Dividend Stocks
Dividends can produce as much as a third of your total return over long periods, and you can even retire on dividends.
There are 4 key stock dividend dates that are involved with dividend payments:
1- The Declaration Date is several weeks in advance of a dividend payment—it’s when company’s board of directors sets the amount and timing of the proposed payment.
2- The Payable Date is the date set by the board on which the dividend will actually be paid out to shareholders.
3- The Record Date is for shareholders who hold the stock before the payable date and receive the dividend payment. That date is set any number of weeks before the payable date.
4-The Ex-Dividend Date is two business days before the record date and it’s when the shares begin to trade without their dividend. If you buy stocks one day or more before their ex-dividend date, you will still get the dividend. That’s when a stock is said to trade cum-dividend. If you buy on the ex-dividend date or later, you won’t get the dividend. The ex-dividend date is in place to allow pending stock trades to settle.
We think very highly of stocks that have been paying dividends for five or more years, at TSI Network. Many of these stocks fit in well with our three-part Successful Investor philosophy:
1- Invest mainly in well-established companies;
2- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities);
3- Downplay or avoid stocks in the broker/media limelight.
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CENOVUS ENERGY INC. $32 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.8 million; Market cap: $24.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.0%; TSINetwork Rating: Average; www.cenovus.com) had to write down its natural gas properties in Alberta due to low gas prices. That’s why its earnings fell 30.5% in 2012, to $1.14 a share from $1.64 in 2011. However, cash flow per share rose 11.1%, to $4.80 from $4.32, as it expanded its oil sands production by 35%.
The company’s oil refineries and low production costs should keep pushing up its cash flow, even if oil prices fall. As a result, we’ve upgraded Cenovus’s TSINetwork Rating to “Average” from “Extra Risk.”
Cenovus is a buy.
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EMERA INC. $35 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 131.0 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.0%; TSINetwork Rating: Average; www.emera.com) gets 60% of its revenue and 50% of its earnings from Nova Scotia Power Inc., which is that province’s main electricity supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean. Other operations include the Brunswick pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in New Brunswick.
The Newfoundland government recently approved a new hydroelectric project on Labrador’s Churchill River. Emera will participate in this operation by paying $600 million for a 29% stake in a new regulated utility that will transmit power from Churchill River to the island of Newfoundland. In addition, Emera will spend $1.5 billion to build an undersea cable (called the Maritime Link) that will transmit 20% of the plant’s power to Nova Scotia. Emera will own 100% of this cable. These two projects should begin operating by 2017.
Meanwhile, Emera earned $220.8 million in 2012, down 8.4% from $241.1 million in 2011. Due to more shares outstanding, earnings per share fell at a faster pace of 10.7%, to $1.76 from $1.97.
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The Newfoundland government recently approved a new hydroelectric project on Labrador’s Churchill River. Emera will participate in this operation by paying $600 million for a 29% stake in a new regulated utility that will transmit power from Churchill River to the island of Newfoundland. In addition, Emera will spend $1.5 billion to build an undersea cable (called the Maritime Link) that will transmit 20% of the plant’s power to Nova Scotia. Emera will own 100% of this cable. These two projects should begin operating by 2017.
Meanwhile, Emera earned $220.8 million in 2012, down 8.4% from $241.1 million in 2011. Due to more shares outstanding, earnings per share fell at a faster pace of 10.7%, to $1.76 from $1.97.
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FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 191.6 million; Market cap: $6.3 billion; Price-to-sales ratio: 1.7; Dividend yield 3.8%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. In addition, wholly owned FortisBC Energy distributes natural gas in B.C.
Fortis should complete its takeover of CH Energy Group (New York symbol CHG) in the second quarter of 2013. CH supplies gas and power to 375,000 customers in New York State’s Mid-Hudson River Valley. Fortis will pay $1.5 billion U.S. for CH Energy, including assuming $500 million U.S. of debt.
In 2012, Fortis’s earnings rose 7.5%, to $322.5 million from $300.0 million in 2011. Earnings per share rose just 3.0%, to $1.70 from $1.65, on more shares outstanding. During the year, Fortis spent $400 million to expand its power transmission operations in Alberta. That was the main reason for the higher earnings. However, revenue fell 2.2%, to $3.65 billion from $3.74 billion. That’s mainly because warmer winter weather cut natural gas demand.
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Fortis should complete its takeover of CH Energy Group (New York symbol CHG) in the second quarter of 2013. CH supplies gas and power to 375,000 customers in New York State’s Mid-Hudson River Valley. Fortis will pay $1.5 billion U.S. for CH Energy, including assuming $500 million U.S. of debt.
In 2012, Fortis’s earnings rose 7.5%, to $322.5 million from $300.0 million in 2011. Earnings per share rose just 3.0%, to $1.70 from $1.65, on more shares outstanding. During the year, Fortis spent $400 million to expand its power transmission operations in Alberta. That was the main reason for the higher earnings. However, revenue fell 2.2%, to $3.65 billion from $3.74 billion. That’s mainly because warmer winter weather cut natural gas demand.
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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $92 and ACO.Y [class II voting] $92; Income Portfolio, Utilities sector; Shares outstanding: 57.5 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.9%-owned Canadian Utilities (see left). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms; Canadian Utilities owns the remaining 24.5%.
In 2012, ATCO’s revenue rose 11.9% to $4.4 billion from $4.0 billion a year earlier. In addition to a higher contribution from Canadian Utilities, revenue at its structures division rose 24.8% due to new mines, such as the Jansen potash project in Saskatchewan. Earnings rose 14.7%, to $375 million, or $6.48 a share, from $327 million, or $5.64.
ATCO continues to trade for less than the value of its assets; investors call this a “holding company discount.” Based on current prices, you can buy a share of ATCO for $92 and get roughly $93 worth of Canadian Utilities. That means you get ATCO’s non-utility businesses, which provide a third of its earnings, for free.
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In 2012, ATCO’s revenue rose 11.9% to $4.4 billion from $4.0 billion a year earlier. In addition to a higher contribution from Canadian Utilities, revenue at its structures division rose 24.8% due to new mines, such as the Jansen potash project in Saskatchewan. Earnings rose 14.7%, to $375 million, or $6.48 a share, from $327 million, or $5.64.
ATCO continues to trade for less than the value of its assets; investors call this a “holding company discount.” Based on current prices, you can buy a share of ATCO for $92 and get roughly $93 worth of Canadian Utilities. That means you get ATCO’s non-utility businesses, which provide a third of its earnings, for free.
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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $79 and CU.X [class B voting] $79; Income Portfolio, Utilities sector; Shares outstanding: 128.6 million; Market cap: $10.1 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.5%; TSINetwork Rating: Above A v e r a g e ; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see right) owns 52.9% of the company.
In July 2011, Canadian Utilities bought an Australian natural gas distributor for $1.1 billion. This move, along with an expansion of its power transmission grid in Alberta, continues to benefit the company. These new assets have also helped offset lower revenue from its Alberta power plants due to planned maintenance shutdowns.
As a result, the company’s earnings rose 13.1% in 2012, to a record $561 million, or $4.11 a share. The new Australian business contributed $26 million to that total. In 2011, Canadian Utilities earned $496 million, or $3.65 a share. Revenue rose 4.7%, to $3.1 billion from $3.0 billion.
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In July 2011, Canadian Utilities bought an Australian natural gas distributor for $1.1 billion. This move, along with an expansion of its power transmission grid in Alberta, continues to benefit the company. These new assets have also helped offset lower revenue from its Alberta power plants due to planned maintenance shutdowns.
As a result, the company’s earnings rose 13.1% in 2012, to a record $561 million, or $4.11 a share. The new Australian business contributed $26 million to that total. In 2011, Canadian Utilities earned $496 million, or $3.65 a share. Revenue rose 4.7%, to $3.1 billion from $3.0 billion.
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TORSTAR CORP. $7.00 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.7 million; Market cap: $557.9 million; Price-to-sales ratio: 0.4; Dividend yield: 7.5%; TSINetwork Rating: Above Average; www- .torstar.com) continues to struggle with falling newspaper ad sales, particularly at The Toronto Star, its flagship paper. Strong competition and unfavourable foreign exchange rates are also hurting profits at wholly owned Harlequin Enterprises, the world’s leading romance novel publisher.
In 2012, Torstar’s revenue fell 4.1%, to $1.49 billion from $1.55 billion in 2011. Earnings fell 52.6%, to $103.2 million, or $1.29 a share, from $217.7 million, or $2.72 a share. If you disregard writedowns and other unusual items, earnings per share would have declined 25.0%, to $1.35 from $1.80.
To improve its profitability, Torstar continues to cut jobs and sell surplus real estate. Since 2010, these moves have cut its annual costs by $34.4 million. In 2013, annual savings should rise to $50.0 million.
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In 2012, Torstar’s revenue fell 4.1%, to $1.49 billion from $1.55 billion in 2011. Earnings fell 52.6%, to $103.2 million, or $1.29 a share, from $217.7 million, or $2.72 a share. If you disregard writedowns and other unusual items, earnings per share would have declined 25.0%, to $1.35 from $1.80.
To improve its profitability, Torstar continues to cut jobs and sell surplus real estate. Since 2010, these moves have cut its annual costs by $34.4 million. In 2013, annual savings should rise to $50.0 million.
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ENBRIDGE INC. $46 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 806.5 million; Market cap: $37.1 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.enbridge.com) operates pipelines that pump crude oil and natural gas from western Canada to customers in eastern Canada and the U.S. The company’s pipelines handle around 65% of all western Canadian crude oil exports.
Pipelines supply 90% of Enbridge’s revenue. The remaining 10% mainly comes from distributing gas to 2 million consumers in Ontario, Quebec, New Brunswick and New York State.
Enbridge’s revenue fell 22.7%, from $16.1 billion in 2008 to $12.5 billion in 2009, as the recession cut gas sales and prices. In 2010, the company started up the $3.5-billion Alberta Clipper pipeline, which pumps oil from Alberta to refineries in Illinois. That helped push up Enbridge’s revenue by 103.0% in 2012, to $25.3 billion.
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Pipelines supply 90% of Enbridge’s revenue. The remaining 10% mainly comes from distributing gas to 2 million consumers in Ontario, Quebec, New Brunswick and New York State.
Enbridge’s revenue fell 22.7%, from $16.1 billion in 2008 to $12.5 billion in 2009, as the recession cut gas sales and prices. In 2010, the company started up the $3.5-billion Alberta Clipper pipeline, which pumps oil from Alberta to refineries in Illinois. That helped push up Enbridge’s revenue by 103.0% in 2012, to $25.3 billion.
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BCE INC. $45 (www.bce.ca) purchased The Source chain of 700 mall-based electronic stores in 2009. This ear, it plans to open 20 new outlets. These stores give BCE a low-risk way to promote its mobile phones and TV services. Best Buy.
CANADIAN UTILITIES LTD. $74 (www.canadianutilities.com) has raised its dividend every year since 1972. The new annual rate of $1.94 a share, up 9.6% from $1.77, yields 2.6%. Buy.
ATCO LTD. $83 (www.atco.com) has raised its quarterly dividend by 14.5%, to $0.375 a share from 0.3275. The new annual rate of $1.50 yields 1.8%. The company has raised its dividend each year for the past 20 years. Moreover, at current rices, you can buy a share of ATCO for $83 and get roughly $86 worth of 52.8%-owned subsidiary Canadian Utilities (see below)....