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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Dividend Stocks Library Archive
We’ve long admired TransCanada Corp. for its high-quality operations and the predictable cash flows they generate. The company is now building several new pipelines and power plants to spur its growth. The $22 billion cost of these projects nearly equals TransCanada’s market cap (the value of all its outstanding shares). But they should pay off for decades to come. TRANSCANADA CORP. $36 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 684.4 million; Market cap: $24.6 billion; Price-to-sales ratio: 2.6; Dividend yield: 4.4%; SI Rating: Above Average) operates a 60,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. The company’s pipelines supply 20% of North America’s natural gas. In 2009, TransCanada’s pipelines accounted for 53% of its revenue and 73% of its earnings....
PENGROWTH ENERGY TRUST $12 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 289.8 million; Market cap: $3.5 billion; Price-to-sales ratio: 2.4; Dividend yield: 7.0%; SI Rating: Average) has proven oil and natural-gas reserves that should last 8.3 years at current production rates. However, it hopes to expand its reserves by doing more drilling on its existing fields in western Canada. That’s a slower route to growth than buying properties from others. But it takes less capital and avoids the risk of big losses when acquired properties fail to live up to expectations. Pengrowth earned $0.32 a unit (or a total of $84.9 million) in 2009. That’s down 79.7% from $1.58 a unit (or $395.9 million) in 2008. Cash flow per share fell 42.7%, to $2.09 from $3.65. These declines mainly reflect a 26.4% drop in oil and gas prices (on a combined basis). In response, Pengrowth cut its monthly distribution by 30.0%, to $0.07 a unit from $0.10, to free up cash for more drilling. The current annual rate of $0.84 yields 7.0%....
We generally focus on market leaders when analyzing stocks in the more volatile Manufacturing & Industry sector. That’s because they have spent decades building large client bases. That cuts their risk, since long-time customers are unlikely to switch to unproven suppliers. Their strong reputations also help them attract new customers. These four industrial companies’ earnings should rebound with the overall economy. However, only three are buys right now. SNC-LAVALIN GROUP INC. $52 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.2 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.3%; SI Rating: Average) is a leading Canadian engineering and construction company. SNC designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems. The company gets 55% of its revenue from North America....
CAE INC. $9.53 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.3 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.3%; SI Rating: Average) continues to expand its medical-simulator operations. It recently teamed up with Ornge, which operates Ontario’s air-ambulance system. CAE will use its simulators and classroom instruction to train Ornge’s paramedics to safely provide patient care in helicopters. The company did not reveal the size of this contract. But deals like this help CAE offset its exposure to the highly cyclical commercial-airline industry. CAE is a buy.
PRECISION DRILLING TRUST $8.68 (Toronto symbol PD.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 275.6 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.0; No dividends paid since February 2009; SI Rating: Extra Risk) provides contract-drilling services to oil and natural-gas producers. The trust will convert to a corporation in May 2010. That’s because Ottawa will start taxing income trusts in 2011. Precision did not reveal the details of the conversion. However, investors will only be liable for capital-gains taxes when they sell. The switch will also make it easier for Precision to attract foreign investors. Precision Drilling is a buy.
GENNUM CORP. $6.06 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.4 million; Market cap: $214.5 million; Price-to-sales ratio: 2.5; Dividend yield: 2.3%; SI Rating: Above Average) makes equipment that stores, manipulates and transfers video signals. It also makes chips that make computer networks work more quickly. Gennum mainly sells its products to television broadcasters. However, the slow economy has hurt TV advertising revenue. That has prompted these clients to cut spending on new equipment. As a result, Gennum’s revenue fell 32.4% in the year ended November 30, 2009, to $85.2 million from $126.9 million in the prior year (all amounts except share price and market cap in U.S. dollars). The company lost $0.07 a share (or a total of $2.6 million) in fiscal 2009. However, that was mainly because of a $5.9-million charge related to a 10% cut that Gennum made to its workforce. It earned $0.54 a share (or $19.3 million) in 2008....
TECK RESOURCES LTD. $42 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 589.1 million; Market cap: $24.7 billion; Price-to-sales ratio: 2.7; No dividends paid since July 2008; SI Rating: Extra Risk) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Coal accounted for 46% of Teck’s 2009 revenue, and 54% of its earnings. Teck also produces copper (28% of revenue, 31% of earnings) and zinc (26%, 15%). The company has reduced its total debt by $6.7 billion since it borrowed $9.8 billion U.S. to buy Fording Canadian Coal Trust in October 2008. Sales of gold mines and other assets helped Teck raise cash for debt repayments. As well, Teck sold $1.7 billion of class B subordinate-voting shares (which carry one vote per share) to a Chinese sovereign wealth fund. This fund now owns 17.5% of Teck’s class B shares, and has a 6.7% voting interest. Insiders still control 61.8% of Teck’s total votes through class A multiple voting shares (100 votes per share). Despite the dilution caused by the extra shares, this investment is helping Teck win new supply contracts from Chinese steelmakers....
Resource stocks should move higher as the global economy continues to recover in the years ahead. But there will be inevitable declines along the way. So we think you should cut your risk in this volatile sector by investing mainly in stocks of profitable, well-established resource companies with high-quality reserves. Teck Resources is a good example. The company bought Fording Canadian Coal Trust in 2008, just before the recession and credit crisis. That forced it to sell shares and assets to raise cash for debt repayments. However, Fording’s coal mines in B.C. should last 20 years or more. And the company’s copper, zinc and other mines make it less reliant on a single commodity. Resource stocks like Teck also provide a hedge against inflation. That’s because they profit directly from rising commodity prices. However, resources is one of the most volatile economic sectors. That’s why conservative investors should limit their resource holdings to no more than 20% of their overall portfolios.
ENCANA CORP. $35 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.3 million; Market cap: $26.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.3%; SI Rating: Average) focuses on developing unconventional natural-gas properties. The company has several landholdings in the Horn River Basin in northeastern B.C. Early drilling indicates that this area contains large amounts of 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. EnCana has recently signed a contract with Korea Gas Corp. Under this deal, Korea Gas will contribute $565 million over the next three years to help develop some of EnCana’s Horn River properties. In return, Korea Gas will receive half of any production, which should begin in 2017. To put this deal in context, EnCana earned $1.8 billion U.S., or $2.35 U.S. a share, in 2009. EnCana is a buy....
TIM HORTONS INC. $33 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 176.2 million; Market cap: $5.8 billion; Price-to-sales ratio: 4.5; Dividend yield: 1.6%; SI Rating: Average) will open 900 new coffee-and-donut shops over the next three years: 600 in Canada and 300 in the U.S. Right now, it has 3,015 outlets in Canada and 563 in the U.S. Most of the new Canadian stores will be in Quebec, Ontario and western Canada. In the U.S., the company will target border states, such as New York, Ohio and Michigan. About 30% of its new U.S. locations will be near existing stores. Tim Hortons faces stronger competition in the U.S. than Canada, so this strategy gives these stores a better chance of success. The company has also developed other new initiatives to spur its long-term growth. For example, it will test 10 new upscale outlets with better furniture and fixtures. It will also make Cold Stone ice cream available in more of its Canadian outlets. That will help attract more customers in the afternoon and evening....