Recent Buy

Canadian National Railway

I decided to add to my position in Canadian National Railway (CNR.TO) (CNI). Canadian National Railway is the larger of the two Canadian railroad companies and the second largest publicly traded railroad companies in North America. The company commands 20,000 miles of tracks and is strategically well placed to move oil from Alberta, the Bakken fields and to/from the refineries in the Gulf Coast. A holding of Bill Gates’ Cascade Investments, this stock has made Mr. Gates and his investment firm very rich over the years. I added 20 shares in the Canadian listed stock, which adds C$20.00 to my dividend income annually going forward. The company is scheduled to release its earnings report tomorrow after market close and is also expected to raise dividends.

Recent Buy Decision

  • Railroads are the pulse of the economy and are critical in the transportation of industrial, lumber, crude, merchandise and agricultural products. An essential part of every portfolio, railroads had been missing from mine, and I decided that this was as good a time as any.
  • A wide moat industry – the players are well established and it is hard for upstarts to disrupt the incumbents
  • CNR has a very strategically well diverse network servicing the Pacific, Atlantic and Gulf coasts.
  • Dividend growth rate is stellar in most major railroad companies, even though initial starting yield is low.

Risks

  • The stock is currently not cheap. At PE over 23, the stock is overvalued. However, I am investing for the long term and a strong company like CNR is hard to find at cheap prices. I will be averaging down on this cost basis over the coming months/years.
  • The crash in oil presents some headwinds for the railroads. While the running costs decrease due to fall in oil prices, the bulk of payload is crude. The crash will probably result in cutbacks, M&A, terminations in oil production companies, meaning that the revenues for the railroads might be affected over the coming quarters.
  • Development of pipelines presents more headwinds. Transporting via pipelines is cheaper, safer and more reliable (no delays due to weather or other unforeseen circumstances) and railroads will feel the pinch once more infrastructure in the ground.

Further Reading

Read this full dividend stock analysis for details on the value of the company, including more detailed outlook, advantages and disadvantages to the industry.

Full Disclosure: Long CNR.TO. My full portfolio is available here.

Is a PepsiCo Spin Off Coming?

PepsiCo

PepsiCo (PEP) is a global powerhouse in the snack and beverage business. The company boasts a plethora of brand names are recognizable anywhere in the world. A company with a market cap of $145B, PepsiCo boasts a brand value of upto $20B. Although the brand value does not match its main competitor Coca Cola (KO), it remains well ahead of other beverage companies such as Dr Pepper Snapple (DPS). PepsiCo remains a great challenger to all its competitors and is very well received in growing emerging economies.

(Source: PepsiCo.com)

According to PepsiCo’s 2013 Annual Report, the company is almost evenly split between the food and beverage segments and the also geographically well diversified, with half of its net revenues coming from North America and the rest from International locations.

Continue reading

Chatter Around the World – 80

Chatter Around the World is a curated weekly update of articles related to economics, investing, dividends and personal finance. In these weekly updates, I also capture my blog updates and news related to my portfolio holdings.

QE in the eurozone

New Blog Posts

Let’s dive into the links that caught my attention this week.

Continue reading

TFSA Contribution Room

Tax Free

As the new year rolls in, we Canadian can be thankful for being rewarded with one of the best things that exists for investors – The Tax Free Savings Account (TFSA). The type of account started in 2009 where savers/investors were allowed to contribute up to $5,000 per calendar year (and is now up to $5500 starting 2013). This article lists some of the basics of TFSA and I share a spreadsheet to calculate your TFSA contribution room.

TFSA Basics

The Tax Free Savings Account is not just a savings account, but should be viewed more as a Tax Free Investing Account. Your funds can grow tax free and can provide with great long term prospects. Most people are familiar with TFSA accounts, but for the benefit for new savers/investors, here’s a recap.

Continue reading

Kinder Morgan Inc (KMI) Dividend Increase

KMI
This is turning out to be a great day for me :) Kinder Morgan Inc (KMI) announced a 2.27% increase in its cash dividend. The quarterly cash dividend will increase from $0.44 to $0.45 per share and payable on Feb 17, 2015 to shareholders on record as of Feb 2, 2015 and ex-div date of Jan 29th. The annual dividend rate goes up from $1.76 to $1.80. Yield going forward is 4.29%.
Chairman and CEO Richard D. Kinder said, “KMI had a good year and will pay cash dividends of $1.74 per share for 2014, exceeding our annual budget of $1.72 per share, and 9 percent higher than the 2013 declared dividend of $1.60. While we experienced some headwinds in the fourth quarter due primarily to commodity pricing, Kinder Morgan demonstrated once again that our large diversified portfolio of mostly fee-based assets can produce good results even in tumultuous market conditions. In 2014 our businesses generated $7.539 billion in segment earnings before DD&A and certain items, a 9 percent increase over 2013, led by our Natural Gas Pipelines, Products Pipelines, SACROC production and Terminals assets. We also completed the transaction to merge the Kinder Morgan entities into one company in late November 2014, which we believe simplifies the company for investors and most importantly paves the way for superior growth at KMI for many years to come. Our current project backlog of expansion and joint venture investments is $17.6 billion. Since the third quarter earnings release, we have placed $730 million of completed projects into service, removed $785 million in projects (primarily in the CO2 segment that have been delayed beyond the time horizon of the backlog due to lower commodity prices), and added $1.24 billion in new projects to the backlog. Projects in the backlog have a high certainty of completion and will drive future growth at the company across all of our business segments.
My portfolio consists of 101 shares of KMI, which increases my annual dividends from $177.76 to $181.80, an increase of $4.04.