Wednesday, May 30, 2012

Good Times, Bad Times

Everyone seems to be talking about changing things so the recent financial crisis does not happen again. I think that they are missing the big pictures. There has always been good times and bad times. You cannot stop life from happening.

However, what you can do it be prepared for the bad times. What governments really did wrong was spend all the money in the good times and saved none for the bad times. And, most Western countries not only spent all their money in the good times, they also ran up huge debts in the good times. If we had acted more responsibly in the good times we would not be having such a hard time now.

All sorts of financial advice suggest that we should have an emergency fund for when we hit problems. No one seems to be suggesting this to governments. It might have been better if they had.

If you want a short easy introduction to this concept, you should watch the video of Tomas Sedlacek at RSA. This video is just over 20 minutes, but it is all you need to have a greater understanding of what is going on. He makes it very easy to understand.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Friday, May 25, 2012

Dividend Payment Cycles 2

I thought it might be useful to sort my dividend paying stocks by Dividend Payment Cycles. To get new Table of stocks I follow and their Dividend Payment Cycles click here.

Thursday, May 24, 2012

Dividend Payment Cycles

Dividends cycles on my spreadsheet are the cycles used when I reviewed the stock. Some stocks do not keep to a particular cycle.

There are three cycle for the companies that pay quarterly. They are:

Cycle 1: January, April, July, October
Cycle 2: February, May, August, November
Cycle 3: March, June, September, December

Some companies pay monthly, especially the old income trust companies, but there are fewer and fewer of these. A few pay semi-annually. Some companies are consistent in what months their dividends are paid, some are not. Most annual reports show what dividends have been declared in a year, not what dividends they have actually paid. (What a company declares in a year and what they pay in a year may or may not be the same.)

As a shareholder you want to know what you actually get paid and when. It can get confusing.

For dividends, you have a declaration date, ex-dividend date, dividend record date and dividend payment date. The declaration date is the date a company declares it will pay a dividend. The ex-dividend date is 2 business days before the dividend record date. (Most charts that give dividend information use the ex-dividend date.) The dividend record date is date that if you are the shareholder of record you will get the dividend. The dividend payment date is the actual day the dividend is paid.

In the following notice, August 3, 2011 is the Declaration date. The ex-dividend date is August 25, 2011. The dividend Record date is September 15, 2011 and the date the dividend is paid is August 29, 2011. This puts the dividend payment into cycle 3.

The notice: “TORONTO, ONTARIO--(Marketwire - Aug. 3, 2011) - Russel Metals Inc. (TSX-RUS) announced today that it has declared a dividend in the amount of Cdn$0.30 per share on its common shares, an increase of 9% over the prior rate. The dividend is payable on September 15, 2011 to shareholders of record at the close of business on August 29, 2011”.

When you are buying or selling a stock, it is the ex-dividend date that you should look at. This is the date used in determining who gets the dividend.

The thing is, some companies pick a cycle and stay with it. Others do not. A company may pay some dividends in cycle 1 and some in cycle 2. Some may pay in Cycles 2 or 3. Some may pay in cycle 3 or 1. If a company pays dividends sometimes in Cycle 3 and sometimes in cycle 1, you can get a situation where one year has 3 dividends and the next year has 5 dividends. However, you do get all your dividends in the end.

As I said about, the annual reports do not help in this as they using show dividends that were "declared" in a year. That does not mean that they were actually paid. They could or could not have been.

You can get an idea of this from Yahoo finance. As with most sites, they give the ex-dividend date. Since the ex-dividend date is 2 business days before the dividend record date, there will be some variation. However, if the ex-dividend date varies by more than 2 days, it could be an indicator that a stock does not stick to a cycle.

If you look at Wal-Mart’s ex-dividend dates they are all over the place. This would suggest that dividend payments are not consistent. Commenter said Wal-Mart pays in January, April, June, and September. Not exactly every 3 months but still 4 times each year.

The Canadian Stock Metro (TSX-MRU.A) has an interesting payment schedule which seems to be March, June, September and November. Also, Richelieu Hardware (TSX-RCH) has a different schedule of February, April, August and late October or early November. Sun Life (TSX-SLF) declares dividends and had 3 payments in 2005 of March 31, June 30 and September 30 and 5 in 2009 of Jan 2, March 1 June 30, Sept 30, and December 31.

Other stocks like TransCanada (TSX-TRP) are consistent. Their dividends are paid at the end of January, April, July and October. Enbridge (TSX-ENB) is the same; they pay a dividend on the 1st of March, June, September, December each year.

Table of stocks I follow and their Dividend Payment Cycles is partly shown below. You have to click here to get full of table. You can use your mouse to high light a line (i.e. the stock, symbol and corresponding DP).

Name Symbol DP
Ag Growth International AFN M
AGF Management Ltd, Class B AGF.B 1
Algonquin Power & Utilities Corp AQN 1
Alimentation Couche Tard ATD.B 3
Alliance Grain Traders Inc AGT 1
Click here to get rest of table.    

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Tuesday, May 22, 2012

Are You Making Money in the Stock Market?

The answer to this question may depend a lot on your point of view. Today the market is up, but it has been going down quite a bit lately. I still think I am making money. My dividend income is probably proof of that.

What I am aiming for is 3.5% dividend yield with 10% dividend increases each year. Of course, you are not going to get the same increase each year, but you can look at averages and median values. I try to meet my goals by having a mix of high yield stocks with low dividend increases (like REITs) and low dividend yields and higher dividend increases. I also have stocks with dividend yields in the mid-range.

I was talking today about buying a stock that has a low dividend yield, but good dividend increases over time. This stock was Richelieu Hardware Ltd. (TSX-RCH). See

So far this year, my dividend yield on actual and expected income is running at 3.68%. My dividends have already gone up 7.66% this year. Last year they increased by 9.23%. My 5 year median dividend increase is 11.35%. Dividend increases range from the lowest of 5.29% in 2010 and the highest of 23.21% in 2007.

For Richelieu that I was reviewing yesterday and today, the 5 and 10 year growth in dividends of at 12.9% and 16.7% per year, respectively does not tell the whole story. In 2006, dividends increased 20%; in 2007, they increased 16.7%; in 2008, they increased 14.8%; in 2009, the increase was 0%; in 2010, it was 12.5% and 2010 it was 22.2%.

The lowest dividend increases always comes a couple of years after the bear market and in 2010 it was right on time as the bear was in 2008 and the lowest increase was in 2010. This is very typical.

Wednesday, May 16, 2012

Analysts’ Recommendations and What They Mean

Do you find that analysts’ recommendations are confusing? It is not so bad when you realize that almost all analysts’ recommendation are on a 5 point scale.

Most places where you find a collection of analysts’ recommendations, they will be using a 5 point system, and they will make a consensus call based on what the majority of the stock analysts think, according to this scale.

Say, according to Morning Call, there are 9 analysts and 5 say a stock is a buy, 3 say a buy/hold and 1 say hold. You should consider this a buy. If you take the Morning Call ratings, you would give the buys 1 point for each analyst (or 5 points) and buy/hold 2 points for each analyst (or 6 points) and the hold 3 points for each analyst (or 3 points) for a total of 19 points. Divide by 9 to get 1.5, which is a buy.

The Globe & Mail rates stocks as Strong Buy (1), Buy (2), Hold (3), Underperform (4) and Sell (5). For the stock Genivar Inc. (TSX-GNV), see ratings at Globe Investor. The Financial Times uses Buy (1), Outperform (1), Buy (2), Hold (3), Underperform (4) and Sell (5). For the stock Ag Growth International Inc. (AFN:TOR), see ratings at their site.

Morning Call rates stocks as Buy (1), Buy/Hold (2), Hold (3), Hold/Sell (4) and Sell (5). See their recommendations at their site.

Possible ratings you will come across are:

1 2 3 4 5
Strong Buy Buy Hold Underperform Sell
Buy Buy/Hold Hold Hold/Sell Sell
Buy Overweight Hold Underweight Sell
Buy Buy/Hold Hold Weak Hold Sell
Action Buy Buy Hold Reduce Sell
Buy Outperform Hold Underperform Sell
Buy Outperform Market Perform Underperform Sell
Buy Outperform Sector Perform Underperform Sell
Strong Buy Moderate Buy Hold Moderate Sell Strong Sell
Top Pick Buy Hold Don’t Buy Sell

Got a Buy on Weakness or Watch recommendation? Generally this is because they think that the price is currently too high and it might go lower. Sometimes the “Don’t Buy” recommendation is meant as a Hold.

Monday, May 14, 2012

It’s May

The stock market is down for two reasons. It’s May and people are worried about Greece.

Thursday, May 10, 2012

Likely to have Downturn?

One of the worries for Power Financial is that there will be a meaningful downturn in the near future.

If you look at the TSX over the past year you will see that lately the TSX has traded in a band and then broke out of this band downward twice recently. This is not a good sign. Go to Globe Investor and click on TSX chart to get a look at its action over the past year.

It is also May. This is not a month for strong upward markets. Also, European financial problems are front and center in investor’s thoughts. However, I do not blame the voters in Europe. The austerity policies have only produced economic problems.

Basically, countries grow or inflate or do both to get out of debt problems. It does not look like Europe can grow its way out. If they inflate their way out, it is also messy, but people tend to go along with that more than with austerity policies.

They will have to make structural changes, but this has been very difficult for Europeans and they will not do this until they are forced into it.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Wednesday, May 9, 2012

Sell in May

Sell in May and go away? Frankly I do not do that. It is not that I do not believe in the seasonality of the market, because I believe there is a certain seasonality to the market. There is support for this idea, because historically, the rise in the stock market between May and September is minimal at best, but the rise in the stock market between October and April is close to the long term rise in the market.

Because I will not sell everything in May does not mean I would not take advantage of the seasonality. The problem with market seasonality is that it is hard to apply it to a particular stock. Some types of stocks have their own seasonality. Some have their own relationship to the business cycle. Selling also involves fees and taxes. If I have a stock I want to hold for the long term, I will not sell it just because the market is underpricing or overpricing it.

However, if there is a stock I want to sell, or if there a future need for cash in one of my RRSP accounts, I look to sell in April or May. Since October is probably the worse month for market crashes, I look to buy something I want around October.

Also, being Canadian, we also have a bit of a run up in the markets to the end of the RRSP season for the 1st of March each year.

Don Vialoux is the Canadian name in market seasonality. He has a couple of websites. One called Timing the Market and the other one called Equity Clock . Don also writes for the G&M. See his columns in the Globe Investor at the G&M. Don talks about how and why the sell in May and go away is really a myth. See is G&M article on this subject.

Another person you might be interested to read Ron Meisels, President of Phases & Cycles Inc. He also writes in the Globe & Mail. See his articles at the G&M.

A site you might want to know about is the one for the Canadian Society of Technical Analysts at csta. Both Don Vialoux and Ron Meisels have belonged to or still belong to this organization.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Wednesday, May 2, 2012

Investing and Withdrawals

Safe Withdrawal Rates
The research I read that came with the 4% withdrawal was making 8% return and with 3% inflation. Do not forget with the earn 8% and take out 4% scenario you will be able to take out an increasing amount of money each year. I would not expect to earn 8% returns over the short term and but I do expect to do so over the long term.

I started to live off my portfolio in 1999. At that time I had half my money in Trading Accounts and half in RRSP accounts.

Saving For Retirement
I just wished there were TFSA when I started to invest. The problem is that I am currently paying higher taxes on RRSP withdrawals than when I was putting money into my RRSP. Unless you are currently in the highest tax bracket, RRSP may not be the way to go.

The reason I am in a higher tax bracket is that my investments have done well. I did get some pension money, but no full pension as I switched jobs during by working career. I was in some defined pensions, but if you do not work until retirement in the same company, you do not get much from them.

When I was investing it was always put money into RRSP now and get a tax benefit. It was also said by everyone that in retirement you will be in a lower tax bracket. This did not work that way for me. I was in a high tax bracket when I stopped working, but most of the years putting money into my RRSP account I was not.

How have things worked out?
I started with a 4% withdrawal, but have since gone lower. What I was worried about was that I was taking out some capital as my dividend income was running at around 2.8% per year. We also had a bear market just after I stopped working. I set about to increase dividend income and only take out dividend income. My portfolio has grown at 4% per year, my current dividend income is 3.5’% and I now withdraw 3%.

One thing that has happen is my dividends have increased much fast than inflation or the growth of my budget. The 5 year median growth in my dividends is running at 11.4%. My yearly dividend increases range from low of 5% to high of 24%. This really helped reduce my withdrawals to just dividend income.

One of the original financial bloggers I read talked on and on about dividend paying growth stocks. These companies tend to pay dividend around 1%, but they also tend to increase dividends by 15% to 30%. With some of these and other dividend stocks my dividends in 1999 was rather low. To increase dividends I bought some companies that paid a higher dividend and raised my dividends income. So now I have a mix dividend stocks with low, medium and high yields and low, medium and high growth in dividends.

Taking Money from RRSPs
When I stopped working, half my money was in a Trading Account and half in RRSP accounts. One RRSP account was a locked in one because the money came from Pension money. Split was Trading Accounts with 49.5%, RRSP 37%, Locked in RRSP 13.5.

I initially tried to run down my RRSP account, which I sort of did, as the split between the accounts is currently at 52.5%, 26.5 and 21%. Part of the reason for this is that my investments in my Locked-in Account worked out better than in my RRSP account. Also, I was only taking from my RRSP account initially, but lately I have switched my Locked-in Account to a RIF to take money out of this one also.

I am current moving money from my RRSP accounts into my Trading and TFSA. That is, I am taking proportionately more money from my RRSP account than my Trading Account. I am not taking anything from my TFSA account.

I always make sure that I have 5 years’ worth of projected money in my RRSP accounts for withdrawals so that I never have to sell a stock at an inopportune time. I use current cash and projected dividend income to ensure this 5 year coverage.

Dividends and Recessions
I have a portfolio rich in increasing dividend paying stock. In the last bear market my portfolio lost value (i.e. stock prices went down on the stock I held went down), but my dividends went up. The same thing has happened in all the bear markets I have experienced. I really have had no year when my dividends have not gone up.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Tuesday, May 1, 2012

Money Sense Article

A while ago I was interviewed for a Money Sense article on investing. This is now online. See Money Sense.