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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TIM HORTONS INC. $34 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 176.2 million; Market cap: $6.0 billion; Price-to-sales ratio: 2.7; Dividend yield: 1.5%; SI Rating: Average) is one of Canada’s largest fast-food restaurant chains. Its 3,015 outlets mainly serve coffee and donuts. The company also has 563 stores in the U.S. Franchisees operate 99.5% of Tim Hortons’ coffee-and-donut shops. The company gets about two-thirds of its revenue from supplying these outlets with coffee, baked goods and related items. (Rents and franchise fees account for the remaining third of its revenue.) Tim Hortons owns its own bakeries and warehouses. That gives it strong quality control, and lets it use its buying power to negotiate better ingredient costs. In 2009, Tim Hortons’ earnings rose 4.1%, to $296.4 million from $284.7 million in 2008. However, its 2008 earnings were depressed by a $15.4-million (after tax) charge for non-recurring costs, including writedowns....
SAPUTO INC. $29 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 207.2 million; Market cap: $6.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.0%; SI Rating: Average) is Canada’s largest producer of dairy products, including milk, butter and cheese. It also makes snack cakes and tarts. Aside from Saputo, the company’s main brands are Neilson, Stella and Dairyland. The company also has operations in the U.S., Argentina and Europe. In the three months ended December 31, 2009, Saputo’s earnings jumped 80.4%, to $104.3 million, or $0.50 a share. A year earlier, it earned $57.8 million, or $0.28 a share. That’s mainly because of contributions from its Neilson Dairy subsidiary, which Saputo bought from George Weston Ltd. (Toronto symbol WN) on December 1, 2008. The higher earnings came despite a 20% increase in milk prices over the past year. (Milk is the main raw material of Saputo’s dairy businesses, which provide 98% of its earnings.) The company has been able to offset most of these extra costs by raising its selling prices for cheese in Canada....
MAPLE LEAF FOODS INC. $9.37 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 136.8 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.2; Dividend yield: 1.7%; SI Rating: Average) is Canada’s largest food-processing company. It mainly makes its products, which include fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. Maple Leaf also owns 89.8% of Canada Bread. Maple Leaf’s strong brands and customer loyalty are helping it continue its recovery from a 2008 listeriosis outbreak at its Toronto meat-processing plant. These strengths should also help it pass along higher costs for pork and other ingredients to its customers over the next few months. In the three months ended March 31, 2010, Maple Leaf’s sales fell 6.9%, to $1.2 billion from $1.3 billion a year earlier. That’s mainly because of a 7.5% drop in sales of frozen baked goods. As well, Maple Leaf gets 23% of its sales from outside of Canada, and the higher Canadian dollar hurt the contributions of its foreign operations....
CANADA BREAD CO. LTD. $47 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.5%; SI Rating: Above Average) is Canada’s second-largest producer of baked goods, after Weston Bakery. It also makes specialty pastas and sauces. Its main brands include Dempster, Tenderflake and Olivieri. In the three months ended March 31, 2010, Canada Bread’s earnings fell 14.5% to $12.7 million, or $0.50 a share. It earned $14.9 million, or $0.59 a share, a year earlier. Without unusual items, mainly the cost of building a new bakery in Hamilton, Ontario, to replace three older Toronto bakeries, earnings per share would have fallen 8.3%, to $0.55 from $0.60. Sales fell 7.6%, to $381.9 million from $413.1 million, mainly because the company lost a major U.S. restaurant customer. That pushed down sales of frozen bagels and breads to restaurants by 16.9%. Sales of fresh baked goods fell 2.2%....
SUNCOR ENERGY INC. $33 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $52.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; SI Rating: Average) became Canada’s largest oil company when it bought Petro-Canada (old symbol PCA) on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor shares for each Petro-Canada share they held. Conventional oil and natural gas account for about 60% of the merged company’s production. The remaining 40% comes from oil sands. That includes its 12% stake in the massive Syncrude oil-sands development. Suncor also operates four refineries and over 1,800 retail gas stations under the Petro-Canada banner. The company wants to expand its oil sands operations until they account for about 70% of its production. To that end, it is selling some conventional and offshore properties that belonged to Petro-Canada. However, Suncor will probably keep Petro-Canada’s projects in Libya and Syria....
Ottawa’s new tax on income trusts comes into effect on January 1, 2011. When it does, it will put income trusts on an equal footing with regular corporations. That will prompt some income trusts to convert to conventional corporations. Others may continue to operate as trusts. Either way, the looming tax has made many investors wary of income trusts. However, some trusts remain well positioned for long-term gains, even with the new tax. These are trusts that operate stable businesses in strong and growing industries. One way we separate these trusts from those that will struggle — or worse — when the new tax kicks in is to look for trusts that have histories of raising their distributions, and plan to keep their payouts at current levels after January 2011....
Last week, the U.S. Securities and Exchange Commission (SEC) announced that it was suing global investment bank and securities firm Goldman Sachs Group for defrauding investors. The SEC claims that Goldman Sachs misled investors about the risks of investing in certain mortgage-backed financial products. The SEC alleges that Goldman Sachs created these products with the help of a hedge-fund manager who then planned to sell short (or bet against them). Stock markets in the U.S. and Canada fell on the news of the SEC’s claims against Goldman Sachs. Shares of Canadian bank stocks also declined slightly, but they quickly recovered. That’s mainly because investors realize that the big-five Canadian banks had limited exposure to these types of complicated and risky financial products....
CANADIAN UTILITIES LTD. (Toronto symbols CU (class A non-voting) $47 and CU.X (class B voting) $47; Income Portfolio, Utilities sector; Shares outstanding: 125.9 million; Market cap: $5.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.2%; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates 19 power plants: 15 in Canada, two in the U.K., and two in Australia, As well, Canadian Utilities sells engineering services to other utilities. ATCO Ltd. owns 52.3% of the company. Canadian Utilities’ 2009 revenue fell 7.0%, to $2.6 billion from $2.8 billion in 2008, partly due to lower electricity prices in Alberta. But thanks to improving efficiency and regulatory relief, its earnings rose 5.9%, to $3.40 a share (or a total of $427.6 million) from $3.21 a share (or $403.2 million). The company aims to fuel long-term growth with new projects. For example, it will soon begin work on a $1.65-billion power transmission line between Edmonton and Calgary....
TRANSALTA CORP. $22 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 218.4 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 5.3%; SI Rating: Average) operates roughly 80 unregulated power plants in Canada, the U.S. and Australia. Coal-fired plants account for about 57% of the power it generates. Hydroelectric and renewable sources account for 23%, and the remaining 20% comes from natural gas. In November 2009, TransAlta paid $755 million for Canadian Hydro Developers Inc., which owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. Adding Canadian Hydro will help TransAlta comply with the tougher environmental regulations that will likely come into force over the next few years. To help pay for this purchase, TransAlta raised $412.5 million by selling 20.5 million common shares for $20.10 each. That increased the total number of shares outstanding by 10%....
EMERA INC. $24 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 113.0 million; Market cap: $2.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.7%; SI Rating: Average) owns Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. Nova Scotia Power supplies 94% of Emera’s revenue. The remaining 6% comes from investments in power companies in the U.S. and Caribbean. Emera is diversifying into other businesses. For example, its Brunswick Pipeline, which carries natural gas from Saint John, New Brunswick, to the U.S. border, began operating on July 16, 2009. The pipeline contributed $14.0 million to Emera’s 2009 earnings. That’s the main reason why its 2009 earnings rose 21.9%, to $175.7 million from $144.1 million in 2008. Emera also benefited from higher power rates in Nova Scotia. Earnings per share rose 20.6%, to $1.52 from $1.26, on more shares outstanding. Revenue rose 10.0%, to $1.5 billion from $1.3 billion....