We are all faced with changes and there are many books which offer advice. One of them is called Switch – How to Change Things When Change is Hard by Chip and Dan Heath, Random House, Toronto, 2010. One of the reasons to read the book is it helps define a road map to get the change needed. In the book they believe the brain is made up of two parts and it generally functions as an Elephant and a rider. The rider can direct the Elephant but the Elephant has a mind of its own, when the two parts work together – magic can happen. In many situations, it is not that organizations do not want to change – it is only targeting one portion of the brain be it the rider or the elephant and unless they both receive attention the change will not happen or last.

The 3 stages to facilitate change Mr. Heath believes are:

1. Direct the Rider:  what looks like resistance is often lack of clarity or communication. Provide crystal-clear direction.
2. Motivate the Elephant – what looks like laziness is often exhaustion. Engage their emotion to go in the direction.
3. Shape the Path – what looks like a people problem is often a situational problem. The authors call the situation the path.

If all three happen, then dramatic change can happen even when you have little power or resources.

A wonderful example is Jerry Sternin was working for Save the Children in Vietnam. His job was to fight malnutrition and he was given 6 months to do his work. It would be easy to say malnutrition was the result of poverty, sanitation, lack of clean water or large institutional fixes that require dollars for infrastructure. Mr. Sternin had a small budget and  travelled to rural villages and measured babies. When they came back eventually someone asked  did you find very, very poor kids who are bigger and healthier than the typical child? The answer was yes, so he said let us see what they are doing. It turns out the mothers were feeding their babies 4 times a day (smaller amounts at time) and adding shrimp, crabs and sweet-potato greens. The result Mr. Sternin devised training programs for mothers to add seafood and greens to the diet and feed smaller amounts. The result was 6 months later 65% of the kids were better nourished.

Another example is women with breast cancer at the University of California at San Francisco Hospital.  The good thing is the treatment was wonderful, the bad thing is similar to many large institutions, all the departments were not in the same building and for very good reasons were run according to their department needs. Laura Esserman decided the concern should be the patient first. They started small and the Breast Care Cancer Center grew to include all the disciplines on one floor working to help ensure the needs of the women who come in, their needs are first.

Another example is BP Petroleum. BP drills wells to bring oil and gas out of the earth. If they are successful, they make lots of money. However, Ian Vann BP’s head of exploration decided to change the rules and rule should be No Dry Holes. The reality at the time was 1 in 5 did not work, but people thought at least the other 4 are making money. To do No Dry Holes – greater emphasis was put of the mapping and aggregating the information they had and sharing it with the others. No dry holes meant drilling in the best locations first and using all information possible. There are still dry holes, because you do not know everything till you drill, but there far less and less money is wasted.

Linking to dividend paying stocks, in the book there are many examples however the ideas are does the company have good direction, what are the consequences of not making better decisions and are they doing better? Often times the process of the change or how sustainable is the change will make the difference. As you examine the companies you have investments in, what are they doing? what does the annual report reveal? what stories do you hear or read about those companies in relationship to the change process?

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

 

We are all faced with changes and there are many books which offer advice. One of them is called Switch – How to Change Things When Change is Hard by Chip and Dan Heath, Random House, Toronto, 2010. One of the reasons to read the book is it helps define a road map to get the change needed. In the book they believe the brain is made up of two parts and it generally functions as an Elephant and a rider. The rider can direct the Elephant but the Elephant has a mind of its own, when the two parts work together – magic can happen. In many situations, it is not that organizations do not want to change – it is only targeting one portion of the brain be it the rider or the elephant and unless they both receive attention the change will not happen or last.

The examples of the book do not necessarily require more money as a solution. They require using what you have and changing the road map to accomplish the change needed. The first example is good for food manufacturers, lousy for public health. If you give people bigger sizes they will eat more.

Another story involves the St. Lucia Parrot, a young man was involved with the conservation of the bird through his studies. He was asked by the government to stay on and do something although there was little money. The reality was few people knew about the parrot so there was no ecotourism; and many would not have missed it if it was not there. However, Paul Butler was convinced of its importance and would have to make an emotional case to the people of the country.

Mr. Butler started small – puppet shows for the kids; t shirts; asked people to write songs; asked ministers to include it in their sermons – be a good steward of the things that we in their trust; had a telecom company use the parrot as a symbol. As people were seeing the parrot, their attitudes changed to wanting to protect it and then came legislation.

Another example is the Lovelace Hospital System in Albuquerque, New Mexico where there was turnover of nurses. Turnover costs money in replacing, training, and allowing them to do what they need to do. The normal thing is investigate why people are leaving and it is important to know. The consultants looked at is why are they staying? When they determined a prime reason was the loyal to the profession of nursing – the solution was how can we enhance that passion?  A number of measures were introduced and satisfaction levels climbed, people stayed longer and patients satisfaction levels increased.

Linking to dividend paying stocks, one of the great things about these companies is they generate profits which pay the dividends. The not so great thing is many times a solution is put resources and money without being creative first. Often times in companies, creativity is stressed when the money is not making enough money, then ideas are asked for. The secret is to be creative in the first place – to see what the results can be. Then built, in an institutional setting there will be barriers, both departmental and people for some have done things the same way all the time. It is important to look at your companies – when are they creative? what solutions which make common sense to the outsider is the company not doing? then you can look at alternatives.

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

 

 

 

 

If you own stocks, it is a good feeling to sell at a higher price than you bought, after all that is what part of the stock market is for. The question is always did you make the right decision – if it was part of reason to buy something else, than maybe for your new stock should out perform the old one. If you are chasing performance, then in all likelihood your returns are going to be lower. Thane Stenner of Richardson GMP writes many investors chase performance for lower returns and it possible, that if they changed their behaviors the returns would be higher. Mr. Stenner specializes in high net worth investors and writes generally what they do is:

1. Expect to have a 3-5 year period of buy and hold. If you have done research and the product fits into your strategy first; you will have more confidence to buy and hold.
2. Control your speculation. There will be some situations that cry for you to do something either short or long; many you will not know, although you might have an opinion. The special situations do not come up everyday, so control your expectations to those areas where you have a significant advantage. Remember to separate speculations from core holdings and routinely take profits to reduce risks.
3. Exercise selling discipline. When they sell try to use rational reasons: a)  Business reasons – the business has changed and is going through restructuring. b) Valuation reasons – the investment is at full value – it is time to look at alternatives. c) risk management reasons – the individual’s tolerance for risk changes. d) personal reasons – to buy something or to pay for something or use the money outside the market.

Linking to dividend paying stocks, notice how buy and hold and using patience fits into dividend paying stocks. If a company is growing its dividend and expects to continue to do so, it can easily be a hold for many years. If something changes, then one can look at the alternatives. If the stock is growing its dividend, it has to be profitable and that will be reflected in a growing stock price.

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

The Republican Presidential nominee will be Donald J Trump which means all the books we has written or co-written will be examined closely. One of those book he wrote was Think Like a Champion published by Vanguard Press, NY, 2009. If you read the quotations and stories you can easily hear Donald Trump speaking – he uses consistent phrases. The book is the normal and time honored elements of living that all of us love to here and can likely with reflection offer your version of the advice. The headings in the chapters include: The Importance of Being a Team Player; Learning is a New Beginning; Learn to Think on Your Feet; Building Connecting Thoughts; Keep it Short, Fast and Direct: Learn from Setbacks and Mistakes; Tell People about Your Success; Keep the Big Picture in Mind; It’s Not Personal, it’s Business; Set the Standard; Go With Your Gut; Know Your Audience; Building Your Reputation and The Harder I Work, The Luckier I Get. If you were to be asked about the topics – it all likelihood you could have examples the same with Donald and the real estate group he heads. Some of his stories tend to be more high profile. (If Donald stuck to these topics, he may make a good President – unfortunately the solutions for the problems, which he understands, do not seem to match yet.

Linking to dividend paying stocks, this book offers the normal ways to life a good life and it tends to be relatively simple. Simple can mean complex because it sounds simple although at times it feels complex with the different forces upon you. The simple in investing is to use compounding. The compounding is over time money will compound upwards without you doing anything. Unfortunately, it generally takes time to generate income to make the compounding work great for you. The rule is your return divided by 9 is the number of years to double. The higher the return, the less the years and the trick is minimize the risks. If you do that you are well underway to achieving financial independence. One of the great methods in the stock market is to use the dividends as part of the total return of your investments and to make compounding work for you.

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

Sean Pugliese of Wickham Investment Counsel examined US dividend companies with a focus on safety and value. One of his metrics is Free Cash flow to Enterprise Value (FCF/EV)

He started with companies with a market capitalization of greater than $ 1 billion.

The FCF/EV had to be greater than 0.5. (FCF is the cash left over for investors after all the expenses. reinvestments and capex. EV is a measure of the company’s value excluding cash)

The dividend yield has to be greater than 4%

Payout is less than 100 ( the dividend payment divided by earnings. A lower number is preferred for it could mean dividends could be raised.)

Earnings momentum is the change in annual earnings over the past quarter. A positive number indicates earnings are rising, a negative means to check other signs for possible dividend cut.

Debt to equity ratio of less than 150. A smaller ratio indicates a lower debt.

Company                  Mkt  Cap         FCF/EV       Dividend      Dividend            Earnings    Debt/

($ bil)                                      Yield %     Payout Ratio %    Momentum  Equity

AT&T                          241.68              0.06              4.93              77.96                   -3.43               104.90

Verizon Comm        210.28             0.07              4.47               53.36                      1.01                546.59

Ford Motor                  53.39             0.39               4.91               64.76                   21.10               474.48

Lyondell Bassell       35.22             0.10                 4.07              32.65                 -2.40               142.93

Valero Energy            26.39           0.12                  4.42              56.77                   -10.33             34.12

L Brands                      19.74           0.06                 5.86               22.80                      6.97              0.0

Internat’l Paper      17.68            0.06                 4.18                 53.32                       -2.68          220.07

Macy’s                        10.13             0.08                4.26                 20.66                   -4.18              179.57

Gap                               7.49             0.11                  4.84                 42.99                  -7.29             68.02

Staples                       5.54               0.10                 4.68                92.31                     29.39             19.22

Source: Bloomberg

Of the ten above. Mr. Pugliese believes L Brands and Staples look the most interesting.

Linking to dividend paying stocks, there are many metrics to be examined and eventually you will need to focus on a few. Lists similar to this one helps focus or narrow the companies to a few depending on your selection criteria. Buying when the stock is declined as long as your believe they are still doing their business plan and can pay their dividend will mean in the long run you will be better off through total return.

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

 

 

 

At the end of every quarter, 45 days later, large institutional investors have to reveal their holdings to the Securities which are made public. From the reports all types of lists are made public including what is happening with the well known investors, the list is examined to see what the “smart” money is doing and it was revealed that George Soros – a billionaire investor has taken a shine to gold. Other folks include Stanley Druckenmiller, David Einhorn accumulated gold in the expectations the price might rise. The information was in Ian McGugan of the Globe and Mail column Investing gurus take a shine to gold.

Gold pays no yield and is very attractive to investments which offer next to no payout. Typically gold prices will fall if rates on bonds and bank accounts were to increase. This leads to the US economy and will the US Federal Reserve raise rates?

If the so called “smart” money is looking at gold, it may be worth looking at, but since the reports are filed 45 days after the quarter, the positions may have increased or decreased in the meantime.

Linking to dividend paying stocks, there are many methods to invest in gold including gold companies on the exchange some pay dividends as their debts have been restructured. The issue today is the reports the large institutions file are to be looked at, examined but try not to make a final decision on them because they are at least 45 days old. However they do offer ideas of what is going on with institutional investors.

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

 

Rob Carrick of the Globe and Mail wrote about companies that have consistent dividend growth.

Stocks of the S&P 100 index  were looked at (or the bigger companies in the S&P 500 index)

The 1 year and 5 year dividend growth rates were compared.

To make the cut, stocks needed growth rates of above 9.5% each for the 1 and 5 years. And no more that a 7% difference between the 1 and 5 years.

Who made it:

Company                                      1 Year Dividend Growth                5 Year Dividend Growth

Walt Disney                                        23.5 %                                            28.8%

CVS Health                                         21.4                                                  27.7

Boeing                                                  19.8                                                 21.0

Lowe’s                                                 21.7                                                  20.6

Microsoft                                             16.1                                                 17.6

Nike                                                       14.3                                                15.6

Honeywell                                         15.0                                                  12.3

Allstate                                              10                                                        9.5

The difference is these companies generate consistent dividend growth each year. Some companies are not that consistent for example

HP                                                       70.                                                     27.8

Dow Chemical                                9.5                                                      25.1

Wells Fargo                                    1.3                                                        26

Linking to dividend paying stocks, the charts (and you can change the criteria) show it is very possible to buy solid companies that consistently raise their dividends with limited risk to you. The companies that consistently raise their dividends are generating profits which helps ensures the stock price rises and your total return to increase. The companies have gone through the economic cycle and doing things very well and as they are rewarded you are rewarded.

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

 

Yesterday was Memorial Day and it is odd to write about genocide because it involves death and no hope. However there are lessons to be learned in ensuring genocide does not happen again. If you read the book in that vein then it is worthwhile reading. The book Genocide was written by Jane Springer published by House of Anansi Press, Toronto, 2006. In the book there are listings of many of the genocides of the past centuries, for it is not new to our age. There are 8 stages:

1. Classification:  People are separated into us and them.
2. Symbolizations: Names and symbols are given to the classified people
3. Dehumanization: The other group is treated as non human.
4. Organization: Special army units or militias are trained, killings are planned.
5. Polarization: Groups are driven apart by extremists; intermarriage or social interaction between groups is forbidden.
6. Preparation: Targeted people are physically separated from each other
7. Extermination: Mass killing of people begins
8. Denial: The perpetrators cover up the evidence, deny the crimes and block investigations into the crimes. They need to removed from power by force.

Genocide happens because people believe their part will have no consequences and they see people as less than equal.

Linking to dividend paying stocks, while companies are seen as competitors, the idea is not to totally wipe them out for them other rules will come into place. The desire for a consistent long term profits is a desire to have near monopoly conditions as well as meeting customer satisfaction levels. When customer satisfaction levels fall, other alternatives are found. Maintaining the customer satisfaction level helps ensure long term consistent profitability. Discriminate by customer, not by people.

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

 

 

 

While at the local library Season 1 of the Musketeers, a TV show produced in England (BBC) was picked up. Many people will know of the Musketeers – all for one and one for all. The TV show was shot in the Czech Republic fronting for France in the time of the 17th Century Paris. There are a number of episodes and one of them concerned a plot to overthrow the King. The Musketeers are known as the King’s Guards as opposed to the Red Guards which was controlled by the Cardinal or the Church. With every King or Queen there are people that prefer not to have them or would want the positions for themselves. In one episode, the plotter teams up with people who for various reasons do not like the King. Those plotting to overthrow the King were used to create a diversion and the usual response to protect the King; for the of the plotter’s real plans to steal the King’s jewels or robbery. It is always relatively easy to see plots to overthrow, but often they have a twist and that twist is a simple robbery.

Linking to dividend paying stocks, on the stock market one often reads or hears about undervalued stocks and some are. There will be various reasons but sometimes when a stock is under takeover, the opponents real reason for objecting was there have not been offered enough money. These players will own thousands of shares which means an increase is a big issue; if you only own 100 then in means a $100 or so. When you do your evaluation, there are big pictures and smaller pictures and simple greed. One method to participate is buy valuable companies which earn profits and are valued for their ability to make profits on a regular basis. If you are a small shareholder, you can collect your dividends as you wait for the institutional companies to push up prices.

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