Dividends Anonymous

Six Common Misconceptions about Dividends

noreply@blogger.com (Dividends Anonymous) — Mon, 23 Nov 2009 03:00:00 PST

Jason Whitby of Investopedia.com writes about six common misconceptions involving dividends that investors should be aware of especially during periods of questionable returns and high volatility in markets.

"During periods of low yields and market volatility, more than a few experts recommend dividend stocks and funds. This may sound like good advice, but unfortunately, it is often based on misconceptions and anecdotal evidence. It is time to take a closer look at the six most common reasons why advisors and other experts recommend dividends and why, based on these reasons, such recommendations are often unsound advice."

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The Dividend Decade

noreply@blogger.com (Dividends Anonymous) — Mon, 16 Nov 2009 03:00:00 PST

Standard & Poor's investment publication, The Outlook, is in the news recently for stating that the next ten years could be what they term as the "dividend decade" as Jay Bryan writes in an article found in The Vancouver Sun.

"...That's because bonds just don't provide the income or safety that's needed in retirement. The thesis, put forth in Standard & Poor's flagship investment publication, The Outlook, contains some important wisdom. Basically, bonds are still important, but certain kinds of stocks might usefully supplement their function as an income-producer in your portfolio. Bonds have long been considered the ballast of a conservative investment portfolio because their issuers have a legal obligation to keep on paying a stated amount of interest until they give you your money back. If the bonds are issued by government, you're highly protected. Even if the issuer is a corporation, few blue-chip firms ever default."

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Dividend Stocks Not Always the Safest Bet

noreply@blogger.com (Dividends Anonymous) — Sat, 07 Nov 2009 03:00:00 PST

Norm Rothery, author of the Stingy Investor website, was in the news this week in an article published by the Financial Post's Jonathan Ratner. In the article the question of whether high yielding stocks or cheap value stocks were a safer bet in a market downturn.

"Rothery finds that high-yield stocks performed just as poorly as the overall market. Dividend stocks also sucked wind. The winners were growth stocks and dividend growth stocks (i.e. stocks that combine both dividend and growth characteristics)."

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When Patience Pays Off

noreply@blogger.com (Dividends Anonymous) — Mon, 02 Nov 2009 03:00:00 PST

Steve Proceviat of the globeandmail interviews Canadian dividend guru Tom Connolly of The Connolly Report about his investments, best returns and dividends.

"It all started with a letter to the Financial Times (of Canada) in August, 1984 - that's what got me thinking about dividend growth investing. The guy who wrote the letter, his income, when he retired in 1966, was $4,800. And by the time he wrote the letter to the Times, in 1984, his income was up to $31,000.That piqued my interest, so I started investigating dividend growth stocks, and buying them.

With dividend growth investing, you have to convince yourself that it works. It's fairly easy to do. There's not too many companies to worry about. There might be 20 good dividend growth stocks in Canada - a small group of Canadian stocks that have really good dividend growth, good cash flow and products that you need. It's just a matter of picking a utility, or a bank, or a food retailer or a couple of industrials, perhaps. And building a portfolio that way."

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Dividends in Downturns

noreply@blogger.com (Dividends Anonymous) — Wed, 28 Oct 2009 03:00:00 PDT

Thicken My Wallet asked the question yesterday, "How effective are dividends stocks in downturns?" The obvious answer depends greatly on a company's ability to maintain (or grow) cashflow as the blog author states.

"First, let’s state the obvious. In order to be a long-term dividend payer, a company has to be able to sustain cash flow necessary to pay dividends quarter over quarter. The implication being that dividend paying stocks do not necessarily have to be profitable all the time but rather they cannot be losing money over the long-term lest they jeopardize the dividend payment and investor confidence."

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Good Dividends at Good Value

noreply@blogger.com (Dividends Anonymous) — Thu, 22 Oct 2009 03:00:00 PDT

John Heinzl of theglobeandmail asks Juliette John of Bissett Funds where to look for good dividends at a good value with three industries targeted by the asset manager.

"The market has been on steroids since bottoming out in March, but don't despair, dividend investors. You can still find reasonably priced stocks with solid yields and attractive prospects. You just have to know where to look."

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Emotions & Dividend Investing

noreply@blogger.com (Dividends Anonymous) — Thu, 08 Oct 2009 03:00:00 PDT

DividendGrowthInvestor published a very good article yesterday on his blog about utilizing strict entry criteria when selecting your dividend stocks. He notes that many investors learnt tough lessons by holding onto "safe stocks" such as BAC and GE because of their dividend history when certain criteria might have steered investors well away from holding them through the past 12 months.

"The point being taken is that entry price paid for stocks does matter. If you mindlessly reinvest dividends or dollar cost average your way into an index fund you would end up paying top dollar for the inflated future income stream from these investments. Thus, having strict entry criteria might prevent you from chasing hot stocks and losing a lot in the process. This entry criteria could also prevent you from investing in companies, simply because you like their brand or your hope that their business would turn up for the better. Even great brands such as Johnson & Johnson (JNJ) or Procter & Gamble (PG) were not good buys when they traded at more than 20 times earnings and yielded only 1% in the early 2000s. There were other companies, which yielded much more than that and traded at lower price to earnings multiples that should have been on investors’ radars. It is better to sit in cash than overpay for stocks and then have to wait for a decade before you start generating any meaningful return on your investments."

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Dividends on the Horizon for Canadian Banks?

noreply@blogger.com (Dividends Anonymous) — Thu, 24 Sep 2009 12:00:00 PDT

Simon Avery of the globeandmail in an article published today discusses the potential for Canadian banks to raise their dividends in the not too distant future citing a few interesting tidbits of information.

"While all of the big banks have raised capital to boost their ratios well above the minimum level, too much capital can depress profitability. That means once the economy is clearly on the mend, they will need to find ways to put the money to work."

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True Yield and Payout Analysis

noreply@blogger.com (Dividends Anonymous) — Mon, 31 Aug 2009 03:00:00 PDT

David Pett of The National Post writes an article discussing "true yield" which George Vasic of UBS describes as a measure of both dividend yield and share dilution.

"In order to account for current corporate policy and still be relevant to future corporate behaviour, Mr. Vasic equates true yield as dividend yield less three year compound annual growth rate (CAGR) of shares outstanding. He stressed that true yield should be used as a complement, not a substitute, for the dividend yield."

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Waste Not, Want Not

noreply@blogger.com (Dividends Anonymous) — Tue, 04 Aug 2009 03:00:00 PDT

Josh Peter, editor of Morningstar Dividend Investor, and peer Bradley Meeks talk about a potential dividend star in their column found on MoneyShow.com. Waste Management (WMI) is the largest US based trash firm and with margins of 15% there's a case to be made for the potential of dividend growth in the future.

"As Waste Management maintains disciplined pricing, we expect gains in operating margins and share repurchases to drive WMI’s per-share earnings and dividend growth potential more than revenue growth. Though near-term increases may be restrained by a weak economy, our long-run forecast supports a 7% average growth rate for the dividend."

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Insurers Face Intense Dividend Scrutiny

noreply@blogger.com (Dividends Anonymous) — Mon, 27 Jul 2009 03:00:00 PDT

While the stock prices of many insurance companies have rebounded since March earnings are about to be released and a number of investors are beginning to wonder if dividends are safe within the group as the Financial Times points out in a recent article.

"In particular, investors have their eyes on dividends in light of falling sales and profits. Rising bond defaults and mortgage losses as the recession bites may also limit the ability of insurers to maintain payouts."

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The Importance of Dividend Re-Investment

noreply@blogger.com (Dividends Anonymous) — Thu, 16 Jul 2009 03:00:00 PDT

Dividend Growth Investor, a regular dividend addict, wrote a very thorough post yesterday on the topic of dividend re-investment with graphs to help demonstrate the compounding effect dividends can have on returns in comparison to receiving returns in cash, capital gains or interest.

"Dividends represent a tangible return on investment, which investors can choose to reinvest, spend or just keep in the bank. Unlike capital gains, which can disappear quickly, dividends cannot be taken away from you once you have received. In addition to that, dividends tend to provide the only source of total returns during sideways and bear markets. When dividends are reinvested however, investors get the power of compounding on their side."

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How Rising Dividends Earn Success

noreply@blogger.com (Dividends Anonymous) — Wed, 08 Jul 2009 03:00:00 PDT

Andrew Tanzer of Kiplinger.com writes an article on dividends that discusses the tried and true strategy of investing involving companies who raise their dividends regularly and why it's stood the test of time.

"Why has a dividend-growth strategy stood the test of time? First, to commit to boosting its payout, a company must be financially strong and confident that its business plan will generate a stream of profit and cash flow."

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Dividends: The Breakfast of Champions

noreply@blogger.com (Dividends Anonymous) — Mon, 06 Jul 2009 03:00:00 PDT

Shirley Lazo of Barron's writes a column on cereal maker General Mills (GIS) after the company boosted its dividend 9%, the single largest increase in its dividend in several years. The large increase indicates to investors how serious the company is about repaying shareholders a portion of profits; even in a difficult economic climate.

"The new quarterly will be 47 cents a share, up from 43 cents, payable Aug. 3 to investors of record July 10. The stock goes ex-dividend July 8. This is General Mills' ninth payout increase in five years. Including predecessors, the Minneapolis company has paid dividends without interruption or reduction since 1898."

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Dividend Yield or Dividend Growth?

noreply@blogger.com (Dividends Anonymous) — Fri, 03 Jul 2009 03:00:00 PDT

ETF Guy from Exchange Traded Funds (ETF Topics.com) writes a thoughtful article on considering two characteristics of a stock, dividend yield and dividend growth, and which metric to choose for a better investment.

"I'd rather invest for dividend yield over dividend growth but my favorite strategy lies somewhere in the middle. I assume most stocks that operate under a high dividend yield, do so for one of several reasons: The share price has recently dropped (due to bad news? poor outlook?), it might be a risky business, or it could be an old ‘out of favor' cash cow. Either way, I would never invest in a company that isn't solid and at least growing modestly. So that should filter out a bunch of high yield stocks, but not all."

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The Best of the Money (Dividend) Blogs

noreply@blogger.com (Dividends Anonymous) — Sat, 27 Jun 2009 03:00:00 PDT

The globeandmail yesterday released their annual "Best of the Money Blogs" survey to seek out the best online financial blog resources for investors and personal finance junkies. If readers are astute they might find a number of Dividend Addicts in the midst of these highly regarded blogs.

"To track down the best financial blogs the Web has to offer, we asked our Globe bloggers, columnists, the Canadian Capitalist and hedge fund manager Howard Lindzon to share their favourites. Want to let us know what you think? Our online poll below will let you vote for your top picks. And, if you have a name we overlooked, add it to the comments. You can also recommend the sites other readers have added. Without further ado, here's the list..."

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Diageo has Scope to Raise Dividend Further

noreply@blogger.com (Dividends Anonymous) — Fri, 26 Jun 2009 03:00:00 PDT

Garry White of the Telegraph.co.uk writes a column on defensive dividend stock Diageo PLC (DEO) and the prospects of future dividend increases from the company.

"Diageo shares have underperformed other defensives over the past six months, but the company generates good cash flows and its dividend is safe. This has created a buying opportunity....Of course, despite its defensive characteristics, the spirits and beer group has not been immune to the effects of the recession. Destocking has been a major theme – and this has obviously hit sales."

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Dividends Can Prevent Inflation Erosion

noreply@blogger.com (Dividends Anonymous) — Tue, 23 Jun 2009 03:00:00 PDT

Charlie Farrell of moneywatch.com wrote an article recently on dividends and how inflation impacts a portfolio. Because dividends have the potential to grow over time threats of inflation to a portfolio can be partly offset by investing in companies that raise their dividends above inflation.

"Historically, dividend payments have increased as the companies that pay those dividends grow their businesses and their earnings. While past performance is no guarantee of future returns, a reasonable long term estimate for future dividend growth on a diversified portfolio is about five percent per year."

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Dividend Lovers Should Take Note:

noreply@blogger.com (Dividends Anonymous) — Wed, 17 Jun 2009 03:00:00 PDT

John Heinzl of theglobeandmail publishes an article on Canadian dividend stocks addressing the issue of some investors feeling as if they've missed the boat on high dividend yields erased by the market advance.

"True, the stock market has been on steroids since hitting its March lows, but there are still plenty of juicy dividend yields out there. And as the economy gradually recovers, the risk of companies cutting their payouts is fading, removing a key source of worry for income-seeking investors. All of which means that dividend stocks still offer decent value, particularly for long-term investors who can tolerate more short-term volatility."

Dividends Discussed:
- Canadian Banks
- Reitmans
- Bell & Rogers
- Thomson Reuters

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Cheap Utility Stocks

noreply@blogger.com (Dividends Anonymous) — Tue, 16 Jun 2009 05:00:00 PDT

Bloomberg has an article out today discussing global utility stocks and their attractive valuations for dividend oriented investors.

"Power producers are offering the biggest dividends since at least 1995. Payouts by utility companies in the MSCI World account for about 5.17 percent of share prices, almost double the rate at the end of 2007, according to quarterly data compiled by Bloomberg. They have increased per-share dividends every year since 2001, the data show. That’s longer than any industry group except health-care companies, which have a dividend yield that is 43 percent lower. The yield from utilities is also higher than the 3.71 percent yield on 10-year Treasury notes. In the previous 14 years, utilities have paid on average 1.74 percentage points less than government bonds, Bloomberg data show."

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Opportunities in Dividends

noreply@blogger.com (Dividends Anonymous) — Tue, 09 Jun 2009 03:00:00 PDT

Johanna Bennett in Barron's interviews Alan B. Lancz on the recent market rally, investing opportunities and the prospects of dividends discussing investments such as Procter & Gamble (PG), American Water Works (AWK) and Eni SpA.

"Q: Are we in a bear-market rally or a bull-market recovery?
A: Wall Street spends far too much time thinking about that, which is why they missed the severity of the financial crisis. It has been a strong rally with the market bouncing off extreme lows. The financial crisis, for the most part is behind us and there is a light at the end of the tunnel. But we are not out of the woods. The massive government bailouts will have unintended consequences, such as rising interest rates, a rising risk of inflation and a weak U.S. dollar. We can't count on China to lead us out of the recession. Meanwhile, I don't expect to see strong economic growth anytime soon."

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Tough to Nail Down Yield

noreply@blogger.com (Dividends Anonymous) — Sat, 06 Jun 2009 06:00:00 PDT

Keith Woolhouse of The Ottawa Citizen writes a column on the topic of dividend yields and where investors should invest their capital in an environment that doesn't reward you for placing money in savings accounts.

"The choice facing investors at this time is not simply where to invest -- extremely low rates on savings accounts make that decision easy. A greater worry is the overhanging concern that the market has got ahead of itself and a correction may be in the offing, bringing down share prices and raising current yields. But waiting for the market to pull back can prove costly and it hasn't worked, so far, for those still on the sidelines."

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The Ultimate DRIP Portfolio (DRIP-folio)

noreply@blogger.com (Dividends Anonymous) — Fri, 05 Jun 2009 05:00:00 PDT

Triaging My Way To Financial Success posted an article discussing the concept of The Ultimate DRIP-folio; an ideal portfolio of dividend stocks that are eligible for a DRIP (dividend re-investment plan) or SPP. He's collaborating with other investors and readers to construct a model portfolio that's both diversified and takes advantages of DRIP discounts offered by companies in this current environment. For Dividend Addicts this could be a great resource to pick up names of companies with effective DRIP programs.

"I want, with the help of readers and investors, to create The Ultimate DRIP-folio; a diversified portfolio of stocks that have eligible DRIPs. This portfolio could be the standard among all investors interested in constructing a portfolio that takes advantage of DRIPs and compounding returns over the long-term."

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Dividends: Waiting for a Rebound

noreply@blogger.com (Dividends Anonymous) — Wed, 03 Jun 2009 03:00:00 PDT

Ben Steverman in BusinessWeek writes an article on the stinginess of companies increasing their dividends and how some companies, despite the recession, are finding innovative ways to give back to shareholders.

"So far in 2009, 80 companies in the S&P 500 have raised dividends, netting shareholders an extra $5.4 billion, S&P says. However, 63 firms have reduced payouts, for a $46.3 billion hit to dividend income. Investors have been disappointed by some of the stock market's most consistent and generous dividend payers. S&P keeps a list of "Dividend Aristocrats," firms that have increased payments for 25 consecutive years. Changes to the list won't be official until the end of 2009, but many aristocrats seem to destined to lose their rank."

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A Big Problem with Dividends

noreply@blogger.com (Dividends Anonymous) — Mon, 01 Jun 2009 03:00:00 PDT

The Dividend Guy wrote an article titled, Dividend Investing's Big Problem, that outlined a main fault of many Dividend Addicts who concentrated their dividend paying stocks in banks and financial stocks rather than other sectors for diversification over the past few years.

"How did I get to have this problem. As I look back on it, it really is quite simple. Some of the longest standing dividend payers and dividend growers were Citigroup and Bank of America and I was buying into that strong yield and strong growth. As a dividend investor, this is what we are really trying to do - achieve that fantastic long term growth that comes from a growing dividend. This lured me into a false sense of security in these securities and I got burned."

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