Worried About Falling Stock Prices?

fearAre you worried about falling stock prices? If you’re thinking about investing, then falling stock prices are great!

The key is to buy quality stocks when they are undervalued. The return on your investment (dividend yield) will also be higher when stock prices are low. Let’s take a look at a real-life example:

ConocoPhillips was founded in 1917, and is an American company which explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide.

ConocoPhillips trades on the New York Stock Exchange under the stock symbol “COP”.

About 4 months ago COP was trading at $86.76, and the dividend was $2.92, which meant you would earn 3.36% on your investment.

Dividend Yield = (dividend / stock price) x 100
Dividend Yield = ($2.92 / $86.76) x 100
Dividend Yield = (0.0336) x 100
Dividend Yield = 3.36%

On October 14th the stock price dropped to $66.20, and the dividend remained at $2.92. Can you guess what the return on investment would’ve been after the price drop?

Dividend Yield = (dividend / stock price) x 100
Dividend Yield = ($2.92 / $66.20) x 100
Dividend Yield = (0.0441) x 100
Dividend Yield = 4.41%

As you can see the lower the stock price gets the higher the dividend yield gets. Therefore a $5000 investment in COP would yield:

3.36% of $5000 = $168
or,
4.41% of $5000 = $220

$220 return on your investment represents an increase of 31% over the $168 return. Would you rather earn $220 or $168?

Lower stock prices represent great opportunities to buy quality dividend paying stocks at higher yields.

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Want to Increase Your Income, Passively?

I love dividends, and I love them even more when they increase.

Increasing dividends means more money in your pocket. A solid stream of increasing passive income!

Here are some recent dividend increases:

US COMPANIES

Am Electric Power (AEP), to $0.53 from $0.50, increase of 6.00%

Barnes Group (B), to $0.12 from $0.11, increase of 9.10%

Brown & Brown (BRO), to $0.11 from $0.10, increase of 10.00%

Cass Info Sys (CASS), to $0.21 from $0.20, increase of 5.00%

Cintas (CTAS), to $0.85 from $0.77, increase of 10.40%

Hubbell-B (HUB-B), to $0.56 from $0.50, increase of 12.00%

International Paper (IP), to $0.40 from $0.35, increase of 14.29%

Lockheed Martin (LMT), to $1.50 from $1.33, increase of 12.78%

McDonald’s (MCD), to $0.85 from $0.81, increase of 4.94%

Middlesex Water (MSEX), to $0.1925 from $0.19, increase of 1.30%

N.W. Natural Gas (NWN), to $0.465 from $0.46, increase of 1.09%

ONEOK Inc (OKE), to $0.59 from $0.575, increase of 2.60%

Parker-Hannifin (PH), to $0.63 from $0.48, increase of 31.30%

Pall Corp (PLL), to $0.305 from $0.275, increase of 10.91%

Pinnacle West Capit (PNW), to $0.595 from $0.57, increase of 4.80%

Royal Bank Canada (RY), to $0.689 from $0.649, increase of 5.63%

Stepan Co (SCL), to $0.18 from $0.17, increase of 5.90%

Texas Instruments (TXN), to $0.34 from $0.30, increase of 13.30%

VF Corp (VFC), to $0.32 from $0.2625 increase of 21.90%

West Pharmaceutical Services (WST), to $0.11 from $0.10, increase of 10.00%

 

CANADIAN COMPANIES

Alimentation Couche-Tard (ATD.B), to $0.045 from $0.040, increase of 12.5%

Bank of Nova Scotia (BNS), to $0.66 from $0.62, increase of 6.4%

CAE (CAE), to $0.07 from $0.06, increase of 16.70%

CCL Ind. (CCL.B), to $0.2875 from $0.2375, increase of 21.0%

Emera (EMA), to $1.55 from $1.45, increase of 7%

Home Capital (HCG), to $0.18 from $0.14, increase of 28.6%

Manulife (MFC), to $0.155 from $0.13, increase of 19.2%

Pason Systems (PSI), to $0.15 from $0.13, increase of 31.0%

Ritchie Bros (RBA), to $0.14 from $0.13, increase of 7.7%

Royal Bank Canada (RY), to $0.75 from $0.67, increase of 12.0%

Russel Metals (RUS), to $0.38 from $0.35, increase of 8.6%

Saputo (SAP), to $0.26 from $0.23, increase of 13.00%

Suncor (SU), to $0.28 from $0.20, increase of 40.0%

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Are You an Anxious, Impatient, Irrational Person?

Four BusinesspersonsShow me an anxious, impatient, irrational person, and I’ll show you a lousy investor. Your emotions are key when it comes to investing. Successful investors don’t let their emotions get in the way.

You’ve probably heard of Warren Buffett, he’s a famous value investor and a self-made billionaire with a successful track record of over 50 years. But what you may not know is that most of what Warren Buffet learned came from Ben Graham. Ben Graham was Warren Buffett’s teacher and mentor at Columbia University, and here’s what Ben Graham had to say about the temperament of a true investor.

“Ben Graham, as we know, fiercely urged his students to learn the basic difference between an investor and a speculator. The speculator, he said, tries to anticipate and profit from price changes; the investor seeks only to acquire companies at reasonable prices. Then he explained further: The successful investor is often the person who has achieved a certain temperament – calm, patient, rational. Speculators have the opposite temperament: anxious, impatient, and irrational. Their worst enemy is not the stock market, but themselves. They may well have superior abilities in mathematics, finance, and accounting, but if they cannot master their emotions, they are ill suited to profit from the investment process.”*

Remember to be a successful investor: remain calm, patient, and rational and invest in quality dividend paying stocks when they are undervalued.

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* page 178, “The Warren Buffett Way” by Robert G. Hagstrom

Has your income gone up by 935%?

Today I’d like to share with you some wisdom from someone who has been a dividend investor for more than 30 years.

In the latest edition of the Connolly Report (August 2014), Tom Connolly had this to say about investing:

“Focus on the growing dividend income, the increasing yields, is my message to you, in a sentence, after researching dividend income common stocks for thirty years. Dividends give stock intrinsic value. Dividend increases build wealth. In 1993, for instance, Royal Bank’s dividend was 29¢. Now RY’s dividend is $3.00. That’s up 935%. Talk about a great retirement asset. Think on this:Royal Bank’s dividend yield in 1993 was much the same in 1993 as it is now, some 4%. That being the case, what must have happened to the stock price? RY’s price grew too. By how much did the price grow? Yes. You are right. If the yield is the same now as it was, price growth must have been roughly the same as dividend growth.”

Mr. Connolly then continues with the most important piece of knowledge:

“I have learned, over the years, to add yield and dividend growth to estimate future return. Telus, for instance, has a current yield of 4% and a five-­‐year dividend growth rate of 8%. I’d estimate return to eventually be 12%. A lot of folks do not agree with this computation. That’s their loss. I’ve worked with dividend growth for thirty years now. It works. We have experienced it ourselves. We know. We hold, hold and hold good dividend growth stocks.”

Royal Bank’s dividend has increased by 935% since 1993, has your income increased by 935% since then? When you own a quality dividend paying stock that continues to increase it’s dividends….the simplest thing to do with those shares is to…hold. Hold, and continue to earn increasing income.

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Another way to grow your portfolio without any effort on your part

Man lying on sofaBesides dividends, there’s another way to grow your portfolio. Stock buy backs. A stock buyback is when a company buys back some of its own shares.

A buyback doesn’t mean a company will come knocking on your door to buy your shares, it simply means a company will place orders on the stock market and over a period of time buy back some of its own shares from other investors.

What does a share buyback mean for you? A share buyback reduces the amount of outstanding shares on the market. Reduced supply usually results in an increase in the share price for the remaining shares.
Bank of Nova Scotia recently announced that they will buyback 1% of their outstanding shares by the end of May 2015:

“…enable [Bank of Nova Scotia] it to purchase up to 12 million of its Common Shares. This represents approximately one per cent of the 1,216,689,705 Common Shares issued and outstanding as of May 23, 2014. Scotiabank believes that the purchase of its Common Shares at market prices may be an appropriate use of its funds to generate shareholder value, as well as for capital management purposes.”*

So if you own shares in BNS, sit back, relax, and continue to collect dividends, while BNS buys back 12 million of its own shares.

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Tech Bubble, Housing Bubble, IPO Bubble, Stock Bubble?

Old light bulb isolated on whiteBubbles, bubbles, everywhere, when a bubble gets big enough it will burst. Speculative investors get excited whenever there’s a stock bubble of any kind. There’s the excitement of making it rich very quickly. Should you invest when stock prices are soaring?

The quick-rich euphoria then trickles down to the everyday Joe, and then your friends and neighbors start talking about stocks. Have you been to a party recently where so and so talked about investing in Tesla, Twitter, Facebook, or the latest social media IPO? It’s easy to get caught up in the hype, and start buying stocks without doing your homework.

Problems arise when bubbles burst and you’re left with huge losses.

In the book, Investing the Templeton Way the authors Lauren Templeton and Scott Phillips discuss bubbles in Chapter 6. In early 1999 Lauren Templeton visited her great-uncle Sir John Templeton (Uncle John) in the Bahamas, she wrote:

 “Not quite sure what to say, I blurted out a largely spontaneous and regrettable question: ‘Uncle John, have you been buying any technology stocks?’ He calmly glanced over at me, gently set his Coke down onto the table, and with the slightest smile said, ‘Let me tell you a story.’

read more

Do You Have Mediocre or Lousy Investments?

investingchartDo you have poor performing investments (stocks, mutual funds, index funds, ETFs)? If so, now might be the time to get rid of them.

Recently the Dow broke through 17,000 for the first time. The stock market reached an all time high.

When the markets are high, that is usually a good time to get rid of your loser investments. Loser investments are investments that:

•    Have been performing poorly over the years
•    Have reduced or eliminated their dividends over the last few years
•    Mutual funds with high fees

When the market is high, generally speaking most stocks and mutual funds will also be high. The investments might be trading at prices much higher than what you paid for them. I hate to lose money, so if I can sell a loser investment for more than what I paid for it then it’s a great time to sell that investment.

When the market is high, use that opportunity to sell your loser investments.

Be cautious of buying any new investments right now, remember you want to buy quality stocks when their prices are low (undervalued). There is no harm in waiting for quality stocks to become undervalued. Remain patient, educate yourself on how to invest, and you’ll be ready when the opportunity presents itself.

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