Tom's Comments

Dividend stocks do better.

If you invested $100 in 1972 in a typical stock which did NOT pay a dividend, how much would your $100 be worth in April 2009? a) $120 b) $129 c) $941 d)$2,246. How about $129. That's less than a one per cent gain per year. Why would one buy a non-dividend paying stocks? Folks who buy stocks which do not pay dividends hope for a gain. There is simply no other way to make a profit. Right? On the other hand, if you bought a 'typical' common stock which grew its dividend over this period, or a company that initiated a dividend, your $100 would have growth to $2,246 along with the dividends. Fascinating numbers, eh. Also look at my 'evidence it works' page which display similar data over different periods of time. The message is clear. I discovered dividend growth decades ago and we are, as a result, enjoying an increasing retirement income. There is no guarantee that our dividend will not be cut, but we selected our common stocks carefully (preferreds are not and do not grow dividends), and, even with all the turmoil over the last year, we have not had a dividend reduction. In fact, the dividends paid by the companies followed in the Connolly Report are up, on average, by 5% so far in 2009.

· 2009/05/21 09:07 · Tom Connolly

ten year dividend growth

I've been working on ten year dividend growth data recently…from 1998 to 2008. This period is often called the lost decade because the return from the index is close to zero. (The reason is simple: in 1998 prices were high, in 2008 prices fell dramatically. LESSON: If you buy when prices are dear, you get poor future returns.) In contrast, we have had excellent dividend growth with our common stocks: 15 of our stocks had double digit dividend growth. I taught this material for years and still like tests. Which of the following companies had the best dividend growth over the decade from 1998 to 2008?

a) CNR b) Bank N.S. c) Power Corp d) Metro (answer just below under Ron Baron)

· 2009/05/18 21:13 · Tom Connolly

Ron Baron

“this is the most attractive time to be an investor in my lifetime” Ron Baron said in the Barron's interview, of May 4 2009. Ron Baron, who founded Baron Capital Group in 1982 oversees nearly $13 billion and has a valuation-conscious strategy. Baron also said, in Barron's, “Stocks are cheap, and selling for less than their replacement cost.”

Answer from just above: They are all about the same. CNR 17.9% per year from 1998 to 2008 (.17 to .92); Power Corp 17.6% (.22 to 1.11); Metro 17.5% ( ten cents to fifty cents); BNS at 16.9% a year over the decade (.40 to 1.92). The highest in our list was IGM Financial at 20.6% per year, the lowest 1.6% for TransCanada because of their dividend reduction in 2000 (from $1.12 to .80, as I recall…the dividend is now $1.52 a year…up 5.6% in 2009). I'll list all these stocks and their ten year data in my next report. I'm working on price gains over the period too. (Average price growth of my list was 5.8% with Metro the highest at 14.9% per year, and BCE the worst at -8.2%. (the others mentioned in the question: CNR was 12.@, BNS at 7.1% a year and Power at 4.2%) It certainly was not a lost decade for the holders of dividend growth common stock. And, as the dividends are holding as I write this in mid-May 2009, we are still getting our high yields, still benefiting from the dividend growth and the resultant price growth. How is your retirement income doing? Does it increase? For the long run, as an alternative to high yield stocks, consider common stocks with a bit lower yield to begin with, but with good dividend growth. We own three of these stocks. I bought Loblaw ( no 's') instead of Metro, drats, at about $50. Then L fell to below $30. Loblaw seems to be recovering now. The dividend held, though, at 84 cents. My income from Loblaw has been flat for the last few years…like a bond. Ship happens, as our son says: He works on one (a ship) as Financial Controller. Next Monday he'll be back in Kingston for a few days. YES! Off to the pub for a few pints and Luke's for smoked meat. He's a Queen's Honour B. Comm 2000 graduate.

· 2009/05/03 13:52 · Tom Connolly

Prem Watsa April 2009

Derek DeCloet's column of April 16 2009 is worth reading carefully. He talked to Prem Watsa who “is upbeat because everyone else is not” More comment in my April report.

· 2009/04/19 12:29 · Tom Connolly

crash and recovery


”[W]e at at a moment in history ” I would definately make time to read this eight page article/speech by William Macdonald. It's something else again…very well done. ”[T]he two model global economy of the last thirty years is dying and will soon be dead.” Be prepared for change. The transition could be dangerous: the transition will take years.

I've read this eight pages again. It is very hard to summarize. My reaction to it: Keep cash in reserve, shun risk, preserve capital. If you do see an investment opportunity, think twice. Be very prudent.

  • Our (the world's) struggle “will be long and costly”. Balance sheet recessions are nasty (think Japan)
  • “There will be more casualties.”
  • The seven main elements: “recognition that one is seriously sick”, the right diagnosis, look into the abyss, political will, policy choice, market response, new shocks.
· 2009/03/29 06:59 · Tom Connolly

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“The key is to wait for the market to decline and to pick companies with the best likelihood of maintaining their dividends” Martin D. Weiss, The Ultimate Depression Survival Guide. TC: Notice his fifth word: there is a lot of waiting with the dividend growth strategy. Valuation is everything. Arnold Bernhard's 1959 book Evaluation of Common Stocks talking about valuation at the time of purchase on page 121. (When I get a jiff, I'll add it here.) The bigger question is: when do you know the market has declined? That's a tough one. One of my guides it yield. I plot yield data.

most_recent_comments.txt · Last modified: 2009/07/10 08:22 by tom
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