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
BOMBARDIER INC. (Toronto symbols BBD.A $4.57 and BBD.B $4.50; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $7.7 billion; Price-to-sales ratio: 0.4; SI Rating: Extra risk) has received an order from Germany’s state-owned railway for 800 passenger railcars. The deal is worth $2.1 billion, or 10.5% of Bombardier’s annual revenue of about $20 billion (all amounts except share price and market cap in U.S. dollars). Bombardier’s Transportation division supplies half of its overall revenue, but just 35% of its profit. However, its gross margin (gross profits as a percentage of sales) improved to 5.1% in its latest quarter from 4.2% a year earlier. It also stands to gain from further spending by governments on new public transit infrastructure projects. As well, growing demand for railcars offsets the cyclical nature of Bombardier’s aircraft division. Bombardier is a buy. The subordinate voting ‘B’ shares are the better choice due to their slightly higher dividend yield and liquidity.
Both Loblaw and Metro are starting to realize the benefits of their ongoing restructuring. Lower costs will help them compete with Wal-Mart, which continues to expand its grocery operations. For new buying, however, we still prefer Metro. LOBLAW COMPANIES LTD. $37 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 274.2 million; Market cap: $10.1 billion; Price-to-sales ratio: 0.3; SI Rating: Above average) is Canada’s largest grocery store operator, with over 1,000 stores. The company’s plan to re-model older stores, improve its distribution systems and rejuvenate its private label products is starting to pay off. In the three months ended October 4, 2008, earnings per share rose 8.9%, to $0.61 from $0.56 a year earlier. These figures exclude unusual items. Sales grew 3.9%, to $9.5 billion from $9.1 billion. Same-store sales rose 3.0%. Long-term of $4.0 billion is equal to 40% of its market cap. Loblaw holds $690 million or $2.52 a share in cash....
FINNING INTERNATIONAL INC. $14 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.4 million; Market cap: $2.4 billion; Price-to-sales ratio: 0.4; SI Rating: Above average) plans to cut about 5% of its workforce, as falling prices for oil and other commodities have hurt demand for its heavy construction vehicles and equipment. However, slowing sales of new equipment could spur demand for Finning’s spare parts and maintenance services, as customers delay replacing older equipment. Severance costs will cut Finning’s earnings by $10 million for the fourth quarter of 2008, and an additional $15 million in the first quarter of 2009. The plan should save the company $40 million a year, starting in 2009. Finning earned $64.8 million or $0.37 a share in the third quarter of 2008. Finning is a buy.
CANADA BREAD CO. LTD. $50 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.8; SI Rating: Above average) is Canada’s second largest maker of fresh and frozen breads, rolls and bagels, behind Weston Bakery. It also makes specialty pastas and sauces. Main brands include Dempster, Tenderflake and Olivieri. Canada Bread continues to profit from its plan to expand its overseas operations, which now supply 25% of its total sales. It’s now one of the largest producers of bagels and specialty bakery products in the UK. Canada Bread also owns three bakery facilities in the United States. It also aims to fuel earnings with innovative new products, such as breads that help improve digestion. Premium products like this generate higher profit margins than its regular products....
Our long-standing advice is to invest in well established companies and spread your funds out across the five main economic sectors: Manufacturing & Industry, Resources & Commodities, the Consumer sector, Finance and Utilities. Generally speaking, stocks in the Resources & Commodities sector and the Manufacturing & Industry sectors expose you to above-average volatility, while those in the Finance and Utilities sectors involve below-average volatility. Consumer sector stocks tend to fall in the middle. We prefer to zero in on Consumer stocks with the size and brands to overcome short-term setbacks, and succeed over the long term....
We are always happy to expand the information we provide to you, but only if it improves the ease and value of using our service. For instance, some investors base buy and sell decisions in part on p/e ratios (the ratio of a stock’s price to its per-share earnings). When we provide a p/e, we try to eliminate all one-time items from earnings. These include writedowns, investment gains or restructuring charges. This gives you a clearer, truer view of a company’s profitability. For decades, investors have used p/e’s to spot undervalued stocks. But a low p/e can signal danger rather than a bargain. Or it may point to investor uncertainty, as is the case right now with Transcontinental (see page 16). That’s why you need to look at p/e ratios in context....
Many of our recommendations have dropped sharply in the past few months, along with the overall market. Here are 10 stocks that we feel have strong rebound potential in 2009. CANADIAN IMPERIAL BANK OF COMMERCE $49 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.5; SI Rating: Above average) is down 37.6% from its recent peak of $78.48 in May, 2008. That’s mainly because it has the most exposure to the problems in the U.S. mortgage market among the big five Canadian banks. CIBC has taken substantial writedowns in the past year, which should cover most of the damage. It also continues to expand its retail banking operations, as well as scale back its riskier operations. CIBC is a buy....
CANADIAN PACIFIC RAILWAY LTD., $37.22, Toronto symbol CP, earned $631.5 million in 2008, down 6.1% from $672.8 million in 2007. Per-share earnings fell 6.0%, to $4.06 from $4.32. These figures exclude foreign-exchange losses and other one-time items. The drop was largely caused by higher fuel and labour costs. Revenue, however, rose 4.8%, to $4.9 billion from $4.7 billion as higher rates offset lower freight volumes. CP’s operating ratio rose to 78.6% from 75.3% a year earlier. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.) Falling oil prices and temporary layoffs should help lower CP’s costs in 2009. The company plans to issue up to 13.9 million new common shares at $36.75 each. The gross proceeds of $510.8 million will help CP cover its pension costs, which will rise from $95 million in 2008 to between $150 million and $195 million in 2009. In 2010, CP estimates its pension obligations will continue to climb, to between $295 million and $345 million. To conserve cash, the company plans to cut capital spending by $200 million in 2009....
NOVA CHEMICALS CORP., $4.76, Toronto symbol NCX, fell 20% this week on fears that the credit crisis will hurt its ability to refinance part of its debt, particularly as the slowing economy has lowered demand for its industrial plastics. Nova’s long-term debt at September 30, 2008 was $1.5 billion U.S., which is equal to 4.7 times its current market cap. This figure excludes a $250-million U.S. bond due in April 2009. Nova has $575 million U.S. in cash and untapped credit lines, so it can easily meet this obligation. The company aims to negotiate better terms for its remaining debt, which includes over $1 billion U.S. due over the next two years. Due to the current economic slowdown, Nova is expanding its cost-cutting program, including reducing its workforce by 15%. These moves should save it $100 million U.S. in 2009 and help Nova pay down its debt....
BANK OF MONTREAL $32.30, Toronto symbol BMO, has agreed to buy the Canadian life insurance business of major U.S. insurer American International Group Inc. (AIG). The bank will pay $375 million, which is equal to 19% of the $2.0 billion or $3.76 a share that it earned in the fiscal year ended October 31, 2008. Bank of Montreal’s insurance operations currently supply just 2% of its total revenue, and this purchase will not significantly expand this division’s contribution. However, insurance is a future growth area. As well, Bank of Montreal probably got this business for a bargain price in light of AIG’s severe financial problems. Bank of Montreal is a buy....