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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: There is a link to an article in today's Globe by Meb Farber that calls into question the generally accepted wisdom that companies that grow their dividends are superior investments. (at least I think it is a generally accepted theory) Is this a theory that you have come across before or do you think that his argument has merit?

http://mebfaber.com/2017/04/26/dividend-growth-myth/

Appreciate your insight.

Paul F.
Read Answer Asked by Paul on April 28, 2017
Q: I note that buyouts are increasing among the small cap stocks. Today alone Lumenpulse and Canam are going private at nice premiums. IRD also gone this month. I am not sure if this is the start of a trend. Are there any companies you would consider as buy-out targets in the next 9 months? I have my eye on Ten Peaks.
Read Answer Asked by Murray on April 28, 2017
Q: More of a feedback comment than anything else. Thank-you, thank-you for this wonderful service you provide. I have been a member of this service from the beginning, and I have followed you careers for sometime. I used to be a mutual fund investor, and overtime slowly dabbled in stocks to take control of our family finances. This service has been invaluable to me and I suspect so many others. In light of some recent company issues I wanted to reinforce the quality of this service. You may not pick all the winners, and that's not your job, but you have certainly helped this individual take control of his families investments and taught him to choose my own winners rather than throw darts and gamble. I may not ask many questions, but the information and insights on this site are outstanding. Thank-you for sharing your talents. - Cheers
Read Answer Asked by Philip on April 27, 2017
Q: I am a retired senior who relies on the income generated from my non registered account, RRSP and TFSA.

My philosophy is to enjoy my money NOW ( while I am still alive!). I am confused as to how to treat ' return of capital' which form part of some companies distribution.

Does this form of income effectively lower the cost of your shares and thus increase your EVENTUAL capital gain (and tax)?. I like the idea of getting money now and paying the tax later (like when I'm dead!). I assume this is relevant only for a non registered account.

What sectors use 'return of capital' and do who have any particular stocks to recommend? Thanks

DEREK

Read Answer Asked by Derek on April 27, 2017
Q: With all the activity recently involving stocks that are shorted, it got me to wondering how and why the actual process works. I believe that the shorter borrows the stock with the promise to return the stock at a future date. The shorter is hoping that the stock falls in price so that the stock can be replaced at a lower price and the shorter pockets the difference.

My questions are: who does the shorter borrow the stock from? Is it from the brokerage who holds stocks in nominee name? I can't imagine an individual wanting to lend stock to someone who is going to do their best to drive that share price down. So if it is the brokerage, do they have the unilateral right to lend the stock or do they need my permission? Do all brokerages participate in this activity? Do I (as the actual owner of the stock) get any of the money the brokerage charges for this service? Why would I want to deal with a broker who is working against me in this regard? Finally, is there a time limit at which point the stock must be returned?

Thanks for the help in understanding.

Paul F.
Read Answer Asked by Paul on April 27, 2017
Q: Hello,

I just want to make sure I fully understand the dividend and tax differences amongst different companies. Could you please list where these different scenarios are best held (TFSA, RRSP, Non Registered), how much they are taxed, and any other important tax information (i.e. which dividends need to be reported, eligible dividends, other common scenarios etc.). This question obviously has many parts so dock as many questions as you see fit.

A) US company with US dividend trading on US exchange:

B) US company without dividend trading on US exchange:

C) Canadian company with US dividend on Canadian Exchange:

D) Canadian company with no dividend trading on US exchange:


Thanks in advance!

Alex
Read Answer Asked by Alex on April 27, 2017
Q: Great article: The Other Side - April 19, 2017 by Michael Batnick
http://theirrelevantinvestor.com/2017/04/19/the-other-side/

See/Insert graph:
http://theirrelevantinvestor.com/wp-content/uploads/2017/04/12.jpg

Excerpt:
...
If I were in the business of picking stocks, I would do two things: I would try to exclude the worst stocks rather than attempt to pick the best, and I would focus on value, which are really two sides of the same coin.

While the best performing stocks from year-to-year are all over the map, from deep value to high beta and everything in between, the worst performing stocks over time share similar characteristics. So maybe it’s not such a bad idea to be a closet indexer after all, except you should try to be in the closet that screens out stocks that are highly levered, have growing accruals, inventory build, or whatever metrics you prefer.

Investors are drawn to glamour stocks because the payoffs can be huge. But while they have great possibilities, they also have bad probabilities, as Patrick has shown. The best performing glamour stocks outperform by 112% on average, but the median result is underperformance of 11%. The best performing value stocks on the other hand, saw a 78% average excess return, while the median saw a 5% average excess return.
...

Comments? As usual, thank you for sound advise.
Read Answer Asked by J Carl on April 26, 2017
Q: I have owned this fund for a very long time and averaged over 8% return through the time I have owned the fund. The fund has a monthly distribution which is reinvested and additional units distributed annually which are also reinvested, a healthy gain in NAV over the years.I'm now 1% over a full position in the portfolio should I continue to let it run, I have not added a dollar to this fund in 10 years or would you trim back to a 5% postion
Read Answer Asked by Thomas on April 26, 2017
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