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
Some of our biggest gainers in the past few years have been in stocks from the Resources sector. Investors need to keep the risk and volatility of this sector in mind. TECK COMINCO LTD. $75 (Toronto symbol TEK.SV.B; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is the world’s biggest supplier of zinc, a metal that prevents steel from rusting. The company also a major producer of copper, gold and indium, a metal used in flat-screen TV sets. Thanks to the huge run up in metal prices in the past few years and its growing cash flow, Teck is now looking for acquisitions that broaden its operations, such as its recent investments in Alberta’s oil sands and its 40% stake in the Elk Valley Coal Partnership, a major supplier of metallurgical coal to Asian steelmakers. Fording Canadian Coal Trust owns the other 60%....
Updating our Income Portfolio Stocks Canadian Utilities Ltd., Pengrowth Energy Trust and Fortis Inc.
CANADIAN UTILITIES LTD. $38 will pay a special dividend of $0.25 a share in September 2006. It has also increased its regular quarterly dividend 1.8%, from $0.285 a share to $0.29. The new annual rate of $1.16 yields 3.1%. Buy. PENGROWTH ENERGY TRUST $24 earned $0.41 a unit in the first quarter of 2006, up 10.8% from $0.37 a year earlier, while cash flow per unit rose 7.3%, to $0.88 from $0.82. Although oil prices rose 22%, Pengrowth’s total production remained unchanged, as acquisitions of new properties offset maintenance slowdowns and asset sales. Excluding acquisitions, Pengrowth’s average daily production in 2006 should grow to around 56,500 barrels per day, up 3% from its earlier forecast. Buy. FORTIS INC. $21 earned $0.35 a share (total $36.6 million) in its first quarter, down 12.5% from $0.40 a share ($39.2 million) a year earlier. If you disregard a one-time gain of $7.9 million in the year-earlier quarter, Fortis’s earnings would have grown 17%, thanks to higher power rates in Western Canada. Revenue grew 2.4%, to $390.8 million from $381.8 million. Buy.
FORDING CANADIAN COAL TRUST $39 (Toronto symbol FDG.UN; Aggressive Growth Portfolio, Resources sector; SI Rating: Extra risk) is a leading producer of metallurgical coal, a key ingredient in steelmaking. It gets 98% of its revenue from its 60% stake in Elk Valley Coal Partnership, which owns six mines along the Alberta-B.C. border. Teck Cominco owns the other 40%. At 2005 production rates, these reserves should last at least 25 years. With further development, the reserves could last 100 years. Unlike most commodities, coal does not trade on a futures market. Instead, Fording must negotiate supply contracts directly with its major customers, mostly steelmakers in Japan and China. About 95% of these are long-term deals that require the customer to buy minimum amounts of coal. However, the two sides negotiate new prices every year....
HART STORES INC. $4.89 (Toronto symbol HIS; Aggressive Growth Portfolio, Consumer sector; SI Rating: Speculative) earned $0.24 a share in its fourth fiscal quarter ended January 28, 2006, up 33.3% from $0.18 a year earlier. However, if you exclude an insurance settlement for a fire at one of its stores, Hart would have earned $0.18 in the most recent quarter. Sales grew 10.8%, to $47.1 million from $42.5 million, mostly due to the opening of eight new stores; it now has 73. Same-store sales fell 1.1%. Based on the success of its new stores in Ontario, the company plans to open at least six more stores in fiscal 2007. That should help increase Hart’s earnings for the year to $0.53 a share, and the stock trades at 9.2 times that figure. The $0.08 dividend yields 1.6%....
NOVA CHEMICALS CORP. $37 (Toronto symbol NCX; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Extra risk) lost $0.06 a share in the three months ended March 31, 2006, mostly due to problems restarting a plastics plant in Ontario after an upgrade (all amounts except share price in U.S. dollars). It earned $1.06 a year earlier. Revenue grew 4.0%, to $1.55 billion from $1.49 billion. Demand for Nova’s plastics should improve this year, as customer inventories fall. The stock is cheap at just 7.5 times the $4.50 U.S. a share it should earn in 2006. Nova Chemicals is a buy....
BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is reorganizing its businesses to unlock some of its value. The biggest part of this plan will combine Bell Canada’s traditional telephone operations in rural areas of Ontario and Quebec with those of 53.2%-owned ALIANT INC. $37 (Toronto symbol AIT; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) into a new income trust called Bell Aliant Regional Communications Income Fund. BCE will assume control over Aliant’s wireless and other operations. BCE shareholders will receive 0.0725 trust units for each common share they own. Consequently, BCE will own 45% of the new trust and run it, and BCE shareholders will hold 28.5%. Aliant shareholders will receive one trust unit for each common share they hold. As a group they will own 26.5% of the new trust....
THE WESTAIM CORP. $6.90 earned $0.21 a share (total $19.5 million) from continuing operations in the three months ended December 31, 2005 compared with a loss of $0.11 a share ($10.4 million) a year earlier. However, the latest quarterly earnings included a $30.1 million gain on the recent sale of shares in subsidiary Nucryst Pharmaceuticals Corp. Westaim now owns 73.5% of Nucryst. It also aims to take its other subsidiary, iFire Technology Corp., public in the next few years. Westaim is still debt free, and has $1.29 a share in cash. Hold. MAVERICK TUBE CORP. $54 has gained 75% in the past six months, as rising energy prices have sharply increased demand for its drilling equipment and pipelines. However, the stock trades at just 8.2 times its likely 2006 earnings of $6.59 U.S. a share. Buy. NORTEL CORP. $3.20 is still having accounting problems. It’s now moving revenue from certain contracts from earlier periods to future periods. This change does not affect the total value of these contracts, but it does hurt Nortel’s reputation. Meanwhile, Nortel’s new management is focusing on sectors of the telecom equipment business where it feels it can capture at least 20% of that market. The recent merger between rivals Alcatel and Lucent could spur new interest in Nortel as a takeover target. Buy.
INCO LTD. $61 (Toronto symbol N; SI Rating: Average) is the world’s second-largest producer of nickel after Russia’s Norlisk. Nickel is a key ingredient in stainless steel, which is more resistant to rust and corrosion than untreated steel. Inco is also a major producer of cobalt and copper. In October 2005, Inco agreed to acquire rival FALCONBRIDGE LTD. $43 (Toronto symbol FAL.LV; SI Rating: Average) for $10.8 billion in cash and stock (all amounts except share price in U.S. dollars). The merger will make Inco the world’s largest nickel company, and greatly expand its production of copper and other minerals. The company feels the merger will let it save $350 million a year by the end of 2007. This is a huge purchase for Inco, whose profits before unusual items grew from $0.35 a share (total $93.0 million) in 2001 to $4.15 a share ($839.2 million) in 2004. Rising energy and other costs cut profits in 2005 to $3.64 a share ($811 million). Revenue shot up, from $2.1 billion in 2001 to $4.5 billion in 2005, as nickel prices soared....
NOVELIS INC. $25 (Toronto symbol NVL; SI Rating: Average) became a public company in early 2005, after former parent Alcan Inc. spun it off to its own shareholders. It was trading at a new high last August when rising aluminum prices undercut its earnings because of clauses in sales contracts that limited its ability to pass these cost increases along to customers. It later announced that it had discovered some accounting errors. This pair of bad news items brought on a six-month downturn in the stock, which we analyzed here and in our Hotline. Now, however, the accounting errors have proven less worrisome than feared and the company is reworking its sales agreements to let its prices reflect aluminum costs. It has also begun to close or sell unprofitable operations, while making new investments in faster-growing businesses. For example, it will spend $30 million to expand a 68%-owned plant in South Korea. That will help Novelis take advantage of growing Asian demand for beverage cans and high-margin aluminum products for electronics. Novelis is a buy for long-term gains.
ROYAL BANK OF CANADA $47 (Toronto symbol RY; SI Rating: Above average) is the first of Canada’s five big banks to sell car and property insurance policies over the Internet; it already offers life and travel policies online. In the past, Royal could only provide rate quotes; prospective clients had to contact Royal’s insurance operations separately to buy. The bank hopes Ottawa will soon let banks sell insurance through branches. That would cut Royal’s costs and boost profits. Royal Bank is a buy....