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
EMERA INC. $20 (Toronto symbol EMA; SI Rating: Average) stands to gain from a new natural gas supply contract signed by wholly owned subsidiary Nova Scotia Power Inc. The deal should increase Emera’s 2005 profits by about $0.07 a share, to around $1.04 a share. The stock now trades at 19.2 times that figure. The deal should also cut Emera’s 2006 overall fuel costs by $22 million. That’s equal to about 15% of the company’s annual income. However, Emera still plans to ask regulators for a 13% rate hike to cover rising costs for other fuels such as coal and oil, which account for over half of its power output. Emera is a buy.
The Internet has disrupted the historic business model of newspaper publishers and other information providers, competing against them for both readers and ad revenue. Thomson was early among media firms to recognize the change and adapt to it. That’s one reason why it was a favourite of ours in the 1990s (though we switched our advice to ‘hold’ several years ago). Torstar and Transcontinental are broadening their Internet activities. All three stocks have an attractive future, but only two are buys. TRANSCONTINENTAL INC. $19 (Toronto symbol TCL.SV.A; SI Rating: Average) is the seventh-largest commercial printing firm in North America. It also publishes newspapers and magazines, distributes flyers and other advertising materials, and operates several Internet sites....
CANADIAN TIRE CORP. $68 (Toronto symbol CTR.NV; SI Rating: Above average) has agreed to sell and lease back two distribution centres in Ontario and Alberta. The deal will generate a $50 million pre-tax gain, which the company will spread over the 21-year term of the lease. To put that in context, the company earned $1.02 a share (total $83.3 million) before unusual items in the third quarter of 2005, up 25.9% from $0.81 a share ($66.2 million) a year earlier. Revenue grew 11.8%, to $1.9 billion from $1.7 billion. Same-store sales at its main Canadian Tire chain rose 2.2%, while same-store sales at Mark’s Work Wearhouse rose 13.9%. Profits at the company’s financial services division rose 11.1% in the quarter, mainly due to expanding use of its Canadian Tire MasterCard. The company keeps its credit risk down by selling some of its credit card receivables to third parties, usually for a gain. Sales of real estate and receivables provide more capital to invest in its business, where returns are likely to be higher....
CANADIAN NATIONAL RAILWAY CO. $95 (Toronto symbol CNR; SI Rating: Average) has suffered several derailments in the past few months. CN prefers to run longer trains, to save fuel and other costs. But longer trains are more difficult to control, particularly in mountainous terrain with steep grades and frequent twists. In fact, the company has had three derailments in British Columbia in the past three months. CN now aims to improve its safety record by spending $800 million on new rails, tires, bridges and signaling systems. That’s over half of the $1.5 billion or $5.30 a share that CN plans to spend on capital upgrades in 2006. That’s also large in relation to the $5.49 a share that CN will probably earn in 2005 (the stock trades at 17.3 times that figure). But improved safety will lead to fewer delays and lower lawsuit risk, which enhances CN’s long-term profits....
MANITOBA TELECOM SERVICES INC. $40 (Toronto symbol MBT; SI Rating: Average) has unveiled a major restructuring, including cutting its workforce by 12%, mainly at its Allstream business communication subsidiary. That should help the company cope with lower revenue from two of Allstream’s former owners, who plan to shift long-distance traffic to their own networks. These moves will cost Manitoba Tel $100 million over the next two to three years, but should cut its annual expenses by $100 million. The company earned $45.1 million or $0.67 a share in the three months ended September 30, 2005. The stock got as high as $54 in March 2004. It has moved down lately on fears that it will have to cut its $2.60 dividend, which now yields 6.5%. But the cash savings from this restructuring should help it maintain the current payout. The likelihood of lower dividend taxes enhances the appeal of all secure, high-yielding stocks....
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Bank stocks have been among the market’s top performers in the past few years — as they have for the past few decades. Now some investors worry that rising interest rates will hurt their loan growth, and that the banks’ loan losses will rebound to the long-term average from their recent lows. That may happen, and bank stocks may face a setback. But banks always face these kinds of risk, while still providing top long-term returns. Meanwhile, in the past five years, Canadian banks have increased their share of Canada’s mutual fund market from 25% to 35%. This and other sources of growth will continue to expand their appeal. We still feel all Canadian investors should aim to own two or three of the top five banks. We like all five, particularly now that Ottawa plans to cut taxes on dividends....
The 2005 deadline for tax-loss selling on the Toronto Exchange is Friday, December 23. If you sell at a loss on or before that date, you can deduct your loss for tax purposes against 2005 capital gains. However, you can also carry your loss back for the past three years, or carry it forward indefinitely, to offset past or future capital gains. It’s always a good time to sell bad stocks, or stocks that are wrong for your portfolio. But you need to balance that rule against the fact that in the final couple of months of the year, some investors dump stocks unthinkingly, just to cut their taxes. In some cases they simply want to sell and be done with it. In others they intend to buy the stock back after 30 days (if you buy back any sooner, your loss becomes non-deductible)....
In the 1980s and 1990s, Alcan qualified as what you might call a cyclical growth stock. It was cyclical because demand for and prices of aluminum and aluminum parts generally rise and fall with the economy. But it had a growth element because aluminum’s strength and light weight make it ideal for use in car parts, to cut fuel consumption. In the first half of this decade, however, Alcan and aluminum went through a slump. Alcan faced regulatory hurdles and the need to integrate major acquisitions. Aluminum demand and prices suffered due to weak car sales, and weak oil prices (which relieved some of the pressure to improve fuel economy). Aluminum prices shot up by more than a third since last summer, thanks partly to rising oil prices, which spurred interest in improving gas mileage. Alcan is beginning to benefit. It is sure to remain volatile, but it is a highly attractive choice for the Resource & Commodities sector of your portfolio....
Searchable versions of your newsletter are not yet available for the dates you’ve selected. In the meantime, we have posted complete issues, in PDF format, for your convenience. Best regards, TSI Network