Recent Buy – Chevron (CVX)

Chevron
I initiated a new position in Chevron (CVX). Chevron is a component of the Dow Jones Industrial Average (DJIA), an oil and gas giant operating in both Upstream and Downstream.The Upstream segment is involved in exploration, development and production of crude oil and natural gas; liquefaction, transportation and regasification associated with LNG; transportation of crude oil through pipelines; processing, transportation, storage and marketing of natural gas; as well as holds interest in a gas-to-liquid project. The Downstream segment engages in refining crude oil into petrochemicals, fuel and lubricant additives, as well as plastics for industrial uses. The company is also involved in coal and molybdenum mining operations; cash management and debt financing activities; insurance operations; real estate activities, energy services, alternative fuels and technology businesses. Chevron also manages interests in 11 power assets with a total operating capacity of approximately 2,220 megawatts.

Recent Buy Decision

Chevron is the fourth largest oil and gas company and has been a great all-round performer. Chevron has been increasing dividends for 26 years with a 5-yr dividend growth rate (DGR) of 9.2% and 10-yr DGR of 9.6%.

I think the stock is currently attractively valued with a P/E of 9.71. The stock has a 5-yr average yield of 3.30% and currently yields 3.37% with a payout ratio of 29.8% and plenty of room to increase dividends.

A summary of the stock:

  • Symbol: NYSE: CVX
  • Quote: $118.66
  • 52-week Range: $100.66 – $127.83
  • P/E: 9.71
  • P/B: 1.61
  • Yield: 3.37%
  • 5-yr DGR: 9.2%
  • Payout: 29.80%
  • Debt to Equity Ratio: 0.14
  • Book Value per Share: 72.27
  • Graham Number: 141.65
 
Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

Chatter Around the World – 8

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

New blog posts this week

Another extremely productive week with 4 new articles 🙂

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

Updates from My Portfolio Holdings

IAMGold (IMG) has been a terrific performer this week in my portfolio. The stock is up over 30% since last Friday. For a full list of my holdings, click here.

Historically speaking, this is a strong period for gold’s performance. But there also some musings about inflation causing some run up.

General Reads

The Newsmakers

Dividend Reads

Have a wonderful weekend.

How to Fight Inflation

What is Inflation?

Inflation is the rate at which your money loses value. When you have positive inflation, the same goods and services costs more in subsequent years due to falling purchasing power. The inflation rate is dictated by the interest rates set by the central bank of the country.

Why Address Inflation?

Every investor needs to address the issue of inflation when dealing with returns. If your investment returns do not beat inflation, then, the investment has actually lost value over the time. A little bit of inflation is desirable by the government since it keeps the money moving and the economy growing. The inflation rates for United States and Canada are shown in the charts (source: inflation.eu).
As you can see from the chart, we are currently at extremely low levels of inflation, historically speaking. Another way to look at this is that we also have the potential of higher inflation in the future.

How to Fight Inflation?

There are a few investments that are good at combating inflation, simply due to their nature. The best inflation hedges are:

  1. Inflation Indexed Bonds: These are bonds that are tied to a country’s inflation index. They go by different names in different countries. In Canada, they are called Real Return Bond and in the United States they called Treasury Inflation Protected Securities, or TIPS for short.
  2. Commodities: Commodities are generally a good hedge for inflation protection.
    • Gold is considered one of the best inflation hedges.
    • Oil can also be a good hedge against inflation.
    • Food products – food prices are one of the quickest responses that companies can manipulate in case of higher inflation.
    • Everyday consumer staple items such as toothpaste, razors etc.
  3. Real Estate: This could be either in the form of your personal home value or owning REITs to get real estate exposure.

My Portfolio Holdings

  1. I do not own any Inflation-Indexed bonds.
  2. Commodities exposure:
    • Gold: I own IAMGold (IMG), a gold mining company instead of owning gold bullion.
    • Oil: I own Husky Energy (HSE) instead of holding/trading oil futures contracts.
    • Food related: I own agriculture/farming related companies/organizations such as Archer Daniels Midland (ADM) and CHS Inc (CHSCP)
    • Everyday consumer staples: I own Consumer Staples Select Sect. SPDR ETF (XLP) that holds most major companies in this sector.
  3. I own REITs which can quickly raise their rent in case of high inflation. I own RioCan REIT (REI.UN) and Omega Healthcare Investors Inc (OHI).

Have I missed anything? What are your thoughts on inflation hedges?

Disclosure: All the stocks/ETF mentioned above.

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

Best Places to Retire 2013

The first ranking discussed here is for the best countries to retire and the second ranking discussed here is for the best cities in Canada to retire. Both these rankings came out earlier this year in spring.

According to this ranking from Natixis Global Retirement Index, Canada is ranked 13th (United States is ranked 19th, if you are asking). The western and northern European countries have swept the ranking mostly due to the higher marks achieved in the Health and Quality of Life sections.

Best countries to retire:

  1. Norway
  2. Switzerland
  3. Luxembourg
  4. Sweden
  5. Austria
  6. Finland
  7. Netherlands
  8. Denmark
  9. Germany
  10. France
  11. Australia
  12. Israel
  13. Canada

Best Canadian Cities to retire:

The best cities to retire in Canada, according to this ranking from MoneySense are:
  1. Victoria, BC
  2. Saanich, BC
  3. Kingston, ON
  4. Burlington, ON
  5. Ottawa, ON
  6. Toronto, ON
  7. Joliette, QC
  8. Saskatoon, SK
  9. Stratford, ON
  10. Winnipeg, MB

My Thoughts

Some metric points may have more influence than others in the ranking consideration which may or may not matter to you.

For e.g.: Israel is ranked higher than Canada, but the political turmoil that comes by living in a country like Israel is not my cup of tea. 
Another e.g., Victoria, B.C may as well have more days above 0C per year (312 days) compared to Ottawa, ON (118 days), but according to the same ranking, violent crime rate is also much higher in Victoria, B.C (2178 per 100K) compared to Ottawa, ON (651 per 100K).
My take from these rankings is – look at the performance metrics and check the relative performance between cities only for the metrics that matter to you. I am still quite happy to see that my city Ottawa is ranked 5th 🙂

Best Monthly Income Funds

Whether you are looking for a simple fund to make monthly contributions or looking for extra diversification in your portfolio, monthly income funds provide a great way to generate passive income. These funds are excellent for a new investor or investors who do not want to constantly monitor their portfolio. The funds allocate money appropriately based on their statement objective between stocks and bonds and pay out monthly distributions.

Monthly Income

There are plenty of sector-specific funds, index-funds and various new complicated funds. There may be a place for such funds in your portfolio depending on your investment objective, but a all-in-one ETF can be a great stress-free core holding for anyone. The following funds discussed here provide just that.


iShares by BlackRock seem to have cornered the market with plenty of options for diversified monthly income funds. The only other player is BMO, who have one ETF in the area. All of the tickers indicated below are listed on the Toronto Stock Exchange.

Fund Name
 Ticker
 MER
Allocation
(Stocks/Bonds)
 Annual
Yield
1-yr Perf
(ex-Dividends)
iShares Balanced
Income Core Fund
CBD
 0.72%
55/45
2.93%
3.08%
iShares Balanced
Growth Core Fund
CBN
 0.89%
76/24
2.89%
9.16%
iShares Global Monthly
Advantaged Dividend Index
CYH
 0.68%
100/0
3.47%
8.17%
iShares Cdn Financial
Monthly Income Fund
FIE
 0.90%
84/16
7.26%
6.90%
iShares Diversified
Monthly Income Fund
XTR
 0.57%
41/59
6.04%
-3.33%
BMO Monthly Income
ZMI
 0.55%
50/50
4.73%
-2.53%

Sector Allocation

The sector allocation for each of the funds varies quite a lot. CBD and CBN are the most diversified funds of the lot; FIE is the least diversified with all investments only in one sector (also geographically undiversified – holdings are localized to Canadian financial sector only).

Sector
 CBD
 CBN
  CYH
 FIE
XTR
ZMI
Financials  29.48%  49.51%  26.65%  100%  21.28%  16.8%
Industrials 3.96% 13.48% 5.83% 4.67%
Energy 3.76% 19.72% 17.47% 12.03% 7.3%
REIT 3.67% 6.32% 9.34%
Cons Disc 3.58% 9.75% 8.52%
Cons Staples 2.37% 8.51% 4.14% 3.81%
Technology 6.53% 16.07% 6.51%
Healthcare 4.76%
Utilities 2.30% 7.84% 7.48% 12.14% 9.9%
Federal bonds 16.36% 12.72%
Provincial bonds 15.45% 12.73%
Corporate bonds 19.75 26.6%
Other 19.06% 8.17% 10.48% 32.6%

Disclosure: I own FIE.A


Photo Credit: anankkml/freedigitalphotos.net

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.