COVID has changed retail shopping in the US, but in some countries shopping on line was pushed ahead a number of years, but people were already shopping on line. All retail companies over the past few years have invested in shopping online, COVID pushed the line ahead the equivalent of 10 years into 1 year. Then there are countries where companies similar to Amazon were available but were being subsidized by countries such as the US, Germany and Britain. An example is Italy.

In an article by Adam Satariano and Emma Bubola of the New York Times News Service, Italy is a country that has preferred to shop in stores, pay cash to buying online in record numbers. If you think about Italy, the numerous coffee shops for people to go outside brings an image that seems natural. Go shopping and stop at small restaurant before going home.

North America is Amazon’s largest market accounting for 2/3s of its $245.5 billion global consumer business. But the Seattle based company has been targeting Europe and other markets to grow.

Amazon entered Italy 10 years ago or in 2010, and prior to COVID 40% of Italians shopped on line compared to 87% in Britain and 79% in Germany according to Eurostat, an European Union government statistics group. Although people shopped on line, e commerce accounts for 8% of retail spending in the country.

In 2020, the total online sales are estimated to grow 26% to a record E22.7 billion ($35.4 billion) according to researchers from Polytechnic University of Milan.

One reason for fewer online shopping in Italy is small and medium sized businesses make up roughly 67% of the economy and 78% of employment. Many companies saw online as a life line or opportunity to stay in business.

Amazon has added 2 new fulfilment centers and 7 delivery stations pushing its workforce up to 8,500 well up from the 200 in 2011.

Linking to dividend paying stocks, to build up and take advantage of opportunities companies need the infrastructure in place. When demand builds the process is repeated over and over to satisfy the customer and keep them coming back. In Italy there were challenges with internet infrastructure but all companies had the same concerns, who takes advantages of it?

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

COVID has affected the world and one of the ways it has affected is income earned has fallen. According to an article by Stephanie Nebehay of Reuters, income earned from work worldwide dropped by an estimated 10.7% or $4.7 trillion in the first 9 months of 2020. The figure was noted by a report by International Labour Organization (ILO).

Governments around the world have including income supports (you remember in the first tranch the US government gave an extra $600 a week), which is equal to 5.5% of global gross domestic product fro the 9 months of 2019.

The United National agency said a decline in employment numbers had generally been greater for women than men. In the 2nd quarter alone, global working time lost was 17.3%, equivalent to 495 million full-time jobs. It was estimated that 14% or 400 million jobs would be lost.

In the 3rd quarter, losses of 12.1% or 345 jobs are estimated to be lost.

Linking to dividend paying stocks, there is an old saying if there is a downturn if affects someone else, it is a recession if it affects you. The lost of so many jobs means the old saying is somewhat ineffective because the slowdown has affected almost everyone. If you have investments in dividend paying stocks, at least the dividends continue to be paid which helps you through the economic changes.

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

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.