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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CANADIAN UTILITIES LTD. (Toronto symbols CU (class A non-voting) $50 and CU.X (class B voting) $50; Income Portfolio, Utilities sector; Shares outstanding: 125.8 million; Market cap: $6.3 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.canadian-utilities.com) distributes electricity and natural gas in Alberta. It also operates a total of 20 power plants in Canada, Australia, and the U.K., and sells its expertise to other firms. ATCO Ltd. (see ATCO LTD. - Toronto symbols ACO.X $57 and ACO.Y $57) owns 52.2% of the company. Canadian Utilities earned $82.0 million, or $0.66 a share, in the three months ended September 30, 2010. That’s up 6.9% from $76.7 million, or $0.61 a share, a year earlier. These figures exclude unusual items, mostly gains and losses on hedging contracts that Canadian Utilities uses to lock in natural-gas prices. Revenue rose 2.5% in quarter, to $550.7 million from $537.1 million. Regulatory rulings helped offset lower power prices in Alberta. The company will probably earn $3.31 a share in 2010. The stock trades at 15.1 times that estimate. That’s a reasonable p/e ratio in light of the steady cash flows it gets from its regulated operations....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “It takes more than a DRIP to make a stock a worthwhile buy.” Some companies offer automatic dividend reinvestment plans, also known as DRIPs. These plans let shareholders reinvest their dividends to buy additional shares (or fractions of shares) of the company. DRIPs bypass brokers, so shareholders save on commissions....
Many people come up with unrealistic answers to the question of how much risk is right for them. For instance, when they’re young and just starting out, many investors decide to move away from safe investing principles and speculate. They expect to build a small portfolio into a big one in a hurry, then shift their money into boring, but more dependable investments.
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Heavy losses can be especially damaging for young investors
As a newcomer in any field, however, it’s easy to fall victim to ruses and snares that someone with more experience would spot right away. Later on, you’ll know better than to bid on an ugly painting just because it’s the work of a noted artist, or invest in a building that faces expensive repairs due to delayed maintenance, or buy a promotional stock due to rumours or touting....
On January 1, 2011, Ottawa will impose a tax on distributions of income trusts and royalty trusts. (Royalty trusts are a form of income trust. They profit from royalties associated with the sale of oil, natural gas or minerals.) The new tax will put income and royalty trusts on an equal tax footing with regular corporations. However, as we note in a just-published issue of The Successful Investor, one royalty trust has an enviable advantage when it comes to dealing with the new tax.
This royalty trust’s tax losses will help maintain its high yield through 2011 and beyond
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We continue to recommend that you cut your investment risk by spreading your money out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities). Most investors should have investments in most, if not all, of these five sectors. The proper proportions depend on your circumstances and temperament. If you’re an income-seeking or conservative investor, you may want to place more emphasis on Utilities. That’s because these firms’ operations (such as power plants and pipelines) generate steady cash flows. That cuts their risk, and gives them plenty of flexibility to invest in new-growth projects. It’s also why utilities are among the best Canadian dividend stocks. In a just-published issue of Canadian Wealth Advisor, our newsletter for conservative investing, we update our buy/sell/hold advice on a utility that’s investing heavily in new-growth projects: TransCanada Corp. (symbol TRP on Toronto). We’ve covered TransCanada for many years in Canadian Wealth Advisor and our flagship publication, The Successful Investor....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Dividends can produce a large part of your total return over long periods.” Dividends rarely get the respect they deserve, especially from beginning investors. That’s because a dividend paying stock’s yearly 2% or 3% or 5% dividend barely seems worth mentioning alongside possible yearly capital gains of 10%, 20% or 30% or more....
SHAWCOR LTD. $27 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.6 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.1%; SI Rating: Average) gets 90% of its revenue by making sealants and coatings that protect oil and natural-gas pipelines from corrosion. The remaining 10% comes from making electrical wire and protective sheaths. In the three months ended June 30, 2010, ShawCor’s revenue fell 25.0%, to $234.5 million from $312.8 million a year earlier. That’s mainly because of a drop in new pipeline construction in North America. ShawCor also completed a major contract in the Caribbean in late 2009. As well, Canada accounts for just 25% of ShawCor’s revenue, so the higher Canadian dollar hurts the contribution of its overseas operations. The lower revenue was the main reason why ShawCor’s earnings fell 68.6% in the quarter, to $10.9 million, or $0.15 a share. It earned $34.6 million, or $0.49 a share, a year earlier....
FINNING INTERNATIONAL INC. $22 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.0 million; Market cap: $3.8 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.2%; SI Rating: Above Average) sells, rents and repairs heavy equipment, such as tractors, bulldozers and trucks, made by Caterpillar Inc. Finning’s major customers are in the mining, forest-products and construction industries in western Canada, the U.K. and South America. In the three months ended June 30, 2010, Finning earned $36.0 million, or $0.21 a share. That’s down 36.3%, from $56.5 million, or $0.33 a share, a year earlier. However, the latest quarterly earnings included a $0.06-a-share charge for costs to install a new computer system and buy back notes. Without these charges, Finning would have earned $0.27 a share in the latest quarter. Revenue fell 2.0%, to $1.07 billion from $1.1 billion. Lower sales of new and used equipment offset a 10% rise in sales of support services. Finning now gets nearly half of its revenue from services. That cuts its risk....
In the latest issue of The Successful Investor, we’ve updated our buy/sell/hold advice on grocery retailer Metro Inc. (symbol MRU.A on Toronto).
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Metro: An aggressive pick that matured into a stock more suitable for conservative investing
Metro is a good example of a stock that has graduated from Stock Pickers Digest, our newsletter for aggressive investors, to The Successful Investor, which focuses on more conservative selections....
CENOVUS ENERGY INC. $29 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.8 million; Market cap: $21.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.8%; SI Rating: Extra Risk) operates three oil-sands properties in Alberta, and one in Saskatchewan. Cenovus ships the heavy bitumen from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of Cenovus’ two main oil-sands projects. Cenovus also owns conventional oil and natural-gas properties. Cenovus’ proved oil and gas reserves will last 14.7 years. These large reserves mean that Cenovus does not need to spend heavily on exploration. That cuts its risk. Moreover, its steam-assisted gravity draining drilling technology should spur its long-term earnings. That’s because this process makes it easier to extract more heavy oil.