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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TELUS CORP. (Toronto symbols T $34 and T.A $32; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 318 million; Market cap: $10.5 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) is Canada’s second-largest telephone company after BCE Inc. (Toronto symbol BCE). Telus has been expanding its wireless operations over the past few years. As a result, the company now gets 55% of its earnings from its 6.3 million wireless subscribers across Canada. Telus has 37% of the wireless market. Market leader Rogers Communications Inc. (Toronto symbol RCI.B) has 48%. The remaining 45% of Telus’s earnings comes from its traditional phone business, which has 4.1 million...
Starting in 2011, Ottawa will impose a tax on the distributions of Canadian income 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.
Real estate investment trusts, or REITs, will remain exempt from the tax on Canadian income trusts, and will likely remain in their current form. (REITs invest in income-producing real estate, such as office buildings and hotels.)
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Tax exemption sets REITs apart from other Canadian income trusts
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ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.1; SI Rating: Above Average) is Canada’s largest bank, with total assets of $659.9 billion. In its third quarter, which ended July 31, 2009, Royal’s earnings rose 23.7%, to $1.6 billion, or $1.05 a share, from $1.3 billion, or $0.92 a share, a year earlier. Revenue rose 32.3%, to $7.8 billion from $5.9 billion. Royal has steadily expanded its capital-markets division over the past few years. Through this subsidiary, the bank helps businesses raise capital by selling shares and issuing debt. It also provides security-trading and research services. Royal gets about a quarter of its revenue from this division....
TORONTO-DOMINION BANK $67 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 854 million; Market cap: $57.2 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) is the second-largest Canadian bank, with total assets of $544.6 billion. TD has built up its U.S. retail-banking operations in the past few years, mostly through acquisitions. In May 2008, it paid $8.5 billion for Commerce Bancorp Inc. Commerce now operates as “TD Bank,” and has over 1,000 branches from Maine to Florida. TD’s U.S. operations now account for about 20% of its profits. But even with Commerce, earnings at TD’s U.S. operations fell 11% in the bank’s most recent quarter, which ended July 31, 2009. This was mainly because the division’s loan-loss provisions climbed 141% from a year ago. The jump was largely the result of depressed real-estate prices in some markets. It added to a 93.4% rise in TD’s overall loan-loss provisions, to $557 million from $288 million....
BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $44 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) is Canada’s third-largest bank, with total assets of $485.9 billion. Rising stock markets continue to help the bank’s trading division. In the three months ended July 31, 2009, the division’s earnings jumped 58.3%, to $470 million from $297 million a year earlier. The Canadian banking division’s earnings rose 8.0%, to $500 million from $463 million. This was largely because of two purchases the bank made last year: it paid $2.3 billion for 37.6% of CI Financial Corp. (Toronto symbol CIX), one of Canada’s leading mutual-fund companies, and $500 million for online broker E*Trade Canada. These additions helped push up the bank’s overall revenue by 11.9%, to $3.8 billion from $3.4 billion....
BANK OF MONTREAL $51 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 549.9 million; Market cap: $28 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is the fourth-largest Canadian bank, with total assets of $415.4 billion. Despite the recession, Bank of Montreal is setting less money aside to cover bad loans. In the three months ended July 31, 2009, the bank allocated $417 million for future loan losses, down 13.8% from $484 million a year earlier. Lower loan-loss provisions at its main Canadian personal and business lending operations offset higher provisions at its U.S. division, particularly for commercial real-estate loans and residential mortgages. Thanks to the lower provisions, Bank of Montreal’s earnings rose 6.9%, to $557 million from $521 million a year earlier. However, earnings per share fell 1.0%, to $0.97 from $0.98, because of an 8.7% rise in the number of outstanding shares. Revenue rose 8.4%, to $3 billion from $2.7 billion....
CANADIAN IMPERIAL BANK OF COMMERCE $61 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 382.7 million; Market cap: $23.3 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is Canada’s fifth-largest bank, with total assets of $335.9 billion. In August 2005, CIBC set aside roughly $3 billion to settle a class-action lawsuit related to its involvement with failed energy company Enron Corp. Last year, it recorded a $486-million tax benefit related to this. The Canada Revenue Agency is now challenging this deduction. If CIBC wins, it will recognize a further tax gain of $214 million. If it loses, it will have to pay $826 million. To put these figures in context, CIBC’s earnings jumped to $434 million, or $1.02 a share in the three months ended July 31, 2009. That’s much higher than the $71 million, or $0.11 a share, it earned a year earlier. But if you exclude unusual items, such as writedowns of securities, earnings per share actually fell 21.9%, to $1.29 from $1.65....
RIOCAN REAL ESTATE INVESTMENT TRUST $17 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 234.2 million; Market cap: $4 billion; Price-to-sales ratio: 5.4; SI Rating: Average) is Canada’s largest real-estate income trust, with properties in all 10 provinces. RioCan specializes in big-box outdoor malls, and owns 247 retail properties, 13 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. The trust also owns office buildings and residential complexes. These represent 4% of its net leasable area of 36.2 million square feet. RioCan’s revenue rose 31.3%, from $581.7 million in 2004 to $763.8 million in 2008, mainly due to strong interest from retailers for big-box-style malls. These malls now account for 45% of RioCan’s holdings....
BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006. Last year, BCE began a major cost-cutting program in response to a high-profile takeover bid by a private group headed by the Ontario Teachers’ Pension Plan....
When investors ask us about our conservative investing strategy, they often wonder when they should dump a weak stock from their portfolio and replace it with something new. Knowing when to sell is part of our conservative investing strategy that we cover in our new special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.
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