Thursday, October 14, 2010

State of My Dividends Q3 2010 2

Before I go on the talk about my dividend changes for the third quarter, I would just like to say that you probably should be careful about investing in dividend paying stock at the moment. I know that I blog continuously about buying dividend paying stock. The thing is it seems that there are an awful lot of people blogging and/or promoting dividend paying stock. When buying stock, make sure you do not overpay. Dividend paying stock seems to be very “in” at the moment. This could push up their stock prices.

However, I do have faith. Once a new bull market begins, people will forget about conservative investing, and have stars in their eyes about how much they can make on more risky stock and/or non-dividend paying stock. At that point, dividend paying stock investing will no longer be “in”, and it will be better for people like me who will still believe in dividend paying stock. This may seem rather cynical, but I have been investing since the 1970’s and I have seen this before.

So, now back to my subject on what dividend changes I got in the third quarter of this year. Yesterday, I updated my spreadsheet for stock I own and dividend changes for the 3rd quarter of 2010, see dividends. For the third quarter of this year, I have had 5 companies that changed their dividends (these dividends are in blue to distinguish them from changes that occurred in the first and second quarter). Since I do dividend calculations based on the applicable company’s financial year, I have also started columns for 2011. There are changes shown 2011 because when a company increases or decreases its dividend part way through their financial year, the total dividends for the following financial year will also be affected.

Yesterday, I talked about 3 of stocks for which I had dividend changes on and today, I will talk about the remaining 2 stocks with dividend changes.

The first stock I would like to talk about is Saputo, which I purchased in 2006 and 2007. To date, I have earned a return 18.6% per year since I have purchased this stock. Just over 2% of this return is in dividends. However, over the past 5 years this company has increased its dividend by just under 14% per year. The current increase is just over 10% as the dividend per share went from $.145 to .16. I record just 7% increase this year as the increase is for September and there is one further dividend payment due in December, so I will receive two dividends at this increase rate.

This has been a very good stock purchase for me. However, please note that this is considered to be a dividend paying growth stock. This is why the dividends are currently a small part of the total return and it is also why the dividends are increasing at so high a rate each year. See my spreadsheet.

The next one to talk about is Canadian Pacific Railway. I bought this stock in 2007 and I have only made a return of 1.2% per year. This is because the stock price has gone down since then 2007. On average, the dividends add some 2% to the total return each year on this stock. The other thing to note about this stock is that this is the first dividend increase since the one in 2008. However, this stock, on average has been rising it dividend by almost 14% per year over the last 5 years.

The dividend for this stock went from $.2475 per share to $.27 a share, a rise of just over 9%. However, since I will only see two dividends at this rate for this stock this year, my dividends are up for this stock by 4.6% this year. Since all my dividends in 2011 could be at the increase rate, my dividends will also go up in 2011 by 4.4%. See my spreadsheet.

One of the stocks I track is EnCana. Since many Canadian Analysts feel we should have resource stocks in our portfolio, I am tracking this one and Cenovus Energy Inc., which just split from EnCana. I must admit that less than 1% of my own portfolio is in resource stocks. This is a very low figure for most analysts.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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