Income Investing Investing Wealth

New Year. Same Story.

December 31, 2020. We were all thankful that the worst year ever was finally over. Yet, so far 2021 is less than two weeks in and the drama is escalating.

I won’t get into the politics, because it’s the politics that is tearing us apart. Instead, I’ll focus on what we all agree on: this is some bullshit!

People are going broke, businesses are closing, folks are sick and dying. The population is at each others’ throats. Oh, and the climate is in slow collapse.

If there ever was a year to take personal responsibility, it’s 2021. Nobody is going to come fix your job, your marriage, your savings account. It’s up to each of us to make this a better world.

It wasn’t always this way. During the mid-20th century, most people could follow a predestined path that led to decent wealth and security. One didn’t really need to think or be different. You just needed to pick a direction and go. The baby boomer benefited from a post-war economic tide that lifted all boats. You had to f&ck up pretty bad to not do well as a boomer.

I don’t have to tell you those days are long gone.

Kids today enter the system saddled with debt because they were forced to get two masters degrees for an entry-level clerk job. Same job 50 years ago went to a high school grad. And that grad would then get married at 21, buy a house at 22 and support a nuclear family through to retirement on a single income and fat DB pension.

No more.

But you already knew this. You’ve seen the wealth disparity charts. Unless you’re one of the lucky ones, you’ve probably personally felt the pressures. I certainly have.

My story in 4 words: it’s all on me.

I have people depending on me to keep it together. Pay the bills, keep food on the table.

I have a successful career. But I fully realize it could end at any moment. I’ve seen dozens of my colleagues over the past 20 years hit a brick wall and never recover. This isn’t something people in their 20s know. Careers have an expiry date, and most end before planned retirement. This isn’t something most people decades ago had to consider.

If there’s one thing I want you to do this year, it’s this: consider what happens if your career ends next year, in 5 years, in 10 years. And when I say ‘end’ I mean END! Like your prospects are reduced down to shuffling coffees at the local diner.

How will you pay the rent and buy food?

With any luck, you have years to prepare. If you are young, you probably have many years of career growth ahead of you. But know this: 50 year old unemployed executives have few prospects. So prepare.

The simple answer many provide is to start a side hustle. Let me level with you. DumbWealth is my side hustle and I don’t make a dime. I do this as a labor of love and it’s still time-consuming and exhausting. I can’t imagine truly putting in an extra 4-5 hours a day after work (and life) to build a secondary source of income. I should, but who has the time or energy. Work, life, kids, exercise, chores. If you’re truly going to start a side hustle, one (or all) of these things inevitably gets neglected. You need a very understanding family and nearly infinite amounts of energy to build a viable side hustle.

OK, so why not take a hobby and try to make something of that?

Photography, painting, woodwork. Sounds great in theory, but turning a hobby into a business is a great way to kill that hobby. The business of photography is about 20% photography and 80% sales and marketing.

If you’re reading all this and saying “well, but…” then all the power to you. You might just be determined enough to pull it off. Some people are.

The rest of us need to build financial freedom in other ways. We need to save, invest and earn a little more at work. It’s a simple and powerful formula that most people neglect, either because it’s boring or they’re addicted to consumerism.

Cut your expenses, save as much as possible and invest that money in a portfolio that will eventually pay you for doing nothing. The income generated from an investment portfolio is probably the greatest gift we can give ourselves. It’s the one way to create a passive income without really doing much more than you’re already doing. You still work the same hours and have the same salary. You just need to sprinkle some planning and discipline onto your daily habits.

Start small, but start today. It’s a slow build that often leaves you questioning the plan. But keep at it and there should be a day when that investment portfolio earns enough to cover your basic needs if you were laid off. If all goes right, there might even be a day when that portfolio allows you to quit your job. That’s financial freedom.

Income Investing Investing

Enbridge Reaffirms Growth Targets and Raises Dividend

There are value traps and then there are hated stocks.

Enbridge is the latter, in my opinion.

After hitting a peak of $56.03 in February, its share price plummeted by about 37% and has only partially recovered its losses. Since November, however, Enbridge shares have rallied about 23% off its lows. Pretty good, but at $43/share it’s still far from it’s pre-Covid high.

With a dividend yield at 7.67% you might think Enbridge is a value trap and the market is pricing in a dividend cut. While that’s a fair assumption, I personally disagree.

First of all, Enbridge’s business model is fantastic. It provides a product and service that has fairly inelastic demand with no real substitutes and little competition. While many companies saw revenues drop close to 100% during the March/April lockdowns, Enbridge experienced a 25% drop from Q1 2020 to Q2 2020. A tough quarter, but not a death blow.

Moreover, Enbridge is run by a fantastic management team with decades of cash flow growth provided to shareholders. Indeed, after possibly the worst year for the economy on record Enbridge management is actually predicting full year 2020 cashflows to grow vs 2019. This company can grow cashflows through thick and thin.

After 2020, Enbridge management expects cashflow (aka Distributable Cash Flow – DCF) to continue to grow by 5-7%.

At $4.50-$4.80, expected full year 2020 cashflows more than adequately cover the annual $3.34 forward dividend. Management has such confidence that on December 8th announced Enbridge’s 26th consecutive annual dividend increase. That’s a solid track record.

All things equal, with a 7.67% yield and DCF growth of 5-7%, would a total return of 12.67%-14.67% be a reasonable intermediate forecast based on cash distributions? Maybe. Of course, other variables (Covid-19 anyone?) can impact the share price, but this naïve forecast aligns with Enbridge’s 25 year CAGR of 15%.

I personally hold Enbridge stock. I’d buy more if I didn’t already have a substantial position.

Income Investing

TSX 60 Dividend Yields Report (November 13, 2020)

Yo! I provide a monthly (ish) update that includes the following information for all TSX 60 stocks:

  • Earnings
  • Dividend per share
  • Ex-dividend date
  • Dividend payment date
  • Forward dividend yield
  • Forward price-to-earnings ratio
  • Price-to-book ratio
  • Price-to-sales ratio

If you don’t already, subscribe for udpates:

Click here for TSX 60 Dividend Yields PDF