Red Flag Yield

By Category: Dividend Yield | 5 comments

Red Flag YieldThe dividend yield of a corporation can tell a lot about the company’s health and struggle. There is a saying that when the yield is too good to be true, it probably is.

Red Flag Yield Indicators

Here is a quick mental chart you can use to classify the different yields. I got 5 groupings to assess a yield change.

Over 20% Yield

This one is probably obvious, when the yield hits those levels, there is a problem. It’s not sustainable and the company will have to reduce the dividends or worse will happen.Just recently Atlantic Power Corporation (ATP) hit that yield level. Not so long ago, Yellow Media also hit those levels and where is the company now? It’s not even listed and the CEO is departing.

If one of your holdings hit those levels; sell, sell and sell.

ATP - Atlantic Power Corporation

ATP – Atlantic Power Corporation

Over 10% Yield

Anything above 10% should still send shivers down your spine. Below is Just Energy (JE) with an 18% yield. The dividend is hanging in there but

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Why Hold High Yield Stocks

By Category: Dividend Income, Dividend Yield | 20 comments

Investment YieldsHigh yield investments can play a part in your portfolio. Even though I am a fan of the 10/10 rule of investing which focuses on the growth of a dividend stock,a high yield dividend stock (or income trust) can have a part in a portfolio. In fact, I have high yield investments in my portfolio.

What is a High Yield Stock

Let’s start by defining what a high yield investment is.

What it isn’t

  • It doesn’t meant that you chase investments based on yield.
  • It doesn’t mean you take risks with unworthy high yield investment (think of Yellow Pages here – I once had it on my watch list … shame on me).
  • It doesn’t mean you ignore fundamentals.

What it is – For me anyways :)

  • The yield is above average and sustainable.
  • The payout ratio will tend to be high which will limit growth appreciation.
  • The business is usually stable such as real estate.
  • The fundamentals are

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Dividend Yield or Growth or both?

By Category: Compound Interest, Dividend Growth, Dividend Yield | 21 comments

After looking into the 10/10 strategy form a previous post where you focus on screening stocks based on a 10 percent dividend growth for 10 years. I though I’d compare a hypotethical investment performance between a dividend growth, a dividend yield and both together.

I am purely interested to see where one type of dividend investment thrives over the other.

Dividend Yield

Crescent Point Energy – CPG

I have picked a company with a decent yield in today’s terms. It’s currently yielding 5.92% and pays its dividend monthly with a discount of 5% on DRIP. It’s a company that operates in the oil and gas industry in Canada. I don’t expect significant dividend growth from this company but the monthly dividend and yield are sustainable and attractive.

I have put a stock appreciation of 5% for every years below and I have not included the discount in the calculations. The investment triples in 15 years. It’s return on investment I would be happy with even if the dividends don’t increase.

Year
Shares
Price
Dividends
Yield
New Shares
Value

2011250$46.27$2.765.96%12$11,567.50 2012262$48.58$2.765.68%12$12,728.88 2013274$51.01$2.765.41%12$13,977.47 2014286$53.56$2.765.15%12$15,319.11 2015298$56.24$2.764.91%12$16,759.96 2016310$59.05$2.764.67%12$18,306.60 2017322$62.01$2.764.45%12$19,966.00 2018334$65.11$2.764.24%12$21,745.58 2019346$68.36$2.764.04%12$23,653.20

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Dividend Aristocrats - The S&P500 Version

By Category: Dividend Aristocrats, Dividend Income, Dividend Yield, Dividends | 20 comments

I came to realize recently that I never shared the US S&P500 Dividend Aristocrats and with the value of the Canadian dollar, investing in solid American blue chip dividend payers should be seriously considered. The Standard & Poors tracks the dividend aristocrats on the S&P 500 and the requirements are not to be taken lightly.

The following criteria must be met to become a Dividend Aristocrat:

  • Member of the S&P 500
  • Must have increased dividends for 25 consecutive years
  • Have at least 3B$ in market capitalization
  • Must have an average trading volume of US$ 5 million in the past 6 months

To be amongst this list is no small feat. I have many of them on my watch list and will possibly make a future RRSP investment when I have some fund available. At this point, I prefer to hold them in my RRSP due to the tax advantage for re-investing the dividends. I am sure you will recognize many but some may be a welcome addition to your watch list.

Dividend Aristocrats – S&P 500

Company Name
Ticker
Price
Yield
Market Cap (B$)
P/E

Exxon Mobil CorpXOM$91.792.05%408.139.36Wal-Mart StoresWMT$76.331.94%252.9615.06Procter & GamblePG$78.702.64%215.7019.83Johnson & JohnsonJNJ$87.212.61%244.9623.72Coca-Cola CoKO$41.934.01%186.7521.99PepsiCo IncPEP$82.122.34%126.9921.05McDonald’s CorpMCD$101.032.42%101.2918.76Abbott LaboratoriesABT$37.485.12%58.4376.643M CoMMM$110.411.99%76.2017.43Emerson Electric CoEMR$57.142.38%41.0820.17Lowe’s Cos IncLOW$42.691.03%46.4725.42Target CorpTGT$68.671.46%44.0316.13Walgreen CoWAG$50.401.35%47.7522.48Kimberly-ClarkKMB$102.542.73%39.4422.31Automatic Data ProcessingADP$69.932.06%33.9324.44CenturyLink IncCTL$37.437.80%22.8026.60AFLAC IncAFL$55.062.18%25.678.70Chubb CorpCB$87.821.78%22.7613.90Archer-Daniels-Midland CoADM$34.161.87%22.5018.14Air Products & Chemicals IncAPD$94.172.46%19.6218.92Consolidated Edison IncED$59.014.07%17.2816.50Becton, Dickinson & CoBDX$100.171.64%19.4617.82VF CorpVFC$185.121.36%20.4118.13McGraw-Hill Cos IncMHP#N/A#N/A#N/A#N/AEcolab IncECL$87.190.78%25.8132.11Grainger, W.W. IncGWW$258.551.02%17.9826.15PPG Industries IncPPG$156.861.45%22.3821.03Stanley Black & DeckerSWK$79.662.06%12.7731.01Brown-Forman Corp BBF.B$71.161.80%15.2026.26Dover CorpDOV$79.541.41%13.6116.82Sherwin-Williams CoSHW$186.080.80%19.2130.10Clorox CoCLX$85.982.56%11.2520.15Hormel Foods CorpHRL$41.261.26%10.9322.12Sigma-Aldrich CorpSIAL$84.420.85%10.1322.09Bard, C.R. IncBCR$105.150.68%8.4618.67McCormick & CoMKC$73.711.52%9.7224.16Family Dollar Stores IncFDO$64.331.12%7.3917.63Cincinnati Financial CorpCINF$47.753.35%7.8016.04Cintas CorpCTAS$44.841.09%5.4918.44Pitney Bowes IncPBI$15.069.83%3.038.36Bemis Co IncBMS$40.172.39%4.1323.51Leggett & PlattLEG$33.343.24%4.7619.48
Readers: Do you have any on your purchase list?

Disclosure: I am long AT&T and KMB