Monthly Archives: August 2016

You’re Richer Than You Think

That’s the campaign tagline Scotiabank launched back in 2006. At the time, Canada was in an economic downturn (political-speak for recession) and the bank caught a lot of flack for the slogan. I happen to like it. A lot.

Piggy Bank on CashThe slogan elegantly captures the idea that we all have more money than we realize. The problem is, most of us don’t keep track of how we spend it. We’ve all had that moment when we look at our bank account balance and think “Where did my money go? I have nothing to show for it!” Lots of little purchases can add up to the feeling of having no money. The reality is, we simply need to keep track of our spending. When we do, we might be satisfied with where our money goes but, if not, we’re armed with the information we need to make changes.

Let’s do some math. Maybe you like to grab a coffee on the way to work each morning. At Tim Hortons that would cost you $1.70 for a medium and at Starbucks a Grande would be about $2.10. For this exercise, let’s pretend you get four weeks vacation and 10 statutory holidays. That means you would buy 230 cups of coffee, or spend between $391 and $483 a year. Let’s imagine you go out to lunch a couple of times a week at $8 a shot. That’s another $768. We can all think of lots of other small, repetitive purchases we make but let’s just use these two for now. If you eliminated those purchases you would have $1,205 every year to invest. Now let’s imagine you do that for 10 years and you manage a return of 5.63% which is our annualized return at the time I’m writing this. After 5 years you’d have over $7,100, after 10 years you’d have about $16,500 and after 20 years it would be almost $45,300! (For this calculation we did not increase your contribution for inflation. If we had, you’d have even more money.)

Now, I’m not suggesting you give up coffee and going out for lunch. If you enjoy those – great! Pick any small, regular expense you have – cable bill, cell phone package extras, whatever. The point is we all have little expenses that add up without our realizing. We could cut out some of those as a small sacrifice andmake a big difference to our retirement savings.

August’s Pick

For those of you who like variety, you’ll be happy with this month’s pick. The bottom line is Metlife Inc (NYSE: MET) again because it comes out with the top score, but we have a couple other options for you. Metlife is still trading nearly 25% off the 52-week high and pays a 3.7% dividend. Really, not much has changed since last month so we’re recommending them again. But we promised some variety… While not the top pick (nor our official recommendation) there are a couple of stocks that are worth taking a look at.

First, Canadian Imperial Bank of Commerce (TSE: CM, NYSE: CM). Canadian banks are strictly regulated and so make for very stable choices for investors. For example, here’s the performance of CIBC over the last 5 years. Notice the number of times they’ve raised their dividend! From $0.90 to $1.21 is a 34% increase in five years. Impressive. That dividend currently sits at 4.9% by the way.


So why not recommend CIBC you might be wondering? One reason only: they are trading at just 5% below their 52-week high so Metlife offers greater potential for capital appreciation. CIBC would be a great purchase too, though, and that’s why we’re mentioning it.

Second, Capital One Financial (NYSE: COF). With a dividend of under 3.5% (currently, 2.5%), this company does not make our cut but I’m mentioning it here because it’s currently on sale and offers some capital appreciation potential. The stock is nearly 32% under its 52-week high which is a great discount for a solid company. With a P/E of only 9.16 and EPS of 6.87 it’s an attractive option. Our portfolio is a dividend income one so we wouldn’t purchase COF but you might want to allocate a small amount of your portfolio to it to reap the reward of the expected (inevitable?) price increase.

There you have it. Three interesting options for you this month. Happy investing!