This week in the US and Canada are days to celebrate their countries founding, and with dividend companies one question is should I diversify among the many companies in the world or stay national. Every country with a stock exchange has some excellent dividend paying companies. The easy answer is if you have an easy method to keep in contact with the country(ies) you are investing in, invest in those ones. If you are essentially a local person, stay more localized.

All investing requires follow up, the easier the better. Although we can access news from around the globe on the internet, if you do not access information regularly, then it is better to stay local and let the company go international. In general, in order for dividend companies to keep paying dividends, revenue streams have to be diversified. If you diversify by country of head operations, are you really getting a diversified portfolio for the companies will have operations beyond its borders.

One thing the eeconomic meltdown taught us, is how connected we all are, even if we did not think we were. Consider how many financial instiutions around the world bought American mortgage back securities that needed to be written off.

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

Once in a while, the writer walks through the local Art Gallery not because of a deep appreciation of the work hanging on the walls, but looking for different perspectives. Those with a deep appreciation can view paintings in terms of how it was painted, the writer has limited knowledge. But what can be seen is the approach or what the painter sees. Most of the time it is the same thing, but once in a while there is something different.

Bringing this thought to dividend stocks, when companies begin to pay dividends they are on the radar of those who look for dividend paying stocks. It tends to mean the companies have reached a stage where growth is not the dominant aspect to the business, but maintaining or growing from where they are becomes important. The companies have reached the stage where they can pay dividends and unless something changes dramatically their stock price is not going to raise 8 times anymore. The price may double or even triple over a period of time.

One of many perspectives is not that companies have embraced whatever new technology there is, but how are they using it to reach and provide more to customer; to ensure the dividend is protected. Even if the company has a dominant market share, there is always competition and change nipping at its heals. Even us dividend buyers have to keep a watch on our companies.

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

Today in the mail, I received a business magazine with a list of top 1,000 companies. Not all are are public, but many are. While the names of the top 20 tend to stay the same, there is change. The change is the one of the important elements of dividend companies, something is always changing and the companies have to adapt to the changes in order to retain their ability to pay dividends. Just because you invest in the companies, it does not mean you can go to the hammock and sleep away the days. Your focus changes to asking is your company protecting their marketshare (and maybe even growing it). If the strategies are not working, your dividend is at risk and it maybe time to determine which companies are meeting the challenge. Fortunately, the research needed does not have to be overnight, it can be monthly or quarterly, you still have opportunity to sleep in the hammock just not all summmer. Similar to all stocks, you still need to do some due diligence.

One of the things a company listing does teach you, is even though the biggest companies revenue may go up and down, they are still making money and from a dividend perspective that is a good thing.

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

A number of posts ago, looking at your routines was given as a clue to what you can invest in. A prime example is General Mills reported their results – the makers of Cheerios and Hamburger Helper and many other foods, increased its dividend by 8% and noted it has been paying a dividend for 113 years. If you owned General Mills you would have very few worries about the payments and would not have to be too cynical.

The investing world is interesting because one of the biggest aspects to it is trust. Trust the money you invest, will be used properly and you will make a return on it.
Trust is easily broken, and many of the best things about investing can be used for fraud. Therefore ensuring your money is safe, can be easily verified is a really good reason to look at dividend paying stocks.

There are many books about Financial Fraud and a good one is called How to Smell a Rat by Ken Fisher.

The 5 signs are:
1. Your advisor also has custody of your assets, the number one biggest reddest flag. Need separation of duties.
2. Returns are consistently great, Almost too good to be true. Returns go up and down, never flatlined, flatline means your are dead.
3. The investing strategy is not understandable The basic strategy should be simple – ie supply and demand of ….
4. Your advisor promotes benefits like exclusivity which has no bearing on results. Exlusivity does not generate returns
5. You did not do your due diligence. Questioning is very good. Being cyncial is good.

All of the above depends on the industry doing the job they should be doing. The mortgage back securities defaults was a lot of people not doing their jobs.

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

The biggest personal investment most people make is their home, the second is their car. then their investments. The average person moves about 5 times, suggesting that when you start paying the mortgage, the most important aspect is not the price appreciation or the increasing market price of your home. Hopefully, you picked a good area for you and anyone who lives with you and the area stays a good place to live for a long time. If that happens your house will appreciate in value over time.

When you pick dividend stocks, as long as they continue to pay dividends the shares will be worth more money over time and in addition, you will have received payments or divdidends which increases your return.

The perspective of a long term is sometimes tough to understand, in today’s world there is a premium on instant gratification, the expression my time has been wasted is often heard; bad movies are called 2 hours that I can not get back; if you call an busy organization there is a wait time and we no longer want to wait.

on the other side of the coin is dividend stocks love time, they do better as time goes by. The value to you increases over time. If you are in the abouve category you can love time to.

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

In the investment world, along with other worlds, the best results are seen with hindsight. With all our ability to access, to learn and to study, at some point a decision is made. Looking back you can tell if it was the right decision. Despite the vast access to information, do you ever have enough or often you will make a decision without every piece of needed information. A example is for those readers who are married, when you decided to get married, did you know everything about your spouse? the answer is no. Hopefully you have been together a long time, which is great. Given you both had choices, did you make the correct one? Yes. Getting married was a decision you made without all the information and you made the correct one. Together you made the right decision.

Everyone can look back and see there was an opportunity ahead of us, but we either did not know or did not react. Other considerations were on your mind – housing prices, economy, family, downsizing, upsizing, holidays, sports, lots of things to occupy your time and energy. There are many different competing ideas and most have a basis of truth, only time will tell which ones receiving a passing grade.

Should you put all your money in cash and wait it out? maybe. (if you do, ensure you determine when you should begin to move out of cash, otherwise you will be waiting a long time) If you believe the real estate prices are at a bottom, is it better to buy real estate? maybe.

Historically, because the western economy is based on oil – to run cars, to heat homes, for goods. It is a reasonable assumption to believe investing in the best companies which pay dividends, continue to be a reasonable investment. Being defensive means a flight to the best quality – Will the stock price go up and down? Yes. Will the quality you picked continue to earn money? Yes. Will you continue to benefit? Yes. Even if you have incomplete information where the economy is going decisions can still be made.

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

When anyone invests money or time, there is a risk-return ratio. Why am I doing this and what do I get back? the emphasis is on getting back. In terms of money, we know the safest place to invest your money is generally – the most senior level of government for the government can raise taxes to pay the bills. If you were to buy, the returns would be near the bottom, unless your country is in serious financial problems (Greece). If you do not like the governement – look at corporate debt – private companies and there is a broad range here, with mature companies a lower risk than start up companies. In an ideal world, at the end of the day, your investment in a start up company should or hopefully make you more money than a mature company. However, most start ups fail, but every once in a while the ones that do well do very well. The likelihood of a mature company failing is limited, not impossible, but the signs will reach the general public well in advance.

If you are okay with the debt of the mature companies, then it is time to look at the stock which is where the companies paying dividends fit. Every stock for every company moves up and down, with the cycles. Today we are in summer, you can think which industries benefit more in the summer. If a company benefits more in the summer, the stock price should move up as the results come in and go down if the expected results do not come in. For example if we expect cement companies to benefit in the summer as construction projects are in full swing, if the cement companies do as expected the stock will tend to go up. If the results are not as expected the stock price goes down. Just becomes a stock price goes down, does not mean the company lost money. It can mean other things – they did not make as much as expected; the margins they had last year were down or instead of making 20% they were making 15%, but the company still made money. As long as they make money, they can still pay a dividend. (One company I worked for was making over a billion dollars a quarter, a “bad” quarter was under a billion. A billion dollars is still making money.)

When you buy the stock for the dividend, the price of the shares will go up and down, because the company tends to be a mature (ie older company with established market share),the company makes money every year. Most of the time the difference between the high and low is not that great so you likekly will not triple your investment unless you own the company for a number of years. The company pays a dividend over the years, and you have the added bonus of stock appreciation which is why you are ahead on the risk – return ratio.

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

A number of years ago, when I first started really looking at dividend funds, they were under the income portion of the listings. This made sense because the object to buying the funds was for the dividend or the yield, as just about all funds are priced daily, you can sell anytime, but the reason for buying is a relatively long term holding with the emphasis on the yield or receiving the dividend. As an added bonus, the share price tends to outperform equity funds as there tends to be less downturn companies in the portfolio for they have a dividend attached to them. The fund industry in its wisdom, because dividend sector was doing very well (one year the funds were up 20%, but that was unusual) decided to change the sector to equity funds. This resulted in financial consultants examining their allocation models and shifted many people from dividend funds to equity funds. The returns were less, the fees more, but the holders were within the guidelines of their allocation charts. This sounds cycnical, it is, but it happened to many for no good reason.

If you look at your charts and see the overallocation towards one sector or another, ask first why did you buy? what results are you expecting and what fees are you paying?
If the dividend fund which you bought for yield, is classified as equity, it is okay. A strict income portfolio does not give you growth, you need both for the long term. The thing you wish to do is try to use the existing system to achieve the best returns at a low risk and for now the existing system favours dividend stocks.

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

Dividends paying companies and dividend funds go up and down similar to the rest of the world. There are no guarantees except for when companies do not pay dividends – there are two reasons One is incomptent executive management who missed the boat and deserved to be replaced. Second is sometimes management has done everything right or seemingly right until events in the world overturn everything. An example is from a book called The Masters of Private Equity and Venture Capital by Robert Finkel and David Greising. The premise of the book is to interview people who run large funds, have done it for years and has done exceedingly well (ie made billions) and find out what or how they do what they do. In order to achieve remarkable results, there are many examples of doing very well; there are examples of not doing well. One example is one of the funds looked at a company which made private jets – the fund had done its homework, the company had a backorder of $10 billion. After 9/11 the order books disappeared. Was it anyones fault the fund lost its investment? no, but it happened. The example is an illustration that events do happen.
Companies that pay dividends typically have large order books and a consistent profitable marketshare, the analysis is to see how management is doing for the world changes, things happen but generally dividend paying companies have time and resources to adjust and keep carrying on to pay dividends.

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