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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FORTIS INC. $23 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 169.2 million; Market cap: $3.9 billion; Price-to-sales ratio: 0.9; SI Rating: Above Average) generates and distributes electricity in five Canadian provinces. It also owns power plants in the U.S. and the Caribbean, as well as hotels and commercial real estate in Atlantic Canada. Regulated businesses account for over 90% of Fortis’s revenue, which gives it plenty of steady cash flow for dividends. In fact, the company has increased its dividend each year for the past 36 years. The current rate of $1.04 yields 4.5%. Fortis is also enjoying the benefits of its July 2007 purchase Terasen Inc., which distributes natural gas in B.C. Fortis’s earnings rose 26.9%, to a record $245 million in 2008 from $193 million in 2007. The gain was mainly because of $118 million from Terasen, compared to $50 million for the 7.5 months that Fortis owned it in 2007. Earnings per share rose 15.2%, to $1.52 from $1.32 on 14% more shares outstanding. Revenue rose 43.6%, to $3.9 billion from $2.7 billion....
TRANSALTA CORP. $21 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 198 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates 50 electrical power plants in North America and Australia. Unlike TransCanada, TransAlta prefers to own unregulated plants. This increases its exposure to sometimes volatile electricity prices. But coal is TransAlta’s main fuel, and its ownership of three coal mines helps keep its costs down. In 2008, TransAlta’s earnings grew 9.8%, to $290 million from $264 million in 2007. Earnings per share rose 11.5%, to $1.46 from $1.31 on fewer shares outstanding. These figures exclude unusual items. Revenue rose 12.1%, to $3.1 billion from $2.8 billion....
TRANSCANADA CORP. $33 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 616 million; Market cap: $20.3 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) operates pipelines that pump natural gas from Alberta to eastern Canada and the United States. It also owns or invests in 19 electrical power plants. Most of TransCanada’s businesses operate under some form of regulation by government agencies. That limits the prices it can charge, but it also provides steady revenue streams for new investments, debt repayments and dividends. TransCanada just raised its dividend for the ninth year in a row. The new annual rate of $1.52 yields 4.6%. Meanwhile, TransCanada’s earnings before nonrecurring items in 2008 rose 16.3%, to $1.3 billion from $1.1 billion in 2007. Earnings per share rose just 8.2%, to $2.25 from $2.08. That’s because the company issued over $1 billion of new common shares during the year to pay for acquisitions and invest in new projects. Cash flow per share rose 7.2%, to $5.28 from $4.93. However, revenue fell 2.4%, to $8.6 billion from $8.8 billion....
CANADIAN IMPERIAL BANK OF COMMERCE $46 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $17.5 billion; Price-to-sales ratio: 1.3; SI Rating: Above Average) is Canada’s fifth-largest bank, with assets of $353.9 billion. CIBC is looking to cut its risk by focusing on retail banking, which now represents 65% of its business. CIBC wants to raise this to 75%. CIBC is also cutting its exposure to risky assets. It recently sold $1.05 billion U.S. of notes backed by American subprime mortgages to private-equity firm Cerberus Capital. The bank is not obligated to compensate Cerberus if these underlying mortgages fail, so this deal should help shield CIBC from future charges....
BANK OF MONTREAL $30 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 503 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.8; SI Rating: Above Average) is Canada’s fourth-largest bank, with assets of $416.1 billion.
Bank of Montreal continues to focus on its retail banking business and shrink its corporate-lending and stock market-related activities. This should give it more stable revenue streams. The bank also aims to spur growth at its insurance operations, which currently supply just 2% of its revenue. It recently agreed to pay $375 million for the Canadian life insurance business of troubled U.S. insurer American International Group Inc. Bank of Montreal earned $2 billion, or $3.76 a share, in fiscal 2008, down 7.2% from $2.1 billion, or $4.11 a share, in the prior year. The latest results included $419 million of after-tax writedowns of securities, as well as a $977-million increase in loan-loss provisions. The prior year included $787 million in unusual charges. Revenue rose 9.2%, to $10.2 billion from $9.3 billion. Bad loans now stand at 0.4% of Bank of Montreal’s total loans....
AIG buy probably a bargain
BANK OF NOVA SCOTIA $30 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 990 million; Market cap: $29.7 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) is Canada’s third-largest bank, with assets of $507.6 billion. Bank of Nova Scotia has the largest international operations of the big five banks, with a third of its earnings coming from overseas. It prefers to focus on developing countries in Latin America and Asia, where it can quickly expand earnings and market share.
Bank of Nova Scotia recently agreed to increase its stake in Thailand’s Thanachart Bank from 24.98% to 49%. Thanachart is Thailand’s eighth largest bank by assets, and that country’s leading automobile lender....
Latest investment looks promising
TORONTO-DOMINION BANK $39 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 810.1 million; Market cap: $31.6 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) is the second-largest Canadian bank, with assets of $563.2 billion. Like Royal, TD has built up its U.S. operations over the past few years. It has focused more on retail banking, however, which is more stable than brokerage services or wealth management. Retail banking in Canada and the U.S. now accounts for roughly 80% of TD’s earnings.
TD is not immune to the current financial crisis. In fiscal 2008, earnings at TD’s wholesale banking division fell 92%, due to $350 million in trading losses and writedowns of illiquid securities....
Writedowns hurt 2008 earnings
ROYAL BANK OF CANADA $30 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $39 billion; Price-to-sales ratio: 1.4; SI Rating: Above Average) is Canada’s largest bank, with total assets of $723.9 billion. Royal continues to expand its operations in the United States. These now account for 17% of its revenue, and have increased Royal’s exposure to the struggling U.S. housing market. In the fiscal year ended October 31, 2008, earnings declined 17.1%, to $4.6 billion from $5.5 billion in the prior year. Earnings per share fell 19.3%, to $3.38 from $4.19 on more shares outstanding. The drop was largely due to a 101.6% increase in loan-loss provisions. Troubled loans now account for 0.96% of total loans, up from 0.45% a year earlier....
TRANSCONTINENTAL INC. $8.50 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.8 million; Market cap: $686.8 million; Price-to-sales ratio: 0.3; SI Rating: Average) now trades at just 5.1 times its forward earnings estimate of $1.66 a share. That’s mainly because advertisers are shifting away from traditional direct mail services to the Internet. Direct marketing accounts for 50% of Transcontinental’s revenue, and 40% of its profit. Transcontinental is also a major commercial printer (25% of revenue, 30% of profit). Many of its major customers, such as newspaper publishers, are now stagnating as the slowing economy hurts their circulation sales and advertising revenues. The slowdown is also putting pressure on Transcontinental’s own publishing operations, which consists of 42 magazines and 172 newspapers, primarily in eastern Canada (25% of revenue, 30% of profit)....
METRO INC. $37 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 110.6 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.4; SI Rating: Average) operates 558 food stores and 268 drugstores in Ontario and Quebec. The company earned $281.3 million in the fiscal year ended September 27, 2008, down 4.6% from $295.0 million in the prior year. Earnings per share fell 2.0%, to $2.48 from $2.53 a year earlier, on fewer shares outstanding. These figures exclude unusual items. Sales rose 0.8%, to $10.7 billion from $10.6 billion. Long-term debt of $1.0 billion is 20% of Metro’s market cap. Metro holds cash of $151.7 million or $1.37 a share. The $0.50 dividend yields 1.4%. Metro’s class ‘A’ subordinate voting shares have jumped by 40% in the past three months. However, they still trade at a reasonable 13.9 times the $2.67 a share that Metro should earn in fiscal 2009....