On Friday, in the Globe and Mail, Peter Aston vice President of client services at Recognia Inc. looked at US large cap stocks. In all comparisons first he had to narrow the field with different criteria. The first criteria was minimum market capitalization of $ 5 billion – this is an effort to focus on greater stability and safety. This reduced the market to 10% of the field.  The second step is to look for companies with a price-to earnings ration of less than 15; a 5 year historical earnings-per-share growth rate of greater than 5 %; debt to equity of 1.5 or less; and 5 year historical dividend growth rate of 10% or more.

The data came up with a number of companies which are:

Company                           Symbol          Market     P/E   EPS Growth  Debt      Dividend

Cap B$                 %           to Equity   Growth %

Apple Inc                           AAPL-Q         510.2       14.6      58.1         0.13        330.2

Coach Inc                         COH-N              11.5       12.9      11.7         0.09       137.8

Capital One Financ           COF-N               43.8      11.0     182.2       0.97          49.6

Fifth Third Banc                FITN-Q               17.6      10.3      35.9        0.77          112.9

Aetna Inc                            AET-N              26.5       13.0      15.1        0.58          298.5

Ensco                                 ESV-N               11.8        8.7       13.5        0.37          216.7

Travellers Comp                  TRV-N              31.6        8.8        25.8       0.25           10.6

21St Century Fox                FOX-N              70.9       11.0        83.0      0.97            12.4

Seagate Tech                      STX-Q               16.3      11.1         9.1       1.33            76.2

Microsoft                             MSFT-Q            325.7      14.8         9.5      0.26           15.9

Raytheon                               RTNN               30.6       14.9        9.6       0.42           14.5

Hopefully the above tell shows there are many good companies to be found although to expect the dividend growth rate over 100% maybe asking for too much. Apple recently started paying a dividend and it does have $ 150 billion outside the US; the others are financials and they were all went down in 2008, but have come roaring back as the US economy improves.

With your investments, learn to narrow the field and you will find many good companies without having to  take on too much risk. The risk part will can be low and the reward high.

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

As summer approaches there will be many theatre companies around the world presenting works by William Shakespeare. Shakespeare is one of the world’s best known writers of plays and many of the themes are timeless. If you go to one or two of the plays, your interest may be sparked about what was it like in when Shakespeare actually performed the works. A book called Life in Shakespeare’s England written by John Dover Wilson, Cambridge, University Press, 1926 is one of many books that help set the scene. Although the themes, Mr. Shakespeare wrote about are universal or speak to us whether we were in the 1500’s or the 2000’s, the plays of Shakespeare are both entertaining and educational. Whether it is Shakespeare or something else, it is good to look at the past to see how the future will unfold and sometimes it is good to know what the conditions were at the time of the writings to gain insight into the writings.

Linking to dividend paying stocks, after you acquire a stock, you may begin to study the history for many companies have books written about them, although the bulk of them were commissioned by the company and try to present them in the best light possible. It is written after you acquire the shares, because usually we know something about the company, but as an owner your interest is more direct to knowing exactly what you own. Sometimes you read about the culture of the company to gain an understanding of how the company manages to keep its market share. Sometimes the culture will tell you how new leaders come to the forefront of the company. Gaining understanding is always good, but remember the themes tend to be universal.

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

This is the time for movies to be released and over the next few months many movies will be released, hopefully some will be blockbusters (make a lot of money). With this thought in mind, a book about screen writing was picked up called Which Lie Did I Tell? by William Goldman, Vintage Books, NY, 2000. Mr. Goldman is an active member of the screenwriter guild and has written many screenplays of movies many of us have seen. The movies include: Butch Cassidy and the Sundance Kid, All the President’s Men, The Princess Bride, Misery, The Chamber, and a host of others. In the book, Mr. Goodman is with a producer – they connect investors to people who make movies to those who distribute movies and take a cut on all the transactions. You can imagine the Producer is someone who sees the glass half full and the potential is still, notwithstanding complications, sky high. During the conversation with an emphasis on the glass half full, the producer asked Mr. Goldman which lie did I tell? If all comes out as projected, none.

Within the book are stories about how actors are pitched, who would be perfected for the role? tips for writing for the movies, how to pitch a story, why scenes work and why they do not, and lots of stories about the movies. Often movies do not work because they try to be something they are not. Movies start off trying to do one thing, but because someone has an idea or they do not how to pull it off, the audience stops believing and the movie does not work. Typically Hollywood movies reinforce and reassure the audience. Independent films unsettle us or throw us curveballs. In terms of ideas, any idea can be a movie, but do you want to spend time writing it?

Linking to dividend paying stocks, the movies are part of our entertainment and many movies are made but only a few of them are great. The stock market has many stocks that can trade and do trade on a daily basis, but few are great. With the stock market if you limit yourself to the great ones or the best ones – profitable, pay a dividend – the market share allows for the ability to continually raise the dividend, you will not have losers in your portfolio. You may not have a blockbuster, but you would have many consistently profitable companies which over time allow you to be wealthier.

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

The Railway Game was written by J Lakasiewicz, Carleton University, Ottawa, 1976. It focuses on Canadian railways, but the names of the railway lines could easily be exchanged to any European and the United States railway. In one of the chapters concerns the story of a proposed rationalization in St. Louis. The City of St. Louis is in the geographical center of the US with the Mississippi River flowing through it. When the US was entering in its railway age, the driving cities were Philadelphia and New York. The New York lines typically went north to Albany and then straight as possible to Buffalo, Cleveland and Chicago and then the rest of the US. The Pennsylvania line which linked to Philly went to St. Louis and then to the rest of the US. The St Louis marshalling yards was the second largest American rail centre in 1974. The yard served 19 companies operating 63 marshalling yards and a network of connecting lines. The rail yards occupy prime city center land. The book refers to a report which says the connecting efficiency is lower than it can be and if the operations were consolidated in a master yard the transit time would be reduced by over 50%. The issue being discussed is when freight is picked up on one place, the railway car often travels on a second railway line before reaching its destination or it needs to be reconnected.

The railway yards are operated by the railway companies but they are all competitors who do not wish to spend great amounts of money to help each other. At the time in the 1970s, the cost was $150 million, that easily translates to a billion in today’s numbers. Railway companies came after the boats and typically occupy downtown land, and to do a master yard, new lands need to be acquired outside of downtown. The problem of course is in the meantime, highway builders built highways near the railway lands and it the railway goes for a long time, few people have wanted to live near a downtown highway. To solve a problem of operational efficiencies creates bigger problems in the downtown of the city.

Linking to dividend paying stocks, in many cases, the companies have large infrastructure connected to the operations of the company for example factories. In order to keep the profit margins, plants are closed which have existed for a long time in a community, that affects people, but it may be good for the company. Very often as a profitable company, the plant has been a good corporate citizen to the community besides offering long service jobs. As long as senior management worries about the impacts on the community and offers to help, then they are doing their jobs. If your company shuts operations and moves the machines in the middle of the night, then you may want to sell because solutions are often complicated, not easy.

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

Some of the early books about investing which were read including owning railway bonds. Books published around the 1900’s included topics of railway bonds and different dealers specialized in the bonds. The companies that being discussed, many of them now do not exist except in Railway Museums. At the present time, the lines have been reorganized, were involved with mergers, nationalized, or discontinued. The Railway Game was written by J Lakasiewicz, Carleton University, Ottawa, 1976. It focuses on Canadian railways, but the names of the railway lines could easily be exchanged to any European and the United States railway. The steam engine was invented and railways would open up the country. In every country, the politicians of the day, wanted to more than encourage railways to be in their area. Grants either from the Federal Government, State Government or Municipal Governments and usually a combination of all three were offered. The Federal Government because the railways connect one end of the country to the other, which is good for the government of the day, offered government guarantees of the railway bonds. The bonds were sold in London and New York, because for investors there was the government guarantee and that is where investment dollars were to be found. In the late 1800’s many times land grants were given to the railway companies which meant the ones that survived had many operations – timber, minerals or natural resources, hotels, etc. For a time, the railway companies were the immigration department, encouraging people to come to North America for free or discounted land in the west. In the 1920’s and 30’s all railways were rationalized and some lines discontinued. One railway in the book if you drew on a map the line should be 84 miles, the railway due to politicians was 148 miles long with most of it having few paying customers. That particular  railway has since been discontinued for roads and trucks.

Linking to dividend paying stocks,  the railways were the infrastructure of the country and politicians were offering public money to build the railroads. In many instances they continued to offer public money to operate the railroads when the lines were not making money. The railway companies would have been wrong not to accept the money. When politicians offer money, and it fits into the plans of the company, money should be accepted whether it is taxpayer or not. In many parts of the world, we somehow forgot most of the infrastructure was paid by taxpayers, just not always operated by taxpayers.

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

Staying in the year around 1500, another family which dominated the events in history was the Borgias. In a book about the Borgias written by Clemente Fusero, Praeger Publishers, New York, 1972,  the Borgia family was originally from Spain and one of the ambitious sons moved up the leadership levels of the Catholic Church to eventually become Pope. In the 1500’s, being Pope was different than it is today.

When the father became the Pope he was in his 60’s and his trusted advisors were his children. The dad had the ambition, knew how the structure worked, over the years had a variety of enemies and was very good at strategic planning. His sons were the muscle, cunning, liked battles and torture. They also followed Dad’s orders and for that action, they were protected and rewarded. When the Pope died, the abilities of the father soon lead to the downfall of the family, for the remaining son had either learned little as he constantly made bad decisions.

Linking to dividend providing stocks, no one person runs a company. The founder had the vision, the dream, and the company achieved market share, but there were others who had skills that enhanced the founder. It is the reason, why who the others are is always important to look at. The President has the final stay in terms of strategy, as long as money is made at the expected return, the President will have a long career. The President is helped by people who feel they could run the company, and the President has to do the great balancing act, which is the reason why successions at companies often do not work well. It is possible to read the biographies of the executive team, but it is more important to research how well they really work together. Often times, bad events bring out the real personalities.

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

Staying in the year around 1500, another family which dominated the events in history was the Borgias. In a book about the Borgias written by Clemente Fusero, Praeger Publishers, New York, 1972,  the Borgia family was originally from Spain and one of the ambitious sons moved up the leadership levels of the Catholic Church to eventually become Pope. In the 1500’s, being Pope was different than it is today.

Back then many Pope had children and families prior to being Pope, now days the Pope is single. In the days of the Borgias, having children and many nieces and nephews was important to consolidate your power. In the feudal system which existed, the armies of the Kings of the country would battle for control of lands and money from the lands. In the case of Italy, the country was divided into a number of states and the leaders would shift who they favoured from time to time. When the alignments changed, to protect themselves or at least give the sense of protection, a daughter, son, niece or nephew was married off to another leader’s sons or daughter. It was hoped that the marriage which was arranged and considered suitable would result in a long term relationship. If all went well, the children grew to love each other, had many children and were good administrators. The children prior to getting married had likely not met one another.

Linking to dividend paying stocks, the Pope was trying to create dividends through a peaceful or relatively peaceful time. It is easier to buy stocks or create financial stability with existing dividend paying stocks. The long term outlook will the companies which have been adaptable in the past will be adaptable in the future, for now they have enough market share to ensure continued dividends.

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

Staying in the year around 1500, another family which dominated the events in history was the Borgias. In a book about the Borgias written by Clemente Fusero, Praeger Publishers, New York, 1972,  the family was originally from Spain and one of the ambitious sons moved up the leadership levels of the Catholic Church to eventually become Pope. In the 1500’s, being Pope was different than it is today. The world was essentially a feudal  society which means countries were divided into estates and the owner would receive money from all the people who lived in the estate. The owner represented the people in parliament (government) and administered the lands both in terms of infrastructure and to settle disputes. In the Catholic Church at that time, the cardinals and others would receive a share from their assigned districts. The cardinals were wealthy, particularly if their country’s dominate religion was catholic, which at this time it was. Rodrigo was one of the cardinals who wanted to become Pope. How a person becomes Pope is to be elected by other cardinals. The cardinals are put in a room, the door is locked and they are told to make a decision before the door is unlocked. Often times two names become to the forefront, if the people are essentially tied, a compromise candidate is chosen. The prime reason for picking the person is their age and the expectation the person would die soon. If the death was taking too long, poison helped the result. In the meantime, the two names at the forefront can do things which the other side could support. The election of a Pope meant when someone did become Pope, they had better have a very good idea of what they want to get done.

Linking to dividend paying stocks, if the above case with Rodrigo Borgia, the fact he wanted to be Pope meant time was important. It took time and age to become Pope, it was very rare to pick a younger person. Similar in investing, it takes time to accumulate money, but once you have regular dividend payments, along with capital gains the financial rewards will be advantageous. The best friend an investor can have is compound interest or using the affects of compound interest. If you can go about your daily life, and only use the interest or dividend component of your investments, every year your assets will grow.

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

The Medici were once the most powerful family in Italy, the family ran a bank and one of its biggest clients was the Pope. In addition, the family helped sponsor and encourage the Italian Renaissance particularly around the city of their hometown – Florence. In the book The Medici – Godfathers of the Renaissance written by Paul Strathern, Vintage Books, London, 2007, the Medici were the dominant financial and political family in Florence.

In the book, the author went through 300 years of the Medici family – a family that started in banking, used the connection to run Florence Italy and produce a number of sons and grandsons and great grandsons. The sons in the fragile time of Italian politics helped keep the peace as well as encourage and commission artists such as Leonard de Vinci, Michelangelo  Donatello and a host of others. The grandsons became Pope of the Catholic Church (Clement VII and Leo X) and eventually the family married royalty –  Catherine  and Maria were Queen of France) who introduced Italian cooking to France which made French cooking better. Some of the arts programs the French love were introduced and supported by the Italians. Along the way ensuring a heir was on their minds. The good thing about a heir is the bloodlines remain, the bad thing is just because of their bloodlines, it does not mean the person has great administrative abilities or have leadership skills. Some of the heirs did not, but were thrust into the positions anyways which lead to decreasing revenues. It is always easier to spend someone else’s money, than to increase the wealth of the state.

Linking to dividend paying stocks particularly in companies where their is a dominant shareholder many families wish to appoint the sons and grandsons to leadership roles. Not all children are worthy or responsible for leadership roles. Sometimes the company suffers because the heir is not worthy although the family hopes the person grows into their role. When the company is private it does not matter, when the company is public it is important to ensure those that have power are responsible. When the AGM happens vote well.

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