Investing | Sustainable Personal Finance

What is Crowdfunding?

By Miranda

The current economic climate has encouraged many people to become interested in striking out and starting their own businesses. Technology has grown to the point that many people can start businesses, and earn money, with the help of the Internet. For those working from home, costs might be low initially, but expansion might require something more. And, of course, if you are a small business starting out in a different location you need start up cash immediately.

Getting that cash can be difficult if you can’t the angel investment you need, or the venture capital you require. And what if the bank turns you down for a loan? Small business funding isn’t easy. However, with the help of crowdfunding many businesses are starting to get off the ground.

What is Crowdfunding?

Crowdfunding works in much the same way as microloans for the poor. You receive a large number of small cash infusions, rather than one or two large ones. Multiple investors can band together to pledge amounts of money ranging from one dollar to thousands of dollars. Web sites like Kickstarter have really taken off in the United States. In Canada, though, the trend is slow to catch on. Sites like Ideavibes and Startup Fuel are offering crowdfunding services, but the regulatory situation in Canada provides challenges to crowdfunding.

How Does Crowdfunding Work?

In some cases, efforts to fund an enterprise are more like donations. Contributions to the startup are made, and the person giving the money may only be listed as a supporter, and receive no tangible benefits. In other cases, business owners offer finished products, or provide discounts, in return for financial support. So, an “investor” might not own equity in the company, but he or she can expect to be among the first to receive a product, or get some other special perk. (I funded a friend’s comic book at a level that allows me to be a background character and get artwork on top of a free copy of the comic.) This type of crowfunding is popular because securities regulators don’t have to get involved. “Investors” receive “gifts” or recognition, and that is the end of it.

The United States just recently passed a law that eases requirements for crowdfunding that involves an equity model allowing investors to receive an actual interest in the business profits. This is where regulatory agencies come in. The United States just passed a law that helps exempt crowdfunding from some of the more onerous requirements of business and investors involved. In Canada, the snag is that there is no national regulatory agency.

Crowdfunding and the Equity Model in Canada

With the equity model, investors truly are investors, and receive some sort of interest in the company, and receive an on-going benefit. However, in Canada the ability to raise funds for your business with the help of crowdfunding is limited by the fact that you would have to meet requirements in 13 different provinces and territories. Unlike the U.S., one rules change doesn’t solve the issue. There would have to rules changes with each of the Canadian securities regulators. And, if one province/territory changed the rules, the funding could only be raised in that region; no nationwide push for funding.

So, while crowdfunding might help your business, it might take a while for it to really catch on Canada — especially if you want to pursue the equity model.

Canadian Dividend Stocks: TransAlta

By Miranda

If you are considering a Canadian dividend stockwith a focus on sustainability, TransAlta might not be a bad choice. There has been a dividend payout since 1993, and TransAlta shows no intention of cutting the dividend anytime soon.

What Does TransAlta Do?

TransAlta is a power generator, and energy marketer. Originally, TransAlta was called Calgary Power, and was founded in 1911. The headquarters is still in Calgary, Alberta. One of the defining characteristics of TransAlta is that the company takes a diversified approach to power generation, and includes facilities in Canada, the United States, and Australia that operate using:

Wind
Hydro
Coal
Geothermal
Natural gas

Even though TransAlta does make use of coal and natural gas, the other energy sources focused on by the company are enough for it to be classified as a renewable energy company. In fact, TransAlta is considered a leader in sustainability, and is included on the Dow Jones Sustainability North America Index, the FTSE4Good Index, and the Jantzi Social Index.

While some might argue that the use of coal might be a reason to dismiss TransAlta as a sustainable company, others believe that the other efforts from TransAlta outweigh some of the non-renewable aspects of the company, as does the company’s active efforts to improve sustainability and eco-friendliness.

How are the TransAlta Dividends?

Right now, TransAlta (TSX: TA) has a dividend yield of 6.40%, and a five-year average of 5.30%. While the yield is reasonably high, the dividend growth rate hasn’t been huge. The dividend growth rate for the last three years 1.82%, and 3.06% for the last five years. However, the fact of the matter is that TA has been boosting dividends in small increments. The dividend payout ratio is 90% currently, and the five-year average is 89%. TransAlta also features a dividend reinvestment plan (DRIP) that can help you build your portfolio a little faster.

The current payout is $0.29 per share, paid quarterly. As you can see, the dividend yield is mostly a factor of the relatively low share price; TA closed at just over $18 per share on April 6, 2012. The 52-week high for TA is $23.24 a share. The total return in the last five years has been -7.60%. However, that could be due to the general problems in the stock market; the last three years, the total return has been 17.33%. So far, though, in the last 12 months TA is down, so that might be an indication that TransAlta isn’t quite ready for recovery.

In terms of financial stability, TransAlta features a debt to equity ratio of 123%, and a P/E ratio of 14%. TA features a debt/equity ratio to industry of 265% and a P/E ratio to industry of 26%. There is a revenue of $701,000,000 with a net income of $28,000,000. The high payout, and the relatively high yield may not be sustainable if continued volatility is seen in the energy sector — and if TransAlta continues to lose ground in terms of share price.

For now, TA is still an interesting opportunity. If you are looking primarily for yield, TA might not be a bad choice especially if you can keep trading fees low via a discount trading brokerage. And, if you think that TransAlta has a good prospect for the future with its focus on renewable energy, you can improve your portfolio and add a little sustainability.

What do you think of TransAlta?

2012 Stocking Picking Contest

By Sustainable PF

Last December I received an email to join the 2012 Island of Misfit Bloggers Stock Picking Contest. How could I pass up picking 4 stocks just so I could see who the competition was going to be?

I fully intended to roll up my sleeves to do some research and analysis on stocks that could do well in 2012. That didn’t happen.

Instead, as the holidays approached and then rolled by the December 31st deadline was starting me down – it was the 29th. It was time to pick some stocks. But what criteria was I going to use?

At the end of the day, quite literally, I opted to pick 4 stocks that make sense to me which can be linked to sustainability of some definition. I also picked the stocks with total disregard to whether I would truly considering buying the stocks with our own money.

Now that the first quarter of the year has passed this long overdue post about the contest and my picks moved back to the top of the to-do list. It also helps that thus far the stock selections have performed quite well. Continue reading 2012 Stocking Picking Contest

5 Interesting Canadian Dividend Stocks to Consider

By Miranda

Lately, there has been a lot of interest in dividend stocks. There has been a lot of focus on dividends lately, especially since Apple investors began asking the company to pay a dividend. Not all companies, as AAPL demonstrates, pay dividends. But those that do are paying a portion of their profits to shareholders. Shareholders receive a certain payout, based on the number of shares they hold.

A dividend stock can provide you with the opportunity for capital appreciation, as the stock price rises, as well as regular income. Many dividends are paid quarterly, although you can find some that are paid monthly, or those that are paid only semi-annually or annually. The even better news is that you don’t have to look only in the United States. There are some interesting Canadian dividend stocks to add to your portfolio as well.

5 Canadian Dividend Stock Ideas

While there is always the risk of loss with any investment, and while companies can cut dividends at any time, it is still worth considering your options in this area. If you are trying to find some Canadian stocks for your portfolio, here are 5 dividend paying stocks worth considering:

Canadian Real Estate Investment Trust (REF.UN): This REIT has been in existence for almost two decades, and focuses on quality real estate assets. The current annual dividend yield is 3.79% and the five-year growth is 2.09%. It’s not anything fancy or flashy, but REF.UN, and other REITs are required to provide dividend payouts to shareholders. There is the chance of stability — provided Canadian real estate doesn’t completely tank.
Shaw Communications Inc (SJR.B): Shaw Communications has been seeing growth. The company specializes in Cable/Satellite TV, and that is a field growing in Canada. The price for SJR.B is fairly cheap, and it comes with a 4.65% annual dividend yield and the five-year growth is a whopping 26.15%. The result is that this could be an interesting addition to your portfolio, with a decent yield, and the potential for higher payouts in the future.
Telus (T): A perennial favorite with Canadian dividend investors, the telecom company offers a 4.07% annual yield. This is in the “sweet spot” for many income investors who like to see 4% to 6% annual yields. Five-year dividend growth is at 12.94%. That’s very respectable, and Telus has long presented a stable dividend option for investors, and is considered a good choice for retirement portfolios.
ClubLink Enterprises Ltd (CLK): This Canadian company has diversified operations (ranging from golf to resorts to ports and rail interests), and offers a nice yield of 4.55%, as well as five-year dividend growth of 4.56%. The stability of the company, and it’s relatively high payout ratio of 70.88% is one reason to consider this company.
MCAN Mortgage Corp (MKP): If you’re looking for a little higher yield, MKP might be a decent choice. It’s annual yield is 8.24%, and the five-year growth is 11.76%. You have the chance to add something with a little more oomph to your portfolio with this stock. However, if the mortgage market is in a bubble, and if the Canadian mortgage industry has trouble, dividends could easily be cut.

Of course, there are plenty of other Canadian dividend stocks, some of them that might be more interesting to you. These are just some ideas that might provide you with options for your portfolio.