Archive for August, 2006

Canadian Bank Earnings

August 31, 2006


With CIBC reporting earnings today, the profit parade at the big banks continued, showing once again that our banks should form the core portion of any portfolio. Here’s how they fared compared to the same period last year [FD: I own shares in TD and BNS]:

  1. Bank of Montreal (TSX: BMO) – $1.38 vs. $1.07
  2. Royal Bank (TSX: RY) – 90¢ vs. 74¢
  3. TD Bank (TSX: TD) – $1.09 vs. 58¢
  4. Scotia Bank (TSX: BNS) – 93¢ vs. 77¢
  5. CIBC (TSX: CM) – $1.86 vs. $(5.77)

Dividends: Royal Bank increased its dividends by 4¢ or 11% to 40¢ per share and now yields 3.08%. TD Bank also raised its quarterly dividend by 4¢ to 48¢ and now yields 3%. BMO (yield – 3.71%), Scotia Bank (yield – 3.3%) and CIBC (yield – 3.48%) maintained their dividends.

Links to earnings reports: BMO, Royal Bank, TD Bank, Scotia Bank, CIBC.

See also: Bank earnings for the previous quarter.

Replacing the Furnace

August 30, 2006


I recently replaced our 17-year-old furnace with a new mid-efficiency furnace bought from Costco, of all places. The old furnace was a low-efficiency model (it had a pilot light) and was probably on its last legs (the salesman said the average lifespan of a gas furnace is about 20 years).

It is difficult to say if it is financially smart to replace an old furnace with one that is more efficient. The new furnace cost us about $2,600 or $130 per year, assuming an average life span. Also, I am assuming a 5% return on the lost opportunity costs of buying the furnace. We spent about $1,200 heating our home last year, so I figure that if the furnace consumed about 15% less natural gas, we would come out ahead.

The old furnace has an efficiency rating of 65% compared to 80% for the mid-efficiency model, so we should be saving about 18% in the heating portion of our gas bills. As the product brochure claims that the furnace uses a variable-speed motor that uses two-thirds less electricity than a standard motor, I am hoping that the new furnace delivers some savings on our hydro bill as well.

I am still not convinced that replacing the furnace was a financially smart move, as the definite answer depends on so many unknown variables. But I am sure of one thing: I won’t be worrying about the furnace breaking down in the middle of winter for a long time.

This and That

August 30, 2006

  1. At a time when the overall savings rate in Canada is negative, it is inspiring to read about the finances of this young couple profiled in The Globe and Mail. Granted, they have a high household income approaching $120K per year but still a combined net worth of over $500K at 33 years of age is pretty darned impressive.
  2. Investors wanting to establish or increase their exposure to gold stocks might want to check out the latest commentary from Leith Wheeler, a boutique money manager with a value bent. Titled Gold Rush or Fool’s Gold, the report concludes: The stock market currently values a typical gold company at almost 2 times its underlying discounted cash flow value, using an extremely low discount rate of between 0% and 3%! This makes no sense to us and does not pass our test of “if the stock market was closed, would we buy the whole company at its current price?”
  3. Larry MacDonald has an interesting post on various blogs that track the deflating housing bubble. I was a bit surprised to find that one blog even tracks the Ottawa Housing Market.
  4. Frugal Canadian has posted a nice chart summarising the benefits of the various popular credit cards. I use the Costco Amex Platinum card (no annual fees and a reward of up to 1.5% in the form of a Costco rebate cheque) for most purchases and the PC Financial MasterCard as a backup. Readers have also pointed out that Citi Driver’s Edge MasterCard is an attractive option.