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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TRANSCONTINENTAL INC. $12 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.8 million; Market cap: $969.6 million; Price-to-sales ratio: 0.3; Dividend yield: 2.7%; SI Rating: Average) is the largest commercial printer in Canada, and the sixth-largest in North America. This business provides 60% of its revenue and profit. The company also publishes newspapers and magazines (25% of revenue, 30% of profit). As well, its marketing communications division (15%, 10%) designs direct mail and other advertising campaigns, and analyzes customer-purchasing data. These services help its clients expand sales and build loyalty. The stock fell to $5.42 last March. That’s because the recession hurt the company’s direct-mail volumes. As well, many of its clients are U.S.-based financial institutions. Higher credit losses prompted many of these customers to cut their advertising spending. Transcontinental has cut its costs in response. This involved closing a direct-mail plant in Pennsylvania and merging some printing plants. So far, these moves have lowered its costs by $50 million a year. It should achieve its goal of $100 million in annual savings sometime next year....
THOMSON REUTERS CORP. $34 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 829.7 million; Market cap: $28.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 3.5%; SI Rating: Above Average) has two main divisions: Markets accounts for 60% of revenue, and sells financial-information products to banks and other financial institutions. Professional (40% of revenue) sells specialized information to professionals in the legal, accounting, scientific and health-care fields. The company gets about 60% of its revenue from the Americas, followed by Europe (30%) and Asia (10%). The financial crisis prompted banks and brokerage firms to cut spending on information products. As a result, Thomson Reuters’ revenue fell 3.7% in the third quarter of 2009, to $3.2 billion from $3.3 billion a year earlier (all amounts except share price and market cap in U.S. dollars). Earnings fell 8.5%, to $0.43 a share (or a total of $359 million), from $0.47 a share (or $392 million). Thomson is taking advantage of the slump in the financial industry to expand its operations. For example, it will pay an undisclosed sum for breakingviews.com, a privately held web site that supplies financial news and commentary....
METRO INC. $37 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 108.5 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.5%; SI Rating: Average) is Canada’s third-largest supermarket operator, after Loblaw and Sobeys. Metro operates roughly 660 grocery stores in Quebec and Ontario. Its major banners include Metro, Super C and Food Basics. The company also operates or supplies around 270 drug stores. Eighty-one of these are located inside its supermarkets. Aside from its grocery business, Metro owns roughly 23% of Alimentation Couche-Tard Inc. (Toronto symbol ATD.B). Couche-Tard has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Based on Alimentation Couche-Tard’s current stock price, this investment accounts for 23% of Metro’s market cap. Couche-Tard is a recommendation of Stock Pickers Digest, our publication for aggressive investors....
Ottawa’s new tax on income trusts comes into effect just over a year from now, on January 1, 2011. When it does, it will put trusts on an equal footing with regular corporations. Right now, trusts pay out a high percentage of their cash flows to their unitholders. This lets them avoid paying corporate taxes. It also gives many of them significantly higher yields than a lot of dividend-paying common stocks. The new tax will eliminate these income-tax benefits. That will prompt some income trusts to convert to conventional corporations. Others may choose to remain as trusts. (For our latest advice on income trust investing, and how trusts should fit into your overall portfolio, be sure to download our free report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”)...
Last week, the Persian Gulf nation of Dubai asked creditors of state-owned conglomerate Dubai World for a stay in payments on its roughly $60 billion U.S. of debt. The news raised fears that the country could eventually default on its debt, and caused a drop in world stock markets. Asian and U.S. banks were particularly hard hit. Like their international counterparts, Canadian bank stocks initially declined when the story of Dubai’s debt problems broke. But they quickly recovered, mainly because investors realized that the big-five Canadian banks are much better insulated from the problems in Dubai than many of their Asian, European and U.S. counterparts....
If you need steady income and want to hold bond funds, we advise you to focus on those with short-term maturity dates (see below for more on bond funds). That’s because bonds with shorter terms face a lower risk from interest-rate increases. You should also avoid funds that take part in any kind of speculative trading.
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This bond ETF offers high quality at low cost
The iShares Canadian Short Bond Index Fund (symbol XSB on Toronto) is a bond exchange-traded fund (ETF) that’s a long-time recommendation of our Canadian Wealth Advisor newsletter. The fund cuts risk by avoiding speculative trading and emphasizing government bonds....
Starting in 2011, Ottawa will impose a tax on distributions of income trusts, including royalty trusts. This will put trusts on an equal tax footing with regular corporations. Many trusts are converting to corporations as a result. Some are even cutting their distributions. However, as we noted in a recent issue of Canadian Wealth Advisor, two royalty trusts have an enviable advantage when it comes to dealing with the new tax. Oil and natural-gas producer Enerplus Resources Fund (symbol ERF.UN on Toronto) has over $2.5 billion of tax losses on its books. It can use these to defer its conversion to a dividend-paying corporation until 2013 or later. Similarly, Pengrowth Energy Trust (symbol PGF.UN on Toronto), which also produces oil and gas, has $3.0 billion in tax losses that it can use to hold off the trust tax until at least 2013....
You’ll find our mutual-fund ratings (Aggressive, Conservative or Income) displayed next to every fund we recommend in our Canadian Wealth Advisor newsletter. They’re key to helping us find top-performing funds, including those that are suitable for income investing. (To show you how our system works, we’d like to share one of the income investing fund buys we recently recommended in Canadian Wealth Advisor. Please read on for full details.) Rating mutual funds is more complex than rating individual companies. When we judge a company’s investment quality, we take nine key factors into account....
CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $39 and CU.X [class B voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 125.6 million; Market cap: $4.9 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates power plants in other parts of Canada, and in the U.K. and Australia. In August, Canadian Utilities received preliminary approval from the Alberta government to build and operate a new high-voltage transmission line between Edmonton and Calgary. Final approval for this project should come later this year. The line is part of a wider plan to make Alberta’s electricity grid more reliable. This new line will cost $1.65 billion, and will probably take several years to complete. To put this in context, Canadian Utilities earned $73.5 million, or $0.59 a share, in the three months ended June 30, 2009....
TRANSCANADA CORP. $33 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 624 million; Market cap: $20.6 billion; Price-to-sales ratio: 2.3; SI Rating: Above Average) operates a 59,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. It also owns or invests in 20 electrical power plants. To diversify its operations, TransCanada is building the $12-billion U.S. Keystone pipeline, which will pump crude oil from Alberta’s oil sands to refineries in Illinois. TransCanada has already signed contracts with oil shippers at an average term of 18 years. In total, these deals represent 83% of Keystone’s capacity. The new pipeline’s first phase should start operating early next year. TransCanada plans to extend Keystone to the U.S. Gulf Coast by 2012....