In one of the newspapers the writer looks at, a useful chart was seen. There are many methods to determine which is the best stock to buy. All methods have some validity but one way to start with is through the credit rating of the companies. The writer David Parkinson with the help of Jamie Hynes sales director of S&P Capital IQ examined stocks with the highest credit rating – in this case S&P credit rating.

The headings were

Stock Name    Price   Credit Rating   Dividend Yield % Payout Ratio  %  5 Year Growth %  and % Total Return

In this particular group of 20 stocks, all paid a dividend, the vast majority had raised their dividends in the past 5 years, most of the shares were up this year and of great interest the total return was more than twice the general stock index.

This chart provides a great starting point to to buy one or more stocks or to look for a index which has stocks which pay dividends and has A to AAA credit ratings. Knowing that high credit ratings of companies outperformed the general market is a good thing.The result should not be surprisingly for stocks that pay dividends and have great credit ratings are highly desirable features and indicate their business plans are working very well.

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

The writer lives in an urban area with mature trees in the neighbourhood. In the fall, the trees lose their leaves and some of the leaves accumulate on the street. This week the  city’s crews finally made it to the street and cleaned it. The city collects the leaves to make compost which is then recycled onto gardens and parks around the city. The end result is something to be valued for it is a sustainable, usable product that the wonders of nature do all the work. However, on a urban street, which is used to being relatively clean, the streets were in need of the city’s cleanup.

Linking to dividend producing stocks – when you buy your shares, sometimes you want the company to do perform similar to all the growth stocks you read about or even follow. You know the dividend is coming, but you want an increase in stock price to. There is nothing wrong with the the want, however for most dividend companies, similar to nature doing its work,  the increase happens over time. The continued dividends with the great possibility of increases every year pushes up the stock price. The great advantage of dividend producing shares is you can buy for dividends and receive an increase in stock price to.

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

An interesting book on the story of Merrill Lynch is the Crash of the Titans by Greg Farrell Crown Publishing NY 2010. This post focuses on management style. Every President and CEO has a slightly different management style depending on how they were picked for the job. As long as the company makes money, it does not really matter on the style. When the company does not make money, style is critical. If you own dividend shares and the shares continue to pay money, for the most part style does not matter. If the company loses money, management style is a very important consideration.

The management style of Merrill Lynch varied over the years – from someone who genuinely loved the investment advisers to someone who considered them less important in their Presidency and focused on other parts of the business.

One of the Presidents to ensure he had no rivals “fired” anyone who he thought was a threat. Three or four years into the his Presidency, the Board looking to the future found the internal pickings for the next leadership to be thin. No secession planning existed under his reign.

A President who decided to talk first to other partners about mergers, then to the Board was removed. He was removed because Board of Directors need process. The first step is explain to the Board where we are and what the financial situation is. Then you go through the strategic options, whether it makes sense to stay independent or sell. And if you wish to sell, who is the right partner? It is then you begin to talk about who you favour. It is very important to remember as a President you report to your Board, your Board can rubber stamp your decisions, but every once in a while, if the process is not followed, they will exercise their authority.

A different President felt anytime someone questioned his authority or decision making, the person was let go. In the end, he has surrounded himself with yes men with less talent than himself. When he went, so did the yes men.

Another great lesson is for any company to remain prosperous it has to have great internal controls and know the potential liabilities of all its assets. Companies buy and sell assets as part of their business, how much are the assets worth? The best company says when in doubt offer to  sell some of the asset into the marketplace. What is the bid or offer price? If the price is lower than what the asset was bought at, mark the asset as such. If it is higher, so much the better.

Books such as the history of Merrill Lynch is a good read, with lessons to be learnt – see what type of management exists in your dividend producing companies.

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

From the book The Big Investment Lie by Michael Edesess published by Berrett-Loehler Publishers, San Francisco, 2007. If you go to a financial planner, at some point there is a fee involved and similar to every other sales, sometimes the smart thing for a financial planner is to sell you the expensive items. There is value in the financial planner, but deal with them in the understanding part is a sales process.

Mr. Edesess has come up with 10 Commandments for Smart Investing.

6. Don’t pay anyone to pick stocks for you; there is no reward for the cost and risk. If you pick stocks, which can be a very good thing, the other person should be asking how does the stock fit into your comfort level and is the position relative to your holdings within reason.

7. Avoid hedge funds like the plague.You likely have read some of the owners of the hedge funds have made lots of money. Part of the reason is the high fees they charge the clients in both up and down markets. Are the clients making more money to justify the fees? If you pay fees which are near credit card interest rates, how much are you making?

8. Know the risks of investing; take only the risk you are comfortable wth. Most companies that deal with financial planning will have you sign a form about what investments you are comfortable with. Your investments should stay in that category, for most people relatively low risk, low fees is best.

9. Keep fees and taxes as low as possible; they can swamp your investment returns. The purpose of investing is to gain more, however fees and taxes have an influence. It is entirely possible to keep fees low as well as to ensure whatever the politicians decide – the method of earnings should be weighted in that direction. Dividend income is taxed less than interest income, if you have more dividend income you keep more of your money.

10. Invest only in true low-cost index funds. Index funds work because the stock exchange removes the “losers” and replaces them with “winners”. Over time, the winners will do better than the losers. The big issue with index funds is time has to go by, which means if you need to sell on a regular basis index funds are not ideal. However, if you are in the work place, they can be be one of your major holdings – ensure you check out the fee, it should be near 1% for the cost of managing the fund is low. Many companies offer mutual fund matching investments for their pension plans, ensure the options include an index fund.

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

From the book The Big Investment Lie by Michael Edesess published by Berrett-Loehler Publishers, San Francisco, 2007. If you go to a financial planner, at some point there is a fee involved and similar to every other sales, sometimes the smart thing for a financial planner is to sell you the expensive items. There is value in the financial planner, but deal with them in the understanding part is a sales process.

Mr. Edesess has come up with 10 Commandments for Smart Investing.

1. Follow a wealth-building strategy, not a gambling strategy  – be similar to the turtle, not the rabbit. Long term horizon making compound interest work for you. If you keep your debt low and most of your money in your home and in dividend producing stocks that have paid consistently over the years, you will do well.

2. Stop searching for the Holy Grail – give up the futile quest to beat the market. Some years you will, most you will not, due to the market fluctuates. Refer back to number one.

3. Stop believing that past performance predicts future performance. If you look at a mutual fund, the best number will be highlighted – it is good marketing. Look at the 5 year or 10 year number. Last year’s star fund is not likely to repeat again because of simple math. If you have 1 penny in your pocket and find a penny on the street, you have doubled your money. If you have $ 50 in your pocket, and find a penny, you have more, but not much.

4. Don’t be duped by the false claims of investment manager and advisers. In every sales or client meeting, someone is trying to find what sales pitch works. The old rule whatever works, works.

5. Fire managers and advisers who charge more than bare bones fees. All organizations charge fees of one sort or another, some fees are higher or lower, you should pay a fee. The concern is how much is reasonable for both parties. Remember if you own a fund and the fee is 2%, your fund has to make greater than 2% before you start to make money. Is it?

The other 5 commandments will be in tomorow’s post.

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

In Baseball this year, a number of players are on the ballot and eligible to voted into the Hall of Fame. Their careers produced consistently exceptional numbers and awards, however part of it was cloud with drug abuse to keep their performances at their peak, even as their age increased. Typically in baseball as a player ages, his performance begins to drop. Steroids helped a number of players retain their edge. Should the voters vote in the Barry Bonds and Roger Clemens? What if the players played on teams you followed? If you say no, do all the players in the Hall of Fame match your standards or should somebody be removed?  Sometimes the answers are not black or white.

Linking to dividend paying stocks – depending on how you answered the above questions, would you own a company that consistently pays dividends but has many lawsuits? In the world of billion and trillion dollar corporations, there will be lawsuits. Lawsuits are part of doing business, most companies try to operate with the fewest lawsuits possible. It would be great if all the companies had no lawsuits, but the reality is many companies are being sued, but most lawsuits are not material to the overall operations of the company. An exception was BP Oil which had to sell off large portions of its assets to pay its fines of the oil spill in the Gulf coast.

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

In the financial pages today, is a story about Costco paying a special dividend. If you are a shareholder, you will be getting extra money. Special dividends are awarded after the Board has examined many opportunities and decided the best use of the cash is to give the money to the shareholder. The reasons for having the extra money is varied  and can include: a sale of a division as the company restructures into core holdings; changes in government regulations which encourage one time events before the regulation is effective; the margins in selling product were much higher for example in commodity prises rose more than what is termed normal; and other reasons come into play.

Dividends by their nature go to shareholders, the Board is well aware of who or what institutions are the biggest shareholders. Does having a special dividend payout increase the insiders accounts, yes. The difference between enriching the shareholders and giving a larger payment to employees is anyone can own shares and shares imply an ownership in the company. The writer’s bias is the Board is doing the right thing.

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

We all have a vision of what time means. If you are around teenagers, the time lines seem short; if you are in the 40’s the time to retirement seems long. If you are in your retirement years, time seems to pick up and the days goes by quickly.

When you invest, the ideal is for a long term horizon, ensuring along the way income is continually received, with the added bonus of a capital gain. One tired and true method is to look at whether the companies you are investing in have been paying dividends for a few years. If they have, you get to project what their outlook should be. For example, if it is a pipeline – will people be needing the services. If the answer is yes, the group of stocks should be high on your list to accumulate and hold. As your projections come true, along with the continuing dividends, invariably the stock price will rise. You will have done well. Investing can be simple.

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

In the homes where we live and sometimes the workplaces we inhabit, art is displayed. Some art is related to festival seasons, some is on the wall for pleasure. Once in a while, a piece of art is or becomes more valuable than childrens’ art which is priceless. The art world is generally inhabited by smaller users who pool their resources to cosign pieces to galleries who try to sell it. Once in a while, you may go to an auction and bid on art for either at a profit or nonprofit fundraising and try to gain a good deal. If you bid at the nonprofit fundraiser, both you and the nonprofit benefit from your bid.

Linking to dividend producing stocks, while art has the advantage of seeing your piece daily and cause a good reaction, dividend producing stocks have the advantages of capital appreciation and a continuing income stream. In addition, because of the continuing income stream a floor price of the stock is automatically set. With the dividends one of the things you can do is go to the nonprofit fundraisers and bid on items including the art.

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