Last week the author read the book Judgment Calls – 12 Stories of Big Decisions and the Teams that Got them Right by Thomas Davenport and Brook Manville, Harvard Business Review Press, 2012. The authors believe one of the reasons why the economy went south in 2008 is lack of judgement in corporate decision making. Thus, they decided to review and find stories of companies that are making better decisions and why? The Organizational Judgement came into focus and the 4 features are: decision making as a participative problem-solving process – how do people affected by the organization have inputs into the problem-solving process? the opportunities of new technology and analytics – the integration of technology into the organization; the power of culture – organizations that practice great judgment have many of the key attributes and values embedded into their operating culture; and leaders doing the right thing and establishing the right context – the leaders role is and are crucial for people take their cues from the leader.

Linking to dividend paying stocks, invariably more companies which pay dividends are rated higher on the organizational judgment scale. While making money and earning profits are needed to pay a dividend, the other side of the coin is long term sustainability. Most of us do not have insider knowledge to how the companies in which we own shares operate, but we can receive on going reviews. The reviews are the shareholder letter, the media reports – what the company is doing in its “home town”, when a company does a product launch – how did it do it? and equally important when something goes wrong how does the organization act? After you have determined the organizational judgment of the company, reviewing the financials is the next step.

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

Yesterday, the author was reading a Linked-In comment about customer service and Bank of America. Afterwards I clicked onto a website by Beyond Philosophy to learn about a company in England called Morgan Sindall Fitout. The company implemented a Perfect Delivery system in the construction business. 10 years ago when the company began its journey, it was a radical idea, because anyone who has done home renovations knows, one thing leads to another and scope creep comes into play. Costs rise, the length of construction gets longer, and what seem simple becomes complex. Morgan Sindall was doing a 24% perfect delivery and now after 10 years in the program is up to 93% which is a testimony to what can be done. Achieving such numbers, along with continuing towards the 100% mark, leads to other aspects of great customer service which are being worked on. Ten years into the program the results along with better customer service are more business, greater profits, better communication on expectations and higher standards.

Linking to dividend paying stocks, similar to Morgan Sindall Fitout, a radical idea can pay great dividends for customers and the company. Most of the time radical ideas are simple ideas, executed very well. Increasing standards in a low expectation field such as Perfect Delivery is getting the job right the first time and on budget. If the competition is not doing it, why can not it be done? There are always risks, in Morgan Sindall the risk was if they did not deliver Perfect Delivery, their fees would be lowered. Their expectation was or it was hoped when they did deliver, people would talk about great service and in the long run they would have a greater market share.

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

In one of the newspapers the writer reads, a section for Kids Camp was inserted with the caption – Camp Skills for Life. Times have changed since the writer was a youth, as a member of Scouts camp and camp skills were integrated into the program; as a member of athletic team – there were specialized camps (which did everything every other camp did plus the Olympic sport connected). Browsing through the insert, all camps follow the same principles as any other business – people need to go and pay fees; camps have to be maintained and staffed; there is a hope that the weather for the numerous outdoor activities planned is good to great; those that have gone previously will recommend and send their kids to the camp; for the adults without kids they can sponsor kids to go to camp; and the camp is fun for both kids and parents.

Linking to dividend producing stocks, all activities are a business and need a cash flow to continue. The camps that have been operating for a number of years are doing that, which allows them to continue for the long term. While brand new camps can and will come forth, the older ones have an advantage, they have been operating for a number of years. If you believe that is a good advantage, then the same philosophy is for your investing. A long term horizon with a continual return to the investors, which is where dividend producing stocks fit into.

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

In the world of investing, one of the goals of everyone is to have more at the end than you started with. But every once in a while, there is eager jump to make money quickly, based on some sort of inside information. You may not have it, but someone you are friendly with does or seems to, except for his inside information does not exist and he only wants your money. The author recently read a book called The Mark Inside by Amy Reading, Alfred A Knopf, 2012. In Chapter One, Ms Reading describes a typical Mark in all its acts. The rest of the book is about the tale of the person seeking revenge to con the con artist, with a healthy sprinkling of the history of people being conned interwoven through the book. It is a good read, because the process still goes on today. Hopefully the stories about the crooked politicians and police have changed for the better. One of the reasons why the con still works today is the wonderful examples of humanity that are prevalent when trust is used for good, can easily be turned and used to con people or swindle them out of their money.

Linking to dividend producing stocks, one method to avoid being conned or swindled is to keep the bulk of your money in stocks that have a history of raising their dividends over the years, as well as you have a good idea of what the companies does. The key to the above is over the long term or over a period of years, your money will grow. If you keep most of your investment money in dividend stocks, you will likely miss the big financial score (you can risk it with your other investment money) but there is almost no reason to change your dividend paying investments.

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

Just about everyone has eaten or heard about McDonald’s. There are very good reasons for it, which seem from the Quality, Service, Cleanliness and Value or QSC&V. Those four words ensure whatever McDonald’s you go to around the world, consistency of high standards will be there. As many who have traveled will attest, McDonald’s is a good, safe choice to eat at. Behind the counter, one of the big competitive advantages of the company is the relationship with their suppliers.

According to the book Vested by Kate Vitasek and Karl Manroot, McDonald’s relationship with its suppliers over the years has been and is on going similar to a 3 legged stool where the legs are employees, owner/operators and suppliers. McDonald’s has a vested interested in its suppliers both living the QSC&V as well as continual innovation for the restaurant. When the company started, this was likely a high risk for the suppliers, now days McDonald’s is large, profitable and pays dividends. The company demands a great deal from its suppliers to invest, to innovate, and to be aligned with the company’s plans which are shared. Suppliers and McDonald’s work with each other to solve problems and look for opportunities in the future. The suppliers work with basic operating principles of fairness, competitiveness, and continuous improvement. The vested model is in contrast to those that continually demand lower prices from their suppliers and the only aspect is price.

Linking to dividend paying stocks, while price is always important, the overwhelming dividend paying companies have a vested interest in their suppliers doing well. It is  important to look at aspects of operations on how the company and its suppliers gain innovation and opportunities. If the answer is overwhelming price, then there are better long term investments, a shining example is McDonald’s.

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

There is a theory to become an expert in something you need to spend 10,000 hours on it. Whether the 10,000 is a perfect number, it is meant you need to spend time on the subject. For this reasons, there are many advisers who do spend time on their particular field, which is great. The time spent leads to gaining a livelihood and the overwhelming majority are trying to do what is right for their clients. In every field, there are incentives or the pay structure influences the decision making. In the world of investments at the retail level in particular some mutual fund companies pay higher commissions than others. A recent article in the Journal of Finance demonstrated what was expected and many consider to be normal, is in fact true. In the MER or Management Expense Ratio, there is a fee for advisers – if the number goes up, there are more sales. That does not necessarily mean it was a bad decision to put money in the fund, it just means with more than one funds to choose from, one aspect the adviser will look at is how much they will or could make from the one with the highest commission or largest fees. The client should ask why one fund is better than the other? what value added are you getting for the higher fees?

Linking to dividend producing stocks – we all know that lowering your fees is a good thing. If you have to generate an extra 2% to make up the difference in fees, a question to ask does your fund perform better or should it perform better? One of the reasons institutions put money into hedge funds is the expected higher performance even though the fees are higher. There are ways of reducing fees such as buying index funds or ETFs or with dividend shares enrolling in a DRIP or Dividend Reinvestment Plan where many companies offer a discount on buying extra shares. As individual there will be fees somewhere in the price, it is important to note it and whether the fee is worth it; sometimes the fee is worth it. If you are going to pay extra, then you should expect and receive more. Many people have some low fee funds and higher fee funds and compare, the ones consistently receiving better returns will receive the bigger share the next year, which is the one of reasons why this blog is about dividend funds.

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

This Sunday is the championship game of the NFL Football game and it is prudent to consider companies that benefit from the game. The important aspect of the game it is one of the few venues left for mass marketers. The number of people that will watch some or all of it, tends to be very high. Giving the high expected viewership, the advertising will be some of the best the industry offers. The half time show will be a spectacle, hopefully the game will be entertaining, and the host city New Orleans will benefit from the festivities. Some companies will benefit from the Super Bowl, although it is one of many events. Similarly some companies benefit from Valentine’s Day. One group of companies that come to mind for the Super Bowl is beer companies – the world’s most popular alcoholic beverage.

Company            Market Cap   P/E     Revenue/Gal     Profit Margin   Dividend Yield

name                      billions $        %               $                      $                  %

Ambev                 140.01          28.97        136.92              43.62            2.89

Molson Coors           8.15           10.73       182.05              35.02             2.84

Boston Beer             1.86           32.29        175.92              22.65            0

SAB Miller                77.16          17.30         70.78              17.87           2.15

Anheuser-Busch      148.57         20.66         97.77            14.66            1.76

Source Wickham Investment Counsel Inc. Bloomberg

Linking to Dividend Producing Stocks, in most categories including the beer business it is possible to enjoy yourself and receive a dividend at the same time. The above list shows some of the companies to give an indication of size and profitability. There is always more research to do, in the beer industry tasting can easily be done. For the Super Bowl, all the beer companies do marketing which means many bars are decorated with Super Bowl items. Investing can be fun and profitable.

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

Invariably many people will go out for meals, a number of years ago most of the meals went to independent or “mom and pop” stores meaning Mother and Father spent much of their time running the store. Now people often go to chain stores such as McDonald’s and many others. There are good decisions to eating at both, for remarkably few people complain about not getting good value at the chain stores. The “dive” tends to be a store that has not changed its interior design in years, but it is clean, and the food is very good. The rent was relatively inexpensive, meals are good and the restaurant knew who it is catering to.

Linking to dividend paying stocks, the restaurant was successful because it knew who it was catering to as it offered good value to the customers. When you buy a dividend paying stock, you should know who does the company cater to and what it offers. In this way as the company changes as companies invariably do, you will know if the company continues to offer good value. Buying a dividend producing stock does not mean the company does not change, what it does mean the companies has and keeps a market share where it offers both good value and high margins to continue to pay dividends.

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

Last evening as the writer was coming home, a runner passed me, not sure what the person was training for, but it was a nice evening for a run. Investing is similar to running, there is preparation or stretching before the run, for investing you need to do  reading or research. Then there is a direction for the run – if you left your home for a 5 mile run which direction would you go? with investing, you need to have an idea of where you want to go up besides with more. The sprinters are the day traders looking for a quick entry and exit. There are marathon runners whose time horizon for training is months, similar to value investors whose time horizons are years. Most people fit something in between sprinters and marathon runners. Just about everyone has a story about buying for a short term horizon, the stock went up, then down and now it is a long term investment. With running, as long as you can run there are no bad decisions – running is good, running outdoors is great, and while you are running the other decisions about food and health just naturally seem to fall into place.

Linking to dividend producing stocks, while there are short term strategies, buying the stock to take advantage of a dividend, most strategies are for the longer term. The reason for the long time horizon is to take advantage of both the dividend payment and over the years as the company continues to pay dividends (and increase them)  the shares will be higher and you will have capital gains. One of the reasons why dividend producing companies work is due to the company paying a dividend, this act allows you to lose much less money when compared to those stocks that you had expected to sell in a short period time but went downwards. Limiting your losses and receiving an income is a great method to preserve and increase your wealth.

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