Recent Buy: March 11th, 2015

March continues to be a volatile month with stock price declines almost everywhere. Even consumer stocks that haven’t moved in months, like KO and PG, are inching toward fair value. My portfolio could greatly benefit from more exposure to that sector, but I’m still stubbornly hoping for better opportunities to come. I had some extra cash to deploy, and today several of my holdings were in the red. Typically, it’s a good idea to average down on a holding when it goes below 5% of your cost basis. It’s a great way to earn even more dividends for less than you originally paid in businesses that you’re holding for the long term anyway. I had 6 holdings overall that met that qualification during the day. Here they are in order from the largest percentage change in value:

2015_MAR_downportfolio

When I rounded out my top 3 negative holdings they were BP, IBM and BNS. I’m still looking away from energy at the moment even though my BP position is down considerably.  I already have a larger weight in that risky company, but I could get interested again in the low $30’s. When I look at IBM I hope it will linger at these prices or even drop lower. I’m interested at today’s prices, but it’s also already a larger weight in my portfolio and when I consider the fact that BP and IBM already pay dividends this month, I decided it was best to average down on BNS.

  I added 30 shares of Bank of Nova Scotia (BNS) to my Sharebuilder ROTH IRA at $49.08 a share and a $6.95 commission for a total of $1,479.35. The trailing P/E was just under 11 with a forward P/E of only 8. The purchase yields 4.40% and adds $67.20 to my 12-month forward dividends for a new yearly total of $1,606.65. My yield on cost (YOC) jumped up from 4.09% to 4.31% and the position value changed from -10.28% to -5.41%. Here’s an image of the changes this made to my portfolio:

2015_MAR_downportfolio2

I first purchased this Canadian banking powerhouse in January, and I have yet to receive a dividend from them. Today’s investment comes with plenty of time to make that first payment a whole lot bigger. BNS recently announced its latest semi-annual dividend increase of 3% and the current entry yield is at a 5 year high. Take a look at this basic YCharts graph:

2015_MAR_ycharts

Here’s an updated fastgraph of BNS looking at forward two year estimates based on its normal 6 year P/E of 12.1:

2015_MAR_FG_BNS

It was a fun coincidence picking up my mail after work today and finding a couple large booklets from BNS. I’ve never received a physical copy of anything like this from any of my other holdings and thought this was neat, even though the prudent shareholder in me secretly doesn’t like the associated costs of these mailings. The packet contains a thick 2014 Annual Report, a shareholder voter sheet, and another large book regarding voting instructions. There are detailed descriptions for several propositions including board elections, directors compensation, phasing out stock options, and executive pension plans. So far in my short investing career I’ve abstained from voting on all of my holdings, and these books now have me second guessing that decision. Since I try to keep up in research on each of my businesses anyway, I plan to exercise that shareholder right more often in the future.

What do you think of BNS? Do you express your right to vote as a shareholder?

My Dividend Growth

http://www.mydividendgrowth.com

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39 thoughts on “Recent Buy: March 11th, 2015
  1. Dividend Hustler

    Great pickup Ryan! BNS is awesome. I would love to buy more from them as the US dollar is just getting so expensive for us canadians. You keep up hustling hard and build up that awesome stream of dividends okay bud. Much love. Tyler.

     
    Reply
    1. My Dividend Growth

      Thanks a ton, Tyler. I completely agree and the rise of the dollar is bound to slow or reverse at some point and I think we’ll see a nice pop in prices of these affected stocks. BNS doesn’t come without its share of current risk, but I’m so happy to be on board. Always good to get support from someone with a huge portfolio like yourself 🙂 Great work and thanks for stopping by!

       
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    1. My Dividend Growth

      Couldn’t agree more BSR. I’m very interested to see how bad things get in the short term, but I’ll be happy to let this one sit in my tax advantaged account and reinvest itself over and over again. Glad you checked in because I really like the looks of you blog! I’m looking forward to following along.

      Best,
      Ryan

       
      Reply
  2. writing2reality

    It is amazing to see that you’re at $1,606 of forward dividends… the compounding has yet to really set in, but you’re getting to a level that it will become almost tangible. Keep up the good work!

     
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    1. My Dividend Growth

      Slowly and surely I’m getting there. It’s awesome already being further ahead of where I expected I’d be. I keep finding myself attracted to lower yields and setting those forward dividends back a bit for higher dividend growth rates, but I was super happy to add over 4% with this bank. The next few names on my watchlist have gigantic yields too which would help and be fun to watch pour in. It’s always great to hear from you and thanks for all the support, W2R!

       
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  3. Dividend Gremlin

    Ryan,

    BNS always reminds me of hockey – the Ottawa Senators used to play in Scotiabank Arena, but the name has changed. The Canadian banks in general represent an awesome opportunity right now, and I think will continue to do so for quite sometime. That industry showed how good it was through the recession and after. I am long CM, and I want to be long the other 4 big ones (RY, BNS, BMO, and TD). They are all excellent opportunities.

    Congrats om furthering your FI,
    Gremlin

     
    Reply
    1. My Dividend Growth

      Nice, I didn’t know that about the Ottawa Senators. I really enjoy live hockey, nothing quite like it and we have a pretty solid team in LA these last few years. CM is a wonderful bank as well and I agree you can’t really go wrong with any of those choices in my opinion. I wonder how low these will go. I’m overweight on financials at the moment but I still wouldn’t mind loading up more. TD or CM would probably be my next pick. I hope all is well Gremlin, just one more day till the weekend and I hope you enjoy it!

       
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  4. Monsieur Dividende

    Great minds think alike, they say. I bought 15 shares yesterday of BNS. I now own 40. Usually I wait for a 10% drop of my average cost basis. I see you have this 5% rule of thumb. I think it’s a great strategy. You can’t go wrong with BNS. Greay buy!

     
    Reply
    1. My Dividend Growth

      That’s excellent to hear MD, congrats on a great purchase yourself and I’m always glad to see other investors on the same page. I’ll admit my heart was a little sad seeing 3 of my holdings over 10% in the red, but my logical side loves it. I don’t have a set in stone rule for averaging down I guess, but I agree at -10% the decision becomes quite obvious. At 5% I might want to initiate a new position instead if there is a more attractive valuation. I guess a lot of it depends on weighting too, and to a certain degree I’m just going with the flow of things for now since my portfolio is pretty small. I hope you have a nice coming weekend and I appreciate you leaving the thoughtful comment!

       
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  5. roadmap2retire

    Hahaa…I am not a fan of receiving all the IR mail and we think alike – that its wasted resources to print and mail it out. Ive received plenty of correspondence in the past and Im surprised this was the first time you received it. Although one trend I am starting to see is, that they send out a letter asking if I am interested in receiving such booklets and I usually dont respond and simply stopped receiving them. I think its prudent sicne most of it probably ends up in the recycling bin. Better to save on the resources unless necessary.

    Good call on picking up BNS at these levels, Ryan. Its very attractive at these levels and thru the year, the Canadian banks will provide some good investing opportunities. Congrats on adding more dividend income to your stream.

    cheers
    R2R

     
    Reply
    1. My Dividend Growth

      Hehe, I completely agree about the mailings. I was really surprised to receive it because of my drought of literature thus far, and it’s interesting to hear that it’s been more common for you. I remember hearing that Disney gave shareholders an artsy certificate which seemed pretty cool and good for teaching children about business ownership, but they got rid of it! I wonder how much money they’ll save from that??? (Cough Cough… BNS…. Cough, hah). I really appreciate the support on this one and have been a big fan of your recent Canadian bank purchases as well.

      Have a great day, R2R!
      ~Ryan

       
      Reply
    1. My Dividend Growth

      My pleasure, RBD. I think you’d do well with any of the major Canadian Banks as most seem to be on sale lately. I’ll be curious to see if you pull the trigger. Thanks for the comment 🙂

       
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  6. HITESH

    Nice buy
    BNS is most international Canadian bank and good opportunity to avg down.
    Keep them coming
    Have you consider CST it is consumer stock.

    THANKS
    HITESH

     
    Reply
    1. My Dividend Growth

      Thanks a ton, Hitesh. I agree and find the diversity of the bank amazing. I haven’t heard of CST before, and it looks like a newer company. I don’t recognize any of the store brands on their website either, so we probably don’t get them here in L.A. At first glance, I don’t like the unproven dividend history and current low yield of 0.6%. I’m okay with a low yield if the company is growing at a rapid pace like my holdings of Visa (V) or A.O. Smith (AOS), but it seems like estimated earnings of CST are actually decreasing for the next few years. But again, I didn’t do any research and am only giving it a first glance. Let me know if you dig up anything compelling if you research them because I like consumer stocks! Always good to hear from you and have a great weekend!

       
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  7. Tawcan

    Congrats on adding on your BNS position. Funny you mentioned about the shareholder materials as we just received ours from BNS yesterday. Been getting lots of shareholder materials from the different stocks that we hold lately. It’s that time of the year agian.

     
    Reply
    1. My Dividend Growth

      Hehe, these mailings are so new to me. I’m wondering if I should expect any more. I suppose they’re only trying to empower the shareholders and that’s a good thing. Hope all is well with you Tawcan and have a nice weekend!

       
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  8. DividendDeveloper

    Always feels nice to average down on a good stock, well done! I actually don’t mind printed out materials. If there’s a company I’m researching, I usually request a printed annual report. IDK, there’s something about holding and reading a physical copy that works for me. And I recycle them or use them somehow when I’m done, so that’s a win. And the cost is a concern, but then again, it’s usually such a small portion of expenses compared to things like salaries and marketing, it’s whatever to me. Anyway, good luck with BNS!

     
    Reply
    1. My Dividend Growth

      Thanks a ton, DD. That’s a pretty great idea you have with physical copies, I think you’re a mini Warren Buffett in that regard. I stare at a computer all day long at work, so having actual papers in my hands sounds like nice relief for my eyes. I total agree that the mailings probably have very little affect on the bottom line if at all… and in that case I want more! Hopefully I’ll receive a few more nice surprises as an investor the longer I’m in the game.

      Best Regards,
      Ryan

       
      Reply
  9. Dividend Mantra

    Ryan,

    Great minds think alike. I also averaged down on BNS a day before you at a similar price.

    Nice job here. Gotta love that yield, especially with it being so much higher than its average over the last few years. They have some short-term headwinds, no doubt, but I think the long-term opportunity is still there. And you gotta love a company that’s been paying dividends steadily since the 1800s. That’s through the turn of TWO centuries. 🙂

    Happy to be a fellow shareholder!

    Best regards.

     
    Reply
    1. My Dividend Growth

      That’s so reassuring to hear, Jason. It seems like a good move and I’m very excited to read your write up about it. The entry yield is phenomenal here, and there’s a lot to like about the 6% percent YoY dividend raise in the face of all these headwinds. Man you’re on fire with those “reduced” contributions! Hehe, I’m having the same fun though and plan to make another purchase by the end of the month. Hope you guys are enjoying the final days of spring break and fly a kite on the beach or something fun!

      All my best,
      Ryan

       
      Reply
    1. My Dividend Growth

      Hi Jai, thanks for the comment. There is a Canadian withholding tax on dividends for taxable accounts, but not for a tax advantaged IRA. If one were to hold them in the taxable account it would decrease the dividend, but not in a tax advantaged IRA. I have my holding in my ROTH IRA. Hope that answers your question, and because not all brokers are the same I’d recommend consulting yours with this same question before you initiate a position.

      Best,
      Ryan

       
      Reply
  10. JC

    LIke the buy here. I’m looking at adding BNS to my portfolio. Especially at such a high starting yield since the dividend taxes are withheld beforehand. Short term they still have some issues but how can you argue against a company that has paid dividends since the 1800’s and is still churning out higher dividends still.

     
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    1. My Dividend Growth

      Glad to hear you sign off and show interest yourself, JC. I’d be very curious to read your analysis. I think it’d be a good fit for you, plus you get cool mailings! Hehe, I’ve seen a lot of other bloggers picking it up lately too which must be a good sign. The current yield is killer and recent dividend raises have been strong. I wonder how much more it can fall from here off it’s 52-week highs. Wishing you a great weekend!

       
      Reply
  11. Dividend Diplomats

    Ryan,

    Very nice pickup! Why go shopping at the store when you can pick up something from your backyard (Okay, that analogy doesn’t look as cool typed out as it sounded in my head). Canadian Banks have taken a beating recently, so this is a great opportunity to lower your cost basis.

    I agree with you, I have been shying away from re-upping on BP. While I am not considering selling the stock, I think there are other values in the oil industry that currently have better financials. Competitors such as XOM and CVX that have stronger balance sheets and better dividend growth are trading at lower multiples.

    Again, great work. Way to add a nice chunk to your dividend income. You are on your way to killing $2,000 in dividend income received this year!

    Bert

     
    Reply
    1. My Dividend Growth

      Haha, the analogy works for me! I think the market is slightly over reacting to headwinds the Canadian banks face, but who really knows what’ll happen from here? Man, the energy sector is scary to me at the moment. I’m excited to see how it all plays out because I’ll learn a good bit about how to deal with volatility. I still want to purchase more in the sector at the right price, but I’m risking missing out on bargains. Hopefully I’ll get to see the prices I’m wanting in at, and if not I still slept well at night so no regrets. Great work to you too, Bert. We’ve both started the year well and I’m excited to see our dividends continue to roll in.

       
      Reply
  12. No More Waffles

    Ryan,

    Although I’m not too familiar with BNS, it seems like a great company to own! As such, I’m glad you increased your position.

    I’ve been keeping an eye on American stocks too the past few weeks because they’ve declined quite a bit. Sadly, though, the compressed Euro doesn’t make them cheaper at all for me. It’s actually quite the opposite… All my US holdings are way up, even though they’re down in USD.

    Really liked the thought process in this one, keep it up!
    NMW

     
    Reply
    1. My Dividend Growth

      Thanks for the kind words, NMW. Currency exchange rates can sure act crazy at times. You’re not alone in avoiding US stocks, I’ve even grabbed a few foreign names myself lately for that very reason. No idea if Canadian taxes are bad for you or not, but I’d be curious to hear your thoughts if you ever research this historic bank. Can’t argue with over 200’s of steady or rising dividends. Best wishes to you this week!

       
      Reply
  13. Vivianne

    As the US economy recover, USD will get stronger with the help of increase interest rate. Everyone are eyeing foreign companies. I’d like to get my hands on the European market, but it don’t want to pay $45 per trade through a broker. So, Canadian companies are better alternative. Many of their companies are listed on NewYork stock exchange. Their yields (banks) are very high 3-5.5% making them very attractive.

     
    Reply
    1. My Dividend Growth

      That’s a great observation thanks for sharing, Vivianne. I’ve been lucky to find a few excellent blogs that are bringing my attention to other amazing Canadian businesses not in the financial sector. I always find great opportunities but have such little free capital, hehe. I hope you have a nice week!

       
      Reply
  14. Dividend Growth Journey

    Ryan,
    Nice purchase. Canadian banking stocks are popular generally and are becoming even more popular. The banking sector is definitely something that I would like to add more and looking at US banks in general. I need to look at Canadian banks as well as Europe (like Barclays) and narrow down 1 or 2 stocks to initiate a position.

     
    Reply
    1. My Dividend Growth

      It’s always a good sign when other like minded people find similar values in stocks. I love the long dividend history and diversification outside of the US this bank provides. Now seems like a great opportunity to invest in a few non US stocks and I haven’t dug much into European financials, so I’m looking forward to seeing what you come up with. Thanks for the comment, DGJ 🙂

       
      Reply
  15. DivGuy

    BNS is a nice choice! Canadian Banks are solid, despite what they’re facing for a couple months or so. Pretty sure you won’t regret it. I never voted on my holdings yet. Maybe one time I’ll try it out!

    Cheers!

    Mike

     
    Reply
    1. My Dividend Growth

      I appreciate that, Mike. That short term noise is just that: short. I haven’t sold a single share since starting the DGI strategy, so I’ve got a long time horizon for this historic name.
      I probably won’t vote on things like board members or compensation, but maybe on divestitures, spinoffs, or acquisitions. I try to invest in good management, so usually my vote would be to support their decision. Thanks for the comment!

       
      Reply
  16. FrugalityToFinancialFreedom

    Ryan,
    Great job there averaging down from -10.28% to -5.41%. I wish I had opened an IRA where I can place my Canadian bank stocks to take shelter of the 15% foreign tax. The lack of research and lack of experience in my part is paying for my ignorance as I wanted to average down (BNS, TD) so bad but I dont want to pay the foreign tax, my dilemma…
    Great buy!
    FFF

     
    Reply
    1. My Dividend Growth

      Thank you much, FFF! Don’t be too hard on yourself, you’ve built an amazing portfolio over there. You’ll be able to use that taxable account’s income in a pinch should you ever need it while my IRA will be locked up until I’m old and bald. Glad to hear from you and have a good one!

       
      Reply
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