After Germany, France has the largest economy in continental Europe. There are many good quality French companies that generate profits consistently year over year. The recent episode with Societe Generale Bank is an exception. Some of the big French companies are Carrefour, Danone, BNP Paribas, Societe Generale etc.
Today’s article will discuss Canadian Pacific (CP) & Canadian National (CNI) ADRs.These are the two great railroads of Canada. CP and CN help Canada move its vast wealth of natural resources and other goods from one point to another.
1. Canadian National – CNI
Canadian National has about 20,264 rote-miles in Canada and US. The company has over 21,685 employees including 5000+ in US. CNI operates the largest rail network in Canada. Its Prince Rupert Terminal in British Columbia (BC) will help increase revenue and freight traffic once it becomes fully operational.
The CN ADR stock has been a great performer for the past few years.
Details:
Yield 1.63%
Mkt Cap = $25B
Revenue = $7.8B
Dividends have been increasing for a many quarters now.The stock is down 8%+ from the 52 Week high.
2. Canadian Pacific – CP
CP was founded in 1881. Has over 14K mile network in the US and Canada.
Details:
Yield 1.27%
Mkt Cap = $10B
Revenue = $4.6B
Dividends have been increasing for a many quarters now.The stock is down 18.70%+ from the 52 Week high.
Which one is a better investment – CP or CN?
This is a difficult question to answer. I would say both are good investments for the long-term. However recently CP has been doing better than CN. Below are some performance observations to review.
CN Performance:
CP Performance:
Some articles from from SeekingAlpha on CNI and CP:
http://seekingalpha.com/article/47823-dividend-analysis-of-canadian-national-railway-company
http://seekingalpha.com/article/58093-buying-opportunity-for-investors-at-cn-rail
http://seekingalpha.com/article/62444-cp-rail-analysts-expect-a-strong-showing-in-2008
Lets say you have $5,000 to invest now in a tax-free account such as a Roth IRA.You have a long-term investment horizon and you do not need to withdraw this money or the returns until you retire. In this article,I will discuss one way to make this money grow to a decent sum for those retirement days.
One way to invest this $5K is to save in a CD. As per Bankrate.com, the average yield on a one year CD is 3.09%. This is pathetic considering the taxes one has to pay and is lower than the inflation rate. By putting the money in a CD, one will actually loose money. The highest CD rate I can find is 3.54%. Of course the rate may remain the same or go lower/higher depending on the fed funds rate over the long-term.
So a better way to invest this money is to invest in foreign utility stocks that pay nice dividends and have some stable growth in times like now and in bull market periods.
An easy way to invest this $5,000 is to put $1K into 5 different foreign ADRs of 5 different countries as follows. At Friday’s closing price, this tiny portfolio will look like this:
1. Eni Spa – E – Italy
Yield 5.05%
Number of shares = 14.72
2. EON AG – EONGY – Germany
Yield – 2.39%
Number of shares = 15.81
3. Energias De Portfgual SA – EDPFY – Portugal
Yield – 2.49%
Number of shares = 16.64
4. Suez ADS – SZEZY – France
Yield – 2.66%
Number of shares = 16.52
5. Companhia Energetica de Minas Gerais – CIG – Brazil
Yield – 9.80%
Number of shares = 54.00
Note: Brokerage commissions are not included in this calculation
This portfolio will yield a total dividend of $224 per year. That equals to a yield rate of 4.48%.
This 4.48% is higher than the average CD rate for 1 year of 3.09% or 3.54%.
Hypothetical Scenarios:
1.In 5 years, at 4.48% our $5K would have grown to $6,225. This assumes that dividends were not reinvested into additional shares. If that was done, the return would be even higher.
At the CD rate of 3.09%, in 5 years this $5K would have grown to only $5,822. That is $400 less than investing in the above portfolio. Also this difference will be higher since the taxes on qualified dividends is a lot lesser than ordinary income taxes levied on interest earned.
2.Let’s assume that there is a share price appreciation rate of 5% average per year for the portfolio and the dividend rate remains the same. Of course the stock prices can go down as well. But over many years the growth rate will be positive.
Note: Most high quality companies especially utilities and banks increase dividends year over year.
Then the $5,000 will grow at 9.48% (5% capital growth rate + 4.48% dividend rate) per year.
This $5K will be worth as below:
In 1 year = $5,474
In 5 years = $7,864
In 10 years = $12,369
In 20 years = $30,596
In 25 years = $48,122
In 50 years = $463,137
Thus someone who invests their $5K as in the above portfolio and does nothing with it for the 50 years, will easily get nearly half a million $. Since most companies increase dividends and the stock price appreciation rate will be higher then 5% average, this small investment will be a wonderful nest egg during retirement.
Some of the places you can vacation with a fruitful investment such as the above are:
Photo: Seychelles, Indian Ocean
Photo: Mauritius, Indian Ocean
Commerzbank is the second largest bank in Germany. The bank was founded in 1870 by a group of merchants and bankers in Hamburg. From those early years, the bank has grown to be the second largest bank now thru many mergers and acquisitions. The bank also endured both World War I and II.
Today the bank has over 36,000 employees with 8,725 of them located outside Germany. Total branches exceed over 1,100.
Photo: Commerzbank Tower in Frankfurt – The tallest building in Europe
Commerzbank ADR (CRZBY) started trading in 1999. Total outstanding shares equal about 657M. Institutional investors own about 76% of the shares.Private investors own about 16%.
CRZBY stock is down 25.97% YTD and is now at $28.50 . The 52 Week high was $51.15. The stock got punished recently due to several writedowns due to subprime exposure losses.
For those with a long-term horizon, this is a value stock at this time.
