Experts worry that the recent interest rate cut in Canada will lure people to rack up even more debt. Bankruptcy trustee Doug Hoyes warns, “the more debt you have, the greater your chances of going bankrupt. It’s simple math.” He predicts bankruptcy numbers will “skyrocket when interest rates rise and people are saddled with ballooning debt payments.” Yikes. That doesn’t sound good. 😐
Anyway, last week I borrowed $1,420 from the bank to purchase 100 shares of Corus Entertainment (CJR.B) for $14.20/ share in my non-registered account. Normally I wouldn’t buy a stock with 100% borrowed money but with credit this cheap how can I say no? 😀 Besides, the dividend from CJR.B is twice as much as the interest I pay on the margin loan so it’s totally sustainable as long as the dividend doesn’t get cut, lol. 🙂
CJR.B Dividend Payout History
Corus is a large media company in Canada that operates both TV networks and radio stations. It owns brands including YTV, Treehouse, Nickelodeon Canada, W Network, OWN Canada, and Movie Central (including HBO Canada and Encore Avenue.)
I also had about $800 US in cash sitting in my RRSP from accrued dividends so earlier this month I also bought 8 shares of Johnson & Johnson (JNJ) at $98 US per share for a total of $784 + commission. The company makes consumer, pharmaceutical and medical products. Household names like Band-Aid, Listerine, Motrin, Splenda, and Tylenol, are all part of the Johnson & Johnson family.
This is one of the largest conglomerates in the world with 265 operating businesses and a market cap of $277 billion. That’s more than the entire GDP of Greece, lol. No offence to the Greeks. And if you’re a citizen from Greece reading this post, you should probably stop reading and go pay your debts. Hah, just kidding. 😉
Both Corus and J&J are not cheap in terms of valuation, but they are not too expensive either. Corus is making 8 times free cash flow and J&J has a P/E ratio of 17.6 times. The reason I decided to buy these stocks is because I believe they would be great additions to my dividend growth strategy. Both names are dividend growers. I just had to wait for a good time to pick them up.
Corus recently missed its quarterly earnings and dropped quite a bit, which some believe is oversold. I think this is good point to start accumulating a small position of 100 shares. Plus the 8% dividend yield is very nice and super tax friendly. 🙂 Johnson and Johnson share price hasn’t moved much over the last couple of years but it has a long term record of steady gains. So I think now would be a good time to jump in before it potentially starts climbing again. It currently has a dividend yield of 3%.
JNJ Dividend Payout History
| Year | Annual dividend per share |
| 2006 | $1.41 |
| 2007 | $1.62 |
| 2008 | $1.80 |
| 2009 | $1.93 |
| 2010 | $2.11 |
| 2011 | $2.25 |
| 2012 | $2.40 |
| 2013 | $2.59 |
| 2014 | $2.76 |
| 2015 | $2.88 estimate |
With dividend growth stocks the important metric isn’t the dividend yield, but rather it’s the rate of dividend growth over time. 🙂
The biggest headwind to Corus is that the regulator CRTC wants to impose a pick-and-pay model next year which could hurt revenues of Canadian entertainment companies. Netflix and other fast growing competitors are another risk to watch out for. The CEO of Corus seems to be pretty confident in its financial future though, and says the dividend is safe. 🙂 The biggest problem Johnson & Johnson has is the strength of the US dollar right now. But foreign exchange headwinds tend to be more temporary than systemic so JNJ is still a viable long term hold me thinks.
Thanks to the new addition of these two stocks in my portfolio my dividend income is now $140/year higher! 😀
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Random Useless Fact
Congrats on those buys LI. Personnally, I sold off JNJ a few years ago with a nice profit on the stock and exchange rate. I would consider it again around the $90US level as that, in my opinion. would leave a good potentilal upside. I find the value of the stock to quite “high” in that it takes a lot of money to buy very few shares. Add to this the exchange rate which is not in our favour right now and I just find it a little bit too much of a stretchfor me at this time. Another “and” is if our CDN$ appreciates then it can wipe out some of the value on a sale, WHen will our $ apprecaite? Some time in the future. Your guess is as good as mine. If our dolar goes down then you are making money if you sell. JNJ is a great company so I still look at them just about every day to see if they hit a slippery slope. I sold JNJ and bought KMI. Just that move doubled my dividends. Held in an RRSP so NO tax consequences. Personnal taste as to the entertainment industry. I have held… Read more »
Maybe JNJ will do a split so investors can buy more shares using the same invested dollar amount. The stock has already undergone 5 splits since the early 1980s. Yeah, RRSP is the perfect place to put stocks like JNJ and KMI. 🙂
Nice purchases, FI35.
Media is really an interesting aspect of investing – and as us bloggers know – content is king. If I remember correctly – you also bought some Time Warner or Fox recently didnt you? I dont really own any media companies per se, but I like the fact that BCE has been growign their media division over the years.
Cant go wrong with that JNJ either. Keep that dividend growing month after month!
R2R
ps: Interesting pics about selecting breeding…although that chicken looks like its on roids 😉
That’s right, I picked up some Fox and Time Warner last year. I’m a big consumer of media so I want to dip my hands in as many mega content creators as possible. The only big one in North America I don’t have yet is Netflix lol. I watched it soar from 2012 to now. Should have bought in back then. It’s on my watch list now. Looks expensive though.
Nice buys. We bought some CJR.B before the recent price drop so might consider adding more the average down the price.
Wow those chickens really “beefed” up. 😀
Haha, nice one. And it appears CJR.B has finally reached a bottom.
I am watching JNJ because I think they may drop soon. They are heavily promoting a new hepatitis drug in the US and there have been some serious side effects occurring that will either force the drug to be removed from the market or to restrict the number of people it can be prescribed to. If the FDA makes an announcement or if JNJ withdraws voluntarily it will drop and be a bargain. These side effects will affect Gilead (which everyone seems to be buying) as well as the JNJ and Gilead drugs are taken together for Hep C.
I can see how that can potentially cause a big move since Hep C affects millions of Americans. Maybe JNJ will drop and you can pick up some. 🙂 Somebody once said invest in companies that buy commodities and sell brands. That’s pretty much what JNJ does.
I also own some JNJ, keeping it for the steady dividends, don’t expect much appreciation out of it though. I’m up maybe 2% on a good day.
Cool, that means we’re investment partners. It’s not a very volatile stock. It’s only gone up 2% since I bought it. Let’s wait and see where it’s at 1 year from now.
Thanks for sharing your recent buys with us. I’m familiar with dividend stalwart JNJ but not CJR though I wouldn’t buy any stock on margin no matter how low the borrowing rates are relative to the dividend received. I guess I just don’t like the idea of leverage/debt. At current levels why not consider the Canadian banks instead such as BNS, TD or RY?
Great suggestion, DH. I have BNS and TD so far, but I should also buy some RY to diversify. Its P/E ratio doesn’t look too bad compared to the historical average. I think I’ll purchase some Royal Bank stocks later this fall when I have more money. :0)
can u elaborate more on exit strategy? Once u hit the million dollar in overall net worth what will be the process wrt converting assets into dividend portfolio after debts repaid?
Gradual or immediate?
Will u keep your day job n maintain current standard of living?
How will u approach your prenup?
I don’t really have an exit strategy. I only have a holistic life plan for now. I’ll basically continue to do what makes sense to me and change my plan accordingly when circumstances change. Once I reach millionaire status I’ll probably continue to do what I’m doing today which is working full time, maintaining my current debt balance (not going into more debt but not paying it all down either,) keep my current standard of living, and continue to build up an even larger retirement fund. 🙂 In terms of cash flow I don’t really need my investment portfolio to provide me with income right now because I’m making active income. So right now my $650K of financial assets is yielding about 2.5% income. The remaining 7%+ of the annual returns comes in the form of capital appreciation. If 10 years from now if I decide to be a stay at home husband or father then my active income would probably drop dramatically. In that case I might want to shift my investments to focus more on income generation and rebalance my portfolio to yield 5% in income, and 2.5%+ in capital appreciation, for example. That could mean selling my… Read more »
OK what if one day u fall in love with someone perfect for u but she’s like ”can’t stand the DSR. Deleverage or I won’t marry u.” Then u r at 1M for instance but u r not mortgage free. And she doesn’t want to live outside of Vancouver and the housing bubble hasn’t burst n she pleads for a house with a backyard for liquid junior to play.
This lady I’m suppose to fall in love with sounds pretty hard to please, lol. But I don’t mind a good challenge. 😉 If that was the reality in the future then I’ll just sell my farms and use the funds to pay the down payment for a single family home with a backyard out in the suburbs. With the farms sold my $200K farm loan would be gone as well, which lowers my financial risk. My family would move into our new home and rent out my old condo and use the rental income to pay down my other debts until they’re all gone.
Will u consider writing about dating on a budget or how liquids’ frugal dates go
Sure. I’ll consider writing about those topics in the future.
Good luck with CJR.B – I suspect Warren Buffet would label it a cigar butt…
CJR.B : I don’t like it either nobody knows where the bottom is.
JNJ : Consolidation but at least you bought at the bottom of it. anything under 96.50 i would worry for another drop
Good luck 🙂
Looks like CJR.B is going back up. At least for now. Hope it continues. Thanks for the luck guys. I’ll probably need it. :0)
LI, have you not considered buying Corus debt instead of the equity?
The Corus bond I was looking at matures at 2020 with a 5% yield to maturity which is a bit higher than its coupon. Given how it will mature 5 years out the debt doesn’t look as appealing as the equity which is paying 63% higher yield. The stock could go down in the short term but there will be time to recover. Still, I might invest in Corus debt later this year to hedge my position just in case. I’m kind of overweight in equities anyway. Thanks for the idea. 🙂