Last week while walking in the downtown area of the urban area where I live, there was an opportunity to view all types of clothing people wear in the summer. On one particular clothing was the slogan “Stray Off the Path” it should not be hard to figure out which athletic company it was designed for. Similar to every good slogan it has more than one meaning – it could mean by wearing the shoes, you can move to set your path to achieve your destination. It could mean the regular paths are too crowded and by straying off the path, you can pass the crowds to get to your destination faster. Of course, there are valid reasons why people go on the same paths – if you walk on the sidewalk, the vehicles are not likely to be on them or it is safer. If you travel on the trade paths that were built over generations of use, there likely will be supports on them – hotels, rest stops, policing, people that will look out for you or it should be safer. In investing, there are many paths to travel, some will do better than others. At some point in time, going on alternative paths may lead you to great profits.

Linking to dividend paying stocks, the alternative paths may lead to wonderful gains, but often after wonderful gains, there comes a big drop which if you had not sold (and most people will have not) the average gains over the years comes near the rest of the pack. If you bought and sold on inside information then you should have a larger than normal gain. If you are not privy to insider information, the best path to take is follow those companies which are already successful and remain successful. One method to determine them is do they pay a dividend? If yes, then you know the company is generating enough income to both invest in the business and to pay the shareholders and you can eliminate the other companies. If the company is not generating enough to invest in the business, then it will slide or its financial books will begin to show myth rather than reality. There are no guarantees in investing, and we do have a culture of individualism, however one of the tried and true methods to continue generate good returns year after year is buying into successful companies which also pay dividends.

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

The movie The Treasure of the Sierra Madre directed by John Huston and stared Humphrey Bogart is considered to be a very good movie to watch and learn something. The essence of the movie is Bogart’s character is working in Mexico but is not doing well, with income here and there. He makes a little money, hears about looking for gold and with 2 other people (one a prospector) goes looking for gold. After a long search, they find a vein in the hills and then gold fever begins. What will you do with your share? do you trust the others to ensure your share is safe? how much is enough? All these questions are age old questions and there is no correct answers – it depends on the individual. In the movie – one wanted a little to retire on; one want some to buy some land and be a farmer; and one want to live the leisure life in style. The movie has the characters react to gold fever on the way from the mine in the mountains to where they would exchange the gold for cash. Also along the way, bandits steal from the miners and this is the learning – the miners thinks the bandits are after his gold dust, the bandits are actually after more tangible items such as shoes, guns and animal pelts. The bandits do not realize the gold is more worth more than all the other things or they do not know the value of the dust and dismiss it. Where is the value you are looking for?

Linking to dividend paying stocks, once you have accumulated a little capital, then you have choices – you can spend it, save it or invest it. If you invest the capital in to a form which pays you a dividend, then you can have the best of all worlds. Over time the capital increases and the dividends can be spent, saved or reinvested, until you have what is enough for you. With dividend stocks, there is value that many will not see for they only see the short term, while dividend stock holders are looking at the long term.

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

The Inferno is another one of Dan Brown’s books which makes an interesting read and is published by Doubleday, NY, 2013. The main character is asked to solve problems left in clues in which a billionaire drug owner believes the world is overpopulated and needs to have fewer people to start fresh. Will he bring impending doom to the world using the back ground of Dante’s book Divine Comedy?. Dante was born into the ruling class of Florence and was exiled for supporting the losing side of a power struggle. Dante wrote the book while in exile about what it was like to descend to hell and back. The levels of hell influenced the Renaissance period and many clues are to found in the art, architecture and locations around Florence. Besides being great piece to look at, some of the paintings have hidden messages in them which lead to clues and since the billionaire is  a fan of Dante seeing the world go to hell, although individually he fell in love and changed his idea that love was the real reason why he was doing what he was doing. He loves the world and wants to ensure overpopulation will not be an issue.

Linking to dividend paying stocks, there are clues to be a successful investor, and similarly to the great art of the Renaissance, if you stick to the great profitable companies which pay dividends, you will be successful. Profitable companies hold their value over time and dividends ensure the company does not stray far from whatever made them the money to be profitable. Sometimes in investing, the trick is picking companies which lose less and gain more. Over the passage of time the profitable company will go higher and the dividend you have received allows for a consistent return on your investment.

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

The book Going for the Green by Robert Thompson, Key Porter Books, Toronto, 2008 is a wonderful book about golfing and the relationships people build. In some professions it seems, golfing is the sport of choice. This means if you are in them, you might want to learn in order to move up in the organization. It is August and that means there are many charity golf tournaments being played every week, unless you have unlimited time and money, you may want to either pick the cause or the people you are expecting to play with. The premise of the book is for when 2 to 4 people go golfing, not only do they golf but they spend time together to either build relationships or learn something from each other. If you could spend 4 hours or so with a senior level person of an organization who would it be? what would you want to learn about them and yourself? how does every handle mistakes when the golf ball goes right or left? do you feel extra pressure on the putt?

For non golf fans, intertwined in the book are the best golf places or some of the most exclusive places to play and who are the designers. What does it take to run a successful golf course? What does the golfing business look like? In the book the focus  is on Canadian golf courses, but many of the golfers golf at the best gold courses around the world.

Linking to dividend paying stocks, when you buy a stock and expect to hold it for a considerable amount of time, you are entering into a relationship with that company for soon you will be noticing it as you make your travels through your life. For example, you may notice if the company gave money to your local hospital or what charities does the company support? it is great if you also support them, then you get two for one. When the company is in the news as an owner you have a different opinion of them than if you did not own shares. Within this relationship, you have determined the senior management of the company, besides paying you a dividend and keeping the company profitable, you can do business with.

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

The book Electric Rivers the story of the James Bay Project by Sean McCutcheon, Black Rose Books, Montreal and NY, 1991 was set in the 1970’s. The time was one where everyone thought we could do anything for in 1969 man had stepped on the moon. When the James River Project was proposed in was big and sexy and it fit into the political world of the government. There was very little not to like about it. It turned out to be very costly costing billions of dollars, it hurt the credit rating of Quebec, but then oil prices went up (the end of cheap oil) and the hydro plants turned into a cash cow for the province. Not only did the people benefit from lower rates, most of the hydro could be exported to New England and New York areas where the hydro companies could close their oil hydro plants and use Quebec’s hydro thus saving money. Not sure if the lower rates were passed on to the users, but the companies were saving money and it was clean energy. As Quebec built the first phase and it went into operations, they looked around and saw more rivers to be tapped and continue to  tap as many rivers as possible. If you look at their construction cycle the expectations are construction for 2 -10 years and operate for 100 years, with a minor renovations along the way. In terms of the investor – generate income for 90 plus years with each project.

As a company, Hydro Quebec generates income into the provincial coffers and this is where investors have to watch out. In Quebec’s case, their politicians need or want to fund all sorts of programs and services, the first place they look is to Hydro Quebec for money. If not continually pushed back, the politicians want to spend the money and as long as hydro rates remain low, voters tend to allow them to do what they wish to do. In an investor owned utility, the free flow cash gives ideas to many in the firm who wish to be involved with vertically or horizontally integrated companies. It takes strong shareholders to curb ambition, for big companies like to do big projects.

Linking to dividend paying stocks, as an investor often you wish the company would do the minimum as long as the income continues to flow – the company is profitable and can pay a dividend. All managements have dreams and pressures place on them to do something, to create more, to do more. As an investor you occasionally need to temper the ambition of management to do and your desire to maintain the dividend.

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

If you like dividend stocks, you love utilities because they are highly regulated, which means high barriers to entry and once they own a hydro plant, it is like printing money. The capital of the building of the plant is soon paid off, the cost of operating relative to the cash flow is low and the water from the river flows for generations past and into the future. Prior to the 1970’s and Watergate, it was relatively easy for any company to tap the potential of the raging rivers across North America. After the 1970’s the public became more cynical and less trusting of government (for some very good reasons). Prior to the 1970’s if a hydro project was proposed, although there would be people that talked about the consequences, the overwhelming general population said this would be good for jobs, the economy, and the future. The book Electric Rivers the story of the James Bay Project by Sean McCutcheon, Black Rose Books, Montreal and NY, 1991 was set in the 1970’s. The setting is a drive 16 hours north of Montreal, which means very few people live there and the politicians and the engineers saw taming the natural landscape and sending electric power south as their salvation. It has worked, hydro continues to be less expensive that the alternative of oil and gas, as long as the ability to send the hydro down the wires exist, the hydro dream of tapping the rivers of the north is a reality.

On the other side of the coin, to ensure the hydro stations work, large lakes were formed, which flooded the land; the habit, which is slow to adapt in the north, decreased and may have stabilized and whatever the normal patterns of the people were changed, some parts for the better. What is important is now that the hydro stations are in and have been operating for a period of time, all the data used to promote new developments can be used to suggest what if it does not go through. What parts of the nature habitant must be looked at first instead of last.

Linking to dividend paying stocks, while they are fewer and fewer untapped rivers to produce hydro; there still are pipelines to be laid for the utility sector. As an investor you are drawn to this sector because it is capital intensive which keeps competition low; there are thousands of people paying for the service on a monthly basis with very few alternatives not to use them (someone may switch from electricity to oil or gas, but it could all be the same company). In the last century it was much easier to build the hydro dam or put down the pipeline, now there will be more challenges because both sides should know the pros and cons better in order to make an informed decision.

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

One of the most common methods to run a company is top down, it can work and for many organizations works well because there is a very defined result that needs to be done. For example, in a fire, senior people need to take control because of the dangers in fighting fires and the experience in fighting the fire and staying alive need to have a chain of command to ensure the fire is brought under control and then put out safely.  The military is also an organizations that needs a top down organization most of the time – when the troops go into battle discussions are not made by all, but through the chain of command. For many other organizations, they can adopt something in between most of the time. One of the problems of organizations that run from top down is they are highly dependent of the agility, the passion, the ability of the leaders. When the leader does not see anything beyond the way it has always been done, the organization suffers.

One of the books which tries to look at changing a top down organization is Cultural Intelligence and Leadership, Editor Karen Davis, Canadian Defence Academy Press, 2009. All military organizations love traditions including the method of decision making that has been passed down from past leaders. Those that wish to change often go to important but smaller military structures to learn the past is the best before coming back to the larger military structures to move up the chain of command. The problem is institutions and countries change quicker than the top down institution, for example in many cities in North America police were Irish, it was not that others could not be, it was it was so much easier if you were Irish to be a cop – having a relative made it easier to get into the force. A good police force reflects the population it serves, things move slowly.

In the book Cultural Intelligence and Leadership looks at least learning about the other cultures in the country and the world and try to determine which approach to use to better procedures of the military and sometimes that means not engaging in battle. Although one quickly learns there are always more than one agenda by groups of people, sometimes they work in together, sometimes they work to take apart.

Linking to dividend paying stocks, competing in the marketplace is easier for people to vote with their pocketbook than with guns. However, with cultural differences one needs to be able to determine how to get an entry to develop a continual market share. If your dividend paying company does not have cultural intelligence and leadership, it is missing a large portion of the market, just because it never had them in the first place. There is money to made in linking to all people not just the ones you have always appealed to.

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

During the summer many people have extra time and novels are read. sometimes they are adventure stories, sometimes romance, and sometimes there is a little of everything. The Rule of Four written by Ian Caldwell and Dustin Thomason, Dell, NY, 2005 is that sort of book. The setting is University of Princeton and a book brings the main characters together – Hypnerotomachia Poliphili, a Renaissance text that has battled scholars for centuries. The context of the book is the author wrote many clues or puzzles to solve the big mystery. In was generally assumed or expected there was treasure at the end of the book and the students and professors would profit by discovering the answer. Although the book was written in Italy, the students were in the US because the libraries in the US, particularly in the universities have some of the best libraries in the world or it can be done. The trick to all the puzzles is link back to the way the author thought and the references he knew. In 500 years, what is being referred to has changed over the years. To understand the answer meant research into what was thought back at the time of the writing. The Renaissance is a great place to have any story because at that period of time – the world’s greatest artists and thinkers were in Florence. They met, they shared ideas, new ways to see the world, to see where man fit in, and it was put down on paper which meant different perspectives were automatically noticed and changed those who could see. Eventually, people who could not see or did not want to see or wanted to go back in time to what they thought was a simpler time rose to power and soon the Renaissance would move from Florence. The book is about saving those books, paintings, music, etc from those who would destroy them.

Linking to dividend paying stocks, the research into finding the answers to the puzzles took weeks and months and years to nibble away and come with an answer. Eventually the answers seem to flow in days and weeks. Investing is sometimes like that, we all invest to make more money, which is a good thing. We buy a stock and it does something (goes up or down)  and we learn what risks we like, what we do not like, what makes money, what rarely makes money and what could make lots of money. It is process that everyone goes through and there is no wrong answer. In the author’s case the process led to dividend stocks which were doing better than the alternatives with less risk. The short answer is profitable companies make good investments – if you can receive a payment for owning them, a dividend, and when the market values companies at higher multiples for making money, profitable companies stocks move up. The big question is which companies will do the best? no one knows until the day is over, but a strong record of consistently earning profits to pay in dividends will have more ups than downs.

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

In the movies, the sniper has found the best location in the city or the country laid wait for a long time till the right moment to shoot the intended target. The bullet moves in slow motion and the affects are final. What is like to be the person that shoots the bullet, in the book Sniper Elite, Rob Maylor, St. Martin’s Press, NY, 2010 tells about his tales to be a Top Special Forces Marksman. Similarly to every craft in the world, there is a lots of training, the quote of it takes 10,000 hours of training to become an expert is very relevant in the book. The reason is in terms of being a sniper, Mr. Maylor believes 70% of the sniper trade is no more than basic infantry skills applied to a higher standard. The other 30% is what makes a good and great sniper. If you think about a sniper, after the first shot or two, people will determine approximately where the shot came from. Depending on the time they have, they will determine the exact spot, the sniper had to get in position, which means gone through the terrain and not be detected by the equally good people on the other side, stay in a position for a period of time, do the shooting allowing for the wind, sun, rain, whatever the weather conditions are and then leave the area safely to do the next task.

In the book, Mr. Maylor is very task oriented, the problem is ahead of you, the troops devise a strategy, either the strategy works or does not and return to base for the next task. Mr. Maylor outlines the steps to be a good sniper, but you need training to do them. The shooting and result are important but the steps up to get where you need to be and getting away safely are the key considerations, if you wish to live another day.

the steps are

Keep all movements slow, and always look before moving

Use the Shadows

Never Enter and Exit a hide by the same route

Use Natural Foliage

Only fire 1 to 2 shots from the same location – if possible move after 1st shot

Whenever possible have a deception plan – false hides, false trials, etc

Marksmanship principles

Eye on the crosshairs, target slightly blurred

Shoot past a solid object

Always have an escape route

Never sacrifice security

Linking to dividend paying stocks, the process of being a marksman is important here, the focus is taking your time, doing your research in advance, trying possibilities, do what you set out to and try not to lose money. If you were a carpenter doing home repairs, the most important thing is the set up, taking your time the board is correctly measured. In buying stocks, for the past number of years buying dividend stocks because of their capital appreciation (stocks price goes higher as the company makes more money or a higher multiple) and the continual dividend payment have made these stocks a very attractive place in the portfolio.

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