When I moved into the home where I live the previous owner had planted a hedge and it was never taken out. Every spring it needs a trim to have reasonably clean lines. After the August holiday, it will need a little trim to keep the lines remaining clean. The hedge is of sufficient age and is firmly established which means as the weather rains or the sun shines the hedge will grow and invariably it will need a trim.

Linking to dividend paying stocks, ideally the companies you own make money through throughout the year, whether it rains or shine, profits continue. You just have to collect the dividends along the way. The trim can be linked to ensuring the profits do continue by doing your homework on the company. The stock price will go up and down, but if the company continues to be profitable and can pay its dividend, there is little you have to do but watch the hedge grow

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

the business of agriculture, potash is a necessary ingredient to make fertilizer. If you want higher yields from the land to feed the world, fertilizer is needed. The Potash industry for many years was controlled by a legal cartel – two of the largest were Russia and Canadian. These cartels lead to higher prices which benefited the companies and profits flowed. One of the Russian members has decided to go alone and prices have dropped. If you think of another cartel – OPEC which increased the high of oil, for many years the larger players have tried to keep oil prices high and oil companies have benefited. As you look around there are other industries in a cartel like positions. While in the cartel position the companies do very well because prices remain high. It also means they can make expensive mistakes, but the high cash flow makes up for the mistakes.

Linking to dividend paying companies, companies in a cartel like position are in great position to pay and continue to pay dividends. The stocks are attractive as the world continues to pay higher prices for their goods and services. However some in a cartel think the grass is greener on the other side or wish to enter into contracts by themselves. Competition generally involves lower prices, in the case of potash the price is expect to fall which causes a ripple effect on the cost of production and future production. As a consumer you want lower prices, as an investor cartels are wonderful.

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

Odds Against is a Dick Francis novel written in 1965 published by Pan Macmillan, London, 2010. Mr. Francis wrote over 40 best sellers dealing with thrillers. In this particular book, the plot is a real estate speculator is trying to buy a racetrack in order to tear it down and sell to housing companies to build houses. Since the book is a thriller, the normal offering of a higher price is not done. The speculator tries to ensure the racetrack loses money by various unsavoury means, to ensure the company loses money and does not pay its dividend. The thinking is many of the shareholders bought for the racetrack and are emotionally tied to it. If the dividend is not paid, shares will be sold and portfolios shifted to those racetracks which do pay dividends. Any remaining holdouts will accept a small capital gain. The real estate speculator ends up with a large capital gain based on capturing value in the land.

Linking to dividend paying stocks, many successful companies which pay dividends own real estate which is not valued at market values. There is extra value in the shares and as long as the company makes a profit and pays a dividend the value of the stock does not tend to be reflected in the share price. As economic cycles are gone through the stock market at various times will value the land as if the company is in a position to sell it (very often the company is using the land for operations which makes selling difficult) Some companies are seemingly more valuable for their real estate than their operations, however a useful strategy is to ensure the dividend can be paid from operations and the real estate and other assets are a bonus

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

When we hear or read the news and things are on it that does not normally happen we tend to think it is an exception to normal practices, for example oil carrying ships being held for ransom. It turns out as you look back in history, this type of activity was part and parcel of transporting goods. In the book Pirates of Barbary by Adrian Tinniswood, Jonathan Cape, London, 2010, the author looked at the Mediterranean in the 1600’s. It was an interesting time with the countries of England, France, Spain, and the Ottoman Empire at war and peace with each other. The added mix was Christianity – Protestants and Catholics were fearful of each other and of the Muslim Ottoman Empire. In the mix of this was trade of goods from India and other areas of the world going to markets in Europe. Whenever there is a war or friction between two countries, each turns to  Pirates to disrupt the trade of the other country. As a reward, the Pirates get to keep a large portion of the value of the goods. In addition, the larger companies involved in the trade, will encourage the government through the navy, to guard their ships so large losses will not happen, all in the greater good of the country and the company. In the meantime, various countries become willing hosts of captured goods to be sold to third parties which eventually end up in countries where they were headed for in the first place. In home countries, since directly helping the Pirates is not legal, goods are dropped off free, but a equal value of merchandise is left in different warehouse. The process works well until the government signs a peace treaty and then is not sure what to do with Pirates. It is hard to turnoff the tap and the infrastructure that has been built up around the practice.

Linking to dividend producing stocks, in all business particularly the insurance business companies must deal with stolen merchandise or shrink. The scale is hopefully less than what happened in the 1600s but dealing with stolen merchandise is something companies have been dealing with for hundreds of years. It is testament to insurance companies to stay in operation for typically in recessions, theft is higher. As it the past, and likely in the future, most large companies will turn to the government for help in solving their problems.

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

There was an interesting story in the Wall Street Journal written by Brian Costa about one of the catchers for the Tampa Bay Rays – Jose Molina. In a variety of baseball statistics, Mr. Molina is not high of the list for an everyday player, but he excels at a little known statistic – when he is catching more strikes are called, than when he is not catching. If more strikes are called, more players are out at the plate or have to change their strategies at the plate sooner, this allows the Rays to win more games. The reason why Mr. Molina gets more strikes is the way he frames the pitch for the umpire who although the strike zone is defined, there is judgement when the umpire makes the call. In a game filled with statistics, the framing statistic is getting more attention. Every year it seems there are more methods to measure what ball players do and the value they give to the team.

Linking to dividend paying stocks, fortunately the key statistic is a simple one – does the company make profits to pay its dividend? if yes, worth keeping; if no, move to alternatives. Every year, there are people trying to find better statistics to gain insights into making money. In dealing with billions of dollars being traded daily, there is a great demand for these numbers. If you are dealing with less than billions, trying to keep it simple is helpful. Start with has the dividend been paid for a number of years? Is there a reason why it will not be paid? Is management not making too many mistakes, but seems to get it right? Other questions will come up, other analysis can be made, but worrying about the quality of the dividend will help ensure the long term price of the stock is upwards.

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

Many people are sports fans and are passionate about their teams which is great. The long term success of any team is to be consistently in the top of the standings of the league they are in and every once in a while making a run for the cup. Those of us who sit in the seats more often, than participate, are the reason why the teams continue to stay in the urban area where we live. Although the money the TV contracts allows the teams to pay very competitive salaries for the “best” players, the atmosphere is better in the stadium than watching from home. In all sports, the key is to have a wide base of support particularly among kids who are the next generation of fans ( a recent article called How Kansas City makes soccer sell by Sam Borden of the New York Times is a great place to start). As the fan base gets older, teams have to figure out how to attract a younger generation to make the decision to come to the arena. If it does it well, as you move around the hometown of the sports team you should see people wearing the merchandise and you know the team is doing well.

Linking to dividend producing stocks, the same principle applies to companies, if they are consistently profitable and pay a dividend they will be long term winners. Every year the stock price will move up and down, but over the long term the value of a profitable business is greater than a company which might be the next and best thing to come along. In sports teams, there generally is a good reason why teams perform in the bottom half of the standings, although in every sport there is a possibility of a breakout year. If you are a fan of one of those teams, it is a great feeling when those teams outperform. However for the best long term results stick to the dividend paying quality companies.

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

Companies make the front page of the newspapers for various reasons – an accident or something went wrong which affected human lives (train accidents), companies releasing new and wonderful products for the general consumers and for the company to protect their turf. Often times a dividend paying company which has been very successful in the past and present, will try to sway public opinion and politicians to leave their high generating aspects of their operations alone. While everyone loves competition in general, most only want it to affect their industry at the margins or to be able to point to competition and still make healthy profits. This is particularly true when politicians speak about opening up markets or deregulation, it will help some and hurt others. To the politicians their concern is votes, to the businesses it is money.

Linking to dividend paying stocks, this is one area where you can do your homework by scanning the various newspapers or journals you enjoy reading. When you see a headline which affects the companies you own, you can ask yourself what does it mean for the dividend? Usually, the answer is in the short term nothing, in the long run perhaps it is time to look at other companies in the industry to see which ones welcome the changes.

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

If you own more than one dividend stock, invariably it will be a bank. The banks generally are money makers – their large retail base gives them access to low cost money which is lent out in higher cost money, the only exception is when the loan losses go to high or think financial crisis. Banks are an excellent stock to collect dividends from. But which one should you buy? Wells Fargo is the biggest bank in the world by market capitalization (share price times number of shares outstanding), the smaller ones can give better overall returns, whatever you pick start similar to the example below:

Mr. Bowman of Wickham Investment Counsel did an analysis looking for the biggest and most efficient banks.

First we narrowed the field to over $ 5 billion in market capitalization.

Second, Tier 1 capital is a measure of the bank’s strength – the higher the better but must be over 6%.

Efficiency ratio shows the percentage of dollar needed to produce $1 in return.

A low number of non-performing assets or loans with greater than 90 day payments frequency.

North American banks ranked by efficiency ratio

In the summer more books are read, perhaps because reading in the outdoor natural light is wonderful. A recent book read called The Heist by Janet Evanovich and Lee Goldberg, Bantam Books, NY , 2013 was well worth the time reading it. Within the book was a short line which all spy novels must do to achieve success – Logistics and resources are the key. If you start to think about that simple line you will notice most of what you do or try to do is captured in the line. To do something the planning starts and depending on what logistics and resources you have to make it work, will generally imply the scale you can do. If you start to stretch the line to companies – those that do well, execute well. They have the right product at the right time at the right place or logistics and resources are working well.

Linking to dividend producing stocks as the company grows and pays a dividend it is sometimes hard for an investor to determine if the company is doing the right thing all the time. One of the keys is to look at its logistics and resources – how does it get the right product to the right place at the right time to be bought? This is one of the methods as an individual you can do research on the companies shares you own or considering buying. How well does your company do the logistics and resources?

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