If you watch TV, invariably one of the regularly successful shows you will have seen is a CSI show whether it is set in Las Vegas, NY, or some other place. There is a formula for the show – a crime is committed and then a team of people do their work. There is a book called Crime Scene Investigation edited by Steven A Koehler and others, published by Reader’s Digest, NY, 2004. The book briefly outlines each of the teams that is needed to gain the conviction. Each member of the team brings a variety of expertise to their job in order to narrow the focus. The Crime Scene is arrived at, photographers take pictures to ensure the smallest detail is not left out; the pathologist tells the time of death, and the investigators begin to figure out what else was happening. The forensic team moves in to very carefully check everything possible for clues; the autopsy will give clues on how the person died; if the crime was done by a weapon – the people who work with weapons will narrow the field to which type; another group will suggest the psychology of the crime or why it was committed leading to the arrest and trial. If all went well, a conviction will result. Each of the above people are likely working on more than one case, one TV the show is wrapped up in a hour, in real life it will weeks or even years.

Linking to dividend paying stocks, what is trying to be linked is groups of people are using their talents to find clues to narrow the field to lead to the conviction. From anyone in the community to a specific person is a large challenge. Anyone who has savings is an investor and there are multiple methods to invest your money. If you are generally happy with what you are doing and getting good results, then it is okay. If you wish to try a long term proven success formula – then dividend paying stocks is something you should put your money in. The best investment over the years is a company making profits and is consistently good at it. If the company is good at it, the company pays its shareholders a dividend as well has enough to reinvest in the company to continue to pay dividends. It is simple formula but it works, because sometimes simple works best.

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

In every election politicians will say we need to invest in technology which as member of the general populace we all say that is a good thing. Then the government gives grants to companies in addition to corporate tax cuts if the companies do invest in research and development. Somehow we believe giving government money will make companies in our living area better and richer in the future.  It may happen, no one really knows. In the book Cathedral, Forge, and Waterwheel – Technology and Invention in the Middle Ages Frances and Joseph Gies, Harper Perennnial, 1994 examine the middle ages and the Renaissance in terms of invention. Part of the legacy of the Middle Ages is the black plaque where millions of people died and when people are only interested in living, not a lot of invention is going on. In the Renaissance prosperity and forward looking leaders brought great talent in one geographic area, invention burst forth. But much of what burst forth was based on gradual progress over thousands of years and humanist way of thinking.

A simple example is the horse collar – if you have seen plowing matches, now most things are done by tractors, but there was a time when horses pulled plows, carriages, stagecoaches, etc. The early inventions was straps around their belly and around their chests, however the straps choked the horse – when someone invented the horse collar the pressure was moved to the sternum which tripled the weight a horse could pull. It sounds simple but it took hundreds of years to figure out.

If you think about a plow – in order to break up the ground to plant a field you need to plow the field. The horse or oxen were used to pull the plow. However at the end of the line, it was difficult to turn and until an easier method to turn the plow was invented, fields were long and narrow. The technology of the day dictated what was available and what people generally did with it.

Technology of many industries such as building, cloth making, steel is discussed in the book and new technology is rarely neutral. The is an affect which is usually unattended, for example as industry goes there is more demand on resources – many years ago the demand was on trees. The tree supplied lumber, but was also used for charcoal to supply fuel for the expanded industry. Soon what looked to be an inexhaustible supply of trees was looking like a shortage – either discover new lands or new things to burn – coal, oil, etc.

Linking to dividend paying stocks, it is generally these types of companies that can pay for their research and development into new technology. It is exciting but it is also has to pay for itself. Many technologies invented in the Middle Ages took years before someone made money for them. Some were better – more productive, but there tends to be a lag time before successful adoption. As a shareholder, that is what you need to watch out for. It is great the company is engaged in research and technology, but to make money from should be the reason for the invention, which is the reason for gradual inventions.

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

When you look around your toolbox or toolkit, have you ever wondered about how the tools were invented?  We all use them, some use them much better than others. In the book, One Good Turn – A Natural History of the Screwdriver and the Screw by Witold Rybczynski, HarperCollins, NY, 2000, some of these questions are answered. Mr. Rybczynski discusses many of the tools in the toolbox and their history and settles on the story about the screwdriver and the screw as one of the best tool of the 1900’s. In turns out there is very good reasons why the screw and screwdriver is a great product of the 1900’s, they are very hard to design and it took great knowledge to do so.  If you look around, the screw is a very useful tool and every home has many of them in use and that is why we would think it must have been an early invention. The problem was to mass produce them was next to impossible – in the early days – much of the work was done by hand which meant the price was high and some were great, others were not so or the consistency was not good and carpenters worked around them. It was not until 1800s before good screws were efficiently produced. It took another 50 years before they were produced with a point and another 100 years before they were produced with the distinctive cross, prior to that the screws were produced with the straight line on the top. The ones with the distinctive cross called a Phillips stay on the screwdriver longer which means the operator has more control and is more efficient. Who is the father of the screw – the great mathematician Archimedes.

Linking to dividend paying stocks, the distinctive cross was invented by a man named Robertson who wanted to control his invention form selling to manufacturing. The Phillips was invented by a man named Phillips who licensed his invention to anyone who wanted to sell and manufacture it. In this case, Robertson lost the contract to the auto companies, Phillips was the alternative and became the standard. This is the big problem with inventors – those who want to control versus those that want to license their invention. Dividend paying companies can scale up faster, better and make more money than most inventors. Inventors tend to see it as their baby and want to be involved, whereas in the company it is one more product to be offered to the consumer.

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

When a company makes profits it has many options what to do with the money, and usually there is a combination of both internal and external operations. Often companies will buy back their shares – when interest rates are high, to raise money companies sell shares into the market. When interest rates are low, it is better to issue bonds and buy back some of the shares in the market. For companies which issue dividends, sometimes with the share purchases, the other action is to increase the dividend as there are fewer shares. In a recent article Michael Bowman examined which companies are doing it better than others. Mr. Bowman email is mike@mikebowmangroup.com and works for Wickham Investment Counsel.

To narrow the field, Mr. Bowman started with companies greater than $ one billion in market capitalization. Next in terms of stock buybacks, the company must have done it in the past year. In addition the companies had to have grown the dividend plus 10% over the past 5 years and the current yield greater than 2%. In addition the EV/EBITDA (enterprise value divided by earnings before interest, taxes, depreciation and amortization) is a common metric to use and looking for a low number. The other figure to give indication is Price to free cash flow (P/FCF) which compares the stock price to operating cash – a low number is preferred. The source was Bloomberg.

Company         Ticker        Market Cap  EV/EVTDA    P/FCF  Dividend     DVD

($Bill)                                               5 Yr %       Yield

IBM                   IBM-N        186.18            9.30            14.80       14.32         2.0

Occidental Pete OXY-N       77.81            5.48            31.16        16.09        2.9

Walgreen Co      WAG-N      58.06           12.17           24.18        22.87          2.2

Lockheed Martin LMT-N        52.62          9.31             12.94         19.27         3.2

General Mills        GIS-N        31.83         11.55            17.55         12.42        3.2

Deere & Co             DE-N       31.64           4.83            29.61         13.72       2.8

Yum Brands          YUM-N       30.76          10.96          20.85         14.26       2.1

Rogers Comm B   RCI.B-T      20.19            7.39          15.46          10.57       4.3

Analog Devices        ADI-Q       15.56           12.66        21.48          12.16      3.0

Wisconsin Energy     WEC-N      9.79            9.84          17.20         20.52       3.6

Western Union              WU-N     9.01            8.24            9.58         65.72       2.9

Harris Corp                 HRS-N      7.36            7.77           11.49        16.0         2.4

From the above chart, there are many different types of companies and some are better than others. However by narrowing your scope, you can pick the best of the best or the elements which are most important to you. In this chart you are looking at dividends, their 5 year growth rate and the probabilities the company will continue to pay the dividend and grow it.

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

Within every organization there are people – most of them try to do the right thing by the organization. When you stretch the organization to the people at the highest levels running the government and military, they all share the same goal how they get there will be a little different. Some will want to go a straight line; some will take the winding road with a few roadblocks along the way. Only in hindsight which is best method is seen. In the book Fighting to Lose by John Bryden, published by Dundurn Press, Toronto, 2014, the author looks at the German Intelligence Service and how they played both sides of the war. In the book, the head of German Intelligence Service Admiral Wilhelm Canaris did not always agree with Hitler’s methods and thus played both sides of the war game. On occasion he ensured the Allies received information that made their life easier to defend or anticipate what Germany was doing. Very often Admiral Canaris would want to take the winding road, while Hitler and others around him wanted to go straight forward. This worked for a few years, it did not work the last years of the war. During the first years of the war, Hitler’s strategy worked because the other sides were not use to fighting back, they learnt; in addition given the world was in a depression and the alternative was not working, Hitler found strong support.

To build the best secret intelligence service in the world Admiral Canaris used a book written by Colonel Water Nicolai called Geheime Machte (1925) or The German Secret Police (London, 1924). Colonel Nicolai was the head of German Intelligence in WW 1 and he advocated gathering intelligence beyond the needs of the military. He advocated the need for knowledge about the economic and political information on its enemies or potential enemies. As well to have the general population give their support to you, the use propaganda to increase patriotism was highly encouraged.

Admiral Canaris’ built up a complete picture of the economic and social fabric of potential enemy states, collecting information covertly and from open sources. The staff were older than raw recruits with knowledge about business, management and administration. Admiral Canaris also tapped into the intelligence gathering potential of business and commercial enterprises with operations abroad. As well he used and develop the best radar and technology with unlimited budgets which Hitler supported. As 1939 came to a close, German had the best intelligence service in the world, the UK  was not even close.

Linking to dividend paying stocks, in is imperative that a division collects information about the competition (and there are plenty of open sources to do so) to be able to counter attack them if they move into your primary high profit areas. Investing in technology to help the company both for productivity gains as well as ensuring competitive advantages. The key is to make sense of all the information that is avaliable and find patterns which will be helpful. With the competition, remember people are people, there should be numerous avenues to interact socially with them to see what they are really thinking and doing.

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

Across North America, medical marijuana or cannabis is increasing becoming a legal investment enterprise. Cannabis or weed has been smoked for many generations even if the President says I did not inhale, the issue is cannabis is easily available. For many concert goers, not smelling cannabis meant there was something wrong with the concert. If you go back a few years, most of the cannabis was imported from Mexico because it was higher quality. Over the years, the California or west coast varieties developed and it became possible to grow it indoors. This is when there is a problem – the growing of plants indoors, unless there is great ventilation leads to mould, however if there is great ventilation the smell of the product can be detected by the neighbours. If you are doing something illegal, do you really want your neighbours to know? Grown ops have been found in apartments, houses and work best in industrial buildings where there is some activity to mask what is going on. One of the many ways the police find grow ops is the electricity usage – to mask summer growing the lights have to be on for 18 hours a day. Mark Coakley wrote a book called Hidden Harvest – the rise and fall of North America’s Biggest Cannabis Grow Op, ECW Press, Toronto, 2014. In this case the industrial facility was a former brewery in a town of about 150,000. The large brewery was off the main highway where thousands of cars went by everyday, but inside the brewery more than 20,000 plants were grown with most of the crop exported to the US. The street value of 10,000 plants was over $10 million. The grow op was in production for about 4 years. In addition there was a few other types of businesses in the space.

In reading the book it seemed for the individuals although the product was illegal, the work paid good money which went to pay mortgages, higher education for children and everyday living. The owners were making millions, but those that worked learned their skills to plant efficiently, to trim the plants, to maintain the buildings as if the plant was a legal operation. Even after the grow op was shut down, the skilled workers were eager to work on the next project.

Linking to dividend paying stocks, in the drug trade, the money is often short term lucrative and then someone goes to jail or dies an early death. Moving about, trying to stay below the radar of the police and blending in are the keys to a longer existence. If you choose the legal methods, the outlook is for a longer life and that is were dividend paying stocks help. The dividends that pay consistently over the years plus the capital appreciation of the stocks will give you a healthy return, it usually takes a longer time frame, but it is legal.

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

On Friday, the NY Times ran an article about the electricity grid in the US, focusing on New York. The article written by reporters Julie Creswell and Robert Gebeloff titled Traders Profit by Placing Bets on an Overworked Power Grid was in the Friday August 15 newspaper. The story is when power is moved from where it is produced to the consumer, there are various reasons why more power is needed than is normally provided. The electric companies are very good at projecting normal demand, but with climate change and normal maintenance spikes happen. To protect the companies from price changes, hedging or congestion contacts are sold. As in every commodity that offers hedge contracts, the majority of buyers wish to protect themselves and hedge, other buyers see the potential spikes means potential profits or speculate on when the spikes will occur. It would appear, just following the regular maintenance schedule will make you money, but when the weather is too hot, consumer demand jumps and healthy profits are made. Hopefully, the electrical company is not speculating in the congestion contracts, for one could see adding the hot weather would automatically mean more maintenance shut downs to achieve higher prices.

Linking to dividend paying stocks, some of the best performing stocks over the generations are investor owned utilities, as a shareholder you may want to know their policy on congestion contracts and the percentage of resources they allocate to them. Is the goal hedging or speculating? This is another area where governments try to protect the industry, but may or may not be achieving the desire result of lower electricity prices. From an investor point of view, the millions of customers who need electricity to live their lives is the reason why utilities are such a good investment; the bulk of the customers pay their bills and the utility pays a steady dividend.

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

If you are a devout Christian or know some people who are, one of their traditions is to eat fish on Friday as a symbol of abstinence of eating meat – sheep, goat or beef. The author though about the eat fish on Friday and asked himself where did the fish come from and what fish were they eating and how did European society develop? The book Fish on Friday by Brain Fagan, Basic Books, NY, 2006 helps answers those questions. One of the many areas where Mr. Fagan’s book goes into are recipes for fish, which lead to part about the army. Over the generations, generals have often remarked a good army moves on its stomach or the men have to eat. An army on the move needs rations to supply the men. What does the army serve? What are the good square meals the officers and men are eating. After Cabot made the official discovery of the Grand Banks. the armies were eating cod from the Grand Banks. This means someone must control the distribution because armies buy food, they do not grow or process food. Using clues gain from the army can tell you which companies have a monopoly on supplying them and what types of foods the army is being supplied with. An interesting note in the book is the income from the fishing grounds off Newfoundland and New England provided more wealth to Europe than the gold from Mexico, which had made Spain the richest country in the world. Fish provided for the English empire.

Linking to dividend paying stocks, there are clues all around you to determine what is a good investment. Often times, the non sexy ones pay a similar return and perhaps better than the sexy ideas. Try to ground your ideas into long term profitable ones, rather than short term ones where you are always looking for the big gain to get you back into the game. If you are normal person and had to choose between fish or gold to invest, you will have a high tendency to favor gold, but reality is you would have made more money on the fish. What is in your portfolio?

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

If you are a devout Christian or know some people who are, one of their traditions is to eat fish on Friday as a symbol of abstinence of eating meat – sheep, goat or beef. The author though about the eat fish on Friday and asked himself where did the fish come from and what fish were they eating and how did European society develop? The book Fish on Friday by Brain Fagan, Basic Books, NY, 2006 helps answers those questions. At the present time, for most of North America if we want something, we go to the supermarket or go to many markets and we can find a fish store and buy it off the shelf to cook the food, but if you cast you mind back to the early centuries, supermarkets did not exist, so where did the fish come from. Citizens would traditionally go to markets, at first the average person would have bought fish for holy days and their choice was eels. As Christianity increased in numbers the choice switched to herring, partly because people learned how to keep it using salt. The next step was the cod and many people have eaten salted cod, now it is whatever fish you like.

The fishing industry had to change to meet the demands of the public. This means some communities benefited from the change, some did not. The control of the market was to ensure the customer was getting a quality product each time they went to market at a price that paid dividends to the owners. Mr. Fagan’s books delves into the changes in technology or changes in preserving and shipbuilding.

Linking to dividend paying stocks, at each of the stages of fishing, there evolved a group of companies which seized the market or had a monopoly until the type of fish or alternative changed. The monopoly could last 50 years or more, as we have seen in today’s economy things do change sometimes faster than what we would like, but they do change. As a shareholder in the dividend paying stock, you have to constantly look at what financial moat does the company have to continually pay its dividend. You may want to do this after the dividend has been paid, but it this economy people are always looking for alternatives and no matter the market, having a monopoly or monopoly like conditions helps in making money but people move to what is the best alternative for them.

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