Many of us have seen the movie(s) and read the books on the DaVinci Code. It makes for very interesting reading, the movie is fast paced and asks interesting questions. There are multiple books about the DaVinci Code and one of them is Dan Burstein’s Secrets of the Code – the Unauthorized Guide to the Mysteries Behind the DaVinci Code, CDS Books, NY, 2004. The book looks at the major claims by the DaVinci Code and asks are they true or could be true or maybe not. It is good for a book to do this because in all organizations are governed by principles, foundations and a constitution. The church is the same and similar to all constitutions or governance structures some things are put in and some are not. The organization does it for very valid reasons and overtime its public decides if the principles are the right ones. If they are, then the governance will change over time.

Linking to dividend paying stocks, the key is the governance will change, but the principles of the company have to remain strong with the public who buys the goods and services. If the governance goes off, so does the company until it decides what it stands for and what is good or not good. The easy method to do this is to read the President’s letters and the values and mission statement. Besides making money do you agree with them? If you do, then you can look at other financial aspects of the company.

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

Read an interesting book on a subject most of North America takes for granted. Over the course of a couple of days, many people will take something out of the freezer to eat. Back in the  1920’s and 1930’s when most people did not have a freezer, Clarence Birdseye was inventing how to freeze foods better. In an interesting book called Birdseye, The Adventures of a Curious Man by Mark Kurlansky, Doubleday, NY 2012, discusses his life and fast freezing. If something is frozen quickly the ice crystals are small and the food retains its flavours; if food is frozen slowly, the ice crystals are bigger and the food will be mushy. Prior to Mr. Birdseye’s invention frozen food was generally mushy and had a very low reputation for good food. Mr. Birdseye, eventually sold his company to what became General Foods, not only had to invent a better way to freeze, but after successfully doing it, the next big step was to find a method to distribute the food and convince people the quality expected would be delivered. With the backing of GF, grocers received freezers and eventually the public bought fridges with freezers, previously people used ice. The process and how that all came to place makes an interesting story.

Linking to dividend paying stocks, the above story has been areas where dividend stocks try not to tread. Inventions are great, inventions which money can be made within a short time period are even better. In the case of freezing foods, now days  they are accepted and eaten on a very regular basis, but the cost of the infrastructure is a high hill to get over. Once it is in place and acceptance is in the marketplace, revenues and dividends can flow. From this perspective, as a general citizen you should encourage people to be curious and always be looking for better solutions. When it comes to your investment dollars try to stay with those companies whose revenues are already flowing.

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

Earlier this week the US Federal Reserve (fed) decided the economy was not as robust as it first thought it was and decided not to cut back on its stimulus package. This means interest rates will stay low in the US and elsewhere for the next couple of years There was an interesting reaction to this announcement – an Equities Managing Director at Barclays on NPR Business show said to the effect “the announcement will do nothing to help the economy. Investors had moved great amounts of money to companies which pay dividends and leaving growth companies to languish at lower prices” This blog disagrees with the statement. For investors who actually want returns on their investments the announcement is a very good thing. Investors have been buying profitable companies which pay dividends and companies with large cash balances have been paying income to shareholders. It is important to note the Equities person  has a bias is for new issues which generates much more fees to the investment company, but not necessarily to regular investors.

Linking to dividend paying companies, one of the best things to put in practice is to keep the bulk of your investments in profitable companies  which earn a good return with lower risk attached to it and to pay limited fees Over time that formula has proven to be the best one for the average investor. If you consider yourself above average, use part of your dividends to buy growth companies. Most will not be profitable, many will lose money on the share price,  but you never know which one will make up for all the others.

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

If you are a sports fan, it is often times to see easier to see business themes in sports  and one of those books where it is evident is Ron Jaworski’s book The Games that Changed the Game, The Evolution of the NFL in Seven Sundays, Random House, NY, 2010. Mr. Jaworski was a quarterback and maybe familiar to people as one of the broadcasters on Monday Night Football with the nickname of Jaws.

The NFL is a very profitable league, the TV contract is worth billions, each team is worth a billion or close to it, the owners are up in that category, which leads to parity in the league – any team has all the resources it needs to win. The variable is the coaching and intergrating the players into their coaching system. Winning management styles differ over the years – some coaches yell, some are soft spoken, but all expect results, and if they do not deliver their time as head coach is a generally a short one. Mr. Jaworski says there is no simple way to win a football game. There are many paths and that is why people watch and continue to care about the game. There are many levels to watch a game from on one level it is physical activity; another level it is a chess match; another level it is about quality of players; another level it is coaching style; another level it is putting everything together in to make a whole; another level it is entertainment.

Linking to dividend paying stocks, if you focus on the teams, all of the teams make money, lots of it. Even though they compete against each other, they share TV revenues and that is a large portion of the budget. From a financial point of view as long as the league does not expand, winning is not necessarily the most important element. Having said that, the owners of the teams over their careers have been successful and do not like to lose or they do not stand pat for long. In the case of your dividend paying stocks, the company has proven to be successful, the question for you is how much monopoly like conditions apply to your companies? Is this percentage likely to continue? if it is then you have little to worry about; if not there are industries that operate on monopoly or semi-monopoly like conditions – check them out.

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

If you are a sports fan, it is often times to see easier to see business themes in sports  and one of those books where it is evident is Ron Jaworski’s book The Games that Changed the Game, The Evolution of the NFL in Seven Sundays, Random House, NY, 2010. Mr. Jaworski was a quarterback and maybe familiar to people as one of the broadcasters on Monday Night Football with the nickname of Jaws. If you consider the National Football League from a business perspective – the most profitable sports league in North America is the NFL and essentially all the teams are worth a billion or more. Worldwide the most popular game is soccer also called football. In the NFL the object of the game is move the ball down the field and across the goal line to score 7 points or kick it for 3 points. That objective has not changed since the founding but the game has. Similar to most businesses, when the game was introduced, there were minor changes but everyone did very similar things. Often times losing teams needed to do something different to make them winning teams – and this is where the coaches become critically important. How the team prepares and practices for a game will determine the outcome. For example, since most people are creatures of habit – they do something before the action if the opposition can detect the habit, they can have a split second advantage which can be capitalized on or be taken advantage of.

One of the themes of the book is the coach trying to determine if there was a blank slate would we be doing the process the same way? Is there an better way? one coach said the field is 100 yards long and 53 yards wide, I want to use every inch of it and devised his plans to do so. Other teams were not using the whole field and had to adjust or see more losses than wins. Every year the players are faster and stronger and play smarter, trying to find a mismatch of skill set to take advantage of gets harder and harder but it is there to be found.

Linking to dividend paying stocks, Mr. Jaworski picked 7 games or turning points in the NFL, and whatever industry you are in, you should be able to pick a few turning points off the top of your head. Then ask the question, for your dividend paying companies  which thrives on a steady market share and profitability, what would change it? how does the company adapt or be flexible to the market and stay profitable? how good are the coaches in the company? or is the monopoly conditions so strong that even an average year would not make a difference?

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

Similar to most people, over the past number of years hearing about the story of Osama Bin Laden has been a continuing story in the news. It was with interest the book Seal Target Geronimo, by Chuck Pfarrer, St. Martins Press, NY, 2011 was read. The book outlines how the Bin Laden story ended. There are many elements  but the key ones are planning and logistics. Eventually Mr. Bin Laden was found by the courier system he used because in the end no one can exist in isolation. Having found him, then the operational aspects began – how was he protected? what are the threats? How will the latest and greatest technology work? It turned out, he was less protected than expected which was a good thing for the US. To secure the compound took 12 bullets from a very experienced and talented team and the latest technology worked.

Linking to dividend paying stocks, as a shareholder you can see how your company is performing the planning and Iogistics? for at this time of the year new products and services are introduced. How is the market accepting them? Can the company deliver the promises it makes to its customers? If it is a retail operation are the shelves stocked with the correct merchandise? If the company has its logistics and planning going well then it should be doing well.

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

When you look at the list of the stocks traded on the exchanges, you will find hundreds of companies, invariably all trying to do the same thing – make money. One of the first tasks you have is to narrow the field – this blog believes one of the best methods to make money is by investing in companies that are proven winners which have a history of paying dividends. By starting with that list, you will tend to be better off in the future. Occassionally in the Globe and Mail and other financial papers, analysis are run to help people. Ian McGugan does a column which helps to narrow the list. Recently he teamed up with Craig McGee of Morningstar.

They were looking to see if US Dividend stocks are still reasonably priced? The first test determined yes they are – dividend stocks are trading at 14.7 times earnings, while historically they trade at 14.9 times.

Next step – which ones are the good ones? To find firms that appear the most reasonably valued, he used CPMS to select the 20 U.S. stocks with the best combination of low price-to-earnings ratios, low price-to-cash-flow ratios and low price-to-sales ratios. (All of them are based on the past four quarters’ results.)

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

This week Verizon – the leading wireless provider in the US closed a bond deal that helped it to buy out Vodafone share of its business. The bond deal was capped at $ 49 billion but had orders up to $100 billion. The 30 year bond yield 6.5% and the 10 year bond was at 5.2 %. The existing US bond yields on a 30 year bond is 3.85% and a 10 year 2.91%.

When you look at another piece of infrastructure – in the 1870s and beyond millions – now billions of dollars went into the building of the railways across the US and around the world. Have you ever wondered why the the money flowed from Europe into railway bonds? The answer was high interest rates and a semi-government guarantee of the backing of the lands. In the case of the railways, most lines that were conceived and built were not profitable, but were given large land grants which under the correct conditions and overtime some could turn out to be income producing. For example, the railway lines which ran through coal country was a great idea – but someone had to set up the mines, do the mining and finally ship it before the railways would see any cash flow. Many railways ran out of time and went bankrupt, many needed to be restructured and over the last 100 years has evolved into the railway infrastructure that exists today. Investors were attracted by high interest rates in the 1870’s and 80’s and if you look around the world, in the last few years a number of institutions were bankrupt caused by high rates and the seemingly never ending task to attract more money to pay the rates. The industry changes but the reasons remains the same.

Linking to dividend paying stocks, as an investor you want high interest rates, as a payee you want low interest rates, however whatever the rate is the company has to have the financial ability to repay its loans. The homework of the dividend buyer is not just to buy the highest yields, but the most sustainable yields from a profitable company. There are numerous examples which allows one to have choice, pick well.

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

you were to look at the richest people in the world, there tends to be a few women, in the early 1900’s one woman’s name would have stood out – Hetty Green. Over the years, she increased her wealth to today’s equivalent of over $ 2 billion. Hetty in business was a titan, but in personal life lived in modest surroundings and dressed in black. Her story in the book The Richest Woman in America – Hetty Green in the Gilded Age by Janet Wallach, Doubleday, 2012 is an interesting read on a number of accounts. Hetty was an interesting person, she lived and prospered as the US turned  into an industrial power which the book describes. Hetty also learned early about the power of compound interest and receiving dividends – her largest investments were the railroads and mortgages and/or real estate.

The growth of railroads was an interesting time in the US from little to crossing the US.  To build the railroads – governments gave free land, which the railroads sold bonds at high interest rates – European money bought the bonds due to the high interest rates being offered and railroads were built. After a few years, too many railroads were built, some went bankrupt which threw financial markets around the world in a decline, then reorganizations happened and the process was repeated. The events of the past few years are remarkably similar to what happen in the 1870s. In this landscape, Hetty managed to buy the good railroads when the prices were down and sell when the prices were up.  How did she do this on a regular basis?

Some of her wisdom is

Before deciding on an investment, seek out every kind of information about it. (investigate and do your homework)

In business, generally do not close a bargain until you have reflected on it overnight or Never be in a Hurry to get rich.(if it is great deal today, it will be a great deal tomorrow – take your time)

Before making a deal, if anyone is fool enough to offer you the full amount, take it. If you are offered less, tell the person you will give an answer in the morning. Think about the matter over carefully in the evening. If you decide that it will be to your advantage to accept the offer, say so the next day.  (what is your best interest? remember it is easier to lose money than make it)

Common sense is the secret of making money.

When good things are so low that no one wants them, I buy them and lay them away; when owing to some new development, they go up and my shares are needed that others will pay dearly for them, I am ready to sell. (if you buy quality, you can be patient and collect the dividends as time goes on)

I also buy when everyone wants to sell, and selling when everyone wants to buy.

If one can buy a good thing at a lower cost than it has ever sold for before, he may be fairly sure of getting it cheap.

(the above three imply some basic rules: being in cash is a good option; you must have regular income stream be it from dividends or interest payments as markets will go up and down – buying profitable companies when prices fall is a great buying opportunity; try to stay out of debt of keep it very manageable).

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