By Jim Royal | More Articles
January 6, 2012 | Comments (8)
Last June, I invested my money equally in a selection of 10 high-yield dividend stocks. Those names offer triple the yield of the average S&P 500 stock. You can read all the details. Now let’s check out the results so far.
Company
Cost Basis
Shares
Yield
Total Value
Return
Southern $39.71 25.0818 4.2% $1,127.18 13.2%
Exelon $41.82 23.818 5.1% $982.49 (1.4%)
National Grid $48.90 20.3693 5.8% $972.63 (2.4%)
Philip Morris International (NYSE: PM ) $68.49 14.5429 3.9% $1,137.40 14.2%
Annaly Capital (NYSE: NLY ) $18.24 65.5 14.2% $1,044.73 (11%)
Frontier Communications (NYSE: FTR ) $7.88 126.4243 14.6% $634.65 (36.3%)
Plum Creek Timber $38.42 26 4.6% $972.14 (2.7%)
Brookfield Infrastructure Partners (NYSE: BIP ) $26.12 38.2825 4.9% $1,090.67 9.1%
Vodafone $26.52 37.5566 4.9% $1,042.57 4.7%
Seaspan (NYSE: SSW ) $14.61 69 5.4% $951.51 (5.6%)
Cash $88.37
Dividends Receivable $112.97
Total Portfolio $10,157.31 0%
Investment in SPY
(Including Dividends) 0.7%
Relative Performance
(Percentage Points) (0.7)
Source: S&P Capital IQ.
Our total portfolio performance slipped back to flat overall, moving from 0.5% last week to 0% this week. That’s rough, but when combined with the solid move up in the S&P, it added up to underperformance, one of the few times since the portfolio began. We have four stocks outperforming the index. But I’m confident in the long-run nature of this portfolio, and I fully expect it to outperform.
With some $200 in cash that should be in the portfolio by the start of February, I’m trying to determine what my next dividend reinvestment should be. Given the massive decline in Frontier and its high yield, I’m strongly leaning toward reinvesting my capital there. But I may make two purchases. Thanks for all your suggestions so far. And remember, I’m reinvesting only in what’s in the portfolio so far. So, Fools, what should I buy?
As we head into a tenuous and uncertain 2012, I’m glad to be in dividend stocks because of their lower downside volatility. We should still see good performance from mortgage REITs, including Annaly, which thrive in poor conditions. You can see my latest thoughts on Annaly and explore 2011’s Top 10 Mortgage REITs. I like the steady all-weather performance from Philip Morris, which keeps massively outperforming because of the stickiness of its products. If we could only get a little cooperation from Frontier, we’d be thrashing the S&P, but investors seem very wary of a possible dividend cut, judging by the shares’ performance of late. The stock just keeps getting pummeled.
Here’s to a prosperous and even better new year!
Dividends and other announcements
Going into the new year, the news has been pretty light. But there have been a few developments and some year-end recaps:
2011 was a record year for fundraising for REITs, with the trusts raising $37.5 billion in equity — the largest since the sector was founded more than a half-century ago. Annaly got its piece of the pie, too, issuing hundreds of millions of new shares for capital to deploy into the market. Now some investors are worried about the potential for a new mortgage-refinance program, which could hurt the profitability of REITs such as Annaly.
Brookfield Infrastructure had a solid year, with a stock that climbed more than 30% for the year. Like Annaly, the company issued shares, in order to pick up new assets. In Brookfield’s case, those were two Chilean toll roads. You can read more about Brookfield’s appeal.
Seaspan announced a big repurchase authorization, up to 10 million shares, or 15% of shares outstanding, in a tender offer. The shocker was the 43% premium the company was willing to pay over Monday’s closing price. Shareholders can tender their shares for $15 by Jan. 11. The company also said it would spend $54 million in stock to buy its management company, helping to eliminate conflicts of interest. That tender probably means that another dividend raise is off the table for a few quarters yet.
Dividend news:
Brookfield Infrastructure paid out $0.35 a share on Dec. 30.
National Grid went ex-dividend on Dec. 2 and pays out $1.0967 per share on Jan. 18.
Frontier paid out $0.1875 per share on Dec. 29.
Vodafone announced a special dividend of 4 pence on top of its 3.05 pence interim payout. The stock traded ex-div on Nov. 16, and the money will be paid out on Feb. 3. In dollars, the total payout comes to about $1.12 per U.S. share at current exchange rates.
Philip Morris went ex-div on Dec. 20 and pays out $0.77 a share on Jan. 10.
Annaly went ex-dividend on Dec. 27 and pays out $0.57 per share on Jan. 26.
All that, of course, means more money coming into our pockets shortly and more money to reinvest.
It’s fun to sit back and get paid, and with the market volatility, we might have a good chance to reinvest those dividends at good prices. Europe continues to be an absolute mess, and continued bad news will probably have stocks plunging again. If they do, I’ll be inclined to pick more shares up.
Foolish bottom line
I’ve been a fan of big dividends for a while, and I think this portfolio will outperform the market over time through the power of dividends. As I promised in the original article, I’ll be holding these stocks for at least a year and will continue to track the portfolio over the course of the year, including news on these companies.
If you like dividends, consider these 10 stocks along with the 11 names from a brand-new free report from The Motley Fool’s expert analysts called “Secure Your Future With 11 Rock-Solid Dividend Stocks.” Today I invite you to download it at no cost to you. Get instant access to the names of these 11 high yielders — it’s free.
January 10, 2012 12:43 ET
AltaGas Ltd. Announces Monthly Dividend
CALGARY, ALBERTA–(Marketwire – Jan. 10, 2012) -
AltaGas Ltd. (“AltaGas”) (TSX:ALA) today announced that the January dividend will be paid on February 15, 2012, to holders of record on January 25, 2012, of common shares. The ex-dividend date is January 23, 2012. The amount of the dividend will be $0.115 for each common share. This dividend is an eligible dividend for Canadian income tax purposes.
AltaGas has a Dividend Reinvestment and Optional Share Purchase Plan (“DRIP”) for eligible Shareholders of AltaGas. Eligible Shareholders may reinvest the cash dividends paid by AltaGas on their common shares toward the purchase of new common shares at a five percent discount to the average market price as defined in the DRIP.
AltaGas is an energy infrastructure business with a focus on natural gas, power and regulated utilities. AltaGas creates value by acquiring, growing and optimizing its energy infrastructure, including a focus on renewable energy sources. For more information visit: www.altagas.ca.
This news release contains forward-looking statements. When used in this news release, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions, as they relate to AltaGas or an affiliate of AltaGas, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect AltaGas’ or PNG’s current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties, including without limitation, changes in market, competition, governmental or regulatory developments, general economic conditions and other factors set out in AltaGas’ or PNG’s public disclosure documents. Many factors could cause AltaGas’ or PNG’s actual results, performance or achievements to vary from those described in this news release, including without limitation those listed above. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this news release as intended, planned, anticipated, believed, sought, proposed, estimated or expected, and such forward-looking statements included in, or incorporated by reference in this news release, should not be unduly relied upon. Such statements speak only as of the date of this news release. Neither AltaGas nor PNG intends, and does not assume any obligation, to update these forward-looking statements. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Reuters Jan 9, 2012 – 10:55 AM ET | Last Updated: Jan 9, 2012 11:03 AM ET
By Jon Cook
TORONTO • Canada’s famously conservative banks, hit last week by a high-profile downgrade, may still be the least-bad option for Canadian investors in what could be another ugly year for stock markets.
The financial sector, whose shares outperformed the overall market in 2011, are unlikely to fall much, and yet have the potential to profit from any market recovery, analysts say.
“The place that is most right, right now, is in the financials sector,” said Rick Hutcheon, president of RKH Investments. “That’s where the game will be.”
In 2011, the worst year for equity investors since the 2008 global meltdown, the overall market fell by 11% while financials were down 7%. Bank stocks were largely flat.
But the financial issues, which account for nearly 30% of the value of Toronto Stock Exchange’s S&P/TSX composite index, were in the spotlight last week when a well-known industry analyst downgraded the sector and predicted the three top lenders would see their shares decline in 2012.
Related
Canadians think we’re in a recession, but economists don’t
Financial Post’s Outlook 2012
Barclays Capital analyst John Aiken forecast an end to the double-digit profit growth that has powered the banks since the financial crisis.
Yet less-bearish observers said risks from Europe’s debt crisis and other external threats make banks a wiser investment than more volatile energy and mining stocks. And traditional safe haven plays like telecoms and health care offer little upside after also outperforming the broader market in 2011.
Instead of trying to mimic what worked in 2011, investors should look for companies in depressed sectors with good value, such as banks, said Barry Schwartz, a portfolio manager at Baskin Financial Services.
“[Pipeline operator] Enbridge is not going to grow at 20% a year,” noted Mr. Schwartz. “However a bank stock could grow at 15% a year and they’re trading at 10 times earnings.”
Canadian banks also offer hefty dividends, and did not cut them in the recent recession. Five of Canada’s six big lenders, including Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and CIBC have dividend yields of more than 4%.
Market veterans said this offers some downside protection if global financial and economic turmoil worsens.
“It’s a sign of confidence on the part of Canadian bank management that, regardless of the outlook, they felt that they were in sufficiently good shape to start raising dividends again,” said Gavin Graham, president at Graham Investment Strategy.
Toronto stocks got off to a solid start in the first week of 2012, with the composite index rising almost 2% to close at 12,188.64. But gains are expected to be modest this year, with the index reaching just 12,500 by the end of 2012, according to a Reuters poll.
Many think problems outside of Canada, especially Europe’s sovereign debt crisis, will impede global growth and demand for commodities. This would hurt more growth-sensitive sectors like mining and energy, which account for more than 40% of Toronto’s composite index.
Last year, base metal and energy issues plunged 27% and 17% respectively, adding up to a miserable year for cyclicals after strong performances in 2009 and 2010.
Most of the gain from commodities in those years was driven by double-digit growth in China, the world’s largest buyer of industrial metals. But Chinese growth slowed last year, igniting a downward spiral in base metal mining stocks.
Despite recent signs that the Chinese economy has steadied and the U.S. economy is picking up steam, eurozone debt worries are expected to dominate in early 2012.
Many also expect the gridlock in Congress to worsen as the U.S. presidential election approaches, hurting investor sentiment and compounding the difficulties for resource stocks.
Still, analysts said investors should not shun commodity-linked stocks indefinitely. Some think they could rally firmly in late 2012 if concern over Europe eases and the global economy gets back onto strong footing.
“To the extent that the market focuses on the U.S., more cyclical names, more consumer-oriented names and more pro-growth names make sense,” said Stephen Wood, chief North American investment strategist at Russell Investments in New York.
“Getting overly defensive at very high valuations is not something people want to do.”
© Thomson Reuters 2012
Bank Dividends Make a Comeback in 2011
By Stephen Grocer
Investing in bank stocks was risky business in 2011. Shares of the nation’s banks were hammered as the economy continued to struggled and concerns about new regulations weighed on them.
But there was a bit of good news.
More banks and thrifts increased or initiated dividends in 2011 than in the previous two years combined, according to a report from SNL Financial. In all 123 banks and thrifts raised or initiated dividends last year, a 36% increase from 2010 and a 68% jump from last year. (Banks that took handouts from the government during the financial crisis generally were barred from paying robust dividends.)
Meanwhile, the number of banks slashing or suspending their dividend fell last year. Only 16 banks cut their dividend lat year, while seven suspended it. In 2010, 31 institutions lowered their dividend and 25 suspended it.
The fourth quarter was particularly active with 39 banks and thrifts raising or launching dividends. The largest dividend increase in the quarter belonged to PacWest Bancorp. The bank approved a quarterly cash dividend of 18 cents a share in November, up from a penny.
Here’s the list of banks which upped their dividends in the fourth quarter of 2011.
Here’s the list of banks that cut dividend in fourth quarter.
And suspended their dividends.
BOSTON — Stock investors ran in place in 2011. The Standard & Poor’s 500 index is ending the year about where it started.
Invest in a stock mutual fund, and you likely ended up losing because of fee expenses. About three-quarters of the U.S. stock fund categories that Morningstar tracks are closing out the calendar out with a loss.
That’s another knock for investors who are still stinging from their losses in the financial crisis of 2008. Although the market rebounded sharply beginning in March 2009, it’s still about 20 percent shy of its peak in late 2007.
Yet even in the gloom of 2011, there was a bright spot: Dividend-paying stocks.
Across the board, the top-performing mutual fund categories were those that invested in dividend stocks, led by funds specializing in utilities stocks. Other top categories were funds that primarily invest in real estate investment trusts, the health care sector, and stocks of consumer goods companies that make necessities.
What’s more, large company stocks outperformed small- and mid-cap stocks. It’s the big companies, rather than the smaller ones, that are the most reliable dividend payers. Nearly 80 percent of S&P 500 companies make regular payouts.
The results are a complete reversal from 2010, when the top-performing funds specialized in small-cap stocks. Those stocks typically outperform larger ones when economic news turns positive, as it did in 2010, a year when stocks rose 13 percent.
But the economic recovery lost momentum in 2011, and investors bid up the prices of dividend stocks, while small-caps fell. “Practically anything paying a dividend was hot,” Morningstar fund analyst David Kathman says.
Dividend-payers are typically well-established companies that share profits through quarterly payouts, rather than plowing the cash back into the company to fuel growth. Stocks of smaller companies can offer greater long-term potential, but are more vulnerable when the economy stumbles, or when fears like the European debt crisis send stocks tumbling.
Investors have been hard-pressed to find decent sources of investment income, which has made dividends more appealing. Consider that 10-year Treasury bonds yield around 1.9 percent. That’s less than half the yield of more than a dozen S&P 500 stocks. With interest rates low, bank accounts and savings options such as certificates of deposit provide even less income than Treasurys.
“People are looking to dividends for income, because they can’t get it from the other sources they normally rely on,” Kathman says.
Here’s a look at average returns through Wednesday for some notable stock fund categories, starting with top four performers:
– Utilities (9.7 percent): These stocks tend to be stable performers in both a rising and falling market. It’s an outgrowth of the typically steady demand for electricity and natural gas. The average dividend yield of utilities stocks within the S&P 500 is 4.1 percent, about twice the average yield of the index. A handful of utilities sector funds delivered returns of around 20 percent in 2011, including Franklin Utilities (FKUTX), which earned top-rung gold honors from Morningstar under its new analyst ratings of funds. Some of the strongest-performing utilities, with gains of more than 30 percent including dividends, were big names like Progress Energy Inc. and Consolidated Edison Inc.
– Real estate (6.9 percent): Real estate investment trusts generate income from properties they own, and often operate. They’re big dividend payers, because they’re required to distribute at least 90 percent of their taxable income to shareholders. Although the real estate market clearly isn’t back to where it was a few years ago, commercial real estate has fared better than residential real estate.
– Health care (6.6 percent): Uncertainty over President Obama’s health care overhaul hurt health care stocks in 2009 and 2010, but that cloud lifted a bit in 2011. Drugmaker Pfizer returned nearly 28 percent. One attraction was the stock’s dividend yield of 3.7 percent. Biotech stocks were among the year’s biggest winners. Biogen Idec shares jumped 64 percent, and a specialized fund, Fidelity Advisor Biotechnology (FBTAX), returned nearly 17 percent.
– Consumer staples (4.5 percent): These funds invest in stocks of companies that provide everyday essentials, from food to soap to trash bags, and typically pay dividends. Demand for these products is stable in good times and bad. Two of the standout stocks in 2011 are tobacco companies paying dividends of 3.9 percent or higher. Lorillard returned about 46 percent, and Philip Morris International 39 percent.
– Financials (16 percent loss): Funds that specialize in stocks of banks and other financial services companies were the worst-performing mutual fund category of 2011. It’s familiar territory. Financial sector funds also have the worst results over the past three- and five-year periods. In 2011, these stocks were hurt by the slowdown in the economic recovery; legal liability stemming from the flood of home foreclosures; and fears that debt-burdened European governments would fail to fully pay their debts, potentially hurting European and U.S. banks. Shares of Bank of America tumbled 60 percent.
Technology (8 percent loss): These stocks are among the top performers over the past three years, but the slowdown in the economic recovery hurt their 2011 results. There were exceptions, like Apple, whose shares gained nearly 25 percent as consumers continued to demand the latest versions of the iPhone and iPad.
As for dividends, the outlook remains strong. The cash coffers of companies in the S&P 500 are at a record $1 trillion, putting them in good position to keep increasing dividends. Payments rose about 16 percent in 2011 compared with the previous year, and more than half of S&P 500 companies increased their dividends.
S&P analyst Howard Silverblatt is quite confident about the outlook for dividends: “You can write the copy for next year now: Dividends continue to increase for 2012.
Source: http://www.courierpress.com/news/2012/jan/02/stock-investors-ran-in-place-in-2011-the-poors/
I am always not a fan of Motley Fool. I actually loath the pretty much like hate to eat the chocolate icecream.
But the following article has some merit to introduce to our readers. It once again emphasis the timeless value of DRIP investing, and what’s more interesting, it has one of the Canadian bank name there. Want to know which one? find out yourself.
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By Dan Caplinger | More Articles
November 30, 2011 | Comments (0)
7 Companies That Give Away Free Stock
Some of the biggest financial scams in history had the simplest pitch: They offered something for nothing. Smart investors have learned to be skeptical of investments that make those offers.
But many companies offer a legitimate, simple way to get what amounts to free money. And it couldn’t be easier to claim your share. All you have to do is buy stocks and reinvest the dividends.
Earning profits, drip by DRIP
Millions of investors have discovered the long-term power of dividends. By buying a stock and reinvesting the dividends into additional shares of the company, you’ll see your total position in the stock soar over the years. For truly long-term investors, the gains from reinvesting dividends often dwarf what they realize from their original shares.
Nowadays, it’s easy to reinvest your dividends. Several discount brokers provide the service at no additional charge, even when it involves buying fractional shares of stock.
But to find the free-money opportunity with dividend-paying stocks, you have to go back to an older method called the dividend reinvestment plan. It may seem old-fashioned, but these plans, also known as DRIPs, can help make your dividends work harder for you.
Here’s how it works: After you enroll in a DRIP, you can arrange to have all your dividends reinvested in shares every quarter. DRIPs typically have rules that determine the per-share price you’ll pay on those reinvested dividends. That makes DRIPs extremely convenient because the reinvestment happens automatically.
But even better, some DRIPs give you a discount on the shares you purchase through reinvested dividends. Before you get too excited, the discount usually is fairly small — between 1% and 5% of the dividend amount. But the discount still represents money that you’re saving versus going out and buying the shares yourself — and even brokers that offer dividend reinvestment services of their own won’t give you those discounts.
Who’s giving away the free money?
Obviously, not every company offers these discounts. But many companies do. Here’s a sample:
Stock
Current Discount Available on Reinvested Dividends
Aqua America (NYSE: WTR ) 5%
Piedmont Natural Gas (NYSE: PNY ) 5%
Pengrowth Energy (NYSE: PGH ) 5%
Health Care REIT (NYSE: HCN ) 2%
Penn West Exploration (NYSE: PWE ) 5%
Omega Healthcare (NYSE: OHI ) 1%
Toronto-Dominion (NYSE: TD ) 1%
Source: Company investor relations.
Why would companies like these let you buy shares at a discount? One reason is that encouraging dividend reinvestment saves companies the expense of cutting checks for small investors. If a DRIP discount encourages you to reinvest those small amounts every quarter, then the company benefits from lower costs.
Another reason is that the move can generate demand for shares without costing very much. Because large institutional investors aren’t going to accept the rules and conditions of a DRIP — rules that encourage long-term investment over short-term liquidity — it’s not as though the company has to worry about hedge funds or other massive investors using DRIPs to siphon millions of dollars from their coffers.
What’s the catch?
DRIPs can be very useful tools, but they do have limitations. For one thing, many DRIPs require you to already be a shareholder of the company to participate. That means that you have to find a way to buy your initial shares of stock before taking advantage of the DRIP. That used to be prohibitively difficult, but again, discount brokers and commissions of $10 or less make buying those first shares a lot less painful for your pocketbook.
Also, some companies charge fees to participate in their DRIPs. So don’t assume that any DRIP is automatically a good deal — even if it offers a share discount on reinvested dividends — until you check the plan’s fees. In some cases, those fees could partially or even completely offset any benefit from a discount.
For the most part, though, DRIPs offer a great way to help you build up a substantial position in dividend stocks. The ones that give you free money make the value of compounding even sweeter over the years.
Discounts are great, but you still want to make sure you have the best dividend stocks in your portfolio. We’ve put 11 of the strongest in this free special report from The Motley Fool; with thousands of readers having already discovered them, you shouldn’t wait another minute to find out about them.
The beauty of the DRIP investing is counting your dividend payment each and every quarter. Now it’s the turn for another big Canadian bank.
TD just declared its Q4 dividends, as well as keeping its 1% discount on DRIP. It’s an attractive investment, although BMO is actually offer better discount.
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TD Bank Group declares dividends
Canada NewsWire
TORONTO, Dec. 1, 2011
(all amounts in Canadian dollars)
TORONTO, Dec. 1, 2011 /CNW/ – The Toronto-Dominion Bank (the Bank) today announced that a dividend in an amount of sixty-eight cents (68 cents) per fully paid common share in the capital stock of the Bank has been declared for the quarter ending January 31, 2012, payable on and after January 31, 2012, to shareholders of record at the close of business on January 5, 2012.
In lieu of receiving their dividends in cash, holders of the Bank’s common shares may choose to have their dividends reinvested in additional common shares of the Bank in accordance with the Dividend Reinvestment Plan (the Plan).
Under the Plan, the Bank determines whether the additional common shares are purchased in the open market or issued by the Bank from treasury. At this time, the Bank has decided to continue to issue shares from treasury, at a 1% discount from the Average Market Price (as defined in the Plan) until such time as the Bank elects otherwise.
In order to participate in time for this dividend, Enrolment Forms for registered holders must be in the hands of CIBC Mellon Trust Company at P.O. Box 700, Postal Station B, Montreal, Québec, H3B 3K3 before the close of business on January 4, 2012. Beneficial or non-registered holders must contact their financial institution or broker for instructions on how to participate in advance of the above date.
The Bank also announced that dividends have been declared on the following Non-Cumulative Redeemable Class A First Preferred Shares of the Bank, payable on and after January 31, 2012, to shareholders of record at the close of business on January 9, 2012:
Series O, in an amount per share of $0.303125;
Series P, in an amount per share of $0.328125;
Series Q, in an amount per share of $0.35;
Series R, in an amount per share of $0.35;
Series S, in an amount per share of $0.3125;
Series Y, in an amount per share of $0.31875;
Series AA, in an amount per share of $0.3125;
Series AC, in an amount per share of $0.35;
Series AE, in an amount per share of $0.390625;
Series AG, in an amount per share of $0.390625;
Series AI, in an amount per share of $0.390625; and
Series AK, in an amount per share of $0.390625.
The Bank for the purposes of the Income Tax Act, Canada and any similar provincial legislation advises that the dividend declared for the quarter ending January 31, 2012, and all future dividends will be eligible dividends unless indicated otherwise.
*Effective November 2010, shareholder records are maintained by Canadian Stock Transfer as administrative agent for CIBC Mellon Trust Company.
Good news to DRIP investors – Bank of Montreal will introduce the 2% discount on its dividend reinvestment plan. The discount was previously introduced during the 2008 financial crisis. After market re-bounce, the discount was scraped by the market.
On the flip side, the re-introduction of DRIP discount is a reflection of current European debt crisis, and bank’s cautionary step to attract more individual investors.
However, it’s still positive news to any DRIP investors who like the steady payment of Canadian bank dividends. Keep in mind, as always, the discount is only applying to the reinvested dividend part, not the OCP (optional cash purchase) part.
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December 06, 2011 07:30 ET
BMO Financial Group Declares Dividend and Introduces a 2 Per Cent Discount on its Dividend Reinvestment Plan
TORONTO, ONTARIO–(Marketwire – Dec. 6, 2011) – Bank of Montreal (TSX:BMO)(NYSE:BMO) today announced that the Board of Directors declared a quarterly dividend of $0.70 per share on paid-up common shares of Bank of Montreal for the first quarter of fiscal year 2012, unchanged from the previous quarter.
For the current quarter, the Board of Directors also declared dividends of:
$0.33125 a share on paid-up Class B Preferred Shares Series 5;
US$0.371875 a share on paid-up Class B Preferred Shares Series 10;
$0.28125 a share on paid-up Class B Preferred Shares Series 13;
$0.328125 a share on paid-up Class B Preferred Shares Series 14;
$0.3625 a share on paid-up Class B Preferred Shares Series 15;
$0.325 a share on paid-up Class B Preferred Shares Series 16;
$0.40625 a share on paid-up Class B Preferred Shares Series 18;
$0.40625 a share on paid-up Class B Preferred Shares Series 21;
$0.3375 a share on paid-up Class B Preferred Shares Series 23; and
$0.24375 a share on paid-up Class B Preferred Shares Series 25
The dividend on the common shares is payable on February 28, 2012 to shareholders of record on February 1, 2012. The dividends on the preferred shares are payable on February 27, 2012 to shareholders of record on February 1, 2012.
The above-mentioned dividends on the common and preferred shares are designated as “eligible” dividends for the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation.
Bank of Montreal also announced the introduction of a 2 per cent discount on the reinvestment of dividends in newly issued common shares under its Shareholder Dividend Reinvestment and Share Purchase Plan (the “Plan”). Under the Plan, shareholders may elect to have dividends on common shares reinvested in additional common shares of the Bank. The Bank determines whether the additional common shares are purchased on the secondary market or are newly-issued by the Bank from treasury. At this time, the Bank has decided to issue shares from treasury at a 2 per cent discount from the Average Market Price (as defined in the Plan) until such time as the Bank elects otherwise. Previously, the common shares purchased under the Plan had been issued from treasury with no discount to the Average Market Price. The discount will not apply to shares purchased under the “Optional Cash Payment” feature of the Plan. This change will be effective for the first quarter of fiscal 2012 dividend (“Q1 2012 Dividend”).
For existing members of the Plan who are residents of Canada and the U.S., the discount will automatically be applied to the reinvestment of the February 28, 2012 dividend payment unless they choose to discontinue participation in the Plan. Any registered holder of record wishing to join the Plan can obtain an Enrolment Form from the Bank’s Transfer Agent, Computershare Trust Company of Canada, from their website at www.computershare.com/bmo, or by calling 1-800-340-5021 within Canada and the United States. Beneficial or non-registered holders of the Bank’s common shares must contact their financial institution or broker to participate.
In order to participate in time for the Q1 2012 Dividend, Enrolment Forms from registered holders must be received by Computershare Trust Company of Canada, 100 University Avenue, Toronto, Ontario M5J 2Y1 before the close of business on January 27, 2012. Beneficial or non-registered holders must contact their financial institution or broker for instructions on how to participate in advance of the above date.
Registered participants in the Plan who would prefer to receive a cash dividend rather than reinvest their dividends may terminate their participation in the Plan by duly completing the termination portion of the voucher on the reverse of the statement of account and sending it to Computershare Trust Company of Canada at the above address, to be received by no later than January 27, 2012 in order to be effective for the February 28, 2012 dividend payment. Non-registered participants in the Plan should contact their financial institution or broker in advance of January 27, 2012 for instructions on how to terminate participation so that the Q1 2012 Dividend is not reinvested in common shares.
Participation in the Plan is only open to residents of Canada and the US. For U.S. residents, a copy of the prospectus relating to the BMO common shares offered pursuant to the Plan is available from Computershare at www.computershare.com/bmo or by calling 1-800-340-5021.
I previously wrote an article that illustrated the potential benefits of reinvesting dividends with several stocks over a relatively short time frame. I wanted to take a moment and focus more closely on The Coca-Cola Company (KO) over a longer time period. Warren Buffett was on to something with this investment. A simple investment back in 1984 would produce a small fortune today without any additional investments. This is the power of dividend reinvestment.
How does this work? If someone had purchased 400 shares of KO back on September 10, 1984 at $60.50 and just reinvested dividends, they would be a millionaire today. While the initial investment is close to $25,000, a significant sum of money today and certainly a relatively larger sum back then, the mathematics and percent returns would be the same for any amount of money. Closing prices from November 9, 2011 were used for this analysis. The following chart shows the detailed breakdown of how the investment has performed over time:
The first step shows the initial investment in 400 shares. The next step is the largest driver of KO returns. KO has been a phenomenally successful company providing significant share price appreciation. Since 1984, KO has had 4 stock splits: one split was 3 for 1 and three others that were just 2 for 1. This means that an investor would have 24 shares today for each share purchased in 1984. Simple math shows that 400 x 24 x 67.03 = $643,488 or a gain of $619,288 over the initial investment. This is a 12.8% return and does not include any dividends. So without question, KO is a bit of an anomaly within the investing world.
The next bucket shows the dividends earned from the initial shares purchased, as well as any shares acquired from splits related to the initial shares. This amount is a staggering $181,544. This reflects historical yields ranging from 1% to almost 4%, a little above the current SPDR S&P 500 Trust ETF yield of 2.0% that is available right now. At this point an investor would have a little over $800,000.
The next two buckets illustrate the impact of reinvesting dividends. While the initial investment provided $182 thousand to purchase additional shares, all of those shares also pay dividends. This second amount totaled $87,874. Almost a third of all dividends received was due to the investment of dividends from that initial investment.
Furthermore, not only do you earn dividends on reinvested dividends, those shares can also appreciate in value. While the initial purchase contributed 9,600 shares to the current total, all the reinvested dividends provided another 7,489 shares. These shares also benefited from KO stellar stock performance, appreciating another $232,593 in value — close to a doubling of the amount of dividends reinvested.
These last two buckets are critical since they represent the bonus from dividend reinvestment. Almost a third of the total gain is from reinvesting dividends. However, it should be noted that this performance was significantly enhanced from KO’s strong overall stock performance. The flip side is that a stock with a higher yield, say a utility type of company, would have an even more exaggerated benefit from dividend reinvestment.
At the end of all this, the investor has a portfolio worth about $1.15 million that paid over $30,000 in dividends in the past twelve months — a sum larger than the initial investment. Not too shabby.
This article illustrates the benefits of dividend reinvesting and impact of compounding — earning dividends on dividends. Clearly, one could invest KO’s dividends in another security. Furthermore, it should be noted that even if dividends are reinvested, they create a tax liability. However, given KO’s strong stock performance and relatively low historical yield, the majority of the gains on the reinvestment are still related to the initial investment. However, over a longer period, or with a stock that has a higher dividend yield, this would flip. It is also important to note that picking another stock and consistently reinvesting dividends might not have the same benefits — especially if it is an underperforming stock, or worse yet– goes bankrupt.
Disclosure: I am long SPY.
Additional disclosure: Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.
source:
http://seekingalpha.com/article/307577-dividend-reinvestment-the-coca-cola-millionaires
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