In the late 1340’s Europe was dealing with the worst outbreak in history – the Great Plague or Black Death was gripping Europe. The disease reduced the population of Europe by a minimum of a third and in some cases over 50% in a very fast death and is well written about in the book The Great Mortality by John Kelly, Harper Perennial, NY, 2005. The plague moved around the countries similar to trade routes and quickly spread through the population. No one really knew why people were getting sick and some were not. The plague we now know was carried by fleas on rats, but back in the 1340’s they did not have the infectious disease control centers we know. They just knew a disease was travelling around Europe leaving death in its wake.

The plague lead to a number of advances, one it is believed the infection ran out of people to kill or the bodies that were left, adapted to the genes. It also believed abnormal climate changes affected the rat population to move to the urban cities from the country. Prior to the plague, in many countries they were either faced with more extreme weather or earthquakes which affected the normal everyday life. The extreme weather could be it drought or rainy weather for 3 years or more, it order to survive people and animals had to move, and typically when people move they go to urban centers for opportunity.

Although the author hopes we never have a plague again, reading the book was hard to read because of the descriptions of death, what was interesting to this blog was how did people react to the plague? In many cities, a minimum of 1/3 of the people died and it was likely closer to 50%. One thing people did was to ensure they had been to the lawyers to update their wills, hoping somebody listed actually survived. People also turned to religion to try to make sense of it all. The religion had both good and bad – if someone dies of the plague what to do with the body and since there were so many deaths how to ensure their souls were saved? People also turned to the worst parts of religion by using the religion to blaming somebody (other religions) for the plague in the name of their religion. The conspiracy folks had a field day one can only imagine what would be going on using the internet. Another aspect of many people passing away is fraud, particularly if someone had money was easily found or stolen.

On the flip side, those that lived after the plague found many shortages – food, administration and work which sent up wages. It many areas it took hundreds of years before things were back to normal.

Linking to dividend paying stocks, the companies which produce dividends consistency prefer stable or near stable conditions, although there will be fluctuations here and there. The plague was very similar to the war where a third or half the population disappears, which produces very challenging situations. If the company has a reasonably diversified income streams it can weather some of the changes the regular environment offers. It is important to note some companies are more use to dealing with challenging environments than others just because of the nature of the business and it is good to learn from them.

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

Sitting under the mighty Oak tree … is part of a well known verse and it is likely memorable because many of us know oak trees. In the book Oak -the frame of civilization by William Bryant Logan, W.W. Norton & Company, New York, 2005, the author discusses oak trees. This column will touch on four stories – shipbuilding, architecture, oak barrels and root system in order you may discover a renewed interest in the oak tree.

Sometime ago the US Navy thought if we could only build a ship that functioned similar to the dolphin they would have the best ship in the world. The dolphin is one of the most efficient animals in the sea – they adjust to the waves and water pressure to go through all types of sea conditions. In short,  the dolphins wiggles through the waves. It turns out there was a ship based on the dolphin  – a Viking ship. The ships were made of cleft oak and had incredible adaptablitiy. The Vikings could sail, they could row, they could turn on a dime, the boat easily went through shallow waters and could be landed at the beach. The ships moved with the waves or were excellent ships in the ocean or closer to shore.The wood that made all that possible was the oak as it is strong, watertight, bendable and workable.

In architecture, between the 4th and 18th centuries, 95% of all buildings built in Europe were made of oak. Including famous churches and great halls. Most of them built by carpenters that had little formal education but through their work knew and understood the wood.

Oak barrels are an incredible invention – you can put liquid or solids in the barrel – without the barrel leaking or breaking. The barrels can be easily moved once something was put in the barrel by rolling it. It took skill to learn how to make a good barrel and when someone had the skill they were called either Mister or Master of the trade. The invention of the forklift meant square containers and less need of the barrel.

If you either look at the Oak tree – most of us know one type of another but there are many types with very adaptable seeds or accorns. If the weather changes, the oak tree will begin to adapt to ensure it will continue. The oak tree is one of the very few trees that has deciduous types (with leaves) and evergreen oaks. The root system will cover a wide radius and its roots have been known to squeeze through the smallest of openings. On top of all that a favoured bird of oaks is the Blue Jay which can carry 4 acorns in its beak which helps spread the acorns to a wider geographic area.

Linking to dividend paying stocks, the oak tree has many of the characteristics you should be looking for in buying shares. In terms of dividend paying – similar to the oak tree you want to buy a company with a flexility and adaptability to stay in business for the long term. You want a strong wood or has many uses or is needed by the populace to be better in their lives. The oak tree has been and is a valuable tree in man’s evolution, many good dividend stocks have helped and are helping countless individuals.

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

Sitting under the mighty Oak tree … is part of a well known verse and it is likely memorable because many of us know oak trees. In the book Oak -the frame of civilization by William Bryant Logan, W.W. Norton & Company, New York, 2005, the author discusses oak trees.  If you asked where can you find an oak tree, it turns out where you can them where we find civilization in Asia, Europe and North America. The story of civilization goes as the following we were hunters and gatherers, but what were we gathering? It turns out many were gathering accorns. Take off the shell. the Insides can be ground into a basic meal which is good for you, although the taste is bland which required the invention of stew. Last week a telephone directory arrived in the mailbox, because of the wide range of the oak tree many people have their last names associated with the oak tree. The oak tree is one of the most diverse trees and it is fortunate for all of us, the oak tree and people got together.  The oak is strong, comparative light, watertight, bendable and workable. The author has some great stories about the oak in terms of boat building, architecture, oak barrels and root system  which will be touched on in tomorrow’s column.

Linking to dividend paying stocks, the oak tree which many of us know for us in the urban environment seems like any other tree, but all is not what it seems. Similar to investing all stocks are shares in companies, but profitable ones are better than others. The profitable ones will earn more money in the longer run, the ones that pay dividends will be even more valuable. Like the oak the tree good investments are flexible, adaptable and have very specific reasons why they are good investments.

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

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