Connolly Report Summaries

♣ Front page: Looking for yields and entry points - focus on quality dividend-payer, use volatility, John Burr Williams' 1938 book ♣ page 2 Where to put cash? some ideas generally and a couple more specific ♣ page 4 the list in yield difference order, with update earnings, a cape column (cyclically adjusted p/e) and dividend growth data (average 10.1%) for all these common (never preferreds, they don't grow wealth) stocks. ♣ page 4 renewal notice, stock screens, some Value Line dividend growth estimates, links, tax on dividends and clawbacks, hedge funds.

For a $10 bill, cheques are not legal tender, you can obtain a copy of this report and our 2011 dividend growth stock summary list from: Louise Connolly, 607 - 185 Ontario St. Kingston ON K7L 2Y7

♣ Front page: “It's a great contraction”; Investing in a sideways market…there is good news; Dr Peter Kirkham on current market conditions. ♣ page 2 comments seven dividend growth stocks ♣ page 3 is the list with comments, the highest non-financial has now moved up into position #5; four more dividend increases; the least expensive four stocks per cost of $1 in dividends; Dr Kirkham's summary on the banks ♣ page 4 has two more yield charts plotted weekly since 2000, comment on telecoms, dividend growth vs the best mutual fund; the ultimate investment protection vehicle is …

For a $10 bill, cheques are not legal tender, you can obtain a copy of this report and our 2011 dividend growth stock summary list from: Louise Connolly, 607 - 185 Ontario St. Kingston ON K7L 2Y7

♣ Front page: A 6% Probable Outcome, the 4% yield + 5% dividend growth portfolio, a few quotes from The Strategic Dividend Investor by Daniel Peris a superb book on dividend growth investing ♣ page 2 has a big table showing 22 stocks I've purchased since 1987 with their buy price and gain since purchase, the start and current dividend and yield on cost (current dividend / buy price), dividend growth and price growth compared (CNR dividend up 877%, price up 785%) on each and also eight reflections on the purchases ♣ page 3 is my list of common stocks with three columns on yield, three on price plus dividend growth data and normalized p/e, along with comment and the cheapest five stocks for cost of $1 in dividends. ♣ page 4 current comment (higher yields mean more retirement income on our next purchase), some dividend growth data from the 1970s, a summary of my July 2011 writings and two yield charts (yield of the list and a bank going back to 2000).

• For a $10 bill (cheques are not legal tender), you can obtain a copy of our August 2011 Connolly Report from our daughter:

Denise Emanuel, 306 Kingswood Road, Toronto, ON M4E 3N9

♣ Front page: After 30 years, a summary of my three precepts in three sentences. Thoughts on waiting for better valuations by Klarman, Chin and Coxe. A two-bar chart showing 'annualized % return' on equities when the p/e at purchases is over 20 and when the p/e is lower ♣ Page 2 has a table, and an explanation, showing various dividend growth rates and initial yields and what the 'yield on cost' would be with dividend growth five, ten, 15 and 20 years later. Highly recommended stocks do less well. ♣ THE LIST of stocks I follow with columns of data on each. Eight more dividend increases (average in 2011 now 9.9%). Comment on the list. ♣ Page 4: four yield charts, three charts of commons near the top of the list. The most recent data shows things are changing. * For a $10 bill (cheques are not legal tender), you can obtain a copy of our June 2011 Connolly Report from our daughter: Denise Emanuel, 306 Kingswood Road, Toronto, ON M4E 3N9

♣ Page 1: What to do (essentially wait), and what not to do, being as the market is up over 100% in the last two years. Thoughts from Watsa, Maida, Montier, Easterling, Smithers, Klarman, Russell and John Burr Williams in 1938. C.A.P.E. of S&P ♣ Page 2 is packed with a summary of February, March and April 'writings'. E.g: Since 1986, there was a 12.6% annual return for Canadian stocks which increased dividends and a 2.4% per year for stocks which did NOT pay dividends. ♣ Page 3 is the list of our dividend growth stocks with revised dividend growth data, revised C.A.P.E. (10-year normalized earnings to 2010) for all our stocks, and revised Graham values with comment on all these changes. ♣ Page 4 has two charts with comment, the seven laws of investing, where dividends fit in the puzzle plus 10-year earnings, Graham and C.A.P.E data for two stocks I might add to the list.

• For a $10 bill (cheques are not legal tender), you can obtain a copy of our April 2011 report and our February 2011, from:

Denise Emanuel, 306 Kingswood Road, Toronto, ON M4E 3N9

♣ Page 1) “Have a Risky Bias” thoughts about the overvalued market - long-term measures of the market: Grantham, Katsenelson (Sideways Markets), Buttonwood, Easterling's new book = Probable Outcomes ♣ Page 2) safe stocks; the three sources of return: yield, dividend growth and re-rating (valuation change) ♣ Page 3) the list in order of yield difference, Graham data for each, dividend growth: 10yr, 5yr and in 2011, and new for 2011 C.A.P.E (cyclically adjusted price earnings ratio - earnings over ten years averaged) for all our dividend-growing common stocks; comments on and changes to the list; Realize that “the market is seriously overextented” ♣ Yield chart and half a page on Leon's, how dividend growth works; my 'cost of $1 in dividends' chart plotted from 2001 ($28.70 now); how you can now lose more capital than you make in interest with fixed income

* For a $10 bill (cheques are not legal tender), you can obtain a copy of our February 2011 report, from:

Denise Emanuel, 306 Kingswood Road, Toronto, ON M4E 3N9

♣ Page 1) Year-end thoughts on how to keep the income flowing, the expensive market, waiting is hard, comments lines on BCE ♣ 2) eight topics from inside dividendgrowth.ca: holding cash, computing future returns, anaemic growth, yield: a third of your return, investment stratagies in the age of deleveraging, a must-have portfolio, Canada's best income stocks and the range-bound market ♣ 3) the list, of course, with three columns on yield, three on price (including Graham's), three on dividend growth rates, and columns on dividend, earnings, payout ratio, and p/e ♣ 4) final renewal notice - comments and comparison on both Manulife and BCE - two yield charts from 2000: ENB (dividend from .635 to $1.96) and BCE. BCE's yield chart is unique. It shows the very low yield of the tech bubble, back to normal, no yield during the Teachers' attempt and the huge jump after their failure

* For a $10 bill (cheques are not legal tender), you can obtain a copy of our December 2010 report, our full 2010 dividend data summary and a page of current comment, from:

Louise Connolly,

607 - 185 Ontario Street

Kingston ON K7L 2Y7

♣ Page 1 Returns Going Forward will be lower; What to do now with money? estimating return: Y + DG ♣ Page 2 Manulife comment; After five years 80% of return comes from yield and dividend growth, 20% from price chanrge. What's coming next? “Trading is Hazardous to your Wealth” a summary of a paper, passive investment strategies outperform; value investors reject most stocks ♣ Page 3 Our list of 23 dividend-growing commons with yield and Graham data on each, dividend growth data and half page of comment; avg yld 3.61 ♣ Page 4 renewal notice; two yield charts and comment: one stock at top of list, an insurance company; the other near bottom (a utility) and expensive.

For a $10 bill (cheques are not legal tender), you can obtain a copy of our October 2010 report, including a page of current writing, from:

Louise Connolly,

607 - 185 Ontario Street

Kingston ON K7L 2Y7

♣ Page 1: range-bound market; Security Analysis - the book; dividends in declining markets - a study; five asset allocation myths ♣ Page 2 - Is Emera value priced? an analysis ♣ Page 3 has the list with a new column: 10 year trailing p/e ratio and comment on it and other matters ♣ Page four - four yield charts and comment eg: Value Line on the Canadian banks ♣ Page 5 - an extra page in August with ten year earnings for the stocks in order of trailing 10-year p/e, and on the back side, ♣ Page 6 Five ways to invest if you are not into forecasting from the little Book of Behavioural Investing by James Montier. It's a great little book.

* For a $10 bill (cheques are not legal tender), you can obtain a copy of our August 2010 report, including the extra pages, from:

Louise Connolly,

607 - 185 Ontario Street

Kingston ON K7L 2Y7

Waiting. ♣ Page 1 three step method for low p/e and dividend yield investing, low yield common and the new normal, gerald M. Loeb's 1935 book - a crash, a rally and then the crash ♣ Page 2 has 'the example' showing dividend growth, the resultant price and yield growth from 1990 to 2009. If this does not convince you dividend growth investing work best, nothing will. ♣ Page 3 has the list with, for each common stock, the dividend growth data, the earnings, payout ratios and a half page of comment ♣ Page 4 contains three yield charts, two going back to 1985 and my cost of $1 worth of dividend since 1991 with comments, including this one from Seth Klarman: hold cash in the absence of compelling investment opportunity

Page 1 - Some ideas on whether to hold, wait or buy now. It boils down to this: long term returns are closely correlated with the valuation of the market upon entry; using dividend yields as a valuation metric…a recent study. ♣ Page 2 - “focus on risk aversion rather than maximizing immediate return” What do do when rates are low + comments on BCE and the best of recent investment reading ♣ Page 3 - Our list of 23 dividend growth stocks in order of yield difference, with updated Graham values and five and ten year dividend growth numbers along with comment about five stocks in the list ♣ Page 4 - three yield charts, one going back to 1985, and a chart of the average Graham value of the list going back to 2005. It's back in negative territory at -11 (getting more expensive).

Page 1 - “seven lean years”; dividend stocks for uncertain times; wait to buy; a range-bound market ahead; dividends could be the only return in the next decade ♣ 2. Volume XXX - A summary of what I have learned after 29 years of dividend investing ♣ page 3 the list of our common stock with observations and comments and eight more dividend increases ♣ page 4 four yield charts going back over a decade will be included - for example GWO's dividend in 1992 was .0625 cents. Now it's $1.23. Great West's yield on it's 1992 cost of $1.76 a share (after three splits) is now 70% (I'm not counting the price gain from $1.76 to $25. Dividend growth investing is right some terrific! Leon's yield chart goes back to 1992 also (dividend was .035 then); Enbridge and Metro yield charts too, with comments.

Page 1. “Dividend growth lives…” All the non-financial common stocks in our list increased dividends in 2009 and most of our financials had higher payouts compared to 2008 (ROB Dec 16 2009). ♣ 2. market overpriced; 10 yr P/E; dividend growth data from 1977 to 1987 from April 1988 Connolly Report; “Inflation or deflation? Yes, is the answer.”; life insurance company stock comment from my neighbour here in Kingston ♣ 3. the list sorted in order of yield difference and including columns for 10 yr, 5 yr and 2009 dividend increases, and already, three 2010 dividend increases along with 14 comments ♣ 4. final reminder about renewals, four yield charts, where to park cash, PIMCO's investment outlook.

: 'It's a bear market rally. Be Cautious' is the headline again. Mostly, page one is about buying and holding common stocks good dividend growing stocks just about forever with ideas from Andrew Smithers' new book Wall Street Revalued. Why? We bought the stock to produce a growing income. RENEWAL NOTICE $50 for on-line; $60 for a re-formatted print copy every two months in 2010. ♣ page 2 is about selecting a stock using the list. ♣ page 3 - the list and a summary of what I put inside the site in the last two months. ♣ page 4 - three yield charts and my cost of buying a $1 in dividends chart with a paragraph of comment on the charts plus some comment on whether prices are 'fair' or not.

Report: 'Stress Secure Income' was my headline. There's a 'new normal' about…be cautious. Whether interest rates. ♣ Page 2 - Dividend increases for the financials? + past returns for dividend growth stocks 13.9% annually in one study and 17% in another; Grantham's Plan C ♣ the list of our DG commons with ten year, 5 yr and 2009 DG data including nine recent dividend increases + Graham's price + nine comments ♣ page 4 - four yield charts, comments on BCE and ideas on current prices , some are fair.

June 2009 1. It's a bear market rally…be cautious was my headline; some thoughts. A few more thoughts on stock price stability, how did our stocks fair from the 2007-2008 high to the recent low compared to ones with a lower price stability rating 2. 9% cagr from stocks in our list over the last decade - a list of our stocks, their total return from 1998 to 2008 with the amount of the return generated by dividends: average 63% - thoughts on buying now 3. Our list with two new columns: 10 year dividend growth beside the 5 year dividend growth and 2009 dividend growth, and recent high yield numbers - including comment on this data and the list - CIBC is on top - three more dividend increases 4. More on the concept of yield plus dividend growth as a way of estimating future returns - Jim Rogers definition of diversification: something that stock brokers came up with to protect themselves so they would not get sued for making bad choices for clients.

April 2009 1. Will our dividends hold? Some thoughts and two dividend examples from the 1930s + Comments from Ian Gordon and Wm Macdonald (“We are at a moment in history.”) Was March 9 'the low”? Page 2) Valuation - adding yield and dividend growth gives 12% for equities vs not much yield for fixed income.- Smithers, Hussman and Grant comments. Page 3) the list with updated data for Graham values (aver of +20) and five year gains (aver 4.6% (vs TSX of -1.2%…no negative yield differences. Paragraph on life insurance stocks. Page 4 lists five links to this site with a sentence of comment and two book review links; plus my cost of $1 in dividends chart (under $20 still) and BMO yield chart back to 1985.

February 2009 1) Nibble yet or wait? (We have knockdown prices for financial stocks…but ) or WAIT? Some thoughts. plus: book value as an indicator, recovery times, balancing off 2008. 2) a whole page on investing in low interest rate periods in cluding the last paragraph titled: What to do? 3) The list with an extra column for price to book this time and thirteen comments under it and the new Graham values for the bank. A list of ten common stocks we follow with 2009 dividend increases percentages (preferreds do not increase dividends). 4) A paragraph on 'will dividends hold?'. s James Grant's book: Mr Market Miscalculates. Yield charts going back to 1985: CU and two banks. I'll also have a chart of the G%D of the list over the last few years.

December 2008 issue mailed on January 7 2009 (We were in France in December)

1. Valuation is everything. “Safety and value are qualities conferred not by the nature of an asset but by the price at which it was acquired” James Grant says. (I'm reading Grant's new book Mr. Market Miscalculates.) Some ideas on valuation 1) in 1998, when stocks were very expensive and 2) now, when valuation are extremely low. When were investors buying? Now, when valuations are very reasonable, people are putting their money in cash and bonds. 'Twas ever thus.

2. A series of ideas, from various sources, about what's going on. For instance, what happened in the fall of 2008 might make investors cautious. This is understandable, but perhaps mistaken. Equities have reverted beyond the mean. Inflation or deflation coming and a paragraph on dividends holding . . .

3.Our list with BCE in it for the last time. Revised dividend growth data to end of 2008: one year and five year. Four increases so far in 2009. Interestingly, the top dozen stocks in the list are all financials. My comments on the list and a few other matters.

4. Four yield charts including the chart of the yield of the list and the new one I'm adding to the list to replace BCE. Some thoughts on the question: Do we buy now?

October 2008 - mailed on October 22 from Kingston Front page: fifteen positive ideas on various topics Page 2. Comparison table: our list prices down 17.7% in the last year versus various indexes eg: DJIA minus - 27 Professionals did not do better in the last year. Comments on diversification and the state of the market generally The market may be down (from what?), but my own RRSP value is up (from what?)…some thoughts. 3. Our list of dividend growth stocks with quite different observations. For instance, the average of the G%D column is a positive 1, six stocks have single digit P/Es. Two more 2008 dividend increases. Average 2008 dividend growth now 9.9% When was the last time you received at 10% raise? Bond income is fixed. Ours isn't. 4. Projected dividend growth; four yield charts: a bank, a food retailer, a life company and the yield of the list chart; renewal notice for 2009.

August 2008 - mailed on August 13 from Kingston Page 1. 1968 Income $4,815 *range-bound market* 1983 Income $31,398 is my headline. An example of how a Canadian dividend growth investor who retired in 1967 did in the last range-bound market. I included data on the TSE 300 over the period 1968 to 1982 for comparison. The market, in essence, went no where…the dividend investor did well. 2 'When to Buy' is my title for page two. Some ideas from different sources. The price you pay when you buy the stock determines your future return. Four yield charts: a bank, a low yield food retailer, a life company and a utility near the bottom of the list. 3. The list includes columns for 2008 dividend growth and five year average dividend growth. The list is in order of yield difference. Three in the top five are not banks. Average of list 3.47%. Under the list: ten recent dividend increases, some observations on the list and recent quotations about the market from four important investors. 4. Some ideas on replacing BCE when the time comes…BCE is finally back over $40.

June 2008 - mailed on June 11th from Toronto - Page One : Dividends shine (like 90% of the return, folks) in range-bound markets, and there is P/E expansion too with value-priced common stocks according to two sets of data from a book by V. Katsenelson on Active Value Investing (get an idea of what the book is like at www.activevalueinvesting.com Also on page one, half a page on Banks stocks and a couple of sentences from George Soros ”…be concerned with wealth preservation” 2. FLIGHTS my acronym for: fees, liquidity, income, growth, health, taxation, security: a brief comment about doing a FLIGHTS test before you invest. 10 portfolio recommendations; a paragraph on bonds; and comments on the four yield charts: average 'yield of the list', average Graham data values over the last three years, yields of three life companies and a financial holding company's yield 3. The list in order of average yield difference with the usual columns of data on each stock, dividend increases since last issue, and fifteen comments on the list 4. Which common stocks of ours, and a few others, have the best price stability

April 2008 - to be mailed Thursday April 17 - Page One: three topics 1. A long transition period upon us - some thoughts. Be glad we don't own mutual funds or that we are into indexing: in April of 1999 the S&P 500 was at 1362. Now it's at 1332: a range bound market. More on this next issue. • dividend growth data on 12 stocks from my April 1988 report…twenty years ago - how dividends held up during this period - there was some dividend growth and two reductions. These sixteen stocks were in my list twenty years ago in April of 1988. They are no longer in the list. They are in order of 10 year dividend growth from 1977 to 1988: Pacific Northern Gas, Alberta Natural Gas, Maritime Electric (PEI - now in Fortis), Noverco (Gaz), Intercity Gas, Newtel (NFLD), inflation at 7.4% per annum, MT&T (now BA.UN), Island Tel, Quebec Tel, B.C. Tel (Telus perhaps now), Inland Nat. Gas, Nova, Bruncor, Consumers Gas, Union Ent. (Gas), TransMountain. • Value Line comments on the Canadian banks and their expected dividend growth figures and projections on dividend growth from Scotia McLeod.too. 2. Declining p/e ratios and how they affect returns + comments on commodities and gold. The answer to the test question on this page is 6…you subtract the contracting P/E ratio. I used to teach this stuff, remember 3. Revised Graham data for all our stocks. Example: With the revision, Power's G%D falls from -29 to -20…it, along with many other of our commons, is now safer. With the revisions and falling prices, the average G%D of our list is down to -9. I show eight dividend increases this issue, one from our list and seven others, one at 100%. Page 4 - Investment havens in a time of panic + a stock which has held up well in this turmoil and two long term yield charts: a bank and an insurance company. I sorry. I forgot to increase the size of the text font in the charts. The BMO chart is from 1985, The GWO chart from 1992.

February 2008 - was mailed Thursday February 21 - 1. Comments by Buffett*, Soros, Montier, Mauldin, Grantham, Jarislowsky and Gross about what's going on… 2. POINTS: Suppose in 2002, you sorted our stocks seven different ways (yield, yield difference, dividend growth rate, G%D etc.) and assigned three points for the stocks in the top quartile, two for the next quartile down, one for the next and none for the bottom quartile, then added up the points, would the stock with the highest number of points in 2002 turn out to have been the best buy (highest capital appreciation) five years later? The most interesting results are on page two, along with current list in order of quartile points too. The tops point getters are not all banks…a couple of low yielders are in there too. 3. Our list with updated data for dividend growth over five years and dividend growth so far this year (eight changes) and the revised G%D for the banks. I also have revisions for the five year price gain versus five year dividend growth columns…big changes here, of course. Comments on changes to the list: IGM , for instance, has moved up because of mutual funds redemptions. Can you imagine people selling when prices go down. Of course, unlike us, fund owners have nothing to hold up the value of their stocks, so maybe they are, well, I better not say it in my outlound voice… Yield + 5 year dividend growth is my extra column this time. Do you believe this is our total return? The average of the column is 18%. If you sort on this column, the top two are not banks, notice, and the bottom stocks are quite similar to the bottom ones on our usual sort on difference in yield. 4. I'm still working on page four: thoughts on nibbling, the yield charts, which stock have held up and which have bent are listed. There are four yield charts with comments. One yield chart is from a stock at the bottom of our list: one can easily see why it, and the others there, are not good buys. A 'yield of our list' chart will be there too along with a bank yield chart and that of my recent purchase. * I've been nibbling too… the ROB headline that he was sitting on his wallet was wrong.

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December 2007 mailed December 27 2008

1. Two yield charts, one is the yield of our list…most interesting at 3.15% My headline changed three times: Pop Goes the Credit Bubble, to The Great Unwinding has Begun, to finally: Be Disciplined. Be very Cautious. Savour Cash. You get the drift. There's a few lines about the Dow Theory and my favourite current sentence: “Certainty in response to questions does not exist.” Capital Ideas Evolving p.64

2. Some thoughts about buying 'safe' stocks from near the bottom of the list - five stocks which have re-bounded from lows to new 2007 highs and those that are close. Our list of stocks has proved resilent again.

3. The list and some current comments: the banks; average dividend growth data…

4. Richard Russell's interesting answer to a question about holding dividend paying stocks admist the turmoil with some comments by 'himself'. I couldn't resist some comments…Mr. Russell is not quite right. Even though he's been writing his letter since 1958, I don't think Richard Russell understands dividend growth investing. Few investors do. Final renewal reminder for 2008. I do not send renewal notices, remember.

October 12 2007

1. A half page each about two studies on dividend stocks. A) Stocks which do not pay dividends flounder in storms based on David Stanley's ideas in October's MoneySaver and B) Valuation at the time of purchase matters a lot. 11% was the real average return for stocks purchased when the yield was in the high range versus 4% forward average annual real return for those stocks in the expensive quintile. MESSAGE: Don't buy expensive [popular] stocks: use valuation measures like yield and P/E. Detail on second study at http://investmentpostcards.wordpress.com/2007/06/05/us-equity-returns-what-to-expect 2.Some comments on BCE, Leon's and a few other stocks. Two yield charts…both banks well above their average yield…the highest yield since 2000, actually. I have found, over the years, that yield valuation signals work. 3. The list with some comments and a new column for 'price to sales' ratio - this issue only 4. The recent price stability of our dividend stocks, with a table showing August low price and current price To weather storms, the solution for me is not diviversification, it's concentration…in dividend stocks. “Our policy is to concentrate holdings.” Berkshire Hathaway 1978 Annual Report. Are corporations tangible values?

August 10 2007 1. More Canadian data on how well Canadian dividend growth stocks do…better than the Yale endowment fund, it seems. A few comments on Capital Ideas Evolving…Peter L. Bernstein's new book. “A stock dividend is something tangible, it's not an earnings projection…” Richard Russell two yield graphs of banks - neither has had a higher yield since 2000 2. P/E contraction since 2000 - it's effect on the price of a dividend growth stock…a short paper 3. The list and some comments on it - eight more dividend increase announcements. #1 in the list this time was #2 last time; #5 last time is now #3 all banks. The other banks are much further down the list. Positions four, five and six are life insurance companies. The average dividend growth of stocks in our list in 2007 is 12.2%. How long will it take your capital to double at that rate? 4. A summary of a 42 page paper by my neighbour Dr. Peter Kirkham, titled: Are life insurance stocks good investments? Some of my comments on life insurance stocks too…how I select the one we own; two year average G%D data for 10 stocks near the top of our list; a comment on BCE and a market comment by Richard Russell.

June 8 2007 1. Average annual return of Canadian dividend growth stocks in the last decade: a)- 2.3%, b) 14.6%, c) 19.8%, d) 22.2%. two yield charts of stocks near the top of the list - one a bank, one a life company - both have had recent dividend increases and one has not had a higher yield since 2000 2. A FIRST for the Connolly Report - chart of Power's G%D from 2005…with some comments about our Graham figure. Some data on two indicies: What would the DJIA be up to if dividends were included? Forget 13,000 plus, we're talking hundreds of thousands. Why I don't index invest Also on page 2…“The biggest mistake in investing is… 3. Our list of common stocks in order of difference from their own yield average - nine dividend increases this issue - comment on BCEas well as a couple of stocks both at the top and the bottom of the list - two high yield banks briefly compared 4. Dividend increase announcements - some thoughts and calculations - one specific example - “Why don't I own this?” was my proof reader's comment.

April 2007 - I'll try to remember to add this soon and that of February 2007