I had a question about why I have invested in Computer Modelling Group (TSX-CMG) since it is risky and the dividend yield is not particularly high. The bottom line is because it is fun. I have made most of my money from Banks and Utility type stocks. I have very good blue chip stocks that I make what I need in dividends.
However, a lot of this investing is boring. I do like tech stocks. When I worked, I worked in IT. So, I understand the risk of investing in Tech stocks. I have not invested much in this company, but it is an interesting company. In the end, I will sell of shares equal to my investment (to get back my original investment) or twice my investment (to lock in some profit) and then I will let it run for a few more years.
Yesterday, I updated my spreadsheet on dividends. For all my stocks, I have shown in the “11” (for 2011) column, if a company has actually increased their dividend yet for their current financial year ending in December 2011. In the “div” column preceding, I show the percentage increase in the dividends for the company’s financial year ending in 2011. I have also added columns of “Div” and “12” for two of my stocks that have financial years not ending in December 2011 and they are therefore into their 2012 financial year.
For the second quarter of 2011, I had 7 companies increase their dividends. The last 3 are shown below. I covered the first 4 yesterday.
Shoppers Drug Mart (TSX-SC);
SNC-Lavalin (TSX-SNC);
TD Bank (TSX-TD)
TransCanada Corp (TSX-TRP);
Shoppers Drug Mart (TSX-SC) is the stock I have bought for my TFSA. This has been a disappointing investment. I had tracked it for years, and then when I finally bought it, new rules on generic drugs were bought in and the company has not been the same since. To date, I have lost 3.12% per year on this investment. I had bought the company for my TFSA for the first three years. In May 2011, I sold some shares and bought Calian Tech (TSX-TCY). At the time, I liked Calian better.
As far as dividends go, they do not have a bad record. The 5 year growth in dividends is 17.35% per year. However, the biggest increases occurred in 2006 to 2008 and they have been more modest since. The latest increase for 2011 is not bad at 11%. Because the increase occurred with the second dividend payment for the year, my dividends for this company will only increase by 9.55% this year. See the spreadsheet.
SNC-Lavalin Group Inc. (TSX-SNC) is a favorite stock of mine. They consistently raise their dividends each year and for the past 5 years, the average increase is 24.2%. Their first cycle dividend payment came in late (in April 1st rather than in the January to March time frame). The dividend increase at 23.5% was much better than last year’s 13.3% increase. The other thing to mention about this stock is that the dividend yield is low and is currently at 1.5% (a high for this stock). The dividend yield is usually closer to 1%, or just below 1%.
SNC is a dividend paying growth stocks and it is the sort you would buy after buying more conservative for your portfolio. Conservative stocks would be utility and financial stocks. This stock is considered to be a consumer stock and most consumer stocks have low yields, but they are a good way to diversify your portfolio. (See my site for information on setting up a portfolio.) See the spreadsheet.
TD Bank (TSX-TD) is my next stock to talk about today. As with most bank stocks, this stock stopped raising their dividends in 2008. This increase at 8.1% is ok, but bank stocks in the past have seen much better dividend rises, more like 12% and sometimes higher. Because this increase came in the second quarter of this year, my dividends from this bank will only be some 6.2% higher than last year. See the spreadsheet.
TransCanada Corp (TSX-TRP) is my last stock to talk about today. This is a solid, conservative, utility type stock. Since the quarterly dividend payments went from $.40 per share to $.42 per share, the dividends have gone up about 5%. My increase in dividends for 2011 is about 5.1% as this company raised their dividends after the first quarter in 2010 also. This stock has a good dividend yield, which is running a bit higher than usual at 4.3%. The average dividend increase over the past 5 years is running at around 5.3% per year, so this year’s increase is a little less than normal. See the spreadsheet.
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.
Susan,
ReplyDeleteIt’s good to hear that you are making what you need in dividends. What I don’t quite understand in this dividend investing strategy is that unless you have a lot of money, how can one make enough to live on dividend income? If you have half a million dollars invested in dividend generating stocks and the average yield is 4% (which is fairly good), the dividend income is only $20,000 a year before tax. If you have a small family, you will need closer to a million dollars invested to live on the dividend income. Is this dividend investing strategy only for the rich?
MML
You are quite correct; the maximum that you should take out of an investment portfolio to live off of is 4%. That means at 4%, you need a half million dollars to get $20,000 of income. It took me 11 years to get $100,000 portfolio and then another 12 years to retire. Once I got to $100,000 things went much faster than I ever thought. However, I was not as focused as other investment bloggers that I current read.
ReplyDeleteIt is a two prong attack of saving money and reducing expenses. It also greatly helps that dividend income is tax much lower than salary income.
Another thing with Dividend Investing, the value of your portfolio will bounce around a great deal, but dividend income is much more stable and tends to increase each year (once you have a decent size basket of stocks). You have to focus on cash flow (what you are receiving in income) and not just on portfolio balance.
I should write more on this subject later.
You might be interested in an interview I did with Dividend Ninja , another blogger. See Part 1 and Part 2.
@Susan, well said, and agree - the 4% rule if you will.
ReplyDeleteI'm getting close to the $100 K mark in unregistered stocks, it is now over if I include the TFSA.
I hope the magic of compounding can do its thing for me and I too, am another 15-20 years away from leaving the workforce with ease.
It is essential that dividend income is taxed at a MUCH lower rate than interest or salaried income; the government can be kind to some degree afterall :)
Cheers,
Mark
Hi Susan - I'm new here. I want to tell you that I really like your site, and your analysis of stocks. I find you clear and honest. To echo your comment above, it took me...I can't remember how long to hit 100 grand (a long time!). But the 2nd 100 came in just a few years, and the third only a year after that. I agree that it's important to look at the cash flow a portfolio generates, and the safety and sustainability of that cash flow from all of its sources, rather than the total net worth figure. Focusing on cash flow helps one to remain calm and content at times like this when the sky seems to be falling. If you have to worry about whether a dividend will be sustained, perhaps it isn't a good investment. That's my opinion, anyway. BTW, nice catch with CTY: I bought some myself a few months ago, and wish I'd bought more! Best wishes, Jay
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