Lets look at Royal Bank of Canada (RY) trades on both the TSX and NYSE.
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.
RY for the past 16 years has had an average P/E trading range of 16.12 (high) and 11.9 (low) after removing a couple of years due to non company earnings issues.
RY also has had some wild swings in the past, P/E value for example in 2009 RY had a high P/E ratio of 24.48 and a really low P/E ratio of 7.29 in 1996.
Update with RY’s earnings for the 1st quarter. My estimates have now been changed too suit.
First let me get past the dividend questions and ranges:
If your wondering about dividend growth? Yes RY has had growth in that area as well.
For the past 16 years (16 years average) RY has increased its dividends by more then 10 fold.
There is no indication that RY won’t continue to paying out more dividends going forward. In fact it is expected that RY will increase its dividend by 5.5% in 2012 to 2.20 per share. As expected RY has increased its dividend. !
RY has raised its dividend starting this quarter by 6% which is now .57 per quarter.
Looking at the level of support that the dividend can provide. Before the 6% increase people were willing to pay 69.58 (H) to 50.98(L). Now the Price support averages should be around 72.11 (H) and 52.83 (L).based on dividend stats*
RY has over that time have had an average annual Earnings growth of 19.74% . Knowing or at least estimating future earnings you can estimate the share price. In this case RY should earn about $5.36 in 2012 (we’ll change this amount to $3.87) and using the average P/E the estimated trading range should be 83.25 (high) and 65.93 (low). RY's future estimated range is now 60.01 (High) and 47.53 (low). RY at the moment is NOT a growth stock, it is possible that it’ll get back to a growth position in 2014
At todays price makes this stock looks like a hold/ low buy ! I'd be happier to buy it under to $54 The listed option trades are still valued are in the correct ranges.
Now on to how to trade, as I’m looking to purchase more shares of RY I’ll be writing a put at my price estimates in this case I’m looking to write a spread which is both the Call and a Put Option at $54 on the Montreal exchange www.m-x.ca . It would be best to sell the put for the shortest term as possible. So I’m looking to sell 10 March 2012 put contracts for 54 and collect the premium of .30 per share.
Since I own 2100 shares of RY at an average price of $56 per share I’m going to write a covered call as well in this case I’m going to split the position into 2 groups. So I’m going to write the April 56 calls for a premium of .85 cents and the October 58 at 1.65 per share.
If your wondering on what the return would be? For the next 17 days til the Puts expiry will net you .555% per share. 54000/300
For the two calls. The first batch is 10 April contracts at 56 for .85 per share. Works out to be 1.52% Plus any dividends. And the October 58 Contracts for 1.65 per share works out to be 2.95% plus dividends. For a Total collected today $2800.00
Monday, March 5, 2012
Wednesday, February 29, 2012
Lets look at Royal Bank of Canada (RY) today.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
The Royal Bank trades on the TSX and on the big board the NYSE under the symbol of (RY). RY has been a publicly traded company for more 10 years, RY in the largest bank in Canada and has operations in the USA and the Caribbean.
RY for the past 16 years has had an average P/E trading range of 16.12 (high) and 11.9 (low) after removing a couple of year due to non company earnings.
RY also has had some wild swings in the past, P/E value for example in 2009 RY had a high P/E ratio of 24.48 and a really low P/E ratio of 7.29 in 1996.
Update with RY’s earnings update for the 1st quarter. My estimates have now been changed a little.
If your wondering about dividend growth? Yes RY has had growth in that area as well.
RY has increased its dividends by more then 10 fold in the past decade.
There is no indication that RY won’t continue to paying out more dividends going forward. In fact it is expected that RY will increase its dividend by 5.5% in 2012 to 2.20 per share.
RY has raised it dividend again this quarter by 6% which is now .57 per quarter.
Looking at the level of support that the dividend can provide. Before the 6% increase people were willing to pay 69.58 (H) to 50.98(L). Now the Price support averages should be around 72.11 (H) and 52.83 (L).
At todays price of $55.90 makes it look like a hold/ low buy ! The listed option trades are still valued are in the correct ranges.Now on to how to trade, as I’m looking to purchase more shares of RY I’ll be writing a put at my price estimates in this case I’m looking to write a spread which is both the Call and a Put Option at $54 on the Montreal exchange www.m-x.ca . It would be best to sell the put for the shortest term as possible. So I’m looking to sell 10 March 2012 put contracts for 54 and collect the premium of .30 per share.
Since I own 2100 shares of RY at an average price of $56 per share I’m going to write a covered call as well in this case and I’m going to split the position into 2 groups. So I’m going to write the April 56 calls for a premium of .85 cents and the October 58 at 1.65 per share.
If your wondering on what the return would be? For the next 17 days til the Puts expiry will net you .555% per share. 54000/300
For the two calls. The first batch is 10 April contracts at 56 for .85 per share. Works out to be 1.52% Plus any dividends. And the October 58 Contracts for 1.65 per share works out to be 2.95% plus dividends. For a Total collected today $2800.00
based on dividend stats*Over the 16 year period RY has managed to increase its annual Earnings growth averaging 19.74% . By estimating future earnings you can estimate the share price. In this case RY should earn about $5.36 in 2012 (we’ll change this amount to $3.87) and using the average P/E the estimated trading range should be 83.25 (high) and 65.93 (low). It future estimated range is now 60.01 (High) and 47.53 (low). RY at the moment is NOT a growth stock, it is possible that it’ll get back to a growth position in 2014
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
The Royal Bank trades on the TSX and on the big board the NYSE under the symbol of (RY). RY has been a publicly traded company for more 10 years, RY in the largest bank in Canada and has operations in the USA and the Caribbean.
RY for the past 16 years has had an average P/E trading range of 16.12 (high) and 11.9 (low) after removing a couple of year due to non company earnings.
RY also has had some wild swings in the past, P/E value for example in 2009 RY had a high P/E ratio of 24.48 and a really low P/E ratio of 7.29 in 1996.
Update with RY’s earnings update for the 1st quarter. My estimates have now been changed a little.
If your wondering about dividend growth? Yes RY has had growth in that area as well.
RY has increased its dividends by more then 10 fold in the past decade.
There is no indication that RY won’t continue to paying out more dividends going forward. In fact it is expected that RY will increase its dividend by 5.5% in 2012 to 2.20 per share.
RY has raised it dividend again this quarter by 6% which is now .57 per quarter.
Looking at the level of support that the dividend can provide. Before the 6% increase people were willing to pay 69.58 (H) to 50.98(L). Now the Price support averages should be around 72.11 (H) and 52.83 (L).
At todays price of $55.90 makes it look like a hold/ low buy ! The listed option trades are still valued are in the correct ranges.Now on to how to trade, as I’m looking to purchase more shares of RY I’ll be writing a put at my price estimates in this case I’m looking to write a spread which is both the Call and a Put Option at $54 on the Montreal exchange www.m-x.ca . It would be best to sell the put for the shortest term as possible. So I’m looking to sell 10 March 2012 put contracts for 54 and collect the premium of .30 per share.
Since I own 2100 shares of RY at an average price of $56 per share I’m going to write a covered call as well in this case and I’m going to split the position into 2 groups. So I’m going to write the April 56 calls for a premium of .85 cents and the October 58 at 1.65 per share.
If your wondering on what the return would be? For the next 17 days til the Puts expiry will net you .555% per share. 54000/300
For the two calls. The first batch is 10 April contracts at 56 for .85 per share. Works out to be 1.52% Plus any dividends. And the October 58 Contracts for 1.65 per share works out to be 2.95% plus dividends. For a Total collected today $2800.00
based on dividend stats*Over the 16 year period RY has managed to increase its annual Earnings growth averaging 19.74% . By estimating future earnings you can estimate the share price. In this case RY should earn about $5.36 in 2012 (we’ll change this amount to $3.87) and using the average P/E the estimated trading range should be 83.25 (high) and 65.93 (low). It future estimated range is now 60.01 (High) and 47.53 (low). RY at the moment is NOT a growth stock, it is possible that it’ll get back to a growth position in 2014
Wednesday, February 22, 2012
Lets look at Canadian Natural Resources (CNQ) today.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios but there are a number of ratios available.
Definitions of the following terms used:
P/E or price divided by its earnings. Shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://http:www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S or cash flow per share. This is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
CNQ trades on the TSX and on the NYSE and has been a publicly traded company for more than 10 years. CNQ is a Oil and gas exploration company with operations in Canada, the North Sea and in Africa.
Starting with CF/S. CNQ has had a 15 year average annual CF/S growth rate of 32.97% and 25% average over the last 3 year period. CNQ also had for the past 15 years, an average P/CF trading range of 9.3 (high) and 4.8 (low) with some wild swings in the past. P/CF values in 1996 as CNQ had a high P/CF ratio of 18.24 and a really low P/CF ratio in the year 2003 at 1.77.
By estimating future CF/S one can estimate future share price. In this case CNQ should earn about $6.3 in 2012 and using the average CF/S the estimated trading range should be $58.60 (high) and $30.52 (low)
What about dividend growth? CNQ has had growth in this area as well.
CNQ has increased its dividends by about 29% annually in the past decade and 22.6% annually over the last 3 years. There is no indication that CNQ won’t continue to be paying out more dividends going forward.
For years CNQ had bounced around the 1% mark as a dividend percentage.
It is estimated that CNQ will increase its dividend again in 2012 to .40 from .36 (2011).
CNQ’s 3 year yield range is .64 (high) and 1.28(low) and its 10 year average range of .62(high and 1.21(low)
The Dividend should support a share price of $55.90 (high) and $28.14 (low). Current price of $27.76 and a yield of 1.512%, puts it into the buy range.
Looking from the P/E side. CNQ for the past 15 years has had an average P/E trading range of 19.91 (high) and 9.85 (low). However if we look at the past 3 years the averages have increased showing a 23.51 (high) and 10.88 (low)
So looking at the price range CNQ should earn about $2.24 in 2012 which is 20% higher than 2011. By using the average P/E the estimated trading range should be $62.90 (high) and $35.94 (low)
At todays price of $27.76 it looks like a buy !
Sum up; Current price $27.76
P/E, low estimated price $35.94
D/P, support price is $28.14
CF/S support price is $30.52
How to trade? If I’m looking to purchase CNQ I’ll be writing a put at my price estimate. In this case I’m looking to write the Put Option at $36 on the CBOE . It would be best to sell the put for as short a term as possible. So I’m looking to sell the March 2012 put at 36 for .75 per share.
Return on cash? For the next 25 days til its expiry will net you 2.08% per share.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios but there are a number of ratios available.
Definitions of the following terms used:
P/E or price divided by its earnings. Shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://http:www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S or cash flow per share. This is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
CNQ trades on the TSX and on the NYSE and has been a publicly traded company for more than 10 years. CNQ is a Oil and gas exploration company with operations in Canada, the North Sea and in Africa.
Starting with CF/S. CNQ has had a 15 year average annual CF/S growth rate of 32.97% and 25% average over the last 3 year period. CNQ also had for the past 15 years, an average P/CF trading range of 9.3 (high) and 4.8 (low) with some wild swings in the past. P/CF values in 1996 as CNQ had a high P/CF ratio of 18.24 and a really low P/CF ratio in the year 2003 at 1.77.
By estimating future CF/S one can estimate future share price. In this case CNQ should earn about $6.3 in 2012 and using the average CF/S the estimated trading range should be $58.60 (high) and $30.52 (low)
What about dividend growth? CNQ has had growth in this area as well.
CNQ has increased its dividends by about 29% annually in the past decade and 22.6% annually over the last 3 years. There is no indication that CNQ won’t continue to be paying out more dividends going forward.
For years CNQ had bounced around the 1% mark as a dividend percentage.
It is estimated that CNQ will increase its dividend again in 2012 to .40 from .36 (2011).
CNQ’s 3 year yield range is .64 (high) and 1.28(low) and its 10 year average range of .62(high and 1.21(low)
The Dividend should support a share price of $55.90 (high) and $28.14 (low). Current price of $27.76 and a yield of 1.512%, puts it into the buy range.
Looking from the P/E side. CNQ for the past 15 years has had an average P/E trading range of 19.91 (high) and 9.85 (low). However if we look at the past 3 years the averages have increased showing a 23.51 (high) and 10.88 (low)
So looking at the price range CNQ should earn about $2.24 in 2012 which is 20% higher than 2011. By using the average P/E the estimated trading range should be $62.90 (high) and $35.94 (low)
At todays price of $27.76 it looks like a buy !
Sum up; Current price $27.76
P/E, low estimated price $35.94
D/P, support price is $28.14
CF/S support price is $30.52
How to trade? If I’m looking to purchase CNQ I’ll be writing a put at my price estimate. In this case I’m looking to write the Put Option at $36 on the CBOE . It would be best to sell the put for as short a term as possible. So I’m looking to sell the March 2012 put at 36 for .75 per share.
Return on cash? For the next 25 days til its expiry will net you 2.08% per share.
Tuesday, February 7, 2012
Today lets look at Goldcorp (G-T or GG-N).
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.
G for the past 10 years has had an average P/E trading range of 32.64 (high) and 23.42 (low).
G also has had some wild swings in the past, P/E value for example in 2004 G had a high P/E ratio of 64.44 and a really low P/E ratio of 9.3 in 2001 .
As this extra large range has been removed to smooth out the ratio a bit. So using the past 3 years the average P/E 22.26 (high) and 18.41 (low) was used. Now your wondering why I don’t use the CF/E well, I did it is very close to the same ratio.
G has over that time had an average annual EPS growth well over 20% when averaged over the years. Knowing or at least estimating future earnings one can estimate future share price. In this case G should earn about $2.53 in 2012 and using the average P/E the estimated trading range should be 56.36 (high) and 46.60 (low)
If your wondering about dividend growth? Yes G has had growth in that area as well.
For the past 11 years (3 years average) G has increased its dividends by more than 20%.
It should be noted that G has had growth spurts in dividend increases and not in steady increases.
For years G hovered around the 1% mark on the dividends since 2001. Since G has been returning a small portion of its earning back to its share owners with todays P/D G has had a low for 2011 of .77% and a high of .82% it is estimated that G will increase its dividend in 2012 to 48 cents from 37 cents (2011).
Now on to how to trade, As I already own 1000 shares of G (38.65) I’ll be writing a call at my price estimates in this case I’m looking to write the Call Option at $56. It would be best to sell the call for a shortest term possible. With a current price of $47.33 the option price of 56 is far out of the money and since G trades on the Montreal (M-X) and the CBOE exchanges the prices can vary.
The M-X for July call at 56 is $1.09 per share and the CBOE July calls for 57.50 with a premium of $1.10
For me the CBOE’s contract for 57.5@ 1.10 would be the best price.
If you are wondering about what the returns would be as of July (assuming) not called away it would be 2.85% , if called away it would be (in my case) 51.58% and both before commissions deducted.
I’d be using caution here as I believe that the general market is going to do a pull back. I suspect that will decline until the first week of April and that would possibly be the best time to sell this company closer to its higher price range.
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.
G for the past 10 years has had an average P/E trading range of 32.64 (high) and 23.42 (low).
G also has had some wild swings in the past, P/E value for example in 2004 G had a high P/E ratio of 64.44 and a really low P/E ratio of 9.3 in 2001 .
As this extra large range has been removed to smooth out the ratio a bit. So using the past 3 years the average P/E 22.26 (high) and 18.41 (low) was used. Now your wondering why I don’t use the CF/E well, I did it is very close to the same ratio.
G has over that time had an average annual EPS growth well over 20% when averaged over the years. Knowing or at least estimating future earnings one can estimate future share price. In this case G should earn about $2.53 in 2012 and using the average P/E the estimated trading range should be 56.36 (high) and 46.60 (low)
If your wondering about dividend growth? Yes G has had growth in that area as well.
For the past 11 years (3 years average) G has increased its dividends by more than 20%.
It should be noted that G has had growth spurts in dividend increases and not in steady increases.
For years G hovered around the 1% mark on the dividends since 2001. Since G has been returning a small portion of its earning back to its share owners with todays P/D G has had a low for 2011 of .77% and a high of .82% it is estimated that G will increase its dividend in 2012 to 48 cents from 37 cents (2011).
Now on to how to trade, As I already own 1000 shares of G (38.65) I’ll be writing a call at my price estimates in this case I’m looking to write the Call Option at $56. It would be best to sell the call for a shortest term possible. With a current price of $47.33 the option price of 56 is far out of the money and since G trades on the Montreal (M-X) and the CBOE exchanges the prices can vary.
The M-X for July call at 56 is $1.09 per share and the CBOE July calls for 57.50 with a premium of $1.10
For me the CBOE’s contract for 57.5@ 1.10 would be the best price.
If you are wondering about what the returns would be as of July (assuming) not called away it would be 2.85% , if called away it would be (in my case) 51.58% and both before commissions deducted.
I’d be using caution here as I believe that the general market is going to do a pull back. I suspect that will decline until the first week of April and that would possibly be the best time to sell this company closer to its higher price range.
Monday, January 23, 2012
.
Lets look at BCE (BCE) today.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S (P/CF) and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
BCE trades on the TSX and the New York stock exchange under the same symbol (BCE)
BCE is a Canadian telco and has well known services in the Canadian market place.
BCE is a tricky stock to review as there are a number of points that need to be considered with the estimates.
BCE for the past 15 years has had an average P/E trading range of 20.56 (high) and 10.87 (low).
BCE also had one wild swing in the past, P/E value for example in 2000 BCE had a high P/E ratio of 156 and a really low P/E ratio of 6.12 in 2007.
If you factored in BCE longer term P/E calculations, BCE had an average high of 20.58 and 15.2 being the low spanning the past 15 years. If you use these P/E numbers then the share price could rise to 64.65 (high) and 47.80 (low) which based on todays current price $42.14, it would be a buy. To me I don’t believe that BCE will return to that higher P/E ratio as BCE is a maturing company and it should be heading into a lower P/E. So at the monument I can’t see BCE getting up there in 2012. Instead I’ll be using the 3 year P/E avg which is far closer to what makes sense to me. The 3 year P/E is 13.72 (high) and 10.87 (low) which is nearer to the P/E range of todays close of 14.4
BCE has over the years had an average annual EPS growth rate of 14.78% over a 8 year average.
In this case BCE should earn about $3.20 in 2012 and using the average P/E, the estimated trading range should be $43.85 (high) and $34.74 (low). With BCE’s current price ($42.14), I believe that BCE is fully valued at this point.
If your wondering about dividend growth? Yes BCE has had growth in that area as well.
For the past 16 years (12 year average) BCE has increased its dividends by 4.7% per year and 12% on average in the past 3 years.
It should be noted that BCE has had growth spurts in dividend increases for example in 2004 the dividend increased from $1.20 to $1.32 and again in 07, 09 and again in 2010.
BCE has also had begun to lower its dividend per share in 1999 ($1.36) and continued to lower the dividend till 2001 ($1.20). BCE raised its dividend in 07 and then halved the dividend in 2008.
It was like riding a bull back then, since then BCE has been increasing its dividend every year after 2008 like clockwork.
Since BCE has been returning a good portion of its earnings back to its share owners with todays P/D gives BCE a historical range with a low of 0.62% and a high of 6.77%. The last 3 year average P/D is 5% (high) and 6.32% (low) and a current yield of 4.9% suggests that BCE is fully valued. The Dividend will support a price range of $44.49 to $35.18
It is estimated that BCE will increase its dividend in 2012 to about 2.10 from 1.96 (2011).
Note BCE has indeed increased its dividend by 2 cents in the first quarter of 2012. If this .54 per share remains the full year will be $2.16. I do suspect that BCE will increase it a little more yet this year.
BCE and its price range when using the CF/S. For the past 3 year average BCE managed to generate a solid 12.27% increase in cash flow per share. The 15 year average, BCE had managed to grow its cash flow per share by 23.11% per year. It is estimated that BCE will increase its CF/S in 2012 by 8% to 7.64 from 7.07. Using the P/CF ratio BCE has had a range of 9.25 (High) and 5.39(low) over the past 15 years, The 3 year average is much different in that its High is 5.14 and a low being 4.07
Doing that math backwards and using the CF/S times the P/CF 3 year average it works out to give a price range of $39.28 (high) and $31.10 (low).
Summing up the price ranges
Current Price $42.14
P/E Price range 43.85 to 34.75
Dividend range 44.49 to 35.18
CF/S range 39.28 to 31.10
Now on to how to trade, As I’m looking to purchase BCE I’ll be writing a put at my price estimates in this case I’m looking to write the January 2013 Put Option at $32 and try to collect a premium of 0.40. It is always best to write the put for a shorter term however BCE has a low Implied vol.
If I was a current owner and if I believe that BCE is fully valued, you could either be looking at writing a covered call at this point. The November 44 for 0.60. Looks about right. Or if you prefer, use your average price per share as the strike price.
Lets look at BCE (BCE) today.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S (P/CF) and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
BCE trades on the TSX and the New York stock exchange under the same symbol (BCE)
BCE is a Canadian telco and has well known services in the Canadian market place.
BCE is a tricky stock to review as there are a number of points that need to be considered with the estimates.
BCE for the past 15 years has had an average P/E trading range of 20.56 (high) and 10.87 (low).
BCE also had one wild swing in the past, P/E value for example in 2000 BCE had a high P/E ratio of 156 and a really low P/E ratio of 6.12 in 2007.
If you factored in BCE longer term P/E calculations, BCE had an average high of 20.58 and 15.2 being the low spanning the past 15 years. If you use these P/E numbers then the share price could rise to 64.65 (high) and 47.80 (low) which based on todays current price $42.14, it would be a buy. To me I don’t believe that BCE will return to that higher P/E ratio as BCE is a maturing company and it should be heading into a lower P/E. So at the monument I can’t see BCE getting up there in 2012. Instead I’ll be using the 3 year P/E avg which is far closer to what makes sense to me. The 3 year P/E is 13.72 (high) and 10.87 (low) which is nearer to the P/E range of todays close of 14.4
BCE has over the years had an average annual EPS growth rate of 14.78% over a 8 year average.
In this case BCE should earn about $3.20 in 2012 and using the average P/E, the estimated trading range should be $43.85 (high) and $34.74 (low). With BCE’s current price ($42.14), I believe that BCE is fully valued at this point.
If your wondering about dividend growth? Yes BCE has had growth in that area as well.
For the past 16 years (12 year average) BCE has increased its dividends by 4.7% per year and 12% on average in the past 3 years.
It should be noted that BCE has had growth spurts in dividend increases for example in 2004 the dividend increased from $1.20 to $1.32 and again in 07, 09 and again in 2010.
BCE has also had begun to lower its dividend per share in 1999 ($1.36) and continued to lower the dividend till 2001 ($1.20). BCE raised its dividend in 07 and then halved the dividend in 2008.
It was like riding a bull back then, since then BCE has been increasing its dividend every year after 2008 like clockwork.
Since BCE has been returning a good portion of its earnings back to its share owners with todays P/D gives BCE a historical range with a low of 0.62% and a high of 6.77%. The last 3 year average P/D is 5% (high) and 6.32% (low) and a current yield of 4.9% suggests that BCE is fully valued. The Dividend will support a price range of $44.49 to $35.18
It is estimated that BCE will increase its dividend in 2012 to about 2.10 from 1.96 (2011).
Note BCE has indeed increased its dividend by 2 cents in the first quarter of 2012. If this .54 per share remains the full year will be $2.16. I do suspect that BCE will increase it a little more yet this year.
BCE and its price range when using the CF/S. For the past 3 year average BCE managed to generate a solid 12.27% increase in cash flow per share. The 15 year average, BCE had managed to grow its cash flow per share by 23.11% per year. It is estimated that BCE will increase its CF/S in 2012 by 8% to 7.64 from 7.07. Using the P/CF ratio BCE has had a range of 9.25 (High) and 5.39(low) over the past 15 years, The 3 year average is much different in that its High is 5.14 and a low being 4.07
Doing that math backwards and using the CF/S times the P/CF 3 year average it works out to give a price range of $39.28 (high) and $31.10 (low).
Summing up the price ranges
Current Price $42.14
P/E Price range 43.85 to 34.75
Dividend range 44.49 to 35.18
CF/S range 39.28 to 31.10
Now on to how to trade, As I’m looking to purchase BCE I’ll be writing a put at my price estimates in this case I’m looking to write the January 2013 Put Option at $32 and try to collect a premium of 0.40. It is always best to write the put for a shorter term however BCE has a low Implied vol.
If I was a current owner and if I believe that BCE is fully valued, you could either be looking at writing a covered call at this point. The November 44 for 0.60. Looks about right. Or if you prefer, use your average price per share as the strike price.
Tuesday, January 17, 2012
Tax-Free Savings Accounts (TFSA)
In the latest survey 13% of Canadians don’t know what it is?
One question that was asked, it was about who is responsible regarding the account?
23% said it was the bank.
12% said it was the government and
7% said that it was their advisor’s responsibility.
Well guess what the answer is? It’s the account holder, as in you and no one else.
The survey also asked about how it worked?
37% had some idea.
14% didn’t know at all.
13% didn’t even know what a TFSA is.
Question about the number of TFSA accounts one can have?
27% think that they can have only one.
35% of surveyed thought that they may get a tax deduction for the contribution.
8% thought that they did receive a tax deduction.
Question regarding taxing the withdrawals?
10% of surveyed thought that they would be taxed.
33% were not sure.
Come on people the rules for a TFSA is NOT difficult.
Here are the rules:
You must be 18 years old (or older) to open an account.
You can contribute up to $5000.00 per year.
From January 1, 2009 the total that you may have contribute is now at $20000.00 per person
You can have as many accounts as you wish - but you cannot contribute more then the $20000
The contribution room is NOT - a don’t use it, lose it type, the limit will just keep growing every year.
So no worries about putting in the max every year.
You can invest into anything including; Stocks, Bonds, GIC’s..etc.
You can withdraw you money at anytime BUT, you cannot re contribute and exceed your maximum allowable contribution.
TFSA - Withdrawals or monies earned DO NOT get added to your income if you are collecting GIS or other social benefits.
Income earned in your TFSA is tax exempt - even after you withdrawal the money.
Beware of over contributions, which have penalties.
See CRA’s website for more details on these over contributions.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
An example:
deposited $5000.00 January 3rd
Withdrawn $1500.00 June 25th,
You cannot re: contribute the $1500.00 before the beginning of the next year.
Account balance $3500.00
You MUST wait for the start of the next calendar year.
Cont. Example: 1500 + 5000 = $6500.00
Is the max that you can contribute the following year.
Is the maximum that you can contribute in the second year.
* no investment income included in the summary.
In the latest survey 13% of Canadians don’t know what it is?
One question that was asked, it was about who is responsible regarding the account?
23% said it was the bank.
12% said it was the government and
7% said that it was their advisor’s responsibility.
Well guess what the answer is? It’s the account holder, as in you and no one else.
The survey also asked about how it worked?
37% had some idea.
14% didn’t know at all.
13% didn’t even know what a TFSA is.
Question about the number of TFSA accounts one can have?
27% think that they can have only one.
35% of surveyed thought that they may get a tax deduction for the contribution.
8% thought that they did receive a tax deduction.
Question regarding taxing the withdrawals?
10% of surveyed thought that they would be taxed.
33% were not sure.
Come on people the rules for a TFSA is NOT difficult.
Here are the rules:
You must be 18 years old (or older) to open an account.
You can contribute up to $5000.00 per year.
From January 1, 2009 the total that you may have contribute is now at $20000.00 per person
You can have as many accounts as you wish - but you cannot contribute more then the $20000
The contribution room is NOT - a don’t use it, lose it type, the limit will just keep growing every year.
So no worries about putting in the max every year.
You can invest into anything including; Stocks, Bonds, GIC’s..etc.
You can withdraw you money at anytime BUT, you cannot re contribute and exceed your maximum allowable contribution.
TFSA - Withdrawals or monies earned DO NOT get added to your income if you are collecting GIS or other social benefits.
Income earned in your TFSA is tax exempt - even after you withdrawal the money.
Beware of over contributions, which have penalties.
See CRA’s website for more details on these over contributions.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
An example:
deposited $5000.00 January 3rd
Withdrawn $1500.00 June 25th,
You cannot re: contribute the $1500.00 before the beginning of the next year.
Account balance $3500.00
You MUST wait for the start of the next calendar year.
Cont. Example: 1500 + 5000 = $6500.00
Is the max that you can contribute the following year.
Is the maximum that you can contribute in the second year.
* no investment income included in the summary.
Monday, January 16, 2012
Lets look at AGF Management (AGF.B).
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.
AGF for the past 16 years has had an average P/E trading range of 20.21 (high) and 11.39 (low).
AGF also has had some wild swings in the past, P/E value for example in 2003 AGF had a high P/E ratio of 39.79 and an really low P/E ratio of 5.24 in 2008 .
AGF has over that time had an average annual EPS growth of 8.24% . Knowing or at least estimating future earnings one can estimate future share price. In this case AGF should earn about $1.41 in 2012 and using the average P/E the estimated trading range should be 19.90 (high) and 13.95 (low)
If your wondering about dividend growth? Yes AGF has had growth in that area as well.
For the past 16 years (14 years average) AGF has increased its dividends by 21.09%.
It should be noted that AGF has had growth spurts in dividend increases for example in 2004 and 2005 AGF increased its dividend by 36% in each of those years.
For years AGF hovered around the 1% mark on the dividends ratio until 2003. Since then AGF has been returning a good portion of its earnings back to its share owners with todays P/D AGF has had a low for 2011 of 5.28% and a high of 7.53% its estimated that AGF will increase its dividend in 2012 to 1.41 from 1.30 (2011).
Now on to how to trade, As I’m looking to purchase AGF I’ll be writing a put at my price estimates in this case I’m looking to write the Put Option at $13. It would be best to sell the put for a short term however AGF has a low option following. So I’m looking to write (sell) the July put at $13 for .30 -.35 cents range.
If I were to buy and write a covered call on AGF with its current closing price of January13th at $16.92 I’d be using caution here as I believe that the general market is going to do a pull back. I suspect that it will decline until the first week of April and that point it would possibly be the best time to buy this company as it would trade closer to its lower P/E range.
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.
AGF for the past 16 years has had an average P/E trading range of 20.21 (high) and 11.39 (low).
AGF also has had some wild swings in the past, P/E value for example in 2003 AGF had a high P/E ratio of 39.79 and an really low P/E ratio of 5.24 in 2008 .
AGF has over that time had an average annual EPS growth of 8.24% . Knowing or at least estimating future earnings one can estimate future share price. In this case AGF should earn about $1.41 in 2012 and using the average P/E the estimated trading range should be 19.90 (high) and 13.95 (low)
If your wondering about dividend growth? Yes AGF has had growth in that area as well.
For the past 16 years (14 years average) AGF has increased its dividends by 21.09%.
It should be noted that AGF has had growth spurts in dividend increases for example in 2004 and 2005 AGF increased its dividend by 36% in each of those years.
For years AGF hovered around the 1% mark on the dividends ratio until 2003. Since then AGF has been returning a good portion of its earnings back to its share owners with todays P/D AGF has had a low for 2011 of 5.28% and a high of 7.53% its estimated that AGF will increase its dividend in 2012 to 1.41 from 1.30 (2011).
Now on to how to trade, As I’m looking to purchase AGF I’ll be writing a put at my price estimates in this case I’m looking to write the Put Option at $13. It would be best to sell the put for a short term however AGF has a low option following. So I’m looking to write (sell) the July put at $13 for .30 -.35 cents range.
If I were to buy and write a covered call on AGF with its current closing price of January13th at $16.92 I’d be using caution here as I believe that the general market is going to do a pull back. I suspect that it will decline until the first week of April and that point it would possibly be the best time to buy this company as it would trade closer to its lower P/E range.
Tuesday, January 10, 2012
Update for MCD option trades:
As mentioned at the end of December, I have written 2 long "Put" option contracts with an expiry date of Jan 2013. I’m hoping to buy McDonalds as 75 dollars per share. The price for the contracts were slightly better then estimated price, the transaction workout at $2.35 per share.
The math on this 200 x 2.35 =
470 - 8
$462.00 net
For this month (January) I have also gotten a fill on my "call" for the strike price of $100. The amount received was again slightly better then estimated it got filled at $1.40 per share
The math on this 200 x 1.40 =
280 - 8
$272.00 net
Next week I’ll look at another company to trade and collect rent from.
If you have a company that you’d like to discuss please feel free to post the name and symbol.
As mentioned at the end of December, I have written 2 long "Put" option contracts with an expiry date of Jan 2013. I’m hoping to buy McDonalds as 75 dollars per share. The price for the contracts were slightly better then estimated price, the transaction workout at $2.35 per share.
The math on this 200 x 2.35 =
470 - 8
$462.00 net
For this month (January) I have also gotten a fill on my "call" for the strike price of $100. The amount received was again slightly better then estimated it got filled at $1.40 per share
The math on this 200 x 1.40 =
280 - 8
$272.00 net
Next week I’ll look at another company to trade and collect rent from.
If you have a company that you’d like to discuss please feel free to post the name and symbol.
Thursday, December 29, 2011
For the owners of MCD
For the people that already have a position in MCD's. MCD does trade weekly on the CBOE which you should be able to collect a fair premium if you follow some basic rules. Now a days everyone has their rules. For me it would be to buy closer to the Low P/E rate range vs to purchase at or near the top.
I do realise that in some types of accounts one cannot write puts on a naked position. So it be best to either wait for MCD to fall into the P/E range that fits your calculations or buys and writes at the current prices. But if you are a person that has or is looking to manage their portfolio a bit more you could be selling covered calls on your holdings. For MCD the Dec 30th expiry is only two days away. I would be looking to sell the January 100 for 1.35 per share. For a number of reasons 1) MCD is trading near its 52 week high. 2) the high topped out at 100.55. At 135 per contract (before commish) 3) there is limited up side to this stock.
Note about commisions, the rate that I pay is pretty small, So I'll use a fair number of $7 dollars plus $1per contract. so using the above 135 for one contract equals $127 net. 2 contracts would net $261 and so on.
If your a current share owner that believes that MCD is at a fair value (like I do) and your average price per share is lower then the currnet price you could look at selling some of your position. An example would be my current average price for 200 shares is $64.15 you could sell one covered call for the $70 strike price for about $30 per share. Which is the same as if I was to sell it at or near the 52 week high. Please note that this option will be exercised and I don't believe that MCD will crash I just think that its at the higher end of fair value. Its just another way of rebalancing your holdings and getting paid to do so. I do own MCD at the above price and I'll be selling half of my shares via a deep in the money covered call. I'll be writing updates on my positions in the coming weeks, stay tuned.
I do realise that in some types of accounts one cannot write puts on a naked position. So it be best to either wait for MCD to fall into the P/E range that fits your calculations or buys and writes at the current prices. But if you are a person that has or is looking to manage their portfolio a bit more you could be selling covered calls on your holdings. For MCD the Dec 30th expiry is only two days away. I would be looking to sell the January 100 for 1.35 per share. For a number of reasons 1) MCD is trading near its 52 week high. 2) the high topped out at 100.55. At 135 per contract (before commish) 3) there is limited up side to this stock.
Note about commisions, the rate that I pay is pretty small, So I'll use a fair number of $7 dollars plus $1per contract. so using the above 135 for one contract equals $127 net. 2 contracts would net $261 and so on.
If your a current share owner that believes that MCD is at a fair value (like I do) and your average price per share is lower then the currnet price you could look at selling some of your position. An example would be my current average price for 200 shares is $64.15 you could sell one covered call for the $70 strike price for about $30 per share. Which is the same as if I was to sell it at or near the 52 week high. Please note that this option will be exercised and I don't believe that MCD will crash I just think that its at the higher end of fair value. Its just another way of rebalancing your holdings and getting paid to do so. I do own MCD at the above price and I'll be selling half of my shares via a deep in the money covered call. I'll be writing updates on my positions in the coming weeks, stay tuned.
McDonalds
Lets look at McDonalds (MCD) today.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
McDonalds (MCD) trades on the NYSE and has been a publicly traded company for about a half century.
McDonalds for the past 21 years has had an average P/E trading range of 19.63 (high) and 12.46 (low).
McDonalds also has had some wild swings in the past, P/E value for example in 2002 McDonalds had a high P/E ratio of 43.89 and an really low P/E ratio in the following year 2003 at 10.54.
McDonalds has over that time have had an average annual EPS growth of 15.3% . By estimating future earnings one can estimate future share price. In this case McDonalds should earn about $5.90 in 2012 and using the average P/E the estimated trading range should be 103.38 (high) and 77.24 (low)
If your wondering about dividend growth? Yes McDonalds has had growth in that area as well.
For the past 21 years (16 years average) McDonalds has increased its dividends by 9.49%.
It should be noted that McDonalds have had growth spurts in dividend increases for example in 2003 McDonalds increased its dividend by 66.67%
For years MCD hadn’t broken the 1% yield mark in dividends until 2003. Since then MCD has been returning a good portion of its earning back to its share owners with todays P/D MCD has had a low for 2011 of 3.38% and a high of 2.43% it is estimated that MCD will increase its dividend in 2012 to 2.67 from 2.44 (2011). Doing the math on MCD’s dividend to price the dividend will support a price range of $98.19 (high) and $73.72 (low).
MCD’s CF/S average growth over the past 16 years is 12.08%, with the 3 year CF/S average being 10.96%. For 2012 MCD should be able to generate a cash flow per share of $7.45. Which is up from the 2011's amount of $6.77.
The share price works out to be $101.01 (high) and $75.46 (low)
Please note that I am looking for MCD to split its stock this coming year.
Now on to how to trade, As I’m looking to purchase MCD I’ll be writing a put at my price estimates in this case I’m looking to write the Put Option at $75. It would be best to sell the put for a short term however MCD is trading at its high. So I’m looking to sell the Jan 2013 put at 75 for 2.25 or more per share.
This posting is open for discussion and to determine the entry and exit price points by using 3 different methods. These three methods use the historical P/E, CF/S and the dividend (D/S) ratios. Please note that there is a ton of ratios out there.
Definitions of the following terms used:
P/E. Price divided by its earnings, which shows what multiple that a investor is willing to pay for $1 dollar of earnings.
http://www.investopedia.com/terms/p/price-earningsratio.asp#axzz1ywxwNlkP
CF/S is the same as earnings except that its referring to the company’s ability to generate cash.
http://www.investopedia.com/terms/c/cashflowpershare.asp#axzz1ywxwNlkP
D/S or Dividend per share. For this ratio you would use the dividend yield formula.
http://www.investopedia.com/university/ratios/investment-valuation/ratio7.asp#axzz1ywxwNlkP
Using these historical ratios a person can estimate what the stock price range should be.
By comparing the 3 year average vs a longer term (10 year average or more) can also help to determine where the market believes the company is in its life cycle, which includes: start up (venture), growth or mature company.
McDonalds (MCD) trades on the NYSE and has been a publicly traded company for about a half century.
McDonalds for the past 21 years has had an average P/E trading range of 19.63 (high) and 12.46 (low).
McDonalds also has had some wild swings in the past, P/E value for example in 2002 McDonalds had a high P/E ratio of 43.89 and an really low P/E ratio in the following year 2003 at 10.54.
McDonalds has over that time have had an average annual EPS growth of 15.3% . By estimating future earnings one can estimate future share price. In this case McDonalds should earn about $5.90 in 2012 and using the average P/E the estimated trading range should be 103.38 (high) and 77.24 (low)
If your wondering about dividend growth? Yes McDonalds has had growth in that area as well.
For the past 21 years (16 years average) McDonalds has increased its dividends by 9.49%.
It should be noted that McDonalds have had growth spurts in dividend increases for example in 2003 McDonalds increased its dividend by 66.67%
For years MCD hadn’t broken the 1% yield mark in dividends until 2003. Since then MCD has been returning a good portion of its earning back to its share owners with todays P/D MCD has had a low for 2011 of 3.38% and a high of 2.43% it is estimated that MCD will increase its dividend in 2012 to 2.67 from 2.44 (2011). Doing the math on MCD’s dividend to price the dividend will support a price range of $98.19 (high) and $73.72 (low).
MCD’s CF/S average growth over the past 16 years is 12.08%, with the 3 year CF/S average being 10.96%. For 2012 MCD should be able to generate a cash flow per share of $7.45. Which is up from the 2011's amount of $6.77.
The share price works out to be $101.01 (high) and $75.46 (low)
Please note that I am looking for MCD to split its stock this coming year.
Now on to how to trade, As I’m looking to purchase MCD I’ll be writing a put at my price estimates in this case I’m looking to write the Put Option at $75. It would be best to sell the put for a short term however MCD is trading at its high. So I’m looking to sell the Jan 2013 put at 75 for 2.25 or more per share.
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