transactions? Have you been buying? Or even selling?

Disclosure: Long RY.TO, ENB.TO, OHI, OKE, BAX, BXLT


  1. Hi DL, great purchases! I also have my eye on RY, would like to add some of it in this month.


    1. Thanks DH!
      Hope you will be able to pick some RY shares. The hassle in Greece may open a great opportunity for that.
      Regards, DL

  2. You're right. Who doesn't own OHI these days? I guess if all goes wrong we will have good company. What are your plans for BXLT? Hold or sell?

    1. Adam,
      I believe that we are going to do well with OHI, but you are right, even in worst case scenario we are in good company at least:)
      Both BAX and BXLT are hold for me at the moment. Very much looking forward to dividend declarations from these companies.
      Thanks for your visit! DL

  3. Great purchases, DL. Like em all.


    1. Thanks, R2R!
      Interesting little detail is that both ENB and RY can be found on your "Top 5 Canadian Foundation Stocks" from February. Wonder if you would still pick same stocks though:)