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 $3.10 (Toronto symbol HCI.UN; SI Rating: Average) sells computers and consumer electronics, mainly through CompuSmart and MicroAge retail stores. The fund, formerly Hartco Corp., converted into an income trust last August, and changed its fiscal year end from January 31 to December 31. In the three months ended December 31, 2005, Hartco lost $0.18 a unit on revenue of $177.3 million. That compares with income from continuing operations of $0.25 a share on revenue of $165.7 million in the three months ended January 29, 2005. Hartco blamed the latest quarterly loss on clearance sales of slower-selling products and store closing costs. The units fell $1.50 due to fears that tough competition and falling margins would force Hartco to cut its monthly distributions of $0.05 a unit (the annual rate of $0.60 yields 19.4%). Even if Hartco cut its distributions in half, the units would still yield nearly 10%....
MDS INC. $21 (Toronto symbol MDS; SI Rating: Above average) soared for us since we first recommended it at $3.75 a share (adjusted for splits) in April 1995. But it has struggled in the past few years, as costly investments in emerging fields like protein research failed to live up to expectations. It also had to write off its equity investments in other Canadian medical companies, and recently sold its portfolio of stocks in roughly 80 biotech and health companies as part of a major restructuring. The company now has three core businesses: contact drug research; mass spectrometers that detect and measure foreign substances in blood and other fluids; and medical isotopes for cancer treatments....
ENCANA CORP. $55 (Toronto symbol ECA; SI Rating: Average) has sold most of its conventional natural gas properties in the past few years to concentrate on what it calls “unconventional resource plays” in North America, including early-stage gas fields. These properties, typically located in remote, mountainous areas, increase EnCana’s drilling and development costs. However, the company feels that the longer production potential of these fields will more than offset any up-front costs. Another part of EnCana’s strategy is to expand in the Alberta oil sands region. It has two projects in operation there, and is developing a third. Oil sands now account for just over half of EnCana’s oil output, or roughly 10% of its entire 2005 production....
BANK OF MONTREAL $67 (Toronto symbol BMO; SI Rating: Above average) aims to double the size of its Harris Bank subsidiary in Chicago, to 400 branches over the next five years. Revenue at this division grew 8% in the first fiscal quarter ended January 31, 2006, partly due to acquisitions. But income rose 16%, as economies of scale let Harris cut its productivity ratio (non-interest expenses like salaries and overhead divided by revenue — the lower, the better) from 68.7% to 67.8%. Increasing Harris’ size could also turn this subsidiary into an attractive takeover target for larger U.S. banks. A strong U.S. operation also increases Bank of Montreal’s own takeover appeal. However, it’s unlikely that Ottawa will permit Canadian banks to merge anytime soon....
TIM HORTONS INC. $31 (Toronto symbol THI; SI Rating: Extra risk) recently sold shares to the public at $27.00 each. We usually advise against buying initial public offerings, since all too many fizzle in their first few years on the market. But we made an exception for Tim’s. Its parent company, Wendy’s International Inc., sold part of Tim Hortons to the public to establish a liquid market, prior to handing out the remaining stock to its own investors. That gives Wendy’s an incentive to prepare things so that Tim Hortons does well in the next few years. Tim Hortons now has 2,600 outlets and 23% of the Canadian fast-food market (in comparison, McDonald’s has only 18% of the Canadian market). Tim Hortons also has 300 U.S. outlets. It has struggled lately in the U.S. due to competition from larger, more established chains, such as Dunkin’ Donuts with 4,400 stores. But Tim Hortons plans to open 200 more stores in the U.S. by the end of 2008. It feels its unique menu and format, which made it a huge success in Canada, will help it find a profitable market between Dunkin’ Donuts and more expensive coffee shops like Starbucks. The stock may seem expensive at 26.1 times its 2005 earnings of $1.19 a share, and 15.1 times its cash flow of $2.06 a share. But we feel that’s reasonable in light of its strong market share and prospects for duplicating its Canadian success in the U.S....
It pays to be skeptical of companies that grow by acquisition. Even the most promising acquisitions can come with hidden problems and unexpected costs that devastate the buyer’s finances. However, some companies are strong enough to overcome the drawbacks of growing by acquisition. Here are four examples. Only three are buys right now, and then only for aggressive investors. SAPUTO INC. $33 (Toronto symbol SAP; SI Rating: Average) has made itself the top dairy producer in Canada in the past few years through acquisitions. However, heavy regulation limits Saputo’s growth in Canada....
We’ve often pointed out that perhaps a third of your stocks will perform much better than you expect. Telus, up nine-fold from its 2002 low, is a good example. It’s also a good example of why we never set target prices for our recommendations. Targets spur investors to quit buying or even sell our best picks way too early. If we had to offer a sell target for Telus in mid-2002, we might have guessed $10 — even $15. But if you sold at that price, you’d have missed out on the subsequent rise to recent highs near $50. That’s why we focus on investment value. It’s a far better tool than sell targets for filling your portfolio with performers like Telus.
All too many investors start out believing that the surest route to long-term profit is a series of profitable short-term trades. Most eventually learn differently. It’s easy enough to put together a series of short-term trades that generate small profit. The hard part is avoiding the occasional disaster that wipes out most if not all of your profits....
In 2000, Telus Corp. acquired money-losing wireless provider Clearnet. It looked like a bad move at the time, but it has paid off. In 2005, wireless provided 40% of Telus’s revenue, 44% of its profit and 53% of its cash flow. New services such as video, music and game downloads should continue to spur wireless demand, and Telus’s profits. The stock has risen nine-fold (see box next page) in the past few years, but we foresee further gains. TELUS CORP. (Toronto symbols T $44 and T.NV $44; SI Rating: Above average) is Canada’s second-largest telecommunications provider, after BCE Inc. It provides local and long distance telephone services to roughly 5 million customers, mainly in Alberta, British Columbia and parts of Quebec. It also provides Internet access services to roughly 1 million subscribers. Telus’s revenue slipped from $7.1 billion in 2001 to $7.0 billion in 2002, but rose to $8.1 billion in 2005. It lost $0.51 a share (total $145.8 million) from continuing operations in 2001, as well as $0.75 a share ($235.8 million) in 2002, mainly due to restructuring costs following the Clearnet acquisition. However, earnings improved from $0.92 a share ($324.4 million) in 2003 to $1.94 a share ($700.3 million) in 2005....
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