One of the advantages dividend buying investors have is they are bias toward utilities or companies that perform like utilities. This means the investor looks for companies with a reasonable diversified customer base, but can act similar to a monopoly because prices can be increases every year. In the case of utilities the price increase comes from the Utility Board or Commission which sets the hydro rates every year, then tend to go up.

Utilities love hydro power, because after the capital cost of constructing the dam, the cost of generating electricity is very low. The maintenance of the wires and distribution is an on going cost, but the power costs are limited. Hydro is defined as green or renewable energy.

The other major elements of renewable energy are solar and wind and we are seeing more wind farms, more homes and farms with solar panels on them and battery storage facilities to ensure hydro flows through the day and evening. What companies do you buy?

The S&P Global Clean Energy Index is a good place to start and includes a 45% increase in prices over the past 12 months. That is the best reason to buy but there are others and David Berman outlined them in the Globe and Mail.

Wind and Solar are Economical

Years ago, renewable energy needed government support (when the writer put solar panels on my house, higher prices from the government were received for the length of the contract ). Technological advances have driven efficiency and reliability along with declining cost of wind and storage components. According to investment banker Lazard, the unsubsidized cost of wind energy has declined 70% over the past decade, while solar is down 89%. The decline makes them less expensive then coal and oil and closer to natural gas.

Growth in Renewables is an Unstoppable Force

Despite the President’s love for coal, US electricity generation from coal fell 22% from 2016 to 2019. Renewables are up 34%. Utility companies compare prices and are no longer building coal plants to generate electricity which is the reason why many coal companies went into Chapter 11.

Big, Savvy Investors are Embracing Renewable Energy

Most Fortune 500 companies have clean energy policies and all the big tech companies are trying to be carbon neutral by 2030. In addition, many large pension fund plans have a Power and Renewables Group to invest in renewable energy.

Even Big Oil Companies want some of the Action

The largest oil and gas companies have signed onto the Paris Accord and trying to determine how best to get into the renewable segment. BP and Total have spent billions and BP expects to increase renewable energy capacity to 50 gigawatts by 2030 and Total expects to generate 40% of its sales from low carbon electricity by 2050.

Linking to dividend paying stocks, oil and gas production is not going to stop, but companies will continue to spend billions on solar and wind and hydro, which means more and more homes will come with solar panels connected to the grid. For an investor, if the cash flows are similar to the good effects of an utility they are worth investing in. Whether you buy the utility or the Index fund, one or more should be in your portfolio.

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

One of the reasons why you invest in dividend producing stocks is they have a cash flow which allows them to invest in the company and give money back to the shareholders. There is always a balance, but in a crisis what a company does with its cash flow can tell you if you want to be a long time shareholder. When the pandemic started all companies were unsure or had low levels of certainty of what to do, then time went on and they adjusted. Office workers worked from home, meetings on Zoom or Webex or one of the platforms and there was a level of adjustment.

Adjustment is always two phases, the first phase just the understanding of what needs to be done and the second stage how long will it go on. Was the pandemic a summer thing and all back to normal in September or will it go longer? In an article by Andrew Willis of the Globe some companies bought back their stock and expected things to be relatively normal. There were a number of companies who batten down the hatches, tap government programs for support and hope the vaccine would come soon.

Others like CN, saw the pandemic last longer and there were things it could do and did. CN is one of the largest railroaders with lines running from Chicago to New Orleans and from coast to coast in Canada. The company has 25,000 employees moving about 110,000 rail cars each week across 60,000 miles of track. All companies have investor conferences to tell their story and CN has been telling a good one.

At the start of the pandemic, the company shut down as the economy shut down, but then it realized and did figured out which customers ran essential services that would be needed – food distributors and farmers. Rail cars were moved to 23 terminals which featured refrigerated facilities. This helped keep grocery stores shelves remaining stocked. The company invested in new ship-to-shore transport system. The company did other investments to ensure the company could meet the demands of its customers.

Linking to dividend paying stocks, every company faces similar problems, the difference is some companies have more money to throw at the problem or do nothing. How does a company’s culture and work force adapt to the new realities? When you examine your investments in companies, how well did they adapt both short term and longer term? Did they pretend the COVID is over? what did they do and not do? If you believe they did the right thing, great if you believe they could have done something else then it is time to look for alternatives.

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

At the Annual Meeting, one of the decisions the shareholders make is accepting the outside auditor and the company receives a fee for auditing the books. 99.9% of the time, shareholders accept management’s recommendation for a wide variety of reasons. Often times as smaller investors we believe the large company has enough experience to see fraud or irregularities that audit companies should catch. In the past, one of the reasons things were not caught was the company was using the audit to get into the door, but making fees for a wide range of consultancy within the firm.

In an article by Huw Jones of Reuters, the Global Chairman and Chief Executive of EY Carmine Di Sibio said in a note to clients, EY regrets not uncovering the fraud at German company Wirecard earlier. The company collapsed after it was short of E1.9 ($2.9 billion), the auditor EY missed it.

Mr. Di Sibio says the lesson learnt is EY will be using data analytics for fraud testing including using social media and banking transaction records. (EY will use data analytics similar to the method your bank ensures you are doing what you are supposed to do). Mr. Di Sibio said these innovative technologies will raise the bar and go beyond currently accepted professional standards. (Hopefully we will read in the auditor’s report that all available technologies were used during the audit).

Auditors are not primarily responsible for detecting fraud, but a British report says they should be. Mr. Di Sibio said the fraud at Wirecard was highly complex designed to deceive everyone – investors, banks, supervisory authorities, investigating lawyers, and forensic auditors.

Linking to dividend paying stocks, as investors we expect companies with a long track record of making profits do it legally and consistently. One of the reasons to invest in these type of companies is there should be very limited fraud, investors know how the company makes its money and the margins being received. If you do not know, ensure the company is not your biggest holding.

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

If you look at the ads from the telecom companies, they are urging you to upgrade your smartphone to take advantage of 5G networks. You may or may not upgrade, but you will want to have some money invested in companies that ensure 5G and Artificial Intelligence AI are being used. There are different avenues including index funds which include computer chip makers, but if you want to own the company and some of them have performed well (full disclosure: I own some shares of Nvidia).

Scott Clayton of TSI Network examined the computer chip makers to help narrow the field, to do this his criteria was:

TSI uses a point system to help simplify decision making.

1 point for 5 years of continuous dividend payment, 2 points for more than 5 years

2 points if company has raised the payment in the past 5 years

1 point for management’s commitment to dividends

1 point for operating in non-cyclical industries

1 point for limited exposure to foreign currency rates and freedom from political interference

2 points for a long term record of positive earnings and cash flow sufficient to cover dividend payments

1 point for an industry leader

Company Div Sustain Points Mtk Cap Div 1 Yr Total Recent

Rating ($ mil) Yield Return % Price

Intel Above Aver 8 212.7 2.6 -3.5 50.37

Texas Instruments Above Aver 8 128.8 2.6 8.8 139.68

Taiwan Semicond (ADR) Above Aver 8 445.2 1.7 86.4 83.13

Nvidia Above Aver 8 320.6 0.1 177.8 500.58

Broadcom Above Aver 7 148.4 3.5 27.2 367.04

Qualcomm Above Aver 7 131.5 2.3 46.8 114.56

Analog Devices Above Aver 7 42.8 2.2 0.3 115.56

These above companies dominate the industry

Intel is the world’s biggest maker of chips for PCs and severs

Nvidia leads in graphics and multimedia chips

Texas Instruments sells chips and electronic products worldwide

Qualcomm focuses on wireless devices

Taiwan Semiconductor makes chips for others including Apple, Qualcomm and Broadcom

Linking to dividend paying stocks, whether you do a point system or not, you need to narrow the field because most of us can not buy everything if we want to own the individual stocks. In this case the most important points are along the lines how safe is the dividend? very safe, then if you expect to buy and hold, then markets will do what markets will do expect they do like profitable stocks. Often the total return relative the risk you take is low and that is a good thing to expect and see in your account.

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

In North America, we are thankful for the wide open spaces and the vastness of the land, you will hear the expression during the election speeches, hopefully you will listen to the speeches. The vastness of the space is a double edged sword – the space allows you to think you will always have lots of space and you do not take care of all of it. The problem of what we do with waste has happened over the years and as garbage dumps have filled up, costs were increased, which means at some point there was a desire among consumers and the public to do something about it. The desire to do something about it and companies doing something means there is a time lag. The reality for companies is to change process takes both time and money, but to change means the extra costs have to passed on to the consumers without them lowering the amount they consume.

Nestle SA is the largest food and beverage companies in the world and has the resources and desire to change some of its packaging. The company recently announced the share of recyclable or reusable packaging has increased to 87% of its products. The other 13% will take another 4 or 5 years of its goal of 2025.

The company has reduced its use of new plastics by a third and is willing to spend up to 2 billion Swiss francs ($2.85 billion) to boost recycled plastics.

Magdi Batato told reporters that packaging plays an essential role in preserving the integrity and safety of our food. At the same time, plastics is a major issue around the world.

Mr. Batato said it was very difficult to give a goal for the usage of paper packaging as there is no one size fits all solution. Plastics will remain a component of packaging, however more of it will be recycled plastic.

Linking to dividend producing stocks, the companies that have been part of the problem are also part of the solution. In reality, when you consider the use of plastics has evolved, much of the reason for using it was the cost component to keep things safe and secure. It does not time to change, but the companies making profits have the ability to move their production lines to use less of the bad stuff and increase their use of the good stuff at the same price point. Companies evolve to do the right thing, unfortunately it is usually not fast enough, but the reasons are related to costs and maintaining margins.

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

The US basic materials stocks offer low valuations and above-average dividend yields, which is a good reason to examine the best stocks in the sector.

Gary Christie of Trading Central examined the sector with the following criteria:

the universe is the S&P 500

minimum market capitalization threshold of $2 billion to focus on the largest and most stable companies

the Price Earnings or P/E of 29 or less.

the Price to Sales ratio of 1.5 or less

dividend of 2.5% or greater

Company Mkt Cap P/E Price/ Div 1 Yr YTD Recent

$ Bil Sales Yield Perf% Perf % Price

Eastman Chemical 10.8 18.9 1.3 3.3 12.6 -0.1 79.50

Ternium SA (ADR) 3.6 16.6 0.4 6.6 – 2.4 -18.1 18.35

LyondellBassell Ind 24.3 12.0 0.8 5.8 -10.6 -23.1 72.51

Steel Dynamics 6.2 11.7 0.7 3.4 1.3 -13.8 29.32

MDU Resources 4.8 13.3 0.9 3.5 -14.0 -20.3 23.56

Comp Siderurgica Nac 3.9 11.9 1.1 2.5 -16.8 -15.4 2.95

Nucor Corp 13.9 27.6 0.7 3.5 -10.1 -18.2 45.98

Nutrien Ltd 21.7 26.0 1.1 4.7 -25.6 -20.6 38.04

Avient Corp 2.5 27.0 0.9 2.9 -18.1 -25.3 27.67

Linking to dividend paying stocks, when you buy a stock it means you did not buy something else which is ok. There are choices to be made, and the only when you look back will you know what the absolute best thing to buy is. Homework is important, lists similar to the above gives you names to examine and some of the names come up regularly which helps ensure you make a good decision. Most of us follow the industry which pays us or we have a bias toward that industry. There are many good companies for you to buy, which is the best one?

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

The price of gold has risen for a number of factors including all governments around the world have been running their printing press or deficit financing to as much as possible. One day although not in the near future, but sometime in late 2021 or 2022, policy makers and politicians will begin to talk about government deficits and higher inflation. The Central Bankers are ensuring the time frame is not this year. In normal times, whenever a commodity price increases and stays increased for a period of time, new miners are coming out of the woodwork to start mines or mine existing mines that became unprofitable at a lower price and the big companies since they are flushed with cash, want to spend it buying other companies. The cycle continues and then the price drops and consolidations will need to be done.

At a recent virtual conference, as reported by Tanisha Heiberg and Arunima Kumar of Reuters, the bigger gold mining companies are trying to damper their desire to spend money. Scotiabank estimated as of June 30 the top and mid-tier miners were holding over $5 billion in cash.

7 of the top 10 global gold miners including Newmont, the world’s biggest gold miner, Barrick Gold Corp, and South Afruca’s Gold Fields have cut planned output for the year by 7%, regulatory filings show.

The last time gold prices rose was in 2011 and gold miners spent like drunken sailors, overpaid for assets and then had to write off billions in assets when prices declined.

This year, Barrick increased its dividend 14% and Newmont boosted its payout 79%.

Linking to dividend paying stocks, one of the reasons you buy the shares is consistency. You want a dividend every year, if the company feels it wants to increase the dividend so much the better. Often times when companies, and people, have extra cash their is a desire to spend on acquisitions. Some go well, many do not. Giving money back to your shareholders is always a good idea.

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

If you think back to March when governments around the world closed the economy as much as possible to try to prevent the spread of COVID, the governments knew that shutting down the economy by asking people not to gather in groups was going to harm people’s livelihoods. Governments around the world open their wallets at the Central Banks and sent money to people, in the case of the US it was an extra $600 a week. At some point, governments were hoping that the virus would become a smaller issue and life would continue. We know COVID is not going away quickly, but governments are not positive what they should do. The President offered $300 and an extra $100 from the state if the state opted in, but most states did not because under the law they are not suppose to run deficits and by people not meeting in groups, taxes are way down, spending is up and deficits will be had, unless Washington sends money.

President Trump has campaigned saying, well there are guidelines for the people, but as a politician you should come to my rally, even though most of the states do not allow for conventions or gathering of people. It is odd, but the real issue is what to do with the people whose jobs are not coming back until people can gather – tourism, hospitality, conventions, travel, etc. In an article by Lucia Mutikani of Reuters, in mid September, at mid August more than 30 million people were on unemployment benefits. In addition, a number of companies such as the airlines were receiving money to keep people on the payroll are letting them go because they not longer receive the money and fewer people are flying.

For state unemployment benefits fell to a seasonally adjusted 860,000 people, economists were expecting 850,000.

Some of the claims were dropping because people were beginning to exhaust their benefits which are limited to 26 weeks in most states.

Meanwhile in Washington, the President is campaigning as the economy has opened up and all is good. There is an election going on, so we do not know if policies will be changed.

Linking to dividend paying stocks, when governments gave money to people to help them get through the shutdowns it was a good thing to do. While people lost their jobs, spending was able to continue although many had extra weeks for adjustments. As an individual, when you buy dividend paying stocks the money you earn can be used to buy more stocks or pay bills or other concerns you have. The dividends allow you to have some options, hopefully over time the options increase as more money comes in. Generally there are a few times when systems can be changed, perhaps this is one of them.

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

In the world of mergers and acquisitions there are 2 distinct parts to the proposal. The first is how does the company add value to the existing shareholders and with many mergers it is easy to see. There are natural extensions of what the company is doing now. The questions are what talent is coming, did the company get the right price at the right time to do what it needs to do. The second distinct phase of an acquisitions is selling the merger to government officials or non direct shareholders. Somewhere in government are levers to make the merger go smoothly or throw wrenches into the operations. If the company has not thought about both distinct phases problems will happen.

In an article by Kate Holton and Douglas Busvine of Reuters, in the example of Nvidia, the company is headquartered in the US and at the present time has the best chips for gaming, AI, smartphones and a host of other uses. Nvidia wants to purchase Arm Ltd based in London, UK for $40 billion from Japan’s Softbank Group Corp. In terms of increasing the use of chip design, the deal makes a great deal of sense for Nvidia.

In London, Arm is a handful of global tech companies headquartered in the London area, in this case Cambridge. One of the most important institutions around Cambridge is the University. Similar to many university towns and cities, a growing technology complex has grown around it including Arm. Therefore Nvidia has promise to invest $40 billion including more jobs and more R&D in England. At one time, the idea of a merger was to send more jobs back to where the company was headquartered and leave servicing and distribution in the merged company. Now days, particularly with COVID and technology jobs, governments are trying to secure as many jobs as possible in their jurisdiction.

Linking to dividend paying stocks, these are the companies with the continuing cash to invest in mergers and every year or two, there is a merger and acquisitions. The basis used to be the spreadsheet and how much more the possible company can add and where costs can be cut. In these days, the added feature is what does the different levels of government say or will do both in terms of politics and using their purchasing powers?

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