In many people’s lives they try to save money for something – a rainday, holidays, unexpected payments, expected payments in the future and that is good. If you are a member of this group, that is great and hopefully you are enjoying your life. A note for the spenders one of the most exciting and free shows is a walk with nature.
When you think about savings, this is similar to dividend paying companies, the companies have savings and reinvest the money to their shareholders. When you think about savings, for most of us, it can go quickly, therefore try to invest in companies which have paid a dividend for a number of years and are expected to continue to do so.
For the spenders, they are very important to the savers because they drive the economy. If we all saved, the consumer economy in which we live in would shrink. Us savers need the spenders to continually spending for the companies to keep paying dividends.

The writer recently picked up a book from the library called Corporate Catalyst by Tony Griffiths published by John Wiley 2012. Mr. Griffiths spent most of his corporate life trying to bring back companies with great assets but lousy performance (almost bankrupt or heading that way). For dividend paying companies – there will always be restructuring but very few do or die situations. The restructuring business involves getting back to basics or focusing, selling where the company has higher margins (can make more money) and at Mr. Griffiths’ level often it means convincing the Board they have a problem and need to do something to prepare for the coming actions.
The reason restructuring affects dividend paying companies less is dividend paying companies are in a fortunate position to already have the high margin business because of barriers to entry for the competition. While there is competition for everything under the sun and clouds, some companies have advantages which allowing for reasonable management, will continue for a long time. The advantages can be government regulation, location, distribution, cost of entry into the business or size of the company (ie GE) and others. Within the company, there is and always will be internal restructuring to create efficienies and the effect of internal politics but to the outside world, the companies continue to make money and pay dividends. Those are the companies you need to invest in, for you to continually gain income.

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

A few days ago, the writer was driving and listening to a talk radio show, the host was talking about things he always wanted to do such as ride in a sports car. He had the opportunity and his driver quickly pushed the speedometer to almost double the highway’s speed limit. The host thought it was a great thing to do, at least once. The ride does have excitement, because of the speed. On the other hand, because of the speed if caught by the police, the result would have meant the car would be towed, a large fine to be paid and almost lost of driving priviledges. Was it worth the risk? perhaps. In thinking about this story, one can equate growth stocks as the sports car, because there is the potential to earn lots of money quickly or you might receive a negative return. At the speed the writer was driving had limited risk, but could continue to drive as much as possible and the police are your friends. . The dividend is the opportunity to drive as much as possible within the regulations.

There is always more questions than answers, till next time, to raising questions

Last week, JP Morgan Chase (a large bank headquartered in New York) reported a profitable quarter of business, at the same time they also reported one of their divisions had lost over $ 5 billion in the same quarter. If the division had not lost money, JP Morgan would have reported an excellent quarter. even though the company lost $ 5 billions the dividend was still paid. JP Morgan is a great example of why buying a divdend paying company is a great idea.
There are thousands of companies on the stock exchanges, most do not pay divideneds. All of those companies have a management hoping to increase revenues during their business plans – some will succeed, many will not. To narrow down the field from the thousands, concentrate on the ones paying dividends first. If there is a long history you can narrow the list even further. From the list, although you wish all the companies would do well, ask if there was no growth or limited growth in their plans, would the dividends still be paid? By this time, you will have a shorter list and then it is a judgement call. History has shown many of those companies on your list besides paying dividends, over time the stock price tends to increase.

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

One of the reasons everyone should buy dividend paying stocks is we are all living longer. An example in Zimbabwe outlines it wonderfully.

Zimbabwe is an African country north of South Africa, at one time it exported wheat for the world and was one of the wealthiest countries in Africa. The people in the government changed skin colour however the very last thing the new government focused on was the economy. Not surprisingly the economy of the country went from one of the wealthiest to the poorest. In is noted those in the inner circle benefited from government revenues and diamonds. During the last election, the vote was close, election officials took a week before announcing the first ballot results. Election officials improved their efficiencies by 1,000% as the second ballot only took hours to announce the people ruling the land had not changed too much.

There is an election coming for this country where everyone is a millionaire, (it buys some groceries but not much else) and although there is hardly any food on the shelves of the stores, people by government figures are living longer. In the coming elections, although the United Nations believes the average life expectancy is 45 years of age, there are over 40,000 people over 100 years of age eligible to vote and more than 132,000 people over 90 years of age.

Even if you do not question those numbers, the point today is to buy dividend paying shares because people are living longer and you will need the income.

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

The nature of the investment industry is the more you trade, the more money they make. In many cases, the they are really good people, but it is the method in which the industry is set up.
Ideally your interest in buying dividend paying companies is to reinvest the dividends to buy more shares. As long as the company makes money and pays dividends you can stick with it. These transactions while increasing your wealth, does not necessarily increase the wealth of the investment firm. When asked about doing more – an interesting note from the UK or England – 6 % of the cola drinkers drink 60% of the cola; 10% of the business travellers are responsible for 66% of an average airline’s profitablitiy. The investment industry does not have to be a profit hog on everyone, just its most active customers.

While you can make money actively trading, you will make very good returns by buying dividend paying companies and reinvesting for the long term.

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

To continue along the same vien from the last column, an important feature of all companies is the Board and top management relating to goverance. When it is weak, losses happen. Although most of us do not know what happens at the Board, sometimes reading in between the lines of the papers you can get a sense of it. Mr. Levitt in his book Take On the Street noted a quote from Michael Miles former Chairman and CEO of Philp Morris Co.
The attributes of Board members are they should be engaged, meaning they should be willing to commit their time and energy. They should know how the “game” is played, and by that he means have experience at the Board level. Directors should not be shy, they should ask inconvenient questions and not worry whether the CEO considers them polite or likable. And finally the directors should have a keen bullshit detector so they know when someone is selling them a bill of goods.

The attributes are generic enough for any organization, but what you are looking for is if they do not seem to be there with the Board you have invested in. Otherwise who is looking out for you?

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

The writer reread the book by Arthur Levitt, Former Chair of the SEC titled “Take On the Street” it was printed in 2002 but the issues never really go away. In the book, after a career making money on Wall Street, Mr Levitt moved to Chair the SEC and tried to take the viewpoint of all investors instead of just some. Similar to every industry, as much as people talk about competition, they perfer it for the other guy. Most people want a regular dependable income and too much competition changes the status quo. Many of the examples dealt with growth stocks or using various accounting methods to make the company look more attractive in the investors eyes. An increasing share price means less questions and greater benefits for insiders. Eventually stock prices do down and things that were done that are not quite illegal, but abuses none the less are shown and reform or regulations are called for.
On the opoosite side of the examples are dividend paying companies, they generally do not get caught in the abuses, because they do not need to. Thus one method to avoid the worst of stock market is invest in dividend paying companies and if they begin to sway into the less than legal side, move on because eventually they will have to post loses.

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

We all know the stock market averages move everyday, sometimes up, sometimes down. This is good because everyday there are buyers and sellers for a variety of stocks, similar everyday in the department store of your choice there are buyers and sellers of goods. Next time you are in the department store, look around is everyone buying the same thing? the answer is no.
The similar thinking happens in the stock market, there are bargains to be had, there are expensive stocks because the companies are doing everything correct for the prevailing sentiment. For example in a low interest rate environment, companies can have extra debt to fund the companies growth (as long as there is the ability to pay for it); if interest rates were to rise and the sentiment is less debt than the companies would have to change their financing program or the market would not like it.

Markets will swing for many reasons (both fundamental and technical), but if you own companies that pay dividends, it does not matter what happens on a day to day basis. You are not selling, as long as the dividends are safe, let the markets swing to the music of the markets.

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