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
Low oil and natural gas prices have prompted Pengrowth to lower production and cut its distributions. However, these moves put the trust in a strong position to quickly increase cash flow and distributions when prices rebound. As well, Pengrowth’s reasonable debt should let it take advantage of depressed energy prices by making acquisitions, probably at bargain prices. Pengrowth has been around since 1988, and is now one of the largest energy trusts in North America. It survived years of low oil prices in the 1990s, and should withstand this recent drop. As well, its high-quality reserves should last well over 10 years. PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan....
TORSTAR CORP. $5.04 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.9 million; Market cap: $397.7 million; Price-to-sales ratio: 0.3; SI Rating: Above Average) publishes The Toronto Star, which is Canada’s largest daily newspaper by circulation. The company also publishes three other dailies and over 100 weeklies, mainly in southern Ontario. Newspapers and web sites account for 70% of Torstar’s revenue and 60% of its earnings. The company’s other main business is wholly owned Harlequin Enterprises Ltd. Harlequin is the world’s leading publisher of romance novels. It also publishes non-fiction titles, including self-help and diet books. Harlequin sells 95% of its books in other countries. This reduces Torstar’s reliance on the Ontario market, which has been struggling because of the recession. It also helps Torstar benefit from a lower Canadian dollar.
Steady revenue, but erratic earnings
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It pays to stay out of new stock issues. Most come to market when it’s a good time for the company and its insiders to sell. This may not be, and often isn’t, a good time for you to buy. New stock issues start out with a big marketing push by the firm that sponsors them. When the initial hoopla ends, hidden risks can emerge. This can spur deep price declines in the new issue that go on for years. Our rule is to stay out of new issues until they’ve survived at least one recession. By then, hidden risk is easier to spot....
Canadian Tire is down 36% from its April 2008 peak of $70. Investors fear that rising unemployment will hurt its sales and increase losses on its credit-card loans. However, the company has been improving its stores. It also owns some of Canada’s best-known brands. These factors give it a big advantage in a highly competitive industry. CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago....
TIM HORTONS INC. $32 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 181.5 million; Market cap: $5.8 billion; Price-to-sales ratio: 3.0; SI Rating: Average) plans to buy back up to 5% of its outstanding shares in 2009. This could cost it $200 million. (In 2008, it earned $301 million, or $1.64 a share.) Share buybacks reduce the number of shares outstanding, which increases the value of the remaining shares. Tim Hortons has also raised its dividend by 11.1%, to $0.40 a share, for a yield of 1.3%. Tim Hortons is a buy. CANADA BREAD CO. LTD. $39 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $990.6 million; Price-to-sales ratio: 0.6; SI Rating: Above Average) earned $64.9 million, or $2.55 a share, in 2008. That’s down 22.6% from $83.8 million, or $3.30 a share, the previous year. However, these figures include several non-recurring items, including the replacement of a U.K. bagel plant that was destroyed by a fire early last year. If you disregard all unusual costs, earnings per share fell 13.3%, to $2.87 from $3.31. Sales rose 12.9%, to $1.7 billion from $1.5 billion, mainly because Canada Bread raised its prices to offset higher wheat and other input costs....
HART STORES INC. $1.20 (Toronto symbol HIS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 13.6 million; Market cap: $16.3 million; Price-to-sale ratio: 0.1; SI Rating: Speculative) operates 90 mid-sized department stores in Quebec, Ontario and Atlantic Canada. Hart focuses on smaller cities that would be unsuitable for big-box chains, like Wal-Mart. This helps cut Hart’s risk. In its third fiscal quarter, which ended November 1, 2008, Hart’s sales rose 11.9%, to $46.2 million from $41.3 million a year earlier. However, the gain was entirely driven by the addition of 10 new stores. On a same-store basis, sales actually fell 2.4%. Expenses related to opening the new stores, including the cost of shipping enough products to stock them, offset the higher overall sales. As a result, earnings fell 53.8%, to $0.06 a share from $0.13. Still, Hart’s $7.5-million long-term debt is a reasonable 46% of its market cap. It also holds cash of $1.8 million, or $0.13 a share. Hart Stores is a buy.
LINAMAR CORP. $3.10 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $200.6 million; Price-to-sales ratio: 0.1; SI Rating: Extra Risk) supplies transmissions and other parts to several carmakers, including General Motors and Chrysler. These two customers owe Linamar $30 million, and it could have trouble collecting if they go bankrupt. To put this amount in context, Linamar earned $85.6 million, or $1.28 a share, in 2008. However, GM and Chrysler together represent just 9% of Linamar’s total receivables. Moreover, based on its experiences with other customers’ bankruptcies, Linamar would likely recover at least half of these funds. Linamar is a buy.
CGI GROUP INC., $10 (Toronto symbol GIB.A) is eligible to bid on upcoming U.S. government contracts for computers, software and technology services. The government has earmarked $50 billion U.S. for computer upgrades over the next five years. CGI’s long history of dealing with U.S. government agencies should help it win new contracts under this program. Buy. INDIGO BOOKS & MUSIC INC., $11 (Toronto symbol IDG) reports that its new Shortcovers web site, which lets users download free and paid electronic content from books and magazines, has attracted customers from over 150 countries. Unlike rival bookseller Amazon.com, which requires customers to buy its Kindle electronic-book reader in order to download books and periodicals, Indigo’s customers can view downloads on a wide variety of cellphones and other devices. This should give Indigo an advantage. Buy....
CANADIAN PACIFIC RAILWAY LTD. $37 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 167.7 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has agreed to sell most of its stake in a 50-50 partnership that owns the railway tunnel between Windsor, Ontario and Detroit. The sale will cut CP’s interest from 50% to 16.5%. With the sale, the Ontario Municipal Employees Retirement System, CP’s partner in the tunnel, will increase its stake to 83.5%. CP will receive $110 million. This is equal to 17% of its 2008 earnings of $631.5 million, or $4.06 a share. It may also receive an extra $22 million, depending on how much freight moves through the tunnel in the future. The sale will help CP pay down its $4.7-billion long-term debt and cope with the recession. CP Rail is a buy.
TORONTO-DOMINION BANK $46 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 850 million; Market cap: $39.1 billion; Price-to-sales ratio: 2.6; SI Rating: Above Average) will probably report lower 2009 earnings. The recession has increased the bank’s loan losses, particularly at its U.S. operations. In 2008, TD earned $3.8 billion, or $4.88 a share, before unusual items. Despite the likelihood of lower earnings, TD feels it can keep paying quarterly dividends of $0.61 a share, for an annualized yield of 5.3%. The current payout rate is equal to 45% of TD’s earnings, which is at the top of its target range of 35% to 45%. Still, TD has enough capital to maintain the dividend even if its earnings fall more than it expects. TD Bank is a buy.