• The RRSP season is nearing its end (your last day for 2014 RRSP contribution is March 2nd 2015) and I thought I would go for 4 stock pick ideas. Since US dividend payouts are non-taxable in a registered account, this is the perfect place for Canadians to buy US stocks. Between you and me, even though the currency exchange rate is hurting your purchasing power, this won’t change this year and it could even get worse. So why not considering the great US diversification in dividend payers and go south of the border for your next pick? Here are my suggestions;

     

    Walt Disney (DIS)

    DIS ranking

     

    You know I’m a big fan of Disney. And their latest quarterly reports confirm my beliefs. Despite an outbreak of measles at Disneyland this December, Disney posted very strong results. Latest blockbuster Frozen boosted home entertainment and toy sales. All five divisions (Media Networks, Parks & Resorts, Studio Entertainment, Consumer Products and Interactive) posted stronger sales compared to same quarter last year. It also benefits from a strong US economy and rising consumer’s confidence as the Parks unit shows operating profit higher by 20%. Disney’s movie studios published a 33% surge in profit led by three blockbusters: Frozen, Guardians of the Galaxy and Maleficient. The best part for Disney is that the pipeline is also full for the years ahead. A new Star Wars Trilogy will hit the screen with the first episode in December 2015 and the company also expects to open Shanghai Disney in spring of 2016. The dividend yield remains low (around 1%), but the company keeps most of its money (payout ratio at 22%) to ensure future growth with major investments. When you look at the stock in a dividend growth perspective, DIS is a BUY.

     

    Lockheed Martin (LMT)

    LMT

     

    Surprising enough, Lockheed Martin managed to go through the US recession and military budget cut clouds without much pain. Now that the economy is doing better and consistent war & terrorism threats continue to appear, the need for additional defence supplies will be required. LMT is now set for higher sales for the upcoming years. The international market is also gaining momentum as Lockheed is trying to find ways to be less dependent on the US Government. The short term outlook is deceiving (as LMT issued lower than expected guidance for 2015) but the long term potential is definitely interesting. On the other hand, you have to note that Lockheed Martin is well-known for lowering guidance to temper hype and delivering higher than expected earnings. Is this a strategy or simply the fact that management is conservative? Either way, higher earnings is always good for dividend investors!

     

    Lazard (LAZ)

    LAZ

     

    Lazard is currently riding the bull market with great success. Earnings are up significantly over the past 5 years and investors benefitted through higher dividend payouts climbing from $0.13/share to $0.30/share during this period. The fact that LAZ earns about 50% of its business from asset management and the other half through M&A provides a better diversification than other “boutique investment firms”. More recently, Lazard stock surged 15% from January 15th to February 5th, the date of their quarterly report. A Combination of strong earnings and optimistic outlook for 2015 made the stock go back to a positive level since the beginning of the year. Lazard is the most geographically diversified investing firm and benefits from a very strong reputation. Diversified revenue income streams (portfolio management, M&A, restructuring services, etc) will open the door for additional profitability in 2015. Now that the payout ratio is back to a more appreciable level, Lazard should be on your radar.

     

    Garmin (GRMN)

    GRMN

     

    This is a timely pick as GRMN just released disappointing results on February 18th and the stock price dropped like a rock on that day. EPS were not good enough for analysts and the company missed the target by $0.01 ($0.77 vs $0.78) for the quarter. This data alone isn’t enough to make the stock drop, but the deceiving EPS guidance for 2015 was as it missed the consensus by $0.14 ($3.10 vs $3.24). Garmin automotive device segment reported a drop in sales of 11%. Enough with the bad news, now I’ll tell you why this stock should be on your list. The first reason is that GRMN increased its advertising expenses by 55% last quarter; this is mainly why the company failed meeting EPS estimates. On the other hand, this marketing strategy might bring additional sales in 2015 as the advertising effect is not always immediate. The second reason GRMN is a good pick is due to its fitness segment. Even though there is fierce competition in this sector, Garmin expects sales to grow by another 25% this year. This helps the company diversify its sources of income (the automotive segment now represents 43% of total revenue compared to 58% in 2013). Considering the recent drop in price, I think Garmin is a great buying opportunity.

     

    Which one is your favorite?

    To be honest, if I had to pick only one stock from this list, it would be Disney… but I hold it already. What do you think?

     

    Disclaimer: I personally hold shares of DIS, LMT and both stocks are also hold in our Dividend Stocks Rock portfolios.

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  • A couple of days ago, Dividend Mantra wrote a fascinating article about financial independence and freedom in general. As opposed to getting a promotion or buying a house, reaching financial independence doesn’t change anything overnight. Yesterday, you weren’t financially independent and tomorrow, you finally reach this stage in life. You simply continue going forward with the very same process and the overall goal doesn’t really stop there. This article got me thinking about my whole perception of freedom and how I’ve changed my ways of managing my finances over time.

     

    The Young Savvy Mike

    Funny enough, I started my life in a very savvy way. I started working at the age of 14, piling up my cash to buy my first car with no debts at the age of 16. In fact, I bought my car 4 months before getting my driver’s licence. It was a 1981 BMW 320i. I was so proud!

    I kept working 35 hrs/week while doing my bachelor’s degree with two majors (finance-marketing) full time. At the age of 22, I bought my first plot of land and at the age of 24, bought my first house with a 25% down payment (all coming from trading). I had the ability to save $800 per month plus my pension plan, plus my RRSP contribution. I paid for my wedding in full, no debts and already had my first child. I worked 6 days a week for about 8 years to keep saving as much as I could to avoid any consumer debts.

    There was a limit to the freedom enjoyed during this period of my life. I was working my tail off day and night, combined with school at the same time. Already at the age of 21, I was already fully financially independent from my parents, living in a nice apartment in Montreal and driving a brand new car… right after selling my old bmer! I was my own money making machine and never stopped working. I didn’t have much debt (mortgage and a car loan) and my month end wasn’t a worry for me. However, I had limited fun since I was always working.

     

    The Young Reckless Mike

    You would think that getting married and having a kid so young would invite me to keep the savvy way and continue saving. The opposite happened. At the age of 28, I had my fourth promotion at work since I started at the age of 23. I was now taking care of a portfolio of clients worth $40M. This is when I started to get reckless and my lifestyle inflated big time.

    Making between 100K and 150K per year at a young age opened the doors of spending. I was working less hours than I was when I was younger but I was making a lot more money. This led me to spend it whenever I wanted. The good thing when you have a solid budget and an increase in your income is that you feel like you are invincible. Vacations, fancy restaurants… even a sports car! It was cliché, but it was darn fun!

    While I had stopped my savings habits at that time to spend more, I don’t regret it. This is another type of freedom; you don’t have to mind money, there is always plenty everywhere! I grew my debts and didn’t care; I was going to make more money the year after. The best part is that it worked! This type of freedom is truly awesome as you never feel frustrated that you can’t buy something or have to wait to get it. You simply buy it and enjoy right away.

     

    The Dividend Guy Mike

    In 2010, my partner and I bought this blog. I was 29 at that time, right in the middle of my spending crisis. At first, it was just another site we bought to make even more money. This part went very well for us. However, something started to change in me. Slowly, but surely. In 2012, I started to feel the weight of debt on my shoulders. I went too far at one point and realized I would feel better if I could pay off my debts. I didn’t only have a mortgage at that time, I had started piling up some consumer debts as well. At one point, I had about 35K split between loans and credit card balance transfer. This wasn’t freedom anymore. I was able to make all my payments easily, but it just didn’t make sense to continue this way.

    It took me a full year before I did anything to change my situation. I was aware that I couldn’t continue this way, but it doesn’t mean I was ready to shut down my freedom for a better budget. I worked on my personal finances in 2013 and put a plan in place. I sold my sport car, dropped a few expenses and made sure I focused on paying down debts.

    Two years later, I’m now consumer debt free again. My remaining debts are my car & RV loan and my mortgage. But this is part of a bigger plan that will be explained later in this post.

    The Dividend Guy changed my way of seeing things. By focusing on sound companies generating cash flow, I started to apply this principle to my own life: having a sound budget generating solid cash flow. I started reading more about passive income generation through dividend investing (guys such as Dividend Mantra are doing an amazing job). It kind of got into my skin and I started to dream about real financial independence again.

    At first, my plan was quite simple and straight forward: live with my day job salary and use my year-end bonus to pay off my debts. Using this simply strategy, I would be completely debt free at the age of 45 (I’m currently 33). Add another 5 years to build a solid nest egg and you get by the age of 50, with a big pension fund and probably 300K in RRSP. Enough to stop working enjoy life and be financially independent.

     

    Minimalist Mike?

    You probably already know about my RV plan if you read this blog on a regular basis; I plan on selling everything in 2016 to live in an RV for a year with my family. It just seems that working another 17 years is too long and life is too short to wait that long to fully enjoy it! This is why I am looking at a whole different approach; minimalism. I currently live in a 3,600 sq ft house and will soon move into a 25 foot long RV. We will sell almost everything we own simply to buy ourselves a piece of freedom. Unfortunately, I know that this is only a piece of freedom and not the whole package deal.

    I will arrive back to my hometown 12-14 months after leaving and I’ll have to adapt once again. But my goal is to make enough money with my site that I can continue to live simply but never have to work for somebody else again. I’ve already dreamed of being my own boss but have yet to achieve it. After all, how can you quit your job and start a business that will generate over 100K in salary in the same year? This is impossible. However, now that I’ll be living in a RV, my business is only required to generate 30K the first year and I can live with 50k the year after once I come back. By adapting my lifestyle, I will reach financial independence, I will reach freedom.

    The funny thing is that I know that I won’t be fully happy with such a limited budget. This is also why I’ve started to work days and nights on my site now so I can generate a decent income in 2017 from my business. This is what freedom looks like for me; being my own boss and not having to restrain my spending. I finally found a way to make it happen.

    What about you; what’s your definition of financial freedom?

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  •  

     

    It was a very good week for me so far. I kept my 2015 resolutions going for almost two months now. I now weight 182 lbs (from 198lbs as at January 1st). I work out 4 times a week and never take a break. My account still shows a solid 9.68%, getting closer to the double digit return already! I’m pretty happy as my two benchmark (VIG for US stocks and XDV for Canadian stocks) are showing respectively +1.53% and -0.64% so far.

    It was also a great week for my sites as I published a guest post on Boomer & Echo called 3 False Reasons NOT to Buy a Stock. There are so many reasons why an investor will ignore a company, but some of them are wrong.

    I also got mentioned by Sure Dividend in his list of Dividend Investing Resources. If you have missed any of the sites he mentioned, click on the link right away!

    Finally, I wrote a MONSTER post about how to build a dividend growth portfolio. I’m sharing my perspective on dividend growth investing and how I build my own portfolio with success.

     

    Other Dividend Reads

    Be prepared, it’s a busy week!

    Lanny from Dividend Diplomats is sharing her anxiety to buy new stocks. I know the feeling as when I have cash in my investing account, it burns my hand and I have to make a purchase. However, I usually keep a list of 5-6 interesting buys to make sure I don’t burn myself in a stupid trade just for the sake of trading.

    Now, we are moving from anxiety to regrets! Div Hut name regret as its main motivator to achieve his goals. The fear of having regret can help you taking action. I personally think it is best to assume your action and never have regrets. My secret is simple; don’t hesitate to take action; you will never regret what you did, only what you didn’t do.

    Dividend Engineering reviews Baxter International (BAX). I don’t hold BAX in my personal portfolio, but I selected it for several DSR portfolios. It is a strong company with great upside.

    Write your Own Reality bought EMR & JNJ. I’m a big fan of JNJ and I would buy more today if I could. This is one company every dividend investor should hold in their core portfolio.

    DivGro bought Starwood Property. It shows a very high yield (8%), but I’m always sceptical about those high yield dividend stocks.

    Dividend Growth Investor ask a very important question: What would happen to Berkshire Hathaway after Warren Buffett is gone? Many investors thought Microsoft was Bill Gates or that Apple was Steve Jobs. So far, they were wrong… probably Berkshire Hathaway will survive too!

    Dividend Earner makes a list of common investing mistakes to avoid. My favorite is “not understanding what you invest in”. Too many investors buy stocks because they heard of them on the news or from a friend.

    Dividend Life buys PG and WPPGY. I always liked PG and always thought it was too pricey… and I simply watch the train go buy and never purchased it while the stock keeps going higher… oh well!

    Dividend Yield makes a list of 19 high yield dividend stocks. Is it time to buy AT&T?

    Dividend Ladder looks at British Petroleum. It’s definitely time to buy energy stock.

    A Special Mention to…

    Robert aka The Dividend Dreamer for his interesting trading strategy. You have to start reading toward the middle of the post as he updated the same post with more trades. He basically buys stocks he intends to hold for a while, but quickly trade out if there is a buck to make. His goal? Reaching 1% return on each trade ASAP. I think it’s worth reading because it is completely different from many other investors since he is doing it on dividend stocks.

     

    We are painting our bathroom this weekend and having a poker. The house will shortly be ready to be put on sale (we put the house for sale in May to have 12 months before our departure to sell it). What are you going to do during your weekend?

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