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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Dividends can produce a large part of your total return over long periods.” Dividends rarely get the respect they deserve, especially from beginning investors. That’s because a dividend paying stock’s yearly 2% or 3% or 5% dividend barely seems worth mentioning alongside possible yearly capital gains of 10%, 20% or 30% or more....

We get a wide variety of interesting questions from members of Pat McKeough’s Inner Circle. Most often, members ask us about specific investments, such as stocks, income trusts or exchange-traded funds, that they’re considering investing money in. However, they send us other types of financial questions, as well. To give you a sense of how the service works, I’d like to share a recent question from an Inner Circle member on investing money in time-shares. I hope you enjoy and profit from it. Q: Pat: What is your take on time-shares? They seem like a deal for a cheaper vacation. Thanks....

When we’re looking for the best investments to recommend in our newsletters and investment services, including our flagship publication, The Successful Investor, we start by putting all the important information we know about a company into perspective. That new invention may be a marvel, but how does it compare to what the competition is doing? The new project sounds impressive, but how much impact will it really have on the company’s profit? The debt sounds high — will the company be able to keep up its agreed-upon interest and principal repayments? Investors intuitively understand this, but they often find it hard to apply when they are looking for the best investments to add to their portfolios. Financial ratios are one way to spot the best investments, but the answers you get can be ambiguous, if not misleading....

Some investors have told us that they are pessimistic about the stock market because of lots of insider selling in the U.S. blue chip stocks they hold. The value of insider buying and selling as a market indicator seems self-evident. After all, company insiders — officers, directors, or owners of 10% or more of a company’s stock — are apt to know more than outsiders do about what’s going on in their businesses.

Insider trading: Not the conclusive indicator that many investors think it is

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LINAMAR CORP. $20 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; SI Rating: Extra Risk) gets about 90% of its revenue by selling transmissions and other parts to several carmakers. The company also makes self-propelled, scissor-type elevating work platforms under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers. Linamar continues to benefit from rising car sales in the wake of the recession. It cut 40% of its workforce during the downturn, but has rehired many workers as car sales recovered. Still, the company expects its cost-cutting plan to lower its annual expenses by $60 million, starting this year. In the three months ended June 30, 2010, Linamar earned $26.6 million, or $0.41 a share. That’s a big improvement over its year-earlier loss of $10.1 million, or $0.16 a share. The year-earlier results excluded severance payments and write-downs of plants and equipment....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Stock market software is a help, but successful investing calls for experienced human judgment.” Many investment firms manage money with the help of something called a “black box.” This is stock market software that picks stocks or makes other investment decisions, based on historical data. Individuals sometimes buy these programs over the Internet or from direct-mail advertising....

SHAWCOR LTD. $27 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.6 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.1%; SI Rating: Average) gets 90% of its revenue by making sealants and coatings that protect oil and natural-gas pipelines from corrosion. The remaining 10% comes from making electrical wire and protective sheaths. In the three months ended June 30, 2010, ShawCor’s revenue fell 25.0%, to $234.5 million from $312.8 million a year earlier. That’s mainly because of a drop in new pipeline construction in North America. ShawCor also completed a major contract in the Caribbean in late 2009. As well, Canada accounts for just 25% of ShawCor’s revenue, so the higher Canadian dollar hurts the contribution of its overseas operations. The lower revenue was the main reason why ShawCor’s earnings fell 68.6% in the quarter, to $10.9 million, or $0.15 a share. It earned $34.6 million, or $0.49 a share, a year earlier....

These days, many investors who are approaching retirement worry that their retirement planning won’t generate enough income once they’ve stopped working. (Our Successful Investor Wealth Management clients’ retirement planning goals are always one of our top considerations when we manage their portfolios. Click here to learn more about how you can profit from our portfolio management services.)

4 components of sound retirement planning

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FINNING INTERNATIONAL INC. $22 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.0 million; Market cap: $3.8 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.2%; SI Rating: Above Average) sells, rents and repairs heavy equipment, such as tractors, bulldozers and trucks, made by Caterpillar Inc. Finning’s major customers are in the mining, forest-products and construction industries in western Canada, the U.K. and South America. In the three months ended June 30, 2010, Finning earned $36.0 million, or $0.21 a share. That’s down 36.3%, from $56.5 million, or $0.33 a share, a year earlier. However, the latest quarterly earnings included a $0.06-a-share charge for costs to install a new computer system and buy back notes. Without these charges, Finning would have earned $0.27 a share in the latest quarter. Revenue fell 2.0%, to $1.07 billion from $1.1 billion. Lower sales of new and used equipment offset a 10% rise in sales of support services. Finning now gets nearly half of its revenue from services. That cuts its risk....

In the latest issue of The Successful Investor, we’ve updated our buy/sell/hold advice on grocery retailer Metro Inc. (symbol MRU.A on Toronto).

Metro: An aggressive pick that matured into a stock more suitable for conservative investing

Metro is a good example of a stock that has graduated from Stock Pickers Digest, our newsletter for aggressive investors, to The Successful Investor, which focuses on more conservative selections.

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CENOVUS ENERGY INC. $29 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.8 million; Market cap: $21.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.8%; SI Rating: Extra Risk) operates three oil-sands properties in Alberta, and one in Saskatchewan. Cenovus ships the heavy bitumen from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of Cenovus’ two main oil-sands projects. Cenovus also owns conventional oil and natural-gas properties. Cenovus’ proved oil and gas reserves will last 14.7 years. These large reserves mean that Cenovus does not need to spend heavily on exploration. That cuts its risk. Moreover, its steam-assisted gravity draining drilling technology should spur its long-term earnings. That’s because this process makes it easier to extract more heavy oil.

Focus on proven properties cuts risk

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ENCANA CORP. $30 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.2 million; Market cap: $22.1 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.8%; SI Rating: Average) is one of North America’s largest natural-gas producers. The company prefers to focus on large unconventional reserves, including shale gas, which is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas. At current production rates, Encana’s proved reserves should last 12 years. However, these properties could last 50 years if you include harder-to-reach reserves. Despite weak gas prices, Encana plans to double its gas production over the next five years. That would help raise its market share, because low gas prices have prompted many of its competitors to cut production....

Brazil’s economy is the world’s eighth largest, and the largest in South America. Brazil is also the world’s ninth-largest oil exporter. Brazil’s economy stalled during the financial crisis, as global demand for the country’s commodity-based exports, including oil, slowed. However, it was one of the first emerging markets to begin a recovery, posting positive growth in the second quarter of 2009. The Brazilian economy could grow as much as 5.5% in 2010. To top it off, the country’s exports to fast-growing China have risen sharply. In 2009, China passed the U.S. to become Brazil’s biggest export market, accounting for 12.5% of its total 2009 exports. The U.S. accounted for 10.5%, followed by Argentina (8.4%), the Netherlands (5.4%) and Germany (4.1%)....

Here are 4 classic errors in stock market strategy that can seriously hinder your returns. All investors make them from time to time. 1. “Averaging down” without reconsidering whether you should have bought in the first place: Many investors have made lots of money by following the stock market strategy of “averaging in” to the stock of a well-established, well-managed company — that is, buying more as funds became available over a period of years. “Averaging down” is different. When you systematically average down (that is, you buy more of a stock you own that has gone down in order to lower your average cost per share), you are zeroing in on your losers....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing, including how to spot the best bargain stocks for your portfolio. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Spinoffs can bring two-way benefits, to the parent and the spun off division.” In a spinoff, a company sets up part of its operations as a separate public company, then hands shares in this company over to shareholders, or gives them a chance to buy these bargain stocks cheaply. Often, the spun off business and the parent both gain. Here’s why:...

As part of our portfolio management strategy, we put a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet.

(We provide personal, in-depth portfolio management services to a small group of investors through Successful Investor Wealth Management....

ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $40.30 (New York Exchange symbol FXI; buy or sell through brokers) is an ETF that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest and most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on the New York exchange. The fund’s top holdings are China Mobile, 10.1%; China Construction Bank, 9.1%; Industrial & Commercial Bank, 7.9%; China Life, 6.3%; Bank of China, 5.8%; Ping An Insurance, 4.6%; China Unicom Hong Kong, 4.3%; CNOOC, 4.3%; China Telecom, 4.2%; and China Merchants Bank, 4.1%. The fund’s holdings give it the following industry breakdown: Financials, 47.1%; Telecommunications, 18.6%; Oil and Gas, 12.3%; Basic Materials, 11.0%; Industrials, 8.0%; Consumer Services, 2.1%; and Utilities, 0.8%. The ETF has an expense ratio of 0.73%. The dividend yield is 2.3%....

ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $26.34 (New York Exchange symbol ESR; buy or sell through brokers), is an ETF that aims to track the MSCI Emerging Markets Eastern Europe Index. The fund’s geographic breakdown is as follows: Russia, 73.7%; Poland, 14.2%; Czech Republic 5.7%; and Hungary, 4.9%. iShares MSCI Emerging Markets Eastern Europe Index Fund’s top holdings are Gazprom (Russia: gas utility), 19.9%; Lukoil (Russia: oil), 9.8%; Sberbank (Russia: bank), 8.8%; MMC Norilsk Nickel (Russia: mining), 4.7%; Mobile TeleSystems (Russia: wireless), 4.4%; Rosneft Oil (Russia: oil), 3.7%; Surgutneftegas (Russia: oil and gas), 3.2%; CEZ AS (Poland: utility), 2.9%; PKO Bank Polski SA (Poland: bank), 3.0%; and Tatnef (Russia: oil), 2.9%....

ISHARES MSCI BRAZIL INDEX FUND $70.55 (New York Exchange symbol EWZ; buy or sell through brokers), is an exchange-traded fund that is designed to track the Brazilian stock market. The fund’s top holdings are Petrobras preferred shares (energy), 9.4%; Cia Vale do Rio Doce (mining) preferred shares, 9.3%; Itau Unibanco Multiplo SA (banking), 9.0%; Petrobras common shares, 7.9%; Cia Vale do Rio Doce common shares, 6.8%; Banco Bradesco preferred shares (banking), 5.2%; Itausa-Investimentos Itau (conglomerate), 3.4%; Cia de Bebidas das Americas preferred shares (beer and other beverages), 3.1%; BM&F Bovespa SA (Brazilian stock exchange), 2.7%; and OGX Petroleo e Gas Patricipa (energy), 2.6%. The ETF’s industry breakdown is as follows: Materials, 26.2%; Financials, 25.1%; Energy, 20.6%; Consumer Staples, 8.8%; Utilities, 5.6%; Consumer Discretionary, 5.3%; Industrials, 3.3%; Telecommunication Services, 2.8%; and Information Technology, 2.0%. The fund has an expense ratio of 0.65%....

ISHARES S&P INDIA NIFTY 50 INDEX FUND $27.04 (Nasdaq symbol INDY; buy or sell through brokers), is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities on the National Stock Exchange of India. The fund’s top holdings are Reliance Industries (conglomerate), 10.2%; Infosys Technologies (software), 8.3%; ICICI Bank, 6.9%; Larsen & Toubro Ltd. (conglomerate), 6.2%; ITC Ltd. (conglomerate), 5.4%; Housing Development Finance, 5.2%; HDFC Bank, 4.8%; State Bank of India, 4.7%; Oil and Natural Gas Corp., 2.8%; and Tata Consulting Services (information technology), 2.8%. The fund’s industry breakdown includes: Banks, 19.6%; Computers: Software, 13.0%; Refineries, 10.9%; Cigarettes, 5.4%; Finance: Housing, 5.2%; Automobiles, 4.7%; Power, 4.6%; Steel and Steel Products, 4.4%; Oil Exploration and Production, 3.8%; and Electrical Equipment, 3.7%....

GLOBAL X SILVER MINERS ETF $16.20 (New York symbol SIL; buy or sell through brokers) tracks the Solactive Global Silver Miners Index. This index includes between 20 and 40 international companies that mine, refine or explore for silver. Germany-based Structured Solutions AG developed this index....

As a member of TSI Network, you’re likely aware that we’ve just released a new free special report, Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand. (If you haven’t seen this new free report, click here to download your copy right away.) We wrote Commodity Investments: Fertilizer Stocks and Potash Stocks That Will Profit from Rising Food Demand in response to rising investor interest in agricultural commodities. This interest is largely the result of BHP Billiton’s (symbol BHP on New York) $38.6-billion takeover bid for Potash Corp. (symbol POT on Toronto), as well as sharp increases in commodity prices, notably wheat.

Successful takeover could boost this potash stock’s fertilizer operations

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ISHARES S&P/TSX GLOBAL GOLD INDEX FUND $24.22 (Toronto symbol XGD; buy or sell through brokers) aims to mirror the performance of the S&P/TSX Global Gold Index. This index is made up of gold stocks from Canada and around the world. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. iShares S&P/TSX Global Gold Index Fund began trading on March 23, 2001. The fund’s top-ten holdings are Barrick Gold at 18.6%; Goldcorp., 13.1%; Newmont Mining, 11.9%; AngloGold Ashanti (ADR), 6.2%; Kinross, 4.7%; Eldorado Gold, 4.2%; Agnico-Eagle, 4.2%; Gold Fields (ADR), 4.1%; Randgold Resources (ADR), 3.3%; and Yamana Gold, 3.1%....

Members of Pat McKeough’s Inner Circle sometimes ask us how to find good investments for young children. If children are under the age of 18, they cannot yet invest as adults. However, there are a couple of savings and investment options available:

1. You (or the child) can open a bank account in the child’s name: Interest paid on small balances may range from zero to, say, 0.50% annually, paid monthly. All of the major banks have special bank accounts for children, usually without service fees on basic transactions. However, once the child has accumulated $500, he or she could move the money into an interest-paying guaranteed investment certificate (GIC).
2. Informal in-trust account: If you want to build up an investment portfolio for a child, then an informal in-trust account is a low-cost and flexible option. (Investments or investment accounts in the name of a child must be set up in trust because minors are not allowed to enter into binding financial contracts.) An adult must be responsible for providing the investment instructions and signing the contract on the child’s behalf. An informal in-trust account has a donor (or “settlor”) who contributes funds to the trust. The trustee is the person in charge of the account, and is responsible for managing the funds for the child (the “beneficiary”). The settlor should not act as the trustee. The settlor’s spouse can be a trustee, however. The money belongs to the child, but only the trustee can make withdrawals if the child is under the age of 18. Once the child reaches 18, the money is theirs to do with as they wish.
   
   

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MANULIFE FINANCIAL $12.53 (Toronto symbol MFC; Shares outstanding: 1.8 billion; Market cap: $22.1 billion; SI Rating: Above Average; Dividend yield: 4.2%) sells life and other forms of insurance, as well as mutual funds and investment-management services. It operates globally, and has $453.9 billion of assets under management. In the three months ended June 30, 2010, Manulife lost $2.4 billion, or $1.36 a share. Canada’s conservative accounting rules forced it to set aside $3.2 billion, mostly to increase reserves for its variable annuities. (Under U.S. accounting rules, it would have actually reported a small earnings increase in the latest quarter.) A year earlier, it earned $1.8 billion, or $1.09 a share. To cut risk, Manulife has hedged, or insured, more of its variable annuities against falling stock markets. Its hedges now cover 51% of these investments, up from 20% in 2009. It’s aiming for 70% by 2012....