Safe Dividend Investing
In 2000, I lost $300,000 in mutual funds that an investment advisor had put my lifesavings into.... I lost it because I had entrusted it to an industry that does not educate investors nor encourage them to look closely at what that industry is doing with their money..... I set out to find a better, safer way to invest..... My podcasts relate to what I learned in creating a generous, reliable income and in growing my wealth.... A few of the more important lessons I learned and explore are:.... (1) It is critical that you become a self-directed investor.....(2) If you can not easily measure the risk and potential in an investment, then do not invest in it. This excludes from your portfolio bundled investment devices, like mutual funds, ETFs and Index funds,..... (3) Financially strong companies who have paid “good dividends” for decades will continue to stay strong and continue to pay good dividends because it is both part of their "character" and in their executives selfish interest.....(4) Diversification is critical. Investing equally in the best 20 strong dividend stocks is the ideal.....A portfolio of 20 limits your risk in any one stock to 5% of your wealth..... No matter how strong you think a stock is, do not fall in love with it..... I have lived very well off my steady dividend income for 18 years, through two market crashes and one pandemic. I have watched my portfolio’s capital more than triple from where I started, despite taking out a generous dividend income every year to live on... In charts, for my second investment book,(Safer Better Dividend Investing), I spent months scoring all 628 dividend stocks paying dividends of 6% or greater traded on the TSX, NYSE and the NASDAQ. I discovered dozens of stocks that can provide not only a generous dividend income but outstanding capital growth.....Financial independence is realizable for careful, patient, dividend investors.
Safe Dividend Investing
Podcast 174 - LOTS OF MONEY BUT POOR - BCE WORRIERS
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Welcome to Safe Dividend Investing’s Podcast # 174 on June 27th of 2024.
Today, I will be answering 2 interesting investment question.
QUESTION (1)
SHOULD I BE WORRIED ABOUT BCE?
QUESTION (2)
AM I RICH IF I HAVE A NET WORTH OF $10,000,000?
SIX INVESTMENT GUIDE BOOKS, BY IAN DUNCAN MACDONALD, ARE AVAILABLE FROM AMAZON.COM / KINDLE BOOKS, THE FOLLOWING ARE THE 2 LATEST:
(1) CANADIAN HIGH DIVIDEND INVESTING -
In this 325-page book, learn how to select, purchase and build a portfolio of 20 Canadian strong dividend stocks. Summary records of 215 stocks are sorted in multiple ways, and each stock's unique page provides detailed scoring data and 24 years of price and dividend trend data. Released September 23.
(2) NEW YORK STOCK EXCHANGE'S 106 BEST HIGH DIVIDEND STOCKS -
In this 334-page book, there is a 2-page report for each company scoring 11 data elements. It also lists 23 years of historical share price and dividend payouts so that investors can judge the stock's reliability. Released December 2022.
A TRANSCRIPT OF THIS PODCAST IS AVAILABLE.
FOR MORE INFORMATION ON IAN'S 6 INVESTMENT BOOKS, 3 NOVELS, PAINTINGS, PHOTOGRAPHS AND DIGITAL ART VISIT www.informus.ca
Ian Duncan MacDonald
Author and Commercial Risk Consultant,
President of Informus Inc
2 Vista Humber Drive
Toronto, Ontario
Canada, M9P 3R7
Toronto Telephone - 416-245-4994
imacd@informus.ca
PODCAST 174
Safe Dividend Investing
Greetings to listeners all around the world. Welcome to Safe Dividend Investing’s Podcast # 174, on June 27th of 2024.
My name is Ian Duncan MacDonald. In today’s podcast, I will be answering 2 interesting investment questions.
The objective of my books, my website and my podcasts are to show all those seeking financial independence how to become informed, confident, successful, self-directed investors.
QUESTION #1
SHOULD I BE WORRIED ABOUT BCE?
Several people have asked me to comment on the stock BCE, otherwise known as Bell Canada Enterprises. It is a stock that trades 10 million shares daily on both the New York Stock Exchange and the Toronto Stock Exchange. It is also a stock that I have probably owned for more than 10 years.
What those who enquired seemed most concerned about was that BCE was paying an 8.93% dividend yield. To them this seems to be a suspiciously high dividend yield for a major stock.
Interestingly in their annual report their chief executive proudly reports that this is BCE’s 16th consecutive year of increasing dividend payouts for shareholders. Perhaps it should raise questions as to why most companies of similar size pay no dividend or dividends of less than 2%. An analysis of the S&P 500 stocks who are selected based on their large capital size disclosed only one stock that would be of interest to a high dividend investor. 200 of these large 500 stocks paid no dividend.
The BCE high dividend yield does not concern me because when I look at the 25 years of BCE dividend payouts in my book Canadian High Dividend Investing, I see dividend payouts starting at 8 cents in 1999 when the share price was $15.74. From there the dividend payouts rise each year by 5 cents to 10 cents over the next 25 years.
These dividend payouts, as an annual percentage gain, went up much faster than the share prices of the company. I found this to be not unusual for companies that pay high dividend payouts.
BCE hit their highest annual revenues of $19.987 billion in 2012 and increased their dividend payout to 52 cents per share. In 2016 the dividend payouts went up to 68 cents when their revenues had shrunk to $16.402 billion. In the market crash year of 2020 when revenues dropped from $18.059 billion in 2019 to $17,082 billion the dividend payout still increased to 83 cents. Their revenues quickly recovered in 2021 to $18.710 billion and climbed to $18.278 billion in 2023. In both those years the dividend payouts climbed.
In 2022 BCE’s share price reached a record high of $68.30 and the dividend payout was 92 cents. In 2023 the share price was down to $58.73 but the dividend payout was raised to 97 cents. In 2024 the share price is now down even further to $44.65 but the dividend payout was raised to $1.00 a share.
BCE’s share price has been up and down by $7 or more, in any given year over the last 25 years. However, the operating margins for BCE have been steady. It is now 20.19%versus 21.04 % a year ago. It is from the operating margin that their dividend payouts are coming.
An operating margin is the money that is left over after all the corporation’s expenses have been deducted from the total revenue. Like all executives, the executives of BCE must not only do their best to maximize revenues, but they must manage that operating margin. If revenues go down, they must find ways to reduce expenses to maintain that high operating margin so their tradition of an ever-increasing dividend payout can be maintained. They have shown over the last 25 years that they are consistently able to do this. It became part of BCE’s culture to provide shareholders with this incentive to hold onto BCE shares
When I compare the 11 factors making up BCE’s current IDM score of 60 to the 11 factors making up the score of 63 in 2023 there are very few changes in the 11 factors that make up the score. It reflects the stability and the strength that comes from careful management of the company.
While no one can accurately predict future share prices, nor the financial surprises that can surprise publicly traded companies, BCE displays an unusual reliability and dedication to profits. Some companies lose sight that their primary objective is to realize a profit.
There are several stocks in my portfolio that concern me far more than BCE. I think BCE sees itself as that safe, reliable stock for widows and orphans. They do not want there to ever be any questions raised about the safety of their dividend payout.
Unlike most investors, I am not a speculator worried about having to cash in my shares to generate enough cash to pay my living expenses. I live off my dividend income. Thus, the safety and reliability of dividend payments is my number one concern. Thanks to such stocks as BCE, I can go for years without ever selling a stock or make changes to the stocks in my portfolio.
BCE’s current high dividend yield of 8.93% is not unusual when you recognize that share prices change due to the bidding for BCE shares by optimistic and pessimistic speculators. A dividend yield must mathematically increase when a share price declines because the dividend yield percent is taken as the percentage of the stock price.
BCE is constantly making changes to their operations and product offerings to increase their revenue. As their revenue increases you will most likely see the dividend yield percent automatically drop even though the amount in the dividend payout will most likely increase as is their tradition. You should then expect that investors to still comment on the drop in the dividend yield percent.
BCE is a company in transition. They like to describe themselves as moving from being a telco to a techco. It is not surprising that their residential hard wired phone service, which was their Telco strength for a hundred years has been declining. Telco subscribers shrunk last year from 3.45 million down to 2.73 million. It is an old technology.
However, their mobile services, which is a modern techco offering, showed growth last year from 12.3 million in 2022 to 13.2 million subscribers.
Their diversification into other revenue streams has also given them a sustaining strength. They now own 35 CTV television stations and 103 radio stations. Their video production operation produces dozens of television shows and professional sports events. They even own a significant percentage of successful sports teams like the Toronto Maple Leaf hockey team and the Raptors basketball team.
Companies are not blocks of wood or computer programs operating in isolation. This company, with a value of $44.65 billion that employs 44,000, is run by capable, professional managers. As employees they are far more involved in the future of their company than investors like you or me. There are very few stocks of this strength and size that offer such a high, reliable dividend income.
I found it interesting that of the dozen financial analysts currently reviewing BCE most were predicting that the share prices would rise from its present $44.65 Canadian dollars (or $32.59 US dollars) to $55 or $57 Canadian. Last year when I wrote my book Canadian High Dividend Investing that there was only one analyst recommending it as a buy.
If you still have concerns about BCE, I suggest you spend a few hours reading their very detailed annual financial statement for 2023. It was released in March. A quick Google search will extract it from the internet.
QUESTION 2
AM I RICH IF I HAVE A NET WORTH OF $10,000,000?
What is 10 million dollars? The reality is that $10 million dollars is just a number in a ledger. You can’t eat $10 million dollars until it is taken out of your ledger and used to buy food and drink. It is then that you quickly learn that you cannot eat or drink more than someone with a net worth of perhaps $1, 000. Only the choice of food you eat might be different, but it may not necessarily be more nutritious or better for you. No matter what you paid for your food and drink, it quenches your thirst and relieves your hunger.
You also soon learn that your wealth will not stop you from getting old, sick and dying. At best it might only delay your inevitable deterioration.
Even more disturbing is, despite your access to the 10 million dollars, that you face spending a third of your life unconscious lying in a bed sleeping. Furthermore, your wealth does not guarantee that you will sleep as soundly as the poorest person out there who has no worldly possessions to lose. The stress endured to accumulate 10 million dollars do not disappear once the 10 million dollars is realized. Fear of losing your 10 million dollars may disrupt your sleep far more than that person who had no money to lose.
Unfortunately, 10 million dollars does not relieve you of boredom or loneliness. If anything, with little to lust or strive for, life may become very dull. This can be compounded by self-isolating yourself from others, once you realize that you are target for charities and the greedy who think you are a wealthy fool. They will do whatever they can to transfer as much of your money from your pockets to their pockets. You rapidly learn to be suspicious of the motivations of all strangers. Your lack of trust and openness with others discourages anyone from wanting to get close to you.
Perhaps to achieve the envy of others, you may choose to live in a twenty-room mansion and drive a luxury automobile. However, you soon realize that you can only be in one room at any given time and when you are stuck in traffic someone on a bicycle may get to their destination faster than you do.
No matter how much money you have, it does not guarantee you good health, warm sincere friendships, a loving family, or the peace and satisfaction that comes with being content with your life. All you have is ten million dollars recorded in a ledger. You are a very poor person if ten million dollars is the only thing that defines who you are and what you have achieved in this life?
END