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
HARTCO INCOME FUND $4.80 (Toronto symbol HCI.UN; Aggressive Growth Portfolio, Consumer sector; Units outstanding: 13.6 million; Market cap: $47.6 million; SI Rating: Extra risk) lost $0.05 a unit in the first quarter of 2007, mostly due to losses at its CompuSmart retail stores. It earned $0.03 a year earlier. Revenue fell 2.1%, to $151.6 million from $154.8 million. Hartco now plans to sell the CompuSmart stores, which provide 25% of its revenue. CompuSmart faces strong competition from big electronic chains, as well as from online retailers. Getting out of the retail business will let Hartco focus on providing computers and services directly to businesses. This move should help Hartco maintain its monthly distributions of $0.05 a unit (12.5% yield). Hartco is a hold for aggressive investors only.
It’s easy to enter the retail industry, and easy to go broke in it if your business concept fails to build and maintain a loyal clientele. However, the industry provides highly rewarding investment opportunities if you stick as we do with well-established companies that have strong brands and other hidden or little appreciated assets. Canadian Tire is a good example. Its famous “Canadian Tire Money” and big new stores continue to encourage repeat visits. Loblaw has stumbled lately, but its recent setback follows a dozen years of huge gains. Investments in new inventory systems and unique food products should help it thrive again....
SOBEYS INC. $58 (Toronto symbol SBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 64.9 million; Market cap: $3.8 billion; SI Rating: Average) shot up after its corporate parent, Empire Co., launched a $58.00-a-share takeover offer for the company. Based on our initial recommendation price of $36 in April 2003, the offer represents a 61.1% gain. A majority of Sobeys shareholders, excluding Empire’s 72.1% stake, have voted in favour of the offer. Empire aims to complete the takeover in the next few weeks. Sobeys investors should tender their shares to receive the full $58.00 without paying brokerage fees.
TELUS CORP. (Toronto symbols T $63 and T.A $62; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 334.4 million; Market cap: $21.1 billion; SI Rating: Above average) has gained 15% since BCE confirmed it is talking with potential buyers. Telus could also decide to bid for BCE. However, a BCE-Telus merger would face significant political opposition. Meanwhile, Telus continues to enjoy the benefits of its heavy wireless investments. Thanks to a 17% jump in wireless profits, overall earnings in the three months ended March 31, 2007 rose 50%, to $0.90 a share from $0.60 a year earlier. The most recent earnings figure excludes a non-recurring charge of $0.32 a share. Revenue grew 4.8%, to $2.2 billion from $2.1 billion. The company aims to pay out between 45% and 55% of its sustainable earnings as dividends; the current annual rate of $1.50 yields 2.4%. The payout ratio in the past 12 months was 46%, so Telus will probably increase its dividend before the end of 2007....
Some readers have asked when we plan to recommend some new stocks, to replace recent takeovers. Regardless of takeover activity, we continually look for new stocks to buy. But a key part of our stock-picking philosophy is “win by not losing”. If we have any doubts about a stock, we refrain from recommending it, no matter how promising it may seem. Besides, though a number of our key buys have been or will be taken over, our Successful Investor Portfolios still offer plenty of choices. We prefer to miss out on good opportunities instead of letting our standards slip, especially now. The market has had major gains in the past four years. We think it has further gains ahead, but no one knows for sure. In the next market downturn, some of the today’s new favourites are bound to suffer deep losses....
The likely takeover of BCE Inc. has pushed up prices of our two other telecom buys, Manitoba Telecom (see below) and Telus (see box on page 62). Any telecom takeover would face hurdles such as limits on foreign ownership and anti-competition concerns. But regardless of whether any takeovers occur, we feel all three of these stocks offer attractive long-term opportunities. Manitoba Tel is riskier than BCE and Telus, due to its heavy exposure to a single province and falling profits at Allstream, its Canada-wide business communications subsidiary. But the stock yields over 5%, and its profits are also improving thanks to a major restructuring plan. MANITOBA TELECOM SERVICES INC. $49 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 65.1 million; Market cap: $3.2 billion; SI Rating: Average) is Canada’s third-largest telephone company, after BCE and Telus. It is the leading provider of local, long distance and wireless telephone service in Manitoba, with over 90% of the market. Other services include Internet access and a digital TV service....
CANADIAN UTILITIES LTD. $47 (Toronto symbol CU) has raised its dividend each year since 1972. The new annual rate of $1.26 a share yields 2.7%. Thanks to higher electricity rates and gains from its natural gas storage operations, first quarter profits rose 57.4%, to $1.07 a share from $0.68 a year earlier. Buy. EMERA INC. $21 (Toronto symbol EMA) earned $0.36 a share in the three months ended March 31, 2007, down 10% from $0.40 a year earlier. A large industrial customer of subsidiary Nova Scotia Power recently resumed operations, which increased electricity sales. However, the extra revenue failed to cover the higher initial production costs. This a short-term setback, and should not hurt Emera’s $0.89 dividend, which yields 4.2%. Buy. PENGROWTH ENERGY TRUST $19 (Toronto symbol PGF.UN) paid out 92% of its cash flow in distributions in the first quarter of 2007, which is higher than comparable energy trusts. But that’s largely due to the timing of recent acquisitions. Pengrowth’s payout ratio in 2007 should average around 87%. It currently pays monthly distributions of $0.25 a unit (15.8% yield). Buy.
GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 892.1 million; Market cap: $31.2 billion; SI Rating: Above average) is Canada’s largest insurance company with $216.2 billion in assets under administration. Power Financial Corp. owns 75% of Great-West’s stock. The company sells its products directly and through brokers to groups and individuals, mainly under the Great-West Life, London Life and Canada Life brands. Great-West also provides retirement planning and other financial services. Canada accounts for about 45% of its revenue, followed by Europe (35%) and the United States (20%).
Troubled Putnam could be a bargain
Great-West recently agreed to buy U.S.-based mutual fund manager Putnam Investments Trust for $3.9 billion U.S. Putnam ran into trouble over a mutual fund trading scandal a few years ago, which hurt its reputation. It also helps explain the low selling price in relation to Putnam’s assets under management of $192 billion U.S....
BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $32 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Units outstanding: 135.2 million; Market cap: $4.3 billion; SI Rating: Above average) earned $0.58 a unit in first three months of 2007, up 56.8% from $0.37 a year earlier....
AGRIUM INC. $41 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 134.0 million; Market cap: $5.5 billion; SI Rating: Average) has agreed to assume a 60% stake in a new, $1.2 billion nitrogen plant in Egypt (all amounts except share price and market cap in U.S. dollars).
Business is improving, thanks partly to rising grain prices. Agrium cut its losses in the first quarter of 2007 to $0.08 a share (total $11 million) from $0.37 a share ($48 million) a year earlier. The company’s business is seasonal, so it typically losses money in the first quarter. Sales grew 25.2%, to $861 million from $688 million.
Investing in the Middle East increases Agrium’s risk, and probably contributed to the stock’s recent weakness. But nitrogen, a key ingredient in fertilizer, comes from natural gas, and the new plant’s close proximity to cheap supplies cuts the risk of this investment. The new plant should increase Agrium’s nitrogen capacity by 20% when it begins operations in 2010.
Agrium is a buy.
Business is improving, thanks partly to rising grain prices. Agrium cut its losses in the first quarter of 2007 to $0.08 a share (total $11 million) from $0.37 a share ($48 million) a year earlier. The company’s business is seasonal, so it typically losses money in the first quarter. Sales grew 25.2%, to $861 million from $688 million.
Investing in the Middle East increases Agrium’s risk, and probably contributed to the stock’s recent weakness. But nitrogen, a key ingredient in fertilizer, comes from natural gas, and the new plant’s close proximity to cheap supplies cuts the risk of this investment. The new plant should increase Agrium’s nitrogen capacity by 20% when it begins operations in 2010.
Agrium is a buy.