Canadian Money Forum banner
41 - 60 of 69 Posts

·
Registered
Joined
·
21,717 Posts
another massive assistance will be provided :)
If a bank has problems, yes it will get massive assistance, but that does not necessarily preserve the equity. Citigroup and Bank of America had huge assistance from the US govt and their equity has been destroyed.

But many investors in Canadian banks seem to think that (inevitable) government bailouts will preserve their equity value. I think this is a big mistake in reasoning.
 

·
Registered
Joined
·
12,135 Posts
I have a lot less concern about our banks now that they have to have higher Tier 1 capital ratios and their debt including potential conversion of prefs into useless common equity, has to be NVCC compliant. It means their shateholder and debt holder capital structure would be destroyed before a taxpayer bailout happens. That would be a Joan of Arc moment for the executives.
 

·
Registered
Joined
·
21,717 Posts
I have a lot less concern about our banks now that they have to have higher Tier 1 capital ratios and their debt including potential conversion of prefs into useless common equity, has to be NVCC compliant. It means their shareholder ... would be destroyed before a taxpayer bailout happens
I'm not concerned about the banks either. The banks will be ok; it's the shareholders that will be destroyed once their equity is diluted into oblivion. This could have happened in 2008 but shareholders of Canadian banks got lucky.
 

·
Registered
Joined
·
915 Posts
James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.

I inherited some AT&T stock but am looking for some strength in the stock price to make an exit. I am not interested in their new media businesses (Warner) which is probably end in tears and I already have Canadian telecom exposure.

Total returns on T have been well below that of the SP500 over the past 5 years. It's been setting lower lows for a couple years now.
 

·
Registered
Joined
·
5,223 Posts
James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.

I inherited some AT&T stock but am looking for some strength in the stock price to make an exit. I am not interested in their new media businesses (Warner) which is probably end in tears and I already have Canadian telecom exposure.

Total returns on T have been well below that of the SP500 over the past 5 years. It's been setting lower lows for a couple years now.
agree, telecom sits with media, energy and pipelines as sectors i am very leery about and try to avoid (we don't have to own anything) due to politics and plain old technological disruption (i only own tech companies in etf's)

i looked at att but decided to pass and stick with telus as my one telco, i can follow them better
 

·
Registered
Joined
·
21,717 Posts
James is the epitome of the cognitive bias known as loss aversion, but I do think AT&T is not so hot as a dividend stock.
I just understand the risks of these things. There's no problem investing in AT&T, or banks, or anything as long as one has a realistic idea of both upside & downside.

Beware aware of both upside & downside is not loss aversion bias. In fact it's a vital part of any kind of risk taking, and that includes thinking through the worst case scenarios.
 

·
Registered
Joined
·
21,717 Posts
T's yield is now 7.2%. I just wanted to point out something about "dividend investing". I think AT&T is a good example of how focusing too much on yield can create a misleading picture and harm your capital.

At first glance, T seems like it's been an OK investment. The 5 year cumulative total return (including dividends, not annualizing) is +16% so you might say, great, it's making money. And it's paying a big dividend.

20647


But is that really OK? Here's what the broader S&P 500 has done in the same 5 years. It's up 84%.

20648


So while the investor didn't lose in AT&T in absolute terms, they certainly did much worse than the broader index. It's a significant underperformance, and in my view, that's harmful since most of us want our capital to last as long as possible into the future.
 

·
Registered
Joined
·
1,391 Posts
I wanted to give this thread a bit of a bump. We are looking at a low interest rate environment for the near term if not longer. I have a tiny position in this US telco and hold BCE and Telus as well. I noticed that the EPS does not meet the current payout and the stock has cut its dividend in the past. The stock is inching closer to the march lows and gave me reason to revisit. I briefly considered placing an order this evening. I think Verizon is probably a better company in this space but perhaps there is a bit more value with AT&T. I don't believe there are many members that stock pick US equities but would welcome any analysis. I am wanting to keep my powder dry for other purchases as we move closer to the US election so will hurry up and wait on this one. Whether or not we see another drop in the next month or so I plan to allocate some cash to equities.
 

·
Registered
Joined
·
21,717 Posts
Dead money. Going nowhere.....
I see that AT&T now has a 7.5% dividend yield, which itself should be a warning sign. But the total return is far more important. Here are AT&T trailing returns.

5 years: 2.4% CAGR ... vs ... 14.0% for US mkt
10 years: 5.0% CAGR ... vs ... 13.8% for US mkt
15 years: 6.1% CAGR ... vs ... 9.9% for US mkt

Nothing to write home about. What does this stock offer you that the dumb old index does not? I don't pick individual US stocks, but if I did, I would be looking for companies which have a history of outperforming the index.

In comparison, BCE and T have performed on par with, or better, than the Canadian index.
 

·
Registered
Joined
·
1,391 Posts
Thanks for the feedback James and Alta. Another example of how chasing yield can result in underperformance. Canadian telcos definitely are more appealing (better balance sheets, moats and opportunity). I am at full allocation for Canadian telcos and happy with their return.
 

·
Registered
Joined
·
3,166 Posts
Picking US stocks is pretty difficult. I am a fan of the US index. Also this industry in particular seems to be very cutthroat in the US. Canadian telcos definitely leverage their monopolistic position and lack of foreign competition barriers to keep their margins healthy.
 

·
Registered
Joined
·
4,416 Posts
AT&T is the only US stock I own. And I don't own much!
I have it in my RRIF where I have a US$ section mainly consisting of foreign ADRs and two Canadian stocks that pay dividends in US$. Purpose is to generate cash flow in US$ that I draw to help pay for Snowbird trips. All holdings are dividend payers . Have had nice gains across the board except for Shell.
I don't recall what made be buy ATT. Probably attracted by dividend and stock price matched funds available. Besides, when in USA I am a customer!
Anyway, thanks for the report. Glad to see stock is doing well.
 

·
Registered
Joined
·
5,587 Posts
I have the same plans Agent. re: use some USD $$ dividends for travelling.

I'm not "there yet" for retirement but is your approach simply to withdraw USD RRSP $$ directly to USD non-reg. for spending?

Seems to make sense (to me) but I wasn't sure if all brokerages don't force some USD > CDN $$ conversion first. Would defeat the purpose of course.
 

·
Registered
Joined
·
4,416 Posts
I have the same plans Agent. re: use some USD $$ dividends for travelling.

I'm not "there yet" for retirement but is your approach simply to withdraw USD RRSP $$ directly to USD non-reg. for spending?

Seems to make sense (to me) but I wasn't sure if all brokerages don't force some USD > CDN $$ conversion first. Would defeat the purpose of course.
We make the withdrawal as part of our annual RRIF withdrawal. The US$ are withdrawn as US$ and go into our unregistered trading accounts along with stocks & C$. From there we can transfer the US$ wherever we choose, but it goes into our US$ BMO account. From there it gets used to fund our BMO Mastercard!

The only conversion that gets done, is in calculating the C$ equivalent for use in calculating the total withdrawal amount. We try to hit the MWR exactly. Stocks, US$ plus C$ cash. BMOIL calculates the exact amount of C$ cash required, based on the stock prices and the US$ FX rates on the day.
 

·
Registered
Joined
·
5,587 Posts
Cool. Makes sense.

Planning for the day when I can move USD $$ out of RRSP/RRIF and travel with USD $$ non-reg. for the same reasons.

Is anything a tax headache at tax time? I guess not really, since all RRSP/RRIF withdrawals must be reported in CDN $$ equivalents anyhow. One or two RRSP withdrawals per year would have those rates defined easy :)
 

·
Registered
Joined
·
4,416 Posts
Cool. Makes sense.

Planning for the day when I can move USD $$ out of RRSP/RRIF and travel with USD $$ non-reg. for the same reasons.

Is anything a tax headache at tax time? I guess not really, since all RRSP/RRIF withdrawals must be reported in CDN $$ equivalents anyhow. One or two RRSP withdrawals per year would have those rates defined easy :)
If you draw from your RRSP or draw in excess of MRW from RRIF, there will be withholding tax deducted. They would first convert the US$ to C$ in order to calculate the wityhholding. I did that once. I think I still received the full US$ amount and they used C$ cash in account for the withholding. But not sure exactly. No matter, it was just about $5k and there was no problem with it then or at tax time.

The way I described we do it earlier has no tax consequences. (Other than paying tax on our RRIF withdrawal at the max rate!) OAS clawback can kick in because withdrawals may put you in a higher bracket. No getting around that ;)
 

·
Registered
Joined
·
1,391 Posts
AT&T stock heads for worst day in 11 months as future dividend cut viewed as ‘somewhat surprising’ - MarketWatch

As Alta said in post #49 Dead money. Going nowhere. Share price down today. The looming cut did not come as a surprise to me at all in fact I thought this was somewhat priced into the stock. the article indicates a desired payout ratio of 40-43%. I was unable to find its current payout on Reuters. Although I agree with the plan to refocus on telecommunications instead of old media, I am not sure I care to stick around for the changes to be implemented. If the article is correct the "resized" dividend won't take effect immediately. I find this odd as the announcement would have the same effect without any of the savings of actually cutting. I don't expect any price appreciation for quite some time. I placed an order for Verizon on Sunday( I see more value and upside) but my order wasn't triggered. Not sure if money will move from AT&T to Verizon. I haven't changed my price but am considering doing so along with the number of shares.
 
41 - 60 of 69 Posts
Top