A variety of financial papers published lists provided by companies which access to the data and promoting their services. One such list was done by Craig McGee at Morningstar Research Inc. The big question Mr. McGee was asking was which companies have grown their dividends in the past years and are expected to continue to grow their dividends. Mr. McGee used a variety of criteria which were;

dividend change over the next 4 quarters vs the trailing 4 quarters.

dividend change over the trailing 4 quarters vs the prior 4 quarters

return on equity for the trailing 4 quarters

payout ratio using expected dividends as a percentage of the current year’s consensus earnings

What he found was 20 companies in Canada and the US which fit the criteria. The companies are meant as a starting point and also by looking at the Return on Equity how relatively safe and secure stocks give a healthy return for limited risk. If you are not getting at least the return of the best ones, perhaps your portfolio needs to be adjusted.

The companies are

Company                          Symbol      Expected Yield            ROE      Payout Ratio

PDL BioPharma               PDLI-Q            7.02%                   694.26%        29.13%

Enso Int’l PLC                    ESV-N            5.99                        11.58           50.85

BCE Inc                              BCE-T            5.07                         20.45            78.16

North West Co                  NWC-T             4.83                        22.71             81.69

Corus Entertainmt ,B    CJR B-T              4.46                        11.46              57.37

Shaw Comm B               SJR B-T            4.19                         18.45              62.50

Emera Inc                          EMA-T           4.12                         13.37             78.38

Mullen Group Ltd                MTL-T           4.09                         16.32           71.43

CIBC                                   CM-T            4.07                         21.68           44.44

PG&E Corp                          PCG-N        4.07                           8.80          60.67

National Bk of Can               NA-T           4.06                          18.35          42.11

Royal Bank of Can                RY-T            3.92                         19.26          47.89

Bank of Nova Scotia           BNS-T             3.91                        15.74           46.80

City Holding Co                     CHCO-Q        3.70                        14.0             49.84

CMS Energy Corp                  CMS-N          3.64                       13.10            61.36

Sturm Ruger & Co                 RGR-N          3.43                       80.27            52.81

CA Inc                                         CA-Q        3.28                       23.63            42.02

McDonald’s Corp                    MCD-N         3.26                       35.17             56.06

Dr. Pepper Snapple Gp           DPS-N         3.13                        28.59             48.24

GameStop Corp                         GME-N      3.12                       15.94             36.07

The above represent some of the best, but it should also show you the risk reward that dividend shares offer. For a relatively low risk, the return on equity has been very good the chart shows the dividend produces a plus 3% yield; the payout ratio shows the dividend for these companies can easily be maintained; and the ROE is primarily in the 15 to 25% range.

There are more questions than answers, till the next time – to raising questions

There is an ad for a new luxury car which starts off as Preconceived Notions …they tell you what is? whether or not it is true? In this case the car company is launching a new luxury car and trying to target those that believe an well established automobile similar to a Rolls Royce would have the same prestige as their new luxury car. Of the positive side, all car brands started at some point in time, all one time they were the new kid on the block. In terms of preconceived notions we all have them about different products and services, particularly if we do not use them very often. We also have preconceived notions about people and take only a few minutes or less to judge them, and since we all do it, it is okay. There is nothing wrong with having preconceived notions as long as we are able to adapt when new facts come forth.

Linking to dividend producing stocks, when you started investing you had a preconceived notion of investing to make money. It turns out being safe and secure is often the best method to achieve good returns. By investing in profitable companies which consistently pay dividends, you wealth grows by the dividends and the capital gains. It is also possible to buy a company that becomes an overnight billion dollar company, but you likely can count on your hands or even one hand the number of companies which did this. Then ask yourself how many stocks are traded on the exchanges and divide the two, the number would be a low percentage, actually a very low percentage. Thus the easier strategy is to buy companies that continually pay dividends which seems to be dull and boring but profitable companies are active In the mergers and acquisition category, for they can afford to buy the competitors or diversify their businesses. As long as the companies maintain their profitability and their dividends, you can stick with dull and boring, for in the long term you will have increased your wealth and that is what investing is about.

There are more questions than answers, till the next time – to raising questions

In the large cities in North America there are many wonderful hospitals and each year partly to raise goodwill and asking for donations; some of them publish a magazine with a few of the many new procedures taking place at the hospital. The stories are heartwarming, some great leaps forward from even a few years ago and raise expectations of the hospital. A number of months ago, visiting one of the hospitals on a regular basis and seeing these abilities to test and treat the patient are amazing. The quality of care which was run into was tremendous and from a personal satisfaction level, one could not ask for anything better. When reading these types of magazines, the heart warming stories are the most important, the second aspect is ask yourself what type of machines and procedures are the doctors using to do the new procedures?With the asking, you will begin homework to see if the machines are standard to all hospitals? are the machines continually used or generating revenue? are the companies investable? What you typically will see is some interesting hospital procedures done with parts of large company, for example GE. The company is a very large one, the revenues of the health care sector are important but GE is not just a health care company.

Linking to dividend paying companies, the large companies similar to GE allow the ability to invest into the health care sector, but that is not their only business. There are many companies in the health care sector, and everyone expects the health care sector to gain in size – partly because of demographics. The baby boom from the 1950 and early 60’s is beginning to retire and expected to live longer. If you listen to a small town radio – birthday and anniversaries the number gets higher every year or in general we are living longer. In terms of the health updates of the hospitals, if you have relatives or you begin to visit them more often, after the goodwill and hospital visit with the people, look around to see opportunities for investment in the health care field.

There are more questions than answers, till the next time – to raising questions

The Loggers is a book by Richard L Williams published by Time-Life Books, NY, 1976 written about the forestry industry on the west coast of the US. Prior to the gold rush which lead many people to the west, the trees kept people in the west (and still do). The timeframe of the book was the 1850’s to the 1900’s, the railways had not connected the country which meant people travelled in ships. The logging companies had gone through the good and easy wood in the northeast and the Midwest and were looking for great forests. The forests were found on the west coast, but the land is not flat which made considerable opportunities for solutions to be found. There was a need for wood to build ships, building growing cities in the east and the tall trees were the dream of many a logger. Saw mills were set up, although the pay for loggers was never great which meant when gold was discovered, the loggers migrated to becoming miners. Eventually many of them came back to logging. and the challenges to get the trees from high in the mountains to the bay where the saw mills were located.

In terms of the lifestyle, the work was hard for the loggers and when they eventually returned to town, the earliest cities always had a section devoted to bars, prostitution and gambling. The loggers would typically sent 3 or 4 months in the bush, then come to town with money in their pockets. One bar in Portland called Erickson’s had a bar of 200 yards staffed by 50 bartenders ready to take the money.

When the railroads were built, the government gave them free land grants, partly to encourage the railroads to become sustainable after the railroad was built. In this fashion the other activities would drive traffic to the railroad, but as railroads were traded on the stock exchange, new owners would sell off assets to pay for other ones. Frederick Weyerhaeuser bought 900,000 acres of timberland from Northern Pacific Railroad for $5.4 million. Northern Pacific was thinking that Weyerhaeuser would transport the timber on the railroads as a customer. At the time Northern Pacific had 44 million acres of land which was quite the asset.

Linking to dividend paying stocks, as long as commodities such as trees are sustainable they make good companies to invest in. Particularly now as the economic situation changes and demand for wood products will be higher. The history of logging and other industries are interesting in how the loggers found solutions to their problems of the logs in one place and the mills in another. History also shows some companies have hidden assets, ie the railroads had grants of land, some of it becomes valuable which makes the railroads more valuable than at first glance.

There are more questions than answers, till the next time – to raising questions

The history of Cotton is the history of the industrial revolution which many do think about however in the book Cotton by Stephen Yafa, Penguin Books, 2005. there is a very good argument made. In the history of cotton, the civil war is fought which similar to all wars is never quite what on the surface it seems like for example the north and south issue. There was the majority theme of slavery overriding the war, however the economies of Boston and New York were on dependent on the cotton trade. The plant was grown in the south, the cotton bales were shipped to mills in the Boston area or the mills in England via New York ports, a disruption in the flow of cotton bales would cause unemployment. The war was fought, it went too long with many battles however in the broader picture the north with the greater concentration of railways and manufacturing plants to supply the army had an enormous advantage from the start. The south was essentially an agrarian society with limited infrastructure and fewer population to man the army. The civil war caused no cotton crop for a number of years and a recession in the economy. Those that stayed on the land were free to become farmers on relatively small farms which allows for a living but unless cotton prices are high does not generate surplus funds. All over the world, farmers borrow or take credit from the bank or the general store and when the crops come in during the fall, pay back the creditors. Some years are better than others where surpluses can actually be made.

The next phase of cotton was the invention of denim or blue jeans, now days most families have more than one pair of blue jeans in their homes at various price points. The acceptance of blue jeans from mining and ranching to hippies to urban designer jeans have many stories along the way. In terms of production of cotton, similar to all crops, there is a pest for each, and in the cotton plant, the pest is called the boll weevil. In an attempt to combat the pest the industry has tried many pesticides with various side affects for both the environment and humans. The other story with cotton is the migration of the production of the textile industry where it has moved from the Boston area to North and South Carolina to China to India and places in between. Cotton is an interesting story.

Linking to dividend paying stocks, cotton is a raw material or commodity which price goes up and down; the manufacturing plants tend to be very price conscious (or on the look out for the place where the price of  labour is kept to a minimum) the products come in a wide range of price points and that is where money is to be made. Invariably all governments want cotton producers to produce the crop and offer subsidies which keep the producers growing but that is not where your first choice of investment should be. Manufacturing needs to be value added or the ability to raise prices to continually to earn revenues to pay dividends. Retail is a tough business but some companies continue to do well including in the textile business. While the product of cotton and the history is very interesting, you must narrow your choices to find continuing profitable companies to invest in.

There are more questions than answers, till the next time – to raising questions

The history of Cotton is the history of the industrial revolution which many do think about however in the book Cotton by Stephen Yafa, Penguin Books, 2005. there is a very good argument made. Cotton came from India and silks from China and one of the reasons the British took over India is the fabric industry. Cotton was known for many years but the ability to remove the threads from the seeds was a hard manual work which meant not much cotton could be produced. With the invention of machines to do the work in England developed by Richard Arkwright, the machines soon meant England was selling cloth to India. In the US, Samuel Slater with financial backing from Moses Brown (Brown University in Rhode Island)  help start the great factories in Lowell, Massachusetts near Boston, Mass. The financial investors were from Boston and this translated into many of the highly reputable institutions near Boston receiving their endowments from the cotton trade. The other aspect of the trade is many parts of the Southern US has ideal growing conditions for cotton. The invention of the Cotton Ginny by Eli Whitney allowed farmers to plant as much cotton as possible and to work the lands – slaves were imported from Africa. The ability to produce more when the world was demanding more cotton fabrics, allowed for increasing prices and produced great wealth in the Southern US, the Boston/NY area and the mill owners in England.

Linking to dividend paying stocks, one of the reasons to invest in them is the wealth they generate, but usually wealth generation has a price somewhere. In the case of cotton, the price was cheap labour in the factories and slave labour to look after the crops. Once the cotton left the factory, few people questioned how it was arrived in the stores except for the demand for the product was high. Hopefully the companies you invest in most people are achieving wealth creation including yourself.

There are more questions than answers, till the next time – to raising questions.

Spring is the season where people get outdoors to do things, which is good for the health. One of the activities the author does is swimming at a local pool. Swimming is a good exercise and sometimes in the water your arms and legs can move more than on dry land. Most of the time swimming is going up the lane and then coming back, but occasionally it is possible to observe the others in the pool. Their swimming styles, strokes, socialization and turning when they come to the wall.

If you watch the best in the world, when they exploded off the wall their legs would have been in a crouched position, their feet not too deep from the water and they would resurface 10 or 15 feet from the wall. During one swim a couple of weeks ago, one person was doing a turn but he was only to push off 2 or 3 feet which is a lot of wasted effort. If the person had come a little closer the turn could be an advantage to his swimming, however every turn he was too far away. Other swimmers barely pushed off the wall and perhaps their concern was the activity not the efficiency. It could be in a general swim what they are doing is the correct thing to do for them for they are swimming.

Linking to dividend paying stocks, with the best companies you are expecting them to perform to the highest potential, not doing whatever. The expectation is the important element, as long as the company is profitable and pays in dividend, you are reasonably happy or at least content to hold. The expectation is the company will do what is necessary to continue to improve and prosper, the standard of expectation is not whatever happens is good enough. Expectations play a role in the stock price – expectations of earnings, growth prospects, management and the expectations of the shareholder.

There are more questions than answers, till the next time – to raising questions

Warren Buffett talks about economic moats, and an economic moat is similar to the castles in the middle ages which had a ring of water around them. Castles are designed for both offensive (to be seen and see the potential enemies) and defensive ( very hard to break in) reasons. If there is water around the castle, it is hard to walk over the water. Craig McGee of Morningstar Research Inc examined stocks in the Morningstar data base to see which companies have an economic moat and how would the returns be if you had invested in them. He was looking at the top 20 stocks with the best combination of price to sales; price to earnings; return on equity. He found if you owned these stocks your return would easily beat the index, often double and equally important using less risk. The model suggests if you wish to own stocks, these are types you want to own. When you buy looked at how wide the economic moat is.

Apple Inc.	AAPL-Q
Boeing Co.	BA-N
CA Inc.	CA-Q
Celgene Corp.	CELG-Q
Deere & Co.	DE-N
Electronic Arts Inc.	EA-Q
Hewlett-Packard Co.	HPQ-N
Iron Mountain Inc.	IRM-N
Las Vegas Sands Corp.	LVS-N
Lazard Ltd.	LAZ-N
Motorola Solutions Inc.	MSI-N
Myriad Genetics Inc.	MYGN-Q
NetApp Inc.	NTAP-Q
PetSmart Inc.	PETM-Q
Tenneco Inc.	TEN-N
TIBCO Software Inc.	TIBX-Q
Tim Hortons Inc.	THI-N
Verint Systems Inc.	VRNT-Q
Int’l Business MachinesWesternUnion	IBM-N WU-N
	Linking to dividend paying stocks, dividends are a sign of economic moat, to pay them the company has to have sustainable earnings. Staying with the best companies often gives you the greatest rewards with the least risk.There are more questions than answers, till the next time – to raising questions.

In my part of the country, the winter has been long and the highs for the weather below normal, that is to change over the coming week. In anticipation of the change or to prepare for the warmer weather at the grocery store some ice cream was purchased. As the weather changes, going outdoors without multiple layers of clothing will be possible, but so will all the other things associated with spring and the outdoors. Things such as gardening, home repairs and eating ice cream. Each of the proceeding can be done when the weather is not as agreeable to work in, but as the weather warms it tends to be the days more people will buy the products and services.

Linking to dividend paying stocks, similar to the eating of ice cream – more is consumed as the weather gets hotter or there tends to be a season for ice cream. This means from an investor point of view, are the sales expected from the best quarter being achieved? if the answer is yes, then the stock can be held on to, if the answer is no – look for a good price to sell the stock. Most stocks have patterns in their sales, as investors it is your job to look and see if they happen.

There are more questions than answers, till the next time – to raising questions