Dividend Investing

A summary of my articles on Dividend Investing. Click here to view the complete posts…

The Dividend Payout RatioThe Dividend Payout Ratio

July 19th, 2011

One of the most important screening criteria I use is the Dividend Payout Ratio (DPR). This simple ratio tells me the ability of a company to pay its dividends to shareholders, and its ability in the future in continuing to do so. The DPR also tells me whether a company has the potential to raise its dividend, or the likelihood that it may cut the dividend.  In this article I examine the DPR ratio, what it means for investors, and some brief examples. This Article was published in the July/August 2011 issue of the Canadian MoneySaver.

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The Yield on Cost IllusionCan You Live Off Your Dividends?
Part 2: The Yield On Cost Illusion

April 29th, 2011

In Part-1 of this series, I examined the concept of dividend income as a viable means to support retirement income.  Some investors missed the entire point of the article. They confused the final value of their stocks and dividend yield, with their Yield on Cost (YOC). They failed to realize the single most important point:  When you retire you are living off the dividend income of your entire portfolio, not the YOC of your original investment. They used YOC to support double digit returns in retirement, far above the current dividend yield of the very stocks they were holding…

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Dividend Income in RetirementCan You Live Off Your Dividends?
Part 1: Dividend Income in Retirement

April 21st, 2011

We all invest for the same end result – to sustain our retirement or lifestyle when we are older. All of us have different goals and reasons, but the end result is the same. How much can we safely withdraw from our portfolio without depleting our original investment capital? Does a primarily 100% dividend stock portfolio support a retirement income?

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High Yield Canadian StocksHigh Yield Canadian Stocks: Part 1

April 5th, 2011

Canada has many high yield dividend stocks and trusts, many are obviously risky. But some of these companies are gems, which are actually safer to invest in than you might think… You can invest in Canadian companies (some well known) with yields of 5% to 10% that have solid balance sheets. Take BCE for example, which has a 5.60% yield and is one of Canada’s leading telecoms and wireless providers.

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The Dividend Payout RatioThe Dividend Payout Ratio

March 9th, 2011

One additional measure of a company’s ability to pay its dividends is the Dividend Payout Ratio (DPR). This ratio indicates how much of a company’s revenue goes into paying out its dividend to shareholders. For example a company with a Dividend Payout Ratio of 60%, would pay out 60% of its earnings to shareholders, while retaining 40% of that income… Dividend Investors focus on the DPR, because it indicates a company’s ability to continue paying dividends, and the likelihood that a company will be able to increase its dividend in the future.

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The Power of Preferred SharesThe Power of Preferred Shares

February 13th, 2011

If you are older and want steady income without market volatility, then preferred shares are an excellent choice for the growth section of your portfolio. The top 14 Canadian preferred shares I reviewed (see table below) had on average nearly twice the yield of common shares, but with 25% less volatility in share price. In real terms that was an average of 5.9% dividend yield, with 10% growth in share price over a 52 week period – or 15.9% average total return.

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Creating Monthly Dividend IncomeCreating Monthly Dividend Income

January 29th, 2011

One strategy for dividend investing is to select dividend paying stocks based on their dividend payout date. So a basket of dividend paying stocks will result in dividends paid out every month. Some stocks pay out dividends monthly i.e. Shaw Communication (SJR.B), but most dividend stocks payout their dividends quarterly.  So the goal is to select a basket of dividend stocks you like, and stagger the quarterly dividend payout dates.

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