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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HOME CAPITAL GROUP INC. $56 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.7 million; Market cap; $1.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.9%; TSINetwork Rating: Average; www.homecapital.com) is a mortgage lender that serves borrowers who don’t meet the stricter standards of larger, traditional lenders, like banks.
Even though Home Capital caters to riskier borrowers, it avoids huge credit losses by identifying problem loans early. It then uses this information to restructure a borrower’s repayment terms and adjust its lending policies.
In the three months ended September 30, 2012, Home Capital’s earnings rose 18.3%, to a record $57.3 million, or $1.65 a share. A year earlier, the company earned $48.4 million, or $1.39 a share.
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Even though Home Capital caters to riskier borrowers, it avoids huge credit losses by identifying problem loans early. It then uses this information to restructure a borrower’s repayment terms and adjust its lending policies.
In the three months ended September 30, 2012, Home Capital’s earnings rose 18.3%, to a record $57.3 million, or $1.65 a share. A year earlier, the company earned $48.4 million, or $1.39 a share.
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IGM FINANCIAL INC. $40 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 252.6 million; Market cap: $10.1 billion; Price-to-sales ratio: 3.9; Dividend yield: 5.4%; TSINetwork Rating: Above Average; www.igmfinancial.com) is Canada’s largest independent mutual fund company, with $119.3 billion of assets under management. Power Financial owns 58.4% of IGM.
To help spur its sales and compete with other fund companies, IGM recently cut the management fees on most of the mutual funds it sells through its Investors Group subsidiary. It is also changing the way it pays its salespeople. This will result in savings that will help offset the lower fee income.
In the meantime, the reduced fees pushed down IGM’s earnings by 12.3% in the three months ended September 30, 2012, to $186.9 million. A year earlier, it earned $213.0 million. Earnings per share fell 11.0%, to $0.73 from $0.82, on fewer shares outstanding. Revenue declined 5.9%, to $634.0 million from $673.8 million.
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To help spur its sales and compete with other fund companies, IGM recently cut the management fees on most of the mutual funds it sells through its Investors Group subsidiary. It is also changing the way it pays its salespeople. This will result in savings that will help offset the lower fee income.
In the meantime, the reduced fees pushed down IGM’s earnings by 12.3% in the three months ended September 30, 2012, to $186.9 million. A year earlier, it earned $213.0 million. Earnings per share fell 11.0%, to $0.73 from $0.82, on fewer shares outstanding. Revenue declined 5.9%, to $634.0 million from $673.8 million.
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CANADIAN PACIFIC RAILWAY LTD. $97 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 173.0 million; Market cap: $16.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.4%; TSINetwork Rating: Above Average; www.cpr.ca) plans to cut 25% of its workforce as part of a major restructuring plan aimed at improving its efficiency. CP is also increasing the length and speed of its trains. The plan should cut CP’s operating ratio from 74.1% in the third quarter of 2012 to 65% in 2016. (Operating ratio is calculated by dividing regular operating costs by revenue—the lower, the better.)
In addition, CP has suspended its plan to build new rail lines that would have served coal mines in Montana and Wyoming. That’s because power plants are switching to cheaper natural gas, which has hurt demand for coal. As a result, CP will take a $180-million charge. That’s equal to 80% of the $224 million, or $1.30 a share, that it earned in the third quarter.
CP Rail was our #1 buy for 2012. It’s still a buy.
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In addition, CP has suspended its plan to build new rail lines that would have served coal mines in Montana and Wyoming. That’s because power plants are switching to cheaper natural gas, which has hurt demand for coal. As a result, CP will take a $180-million charge. That’s equal to 80% of the $224 million, or $1.30 a share, that it earned in the third quarter.
CP Rail was our #1 buy for 2012. It’s still a buy.
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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $77 and ACO.Y [class II voting] $77; Income Portfolio, Utilities sector; Shares outstanding: 57.5 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.atco.com) gets two-thirds of its earnings from its 52.8% stake in Canadian Utilities (see page 1).
Most of the remainder comes from ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms. ATCO owns 75.5% of this business, while Canadian Utilities owns 24.5%. Another subsidiary, ATCO I-Tek, manages computer networks, billing and payment processing for a wide variety of businesses.
ATCO’s revenue rose 12.5%, from $2.9 billion in 2007 to $3.3 billion in 2008, but fell 4.8%, to $3.1 billion, in 2009. Revenue improved to $3.5 billion in 2010, and to $4.0 billion in 2011.
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Most of the remainder comes from ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms. ATCO owns 75.5% of this business, while Canadian Utilities owns 24.5%. Another subsidiary, ATCO I-Tek, manages computer networks, billing and payment processing for a wide variety of businesses.
ATCO’s revenue rose 12.5%, from $2.9 billion in 2007 to $3.3 billion in 2008, but fell 4.8%, to $3.1 billion, in 2009. Revenue improved to $3.5 billion in 2010, and to $4.0 billion in 2011.
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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $68 and CU.X [class B voting] $68; Income Portfolio, Utilities sector; Shares outstanding: 128.1 million; Market cap: $8.7 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.6%; TSINetwork Rating: Above Average; 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 page 2) owns 52.8% of Canadian Utilities.
The company’s power plants supply around 60% of its earnings, followed by gas distribution (30%) and other businesses (10%). It gets 90% of its earnings from Canada.
Canadian Utilities’ revenue rose 15.6%, from $2.4 billion in 2007 to $2.8 billion in 2008. However, lower power rates for its unregulated plants in Alberta cut its revenue by 7.0%, to $2.6 billion, in 2009. Revenue rebounded by 4.5% in 2010, to $2.7 billion, after it started up a new power plant in Australia.
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The company’s power plants supply around 60% of its earnings, followed by gas distribution (30%) and other businesses (10%). It gets 90% of its earnings from Canada.
Canadian Utilities’ revenue rose 15.6%, from $2.4 billion in 2007 to $2.8 billion in 2008. However, lower power rates for its unregulated plants in Alberta cut its revenue by 7.0%, to $2.6 billion, in 2009. Revenue rebounded by 4.5% in 2010, to $2.7 billion, after it started up a new power plant in Australia.
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TORONTO-DOMINION BANK $81 (www.td.com) owns 45% of TD Ameritrade Holding Corp. (Nasdaq symbol AMTD), a leading U.S. online broker. Ameritrade will contribute $51 million to TD’s earnings in its 2012 fourth quarter, which ends October 31, 2012....
Dividends often don’t get the respect they deserve, especially from beginning investors. That’s because a dividend stock’s yearly 3% or 5% yield may not seem impressive alongside yearly capital gains of 10%, 20% or 30% or more. Yet dividends are far more reliable than capital gains. So with today’s low interest rates, investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price). That’s why the high dividend yield of a company like Bell Aliant stands out....
ENCANA CORP. $21 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $15.5 billion; Price-to-sales ratio: 2.0; Dividend yield: 3.7%; TSINetwork Rating: Average; www.encana.com) owns the Deep Panuke offshore natural gas field south of Nova Scotia.
The project’s cost has risen to $960 million from an earlier estimate of $750 million because Encana had problems building the drilling platform (all amounts except share price and market cap in U.S. dollars). To put that in context, the company’s cash flow was $794 million, or $1.08 a share, in the quarter ended June 30, 2012.
Even with these delays, Encana still aims to begin producing gas at Deep Panuke by the end of 2012. At full capacity, this new project will increase the company’s daily gas production by 9%.
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The project’s cost has risen to $960 million from an earlier estimate of $750 million because Encana had problems building the drilling platform (all amounts except share price and market cap in U.S. dollars). To put that in context, the company’s cash flow was $794 million, or $1.08 a share, in the quarter ended June 30, 2012.
Even with these delays, Encana still aims to begin producing gas at Deep Panuke by the end of 2012. At full capacity, this new project will increase the company’s daily gas production by 9%.
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ATCO LTD. $75 (www.atco.com) has won a contract to design and build a noise-control barrier around a natural-gas-fired power plant in Texas. This barrier will shield nearby residential neighbourhoods from low-frequency sounds that rattle doors and windows....
CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.7 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Average; www.cae.com) is the world’s leading maker of flight simulators for commercial airlines, with 70% of the market. It also makes simulators for military clients. The company began training pilots for its customers in 2001; it now has over 100 flight schools in 30 countries.
CAE gets 50% of its revenue from military clients. That cuts its exposure to cyclical commercial airlines, which supply 45% of its revenue.
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CAE gets 50% of its revenue from military clients. That cuts its exposure to cyclical commercial airlines, which supply 45% of its revenue.