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.

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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.

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Kinder Morgan Inc (KMI) Dividend Increase

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.


Bank of Canada Cuts Interest Rates

Bank of Canada

In the second surprise of the morning, Bank of Canada (BoC) announced that the interest rates will be cut from 1% to 0.75%. That 25 basis points may not seem like much, but it goes to show that all is not well with the Canadian economy. The slump in the oil and energy sector has seen numerous job cuts announced with more to come. One report has suggested that the Canadian tar sands might see upto $60B in capex cuts over the coming weeks and months. Not just the oil sector, retail stores have been announcing bankruptcy and/or simply just pulling out of the Canadian market.

A move to cut rates from the BoC was expected, but not until later this year. There have been plenty of indications – both from the bond market and the forex market to suggest that the Canadian interest rates would be cut. Some banks were expecting that announcement to come later in the year. Following is the statement from BoC.

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Realty Income (O) Dividend Increase

Realty IncomeSurprise! Realty Income (O) announced a 3% increase in its cash dividends for common stockholders. This was a surprise move from the company as the last dividend increase announcement came in December 2014 with a 0.17% increase. The monthly dividend increases from $0.1834167 to $0.189 per share. The dividend is payable on Feb 17, 2015 to shareholders of record as of Feb 2, 2015. This is the 79th dividend increase since Realty Income went public in  1994.

John P. Case, Chief Executive Officer of Realty Income, commented, “We are pleased that the continued strength in our operations allows us to increase the amount of the dividend we pay to our shareholders, while still maintaining a comfortable dividend coverage ratio. The new annualized dividend amount of $2.268 represents an increase of 3.0% per share as compared to the previous annualized dividend amount of $2.201 per share. With the payment of the February 2015 dividend, shareholders will enjoy an increase of 3.75% in the amount of their dividend as compared to the same month in 2014.”

The new monthly dividend amount represents an annualized dividend amount of $2.268, up from $2.201 per share. My portfolio consists of 60 shares of Realty Income and the new increase bumps up my annual dividends from $132.06 to $136.08, an increase of $4.02.