Welcome to my Thoughts on Finances November 2015 post where I discuss my investments, debts and how I’m managing the family finances. Here’s what’s been going this past month and where I see us headed in the next few months.
Paying Down Debt
Saving and investing our money is only one part of the wealth-building equation. The other, of course, is paying off our debts. On that front we’ve been slowly grinding along with trying to tackle our HELOC debt. We used it to fund our home renos and for the downpayment on the rental property. This debt is proving to be a real drag on our finances and it has really limited my investing activities this year (other than buying the rental property!).
But all of that is OK because I invest for the long term. So what if I have a few crappy months when it comes to my finances. By fixing up my house I’ve added value to it and made it more energy efficient. The rental property will undoubtedly add considerable monthly cash flow as well as an increase to my net worth over time. What I’ve learned over the years is that building wealth is not a simple linear process. It has its ups and downs too. The important thing is that I keep my eye on the long term trend and make smart choices with money today.
So my plan to tackle our 50K HELOC will be to use some windfall money that we get in the new year from my work savings plan, bonus and income tax refunds to eliminate as much of the debt as possible. As it stands now, I’m forecasting that it will be paid off by June. After that I will be buying up lots of my favourite dividend stocks and index funds and, who knows, maybe even another rental property.
I’m happy that we finished the upgrades on the rental property and that it is fully rented. So far, it has not been very profitable but, then again, we’ve only had it for 2 months. Things should get better by February when the upgrades are paid for. As it stands now I’m projecting a cash profit of about $120 for the next 2 months. Afterwards it should be somewhere around $500-$600 per month if there are no maintenance issues.
Monthly Investing Activity
As I mentioned above, I haven’t invested as much as I would have liked to this month, but I managed to buy more shares in Emera (EMA) and Bank of Montreal (BMO) through my regular, automatic contributions into my DRiP accounts. I also managed to send off $300 to buy some more shares in Fortis (FTS) on December 1st.
In spite of not having a lot of money to invest this month, I was very happy to see that 2 of my companies raised their quarterly dividend. Telus (T) increased its by 4.8% and Sun Life Financial (SLF) increased by 2.57%. This is one of the big benefits of being a long term dividend investor. Year after year my companies raise their dividend payout which effectively gives me a raise for doing absolutely nothing at all. At my work, I’m lucky to get 2% a year, but as an investor it seems like I get at least that amount every second quarter!
If I Had $10k
What would I do if I had $10k just lying around? Hands down I would buy TransCanada Corp (TRP). The stock is down 30% year to date and yields about 5%. That dividend is projected to grow about 8% on average until 2020.
Hundreds of billions of dollars have been invested in the oilsands over the past few decades and despite the recent slide in oil prices, output for the oilsands is projected to increase over the coming decade. TRP will benefit from this in the long run as I believe that sooner or later more pipelines will be built to ship Canadian crude.
But shipping crude oil is only one segment of TRPs business. They’re also involved in power generation and natural gas distribution. As far as I can see, we will always need electricity and natural gas to heat our homes.
All told, I feel that buying TRP in the low $40s offers an incredible opportunity for the long term dividend growth investor. I own a small position of TRP in my DRiP account (about 27 shares) and I wish that owned more.
Disclosure: I am long TRP
This article represents my opinion only. Please consult with a financial advisor before making any investment decisions. See full Disclaimer for more information.
Photo Credit: Photo by pakorn/Freedigitalphotos.net
Thanks for reading my thoughts on finances November 2015.