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. $24 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) supplies electrical power to around 915,000 customers in five Canadian provinces. It also owns or invests in electrical utilities in New York State, Belize and the Cayman Islands. Its real estate division owns hotels and other commercial properties, mainly in Atlantic Canada. The company has increased its dividend in each of the past 32 years. The current rate of $0.64 a share yields 2.7%. That’s lower than TransAlta, TransCanada and Emera, but we feel that Fortis’s focus on expanding its operations outside of Atlantic Canada should enhance its earnings growth, and let it continue its policy of annual dividend increases. In the second quarter of 2006, Fortis earned $37.9 million, down slightly from $38.2 million a year earlier; per-share earnings remained unchanged at $0.37....
EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, and Bangor, Maine. Emera’s high market share and largely regulated operations give it plenty of steady cash flow to increase dividends (its current dividend of $0.89 a share yields 4.5%) and fund new projects. For example, Emera recently agreed to build a $350 million pipeline that would transport natural gas from a proposed liquefied natural gas (LNG) terminal near Saint John, N.B. to the U.S. portion of the Maritimes & Northeast Pipeline in Maine. (Emera owns 12.9% of the Maritimes & Northeast pipeline.)...
TRANSCANADA CORP. $35 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) operates a 41,000-km pipeline network that transports natural gas from Alberta to central Canada and the United States. This business supplies 60% of its profit. The remaining 40% comes from its energy division, which owns or operates 23 electrical power plants. The company has increased its dividend every year since 2000. The current annual rate of $1.28 yields 3.7%. In the second quarter ended June 30, 2006, TransCanada’s earnings from continuing operations grew 22.0%, to $0.50 a share (total $244 million) from $0.41 a share ($200 million) a year earlier....
TRANSALTA CORP. $24 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; SI Rating: Average) operates 51 electric power plants in Canada, the United States, Mexico and Australia. The company currently pays a quarterly dividend of $0.25 a share, for an annual yield of 4.2%. TransAlta’s stock has stayed in a narrow range in the past three years. Investors feared that rising coal and natural gas prices, which account for 85% of TransAlta’s fuel needs, would force it to cut the dividend. Concerns over future maintenance costs at some of TransAlta’s older plants have also weighed on the stock....
IGM FINANCIAL INC. $47 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s largest mutual fund company, with $103.7 billion in assets under management. It also offers retirement planning and other investment services. Power Financial controls roughly 55% of IGM’s stock. IGM has two main subsidiaries. Investors Group sells its products through its own network of 3,600 financial advisors. Mackenzie Financial sells its funds through independent brokers....
GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is one of Canada’s largest insurance companies, with $191.3 billion in assets under administration. It sells its insurance products directly and through brokers to both individuals and groups. Power Financial controls about 75% of Great-West. The company also provides wealth management and other financial services. Great-West gets roughly 50% of its profit from Canada, 30% from the U.S. and 20% from Europe. Great-West’s revenues rose from $16.1 billion in 2001 to $23.9 billion in 2005, or 10.4% compounded annually. Much of that growth is due to Great-West’s 2003 purchase of rival Canada Life Financial Corp. for $7.2 billion in cash and stock....
SAPUTO INC. $35 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; SI Rating: Average) is the largest dairy food processor in Canada. Its main brands include “Armstrong”, “Frigo” and “Stella”. Canada accounts for two-thirds of its revenue. Saputo also has dairy operations in the United States and Argentina. Saputo’s revenue fell from $3.5 billion in 2002 (fiscal years end March 31) to $3.4 billion in 2003, but grew steadily to $4.0 billion in 2006. Income rose from $1.54 a share (total $160.2 million) in 2002 to $2.20 a share ($232.1 million) in 2005. However, a writedown cut Saputo’s earnings in 2006 to $1.82 a share ($192.1 million). The company relies on acquisitions to fuel its growth. Although this adds to its risk, Saputo has a good history of quickly integrating new businesses and cutting their costs....
CANADA BREAD COMPANY, LTD. $61 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; SI Rating: Above average) is a leading supplier of fresh and frozen baked goods to supermarkets and restaurants. It also makes pastas and sauces. Its main brands include “Dempster’s”, “Tenderflake” and “Olivieri”. Canada Bread’s revenue rose from $678 million in 2001 to $1.35 billion in 2005, mainly due to its $262.3 million acquisition of the U.S. and UK bakery operations of Maple Leaf Foods Inc. (see below). Maple Leaf now owns 87.5% of Canada Bread. Earnings before restructuring costs jumped from $0.97 a share (total $36 million) in 2001 to $1.80 a share ($64 million) in 2002. Income fell to $1.61 a share ($63 million) in 2003, but grew to $2.62 a share ($99 million) in 2004, and to $3.07 a share ($111 million) in 2005....
MAPLE LEAF FOODS INC. $13 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; SI Rating: Average) is one of Canada’s largest food processing companies. It makes fresh and frozen meat products under the “Maple Leaf” and “Schneiders” brand names. It also supplies animal feeds and other agricultural services to farmers, and owns 87.5% of Canada Bread. The company’s revenue rose from $4.8 billion in 2001 to $5.1 billion in 2002, but slipped to $5.0 billion in 2003. In 2004, Maple Leaf paid $499 million for rival meat processing company Schneider Corp. Consequently, revenue grew to $6.4 billion in 2004, and to $6.5 billion in 2005. Income rose from $0.55 a share (total $57.4 million) in 2001 to $0.71 a share ($84.7 million) in 2002. Restructuring costs cut Maple Leaf’s profit in 2003 to $0.27 a share ($35.1 million), but income improved to $0.89 a share ($102.3 million) in 2004....
CAE INC. $8.65 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Above average) is a leading maker of full-size, computerized flight simulators. Airlines use these devices to train pilots to fly certain aircraft, and to prepare flight crews to handle emergencies. CAE also makes simulators for military aircraft, including fighter jets and helicopters. In 2001, the company began operating pilot-training facilities, which nicely complements its simulator business. CAE is now the world’s second-largest provider of pilot training services, with 22 facilities on four continents. Demand for these services should grow, since it’s cheaper for airlines to send pilots to CAE’s schools than to train them in-house. CAE gets about half of its revenue from civilian airlines, and half from military organizations. That helps cut its exposure to the highly cyclical air travel industry. Revenue from continuing operations fell from $1.01 billion in 2002 (fiscal years end March 31) to $938.4 million in 2004, mostly due to the drop in air travel after 9/11. Revenue grew to $986.2 million in 2005, and to $1.11 billion in 2006....