Investing

Investing Idea - Dividend Growth

  • Last Updated:
  • Oct 12th, 2019 3:08 pm
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
5435 posts
5533 upvotes
@last_sd @ghuraba @jimbod @daydreamer7 @RFDSimple @Dpack22 Apologies for the delay getting back to you about those companies, I'll post about them later - same for everyone asking for next purchases, since there are lots of opportunities now, been really busy with some parallel projects and family, but looking forward to deploy further capital into some good opportunities ahead.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Deal Fanatic
User avatar
Sep 8, 2007
7003 posts
6242 upvotes
Way Out of GTA
rodbarc wrote:
Dec 23rd, 2018 11:15 pm
My 2 cents regarding the recent market crash, and what I'm doing about it on this post.

Happy Investing and Happy Holidays!


Rod
Well said. And since I tend to come at things as a contrarian, this feels like a kid in a candy store. Companies growing earnings, haven’t missed all on sale because of recession fears based on what appears to be a blow off from an overbought situation.

I’m glad the sell off is occurring slowly as it gives me time to do work on a wider variety of names. If I was fully invested and a persistent buyer, I’d turn my contributions up to 11 during periods like this.
Jr. Member
Nov 22, 2007
170 posts
20 upvotes
Toronto
Pretty generic question and am pretty sure the answer would be variable but if I had to buy 4 or 5 good stocks for dividend investing at the moment for say 5k or 4k each which would be the way to go?

Was thinking putting a couple top 5 banks (which are dawdling at 52 week lows) + 1 Reit + 1 financial and couple of energy sectors like suncor or enbridge
Newbie
Nov 19, 2017
78 posts
57 upvotes
ENB would be my top pick to add to you
HCG is very undervalued and will be turning on their dividend in the near future
As you said, your pick of the top 5 banks is a good investment right now

good luck!
Member
Nov 16, 2013
469 posts
81 upvotes
Mississauga
rodbarc wrote:
Dec 23rd, 2018 11:15 pm
My 2 cents regarding the recent market crash, and what I'm doing about it on this post.

Happy Investing and Happy Holidays!


Rod
Happy holidays Rod,

Excellent read.

I have only observation-

As I understand your note, investing in dividend growth is for long term and not for short term. You had given great example of 1932.

My question is if someone holds shares for very long time then those companies may pay dividend for certain years but eventually fold.

How many companies are active and paying dividends for long time ( 50 years)

The below link mentions that only 60 companies remained between 1955-2017 out of Fortune 500.

http://www.aei.org/publication/fortune- ... rosperity/

Your thoughts on long term and how to avoid such scenario if one has long term view.
Deal Addict
May 22, 2003
3760 posts
1560 upvotes
Vancouver
Jackson75 wrote:
Nov 13th, 2018 11:03 pm
Hi Rod,

What do you think of Pepsi? I am thinking to buy and hold. The dividend payout is not bad?

Thank you in advance.

I managed to snag Pepsi when it hit $100, very happy to hold this for the rest of my life.
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
5435 posts
5533 upvotes
vivmk20 wrote:
Dec 30th, 2018 8:37 pm
Happy holidays Rod,

Excellent read.

I have only observation-

As I understand your note, investing in dividend growth is for long term and not for short term. You had given great example of 1932.

My question is if someone holds shares for very long time then those companies may pay dividend for certain years but eventually fold.

How many companies are active and paying dividends for long time ( 50 years)

The below link mentions that only 60 companies remained between 1955-2017 out of Fortune 500.

http://www.aei.org/publication/fortune- ... rosperity/

Your thoughts on long term and how to avoid such scenario if one has long term view.
Happy Holidays to you too! Excellent question.

First, many companies are still around and paying dividends for much longer than 50 years. Scotiabank has paid dividends to common shareholders every year since its foundation in 1832. It has increased its quarterly dividends in 43 of the last 45 years. Enbridge has been paying dividends for the last 64 years. On the US side, it's even longer: companies like Procter & Gamble has paid dividends since 1891 and it has increased dividends for 62 consecutive years. Coca-cola has paid dividends since 1893 and has increased it for 56 consecutive years.

However, I don't believe in buy-and-forget. We have lots of examples of companies that were the best at one time, and they fold, because they stop innovating or they can't comprehend industry changes or management makes a series of risky decisions and mistakes that eventually destroy a once well-run business. Kodak and Sears are 2 great examples. Citibank were severely affected, and although it's making progress to recover, it never reached previous levels. The most recent example for this kind of failure as an investment is GE.

How to avoid? You can't avoid every case. You can predict some cases, by monitoring earnings and cash flow, and if payout rate is too high (the company is borrowing to pay dividends) or if revenues and sales are struggling and the yield is too high, management typically decides to cut / suspend dividends to free up cash flow to grow again, either by investing in innovation or acquire other businesses. And if the company doesn't meet my criteria as a sound business to partner with, I sell, no matter how low the stock is - it's important to not be emotionally attached with a stock or the money involved when making these decisions, because it has to be a rational decision. I go through this exercise every year, by looking at the financial report of every company that I own, and evaluate if I'm still comfortable of how the business is operating (I don't look at stock price). Some companies I decide to sell because earnings and cash flow have been declining for a business cycle or so, or if the industry is clearly changing and the business isn't / can't catch up. Others I sold because they no longer meet my income growth goals, probably due to dividend cuts, either because the company has positioned to be a growth company or because dividends were cut to free up cash flow as they were having challenges to grow.

Remember, investing is not about avoiding risks, it's about managing risks. And how to manage this scenario? Having a diversified portfolio. By screening for quality and valuation, we are employing our best abilities to partner with a business that meet these criteria, with the information that is available today. When we buy a stock, we're buying a piece of a business and their earnings potential. Only time will tell if that earnings growth will materialize the way we expect. That's why I like to look at the past and present, since past tells me a lot about the quality of the company, their ability to react and adapt to other challenging times, their ability to keep or grow dividends, how long it took for them to grow earnings and cash flow, etc. It tells me nothing for how they will do in the future, it just tells me how resilient they were in the past, and to me, that's good information on how competent management has been. The present tells me valuation, by comparing the intrinsic value of the business, based on their most recent earnings and what they are estimated to make this year, versus the multiple ratio that company is trading at - and if that multiple is aligned with how the business is growing and how the market typically price that business or its peers. Lastly, the future is about forecasting. It's not a pure guess, as we can use corporate guidance and institutional firms covering these companies to help to determine where the company is headed, and plot different scenarios to evaluate potential total return. On my case, my primary goal is income and growth of that income, so I don't care much about total return, I care mostly on the company cash flow and their ability to generate and grow that cash flow - cash flow and dividends are way more predictable than stock price.

So although we might say that we're comfortable holding a company forever, I believe it's paramount to do a sound check every year on how the business is performing, and having well defined rules when to enter and when to exit a partnership. If you are consistent following these rules, and if you have a diversified portfolio to have exposure to many of these quality companies (which were acquired at a decent valuation), you will do very well, because that's the essence of investing and how most successful investors built their wealth. The hard piece is not finding a good business or be lucky to buy during the bottom of a recession. The hard piece is being consistent with the method that you choose to employ and have the discipline to stick with this method no matter what the market does. As long as you don't let greed buy higher than you should and you don't let fear sell lower than you should (as this would typically be emotion driven), I think it's safe to say that we'll see many solid companies to fold during our lifetime, but we'll exit before they actually fold, and by monitoring our portfolio for operating business performance, the gains will outpace the losses.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Member
Nov 16, 2013
469 posts
81 upvotes
Mississauga
rodbarc wrote:
Dec 31st, 2018 8:05 am

How to avoid? You can't avoid every case. You can predict some cases, by monitoring earnings and cash flow, and if payout rate is too high (the company is borrowing to pay dividends) or if revenues and sales are struggling and the yield is too high, management typically decides to cut / suspend dividends to free up cash flow to grow again,

Remember, investing is not about avoiding risks, it's about managing risks. And how to manage this scenario? Having a diversified portfolio. By screening for quality and valuation, we are employing our best abilities to partner with a business that meet these criteria, with the information that is available today. When we buy a stock, we're buying a piece of a business and their earnings potential.
Rod
Thanks Rod for awesome advice . Great way for me to start 2019. The above lines are gold standard for investing, if I can say soGrinning Face With Smiling EyesGrinning Face With Smiling Eyes

Thanks again
Penalty Box
Apr 27, 2015
1330 posts
255 upvotes
Rod,curious what is your opinion on FC and FN?
No political content in sigs
Penalty Box
Apr 27, 2015
1330 posts
255 upvotes
vivmk20 wrote:
Dec 30th, 2018 8:37 pm

http://www.aei.org/publication/fortune- ... rosperity/

Your thoughts on long term and how to avoid such scenario if one has long term view.
as per article above 88% of the companies from 1955 have either gone bankrupt, merged with (or were acquired by) another firm, or they still exist but have fallen from the top Fortune 500 companies (ranked by total revenues) ... curious what % of companies went bankrupt?
No political content in sigs
Deal Expert
User avatar
Sep 19, 2004
22506 posts
4358 upvotes
Waterloo
Good news for IPL if insider/CEO is buying $482K at 9% yield
Inter Pipeline Ltd. (IPL-T)

On Dec. 20, the company’s president and chief executive officer Christian Bayle invested over $482,000 in shares of Inter Pipeline with the acquisition of 25,000 shares at a cost per share of $19.2888. This trade increased his account’s holdings to 485,000 shares.

The company pays its shareholders a monthly dividend of 14.25 cents per share or $1.71 per share yearly. This equates to a current annualized dividend yield of just under 9 per cent.
Which Credit Cards to sign up? >> Jerry's List of Credit Cards with $200+ Welcome bonus/Aeroplan & AMEX Churning FAQ
AMEX Personal 60K || Business Platinum 75K || Biz Gold 40K
Deal Addict
User avatar
May 25, 2008
1392 posts
583 upvotes
Toronto
jerryhung wrote:
Jan 4th, 2019 8:07 am
Good news for IPL if insider/CEO is buying $482K at 9% yield
Too good of a deal to pass up. Picked up alot for the RESP and non-reg account just before Christmas....
Newbie
Nov 19, 2017
78 posts
57 upvotes
taal wrote:
Jan 4th, 2019 7:17 pm
What do folks think of cineplex ?
Enbridge is a good business because everyone needs heating.
Big 5 banks...market will continue to go on.
McDonalds...there will always people who buy food and coffee there.
Cineplex? People will watch movies, yes. However, despite that, earnings are dropping. How are they going to fix this? No one wants their overpriced popcorn to begin with, are they going to raise prices for that even more? For one movie, Cineplex charges more than what Netflix charges for a subscription. I grew up going to Cineplex but I am having a hard time defending them as a business.
Member
Apr 21, 2010
231 posts
19 upvotes
organeer wrote:
Jan 5th, 2019 5:43 pm
Enbridge is a good business because everyone needs heating.
Big 5 banks...market will continue to go on.
McDonalds...there will always people who buy food and coffee there.
Cineplex? People will watch movies, yes. However, despite that, earnings are dropping. How are they going to fix this? No one wants their overpriced popcorn to begin with, are they going to raise prices for that even more? For one movie, Cineplex charges more than what Netflix charges for a subscription. I grew up going to Cineplex but I am having a hard time defending them as a business.
Yeah I definitely get that, but I don't think the experience of "going to a movie" is going away anytime soon ; It's generally an outing with friends/family/... something you can't easily do in 1 person's house / apartment (much more so for the later).

But in terms of revenue growth, I just don't see any of that; Better phrased it's all dependent on what movies are released so it'll go through cycles as box office attendance has shown in the past ! So I'd assume little to any revenue growth ... I agree they can't just keep raising prices; I also think there other initiatives (VR / Recroom) will fail or produce little revenue growth.

I think VIP cinemas were a great initiative, they seem to do very well, though I can never get myself to go to one (paying more for a smaller screen).


Anyway, ok say they don't growth revenue, can they still sustain the current dividend which is obviously very compelling.

Top