TransAlta Corporation (TSX:TA) (NYSE:TAC) today announced that it has added a Premium Dividend(TM) Component to its existing Dividend Reinvestment and Share Purchase Plan (the Prior Plan). The amended and restated plan is called the Premium Dividend(TM), Dividend Reinvestment and Optional Common Share Purchase Plan (the Plan).
The Plan provides eligible shareholders of TransAlta with two options, to reinvest dividends at a current three per cent discount towards the purchase of new shares of TransAlta or instead, to receive the equivalent to 102 per cent of the dividends payable in cash.
More specifically, the mechanics of the Plan, provide eligible shareholders with the choice of having their dividends:
/T/
– Reinvested in new shares of TransAlta at a discount of three per cent,
to the average market price (the Dividend Reinvestment Component), with
the discount to be determined from time to time by the board of
directors of TransAlta (the Board), or
– Delivered to CIBC Mellon Trust (the Plan Agent) in exchange for a
premium cash payment to the shareholder equal to 102 per cent of the
reinvested dividends (the Premium Dividend(TM) Component).
/T/
“This new feature to our program allows those shareholders who do not want to convert their dividends to TransAlta shares at a discount to instead receive a cash premium so that others may hold newly created TransAlta shares”, said Brett Gellner, CFO of TransAlta. “This mechanism is an efficient way for the company to attract new equity to support our investment grade credit ratings and growth program.”
Eligible shareholders enrolled in either the Dividend Reinvestment Component or the Premium Dividend(TM) Component may purchase new shares at a discount to the average market price under the optional cash payment component (the OCP Component) of the Plan by directly investing up to CDN$5,000.00 per quarter. The applicable discount under the OCP Component is also determined from time to time by the Board.
To participate in the Plan, eligible shareholders must be resident in Canada. Residents of the United States or an individual who is otherwise a “US Person” under applicable United States securities laws may not participate in the Plan. Shareholders who are resident in any jurisdiction outside of Canada (other than the United States) may participate in the Plan only if their participation is permitted by the laws of the jurisdiction in which they reside and provided that TransAlta is satisfied, in its sole discretion, that such laws do not subject the Plan, TransAlta, the Plan Agent or the Plan Broker to additional legal or regulatory requirements.
An eligible shareholder who was properly enrolled in the Dividend Reinvestment Component of the Prior Plan will automatically be deemed to be a participant in the Dividend Reinvestment Component of the Plan, without any further action on their part. An eligible shareholder who was either not properly enrolled in the dividend reinvestment component of the Prior Plan through the Plan Agent, or who wishes to enroll in the Premium Dividend(TM) Component of the Plan, must enroll in the Plan either (i) directly if such shareholder is a registered shareholder, or (ii) if such shareholder is a beneficial shareholder whose shares are held through a broker, investment dealer, financial institution or other nominee, indirectly through such broker, investment dealer, financial institution or other nominee.
No commissions, service charges or similar fees are payable in connection with the purchase of shares from treasury under any component of the Plan. All administrative costs of the Plan will be paid by TransAlta. Shareholders who wish to participate in the Plan indirectly through brokers, investment dealers, financial institutions or other similar nominees through which their shares are held should consult such nominees to confirm whether commissions, service charges or similar fees are payable.
Canaccord Genuity Corp. will act as the Plan Broker for the Premium Dividend(TM) Component of the Plan.
Eligible shareholders are not required to participate in the Plan. Those shareholders who have not elected or been deemed to have elected to participate in the Plan will continue to receive their monthly cash dividends in the usual manner.
TransAlta reserves the right to limit the amount of new equity available under the Plan on any particular dividend payment date. No assurances can be made that new common shares will be made available under the Plan on a quarterly basis, or at all. Accordingly, participation may be prorated in certain circumstances. If on any dividend payment date, TransAlta determines not to issue any equity under the Plan, or the availability of new common shares is prorated in accordance with the terms of the Plan, then participants will be entitled to receive from TransAlta the full amount of the regular dividend for each common share in respect of which the dividend is payable but cannot be reinvested under the Plan in accordance with the applicable election.
Participation in the Plan does not relieve shareholders of any liability for taxes that may be payable in respect of dividends reinvested in new shares or shares sold under the Plan. Shareholders should consult their tax advisors concerning the tax implications of their participation in the Plan having regard to their particular circumstances.
A complete copy of the Plan, together with a related series of Questions and Answers, are available on TransAlta’s website at www.transalta.com or can be obtained by calling CIBC Mellon Trust, TransAlta’s transfer agent, at 1-800-387-0825 or TransAlta Investor Relations at 1-800-387-3598.
This news release only provides a summary of some of the terms of the Plan. The Plan, and not this news release, defines the terms and conditions of the Plan and the rights of eligible participants in the Plan. This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities.
TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate our, wind, hydro, geothermal, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. For 100 years, TransAlta has been a responsible operator and a proud contributor to the communities where we work and live. TransAlta is recognized for its leadership on sustainability by the Dow Jones Sustainability North America Index, the FTSE4Good Index and the Jantzi Social Index. TransAlta is Canada’s largest investor-owned renewable energy provider.
Read more: http://www.digitaljournal.com/pr/593710#ixzz1n3XAvxld
Yahoo has an article trumpeting DRIP..
Dear Dr. Don,
How do I find out more information about dividend reinvestment plan, or DRIP, investing?
– Con Compounding
Dear Con,
Dividend reinvestment plans are an easy way for an investor who owns shares of a company stock to reinvest the quarterly dividend payments paid by that company. I own some shares of Campbell’s Soup stock and have the dividends reinvested. The dividends are taxable income in the year paid, so there’s no tax savings. It’s just a convenient way to reinvest the dividend payments and keep the money invested.
DRIPs aren’t just for reinvesting dividends. Investors also can use DRIPs as a way to accumulate shares of a company’s stock by purchasing them directly from the firm. This may eliminate the need for a stockbroker and a brokerage account.
Since it’s common for a company to require that an investor own at least one share of its stock registered in the investor’s name before the investor can participate in a DRIP, the investor has to find a way to own that first registered share. It’s also common for a company to charge a fee from the investor to participate in its DRIP, although not all do.
There also are firms that offer a no-load option, meaning investors can buy that initial share directly from the company. These firms have minimum initial purchases, which can range from $50 to $1,000. The home run for a DRIP investor is a firm that offers a no-load initial purchase, free dividend reinvestment and a discount on the stock price, although the discount is taxable income to the investor. Those firms are quite rare.
I’m not a fan of DRIP investing for purchasing shares of common stock in a company. In a world of online brokers with rock-bottom commissions, there just isn’t the need to participate in a DRIP and manage multiple investments with individual firms’ DRIPs.
Source: http://au.finance.yahoo.com/news/investment-feet-wet-drip-080138470.html
Another our DRIP holding paying out today..
CALGARY, ALBERTA, Feb 14, 2012 (MARKETWIRE via COMTEX) — TransCanada Corporation CA:TRP -0.02% TRP +0.36% (TransCanada) today announced that the Board of Directors (Board) of TransCanada declared a quarterly dividend of $0.44 per common share for the quarter ending March 31, 2012 on the Company’s outstanding common shares, a five per cent increase over the $0.42 per share paid in each of the previous four quarters. The common share dividend is payable on April 30, 2012 to shareholders of record at the close of business on March 30, 2012.
The Board also declared the following regular dividends on TransCanada’s preferred shares:
An interesting article to read on the other side of the fence of DRIP investing…
At a Berkshire Hathaway (BRK.A) shareholder meeting several years ago, Berkshire Vice-Chairman Charlie Munger responded to a question about the very personal nature of investing by posing the rhetorical question: “If economics isn’t behavioral, then what the hell is it?”. With this in mind, there are two factors in particular that usually make it very difficult for finance writers to make broad generalizations in the realm of financial advice: (1) past performance is no guarantee of future returns, and (2) no two investors share the same psychology and identical investment objectives.
For today, I wanted to look at one of the most sacrosanct tenets of dividend-focused investing: the automatic suggestion that investors should reinvest their dividends. In most cases, this is uncontroversial advice. When a financial columnist encourages investors to reinvest dividends, it’s usually about as daring as when a politician says: “I support the troops”. You’re not exactly going out on a limb by suggesting that putting more money to work can reap its own rewards.
The long-term benefits of dividend reinvestment are probably self-evident, but we might as well take a quick look at a case study to illustrate the point. Let’s say that on January 1, 1990, you decided that Johnson & Johnson (JNJ) was a good investment, and plopped $10,000 into the healthcare giant to hold for the long haul. If you simply collected the cash dividends along the way to meet your living expenses, the investment would be worth just shy of $57,000 today, plus you would have collected around $18,000 in dividends during that time frame, generating $75,000 worth of value from your initial $10,000 investment.
Had you chosen to reinvest that money back into Johnson & Johnson, you’d be sitting on just north of $119,000. The investor who lived off his dividends the whole time would be currently receiving about $1,990 annually from Johnson & Johnson, whereas the re-investor would currently be receiving about $4,150 in annual dividends, roughly twice the amount of the investor who did not reinvest. Similar scenarios play out for other consumer goods giants like Coke (KO), PepsiCo (PEP), Colgate-Palmolive (CL), or Procter & Gamble (PG) over the past 20 years.
While I do have a very strong appreciation of the wealth-building effects of compounding over the long term, I try to maintain a clear-eyed view of how the process of accumulating dividend-growth stocks might play out in my own life. Here’s a table on what $10,000 compounding at 10% for 24 years might look like (I say “might” because this assumes a constant 10% annual compounding rate, which would almost never happen in real life).
According to the table, a $10,000 investment would grow to be worth around $110,000 at the end of the 24-year period. That’s pretty nice, but there is something very important to keep in mind about the nature of compounding – the big gains do not come until the end of the compounding term. In this example, year 20 through year 23 produced a $30,000 increase – at the beginning of the compounding period, it took from year 0 to year 13 to produce a $30,000 gain.
The last four years of the compounding period produce as much additional wealth as the first 14 years combined. This does not make dividend reinvesting “bad”, but it does introduce a variable into the equation that is worth taking into consideration.
This got me thinking about opportunity cost and the proper way I ought to think about dividend reinvestment. If your investing goal is to amass as much wealth as possible, then yes, you should reinvest everything, and you can exit the discussion now. But if your personal goal is to maximize the utility and value of every dollar that you have, then I think that the discussion on this investment strategy gets a little more complicated.
Despite the dividend mania articles that have been cropping up lately, I still doubt that dividend-focused investing will ever become the “It” form of investing, simply because it requires a level of patience and long-term tenacity that is not compatible with the psychology and impulses of a large chunk of the American population.
Sometimes I’ll receive correspondence from successful dividend growth investors who note the frustrating nature of compounding with dividend growth stocks – often, you’re not loaded until you’re an old man! They might have that $5 million fortune at the age of 70, but what they really wish they could do is take that $5 million and combine it with their 25-year-old bodies and stir up some mischief.
I thought about this hypothetical construction when I recently paid $100 for a Bruce Springsteen concert ticket for the March 19 show at the Greensboro Coliseum. And let’s pretend that the only way I could pay for this concert would be if I elected to take my Colgate-Palmolive or Kimberly-Clark (KMB) dividends in the form of cash, instead of dividend reinvestment. That decision had a very real opportunity cost. It didn’t just cost me $100, but it cost me the $100 that I could have invested in Colgate-Palmolive or Kimberly-Clark and watched compound at 9% for 30 years. A hundred dollars invested at 9% for 30 years turns into $1,400 dollars.
At that point, I need to make the decision whether or not seeing Springsteen live is worth $1,400 over the long haul (of course, if you really want to judge opportunity costs correctly, you have to factor in the odds that you’ll die before reaping the fruit of your investments, the odds that you’ll have a spouse divorce you and turn that $1,400 into $700, etc., so you have to make your peace with a fuzzy guess).
The conventional wisdom with dividend reinvestment is that you should automatically plow that money back into shares of stock or establish a new investment. But I think that this conclusion deserves a nuance or secondary question. Instead of automatically going on autopilot and reinvesting the funds, you should ask yourself, “What will generate the greatest amount of satisfaction and utility for me from this money – spending it now, or spending (hopefully) more later?” There’s no right or wrong answer to this question, but I would guess that your overall level of satisfaction with your investments will correspond to how well you answer this question honestly.
And of course, if you are a cynical investor, there is a more practical reason for why you might consider taking the dividends to live off – the stock could conceivably implode in the future, and it’s no fun reinvesting into something that could eventually turn into $0. Bank of America (BAC) investors who collected their dividends from 1986 to 2007 were able to receive almost triple their initial investment back in the form of dividends, and this can at least offset the significant bruising that occurs when the stock falls to $7 and the dividend turns into $0.01 quarterly.
But of course, most investors do not believe their investments will meet the same fate as Bank of America, and plus, I would guess that many investors would rather be like the hypothetical Johnson & Johnson investor generating $4,000 annually due to dividend reinvestment, rather than only taking in $2,000 due to “eating of the harvest seeds” along the way.
Personally, I’m a big fan of dividend reinvestment, especially since I’m in my 20s and reinvestment has the potential to reap significant benefits for my future self. But if you’ll look at the title, you’ll notice that I didn’t say that investors shouldn’t reinvest dividends, but rather, they should not “automatically” reinvest dividends. I think that the discussion of opportunity costs is a variable that has its place in the equation, and it’s almost always overlooked when the topic of dividend reinvestment comes up.
If I have a $200,000 portfolio when I’m 30, which is generating $6,000 in annual dividends, I ought to at least ask myself the question: Would I rather take that once in a lifetime European vacation now while I have the full capacity to enjoy it, or would it be better for my 70-year-old self to have an extra $100,000?
These are the types of value judgments I hope that investors consider, and while I lean strongly on the side of dividend reinvestment, I can guarantee you that I will be thinking about the opportunity costs and personal utility factors that are at play every time that hypothetical $1,000 check from Coca-Cola rolls in.
One of our favourite DRIP cadidate MFC just dished out their quarterly dividend to the investors.
TORONTO, Feb. 9, 2012 /PRNewswire via COMTEX/ — C$ unless otherwise stated TSX/NYSE/PSE: MFC SEHK:945
Manulife Financial Corporation’s Board of Directors today announced a quarterly shareholders’ dividend of $0.13 per share on the common shares of Manulife Financial Corporation (the “Company”), payable on and after March 19, 2012 to shareholders of record at the close of business on February 22, 2012.
The Board also declared dividends on the following non-cumulative preferred shares, payable on or after March 19, 2012 to shareholders of record at the close of business on February 22, 2012.
Class A Shares Series 1 – $0.25625 per share
Class A Shares Series 2 – $0.29063 per share
Class A Shares Series 3 – $0.28125 per share
Class A Shares Series 4 – $0.4125 per share
Class 1 Shares Series 1 – $0.35 per share
Class 1 Shares Series 3 – $0.2625 per share
Class 1 Shares Series 5 – $0.313425 per share
In respect of the Company’s March 19, 2012 common share dividend payment date, the Board has decided that the Company will issue common shares in connection with the reinvestment of dividends and optional cash purchases pursuant to the Company’s Canadian Dividend Reinvestment and Share Purchase Plan and its U.S. Dividend Reinvestment and Share Purchase Plan. The price of common shares purchased with reinvested dividends will be reduced by a two (2%) per cent discount from the market price, as determined pursuant to the applicable plan.
About Manulife Financial Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. In 2012, we celebrate 125 years of providing clients strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife Financial and its subsidiaries were C$500 billion (US$491 billion) as at December 31, 2011. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945′ on the SEHK. Manulife Financial can be found on the Internet at manulife.com.
SOURCE Manulife Financial
I previously wrote an article about Johnson & Johnson (JNJ) to review its performance and the impact of both dividend reinvesting and periodic stock purchases. Over the long run, these activities, with the right stock, can really pay off. After 40-plus years, a small initial investment and periodic purchases can transform into a million-dollar position.
Dividend reinvestment takes time…
It is important to recognize that it takes a while to build up a large enough position of stock from reinvested dividends, before they will begin to contribute a material amount of the total dividends (relative to the initial stock purchase). The following chart shows the ratio of dividends from shares purchased with dividends relative to all dividends received (from shares purchased with dividends and the initial investment). For this analysis, I did not consider any recurring purchases of JNJ, which would further complicate the picture.
Source: TCB Capital Advisors LLC
Looking at the chart shows very little impact for the first five years, which makes intuitive sense. JNJ’s dividend yield was relatively low then. Assuming a 1.0% annual yield or approximately 0.25% per quarter, the first quarter wouldn’t even produce enough dividends for a single share. (This analysis assumes that you can purchase partial shares). However, after seven years, the amount is over 5%, meaning that for every $20 in dividends of income, $1 was from stock purchased with previous dividends. After about 14 years, this ratio is up to 20% and then after over 20 years, it is almost 35%. After almost 38 years, the ratio shifts to about 50/50. From here, it will continue to tilt in favor of dividends from stock purchased with dividends.
The chart is also not a straight line, it actually has some slight waves in it. These fluctuations reflect changing dividend amounts over time. The following chart shows the trailing twelve month dividend yield for JNJ:
Source: Calculated from Yahoo!Finance data
One can clearly see that the dividend yield fluctuates. In the late 1990s, it was down under 1.5%. On the previous graph showing the percentage of dividends from reinvested dividends, the late 1990s showed a slight flattening of the growth trajectory. As dividend yield increases, that curve will rise more sharply. As dividends decrease, the growth will slow. However, the first curve will always increase if the company is paying dividends. Also, one can see that in the late 1970s to early 1980s, when the yield was high, the first graph showed more rapid increases in dividends from reinvested dividends.
So what should an investor do with this information? Reinvestment programs take time to show material changes; however, they also have the potential for a snowball effect that can show more impressive results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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/357091-dividend-reinvesting-patience-pays-off
Residual income is a much more valuable asset to a long term investment strategy than gains that occur only once. After a single investment yields regular returns, you are able to strengthen your position at no additional cost by placing the returns back into the company. Companies with valuable dividend stock provide regular returns without a loss of stock value and consistent revenue to support the dividend. The ability to support sustained growth over a long period of time shows just how frequently a stock can pay out and how lucrative its payout will be. In this article, I analyze five stocks that, in my opinion, have the durable competitive advantages to succeed over the long run. Of course, this analysis should serve as a starting point for your own due diligence.
Altria (MO) is a potential buy candidate due to its resilience in a difficult market as the leading tobacco producer in the United States. Despite regulations, a decline in smokers and public anti-tobacco sentiments the company has continued to make over $3 billion a year in profits each year. It has persisted despite the major threat imposed on it from regulation and a public drive to move consumers away from cigarettes. Altria pays out quarterly dividends at a $1.64 rate annually and provides a yield of just under 6%. Its dividend grew in 2011 from $0.38 per share to $0.41 and its stock almost doubled from $16 to $28 per share in only three years, making this a stock that you should own. The payout ratio is 93%.
Procter and Gamble (PG) is a dividend stock that you will want to hold onto for life. Proctor and Gamble owns a very extensive line of consumer brands that range from household products to hygiene and fashion. Not only is the company extremely profitable with reported profits of $13.4 billion in 2009, $12.7 billion in 2010 and $11.7 billion in 2011, but it pays out generous quarterly dividends of $0.52 per share with a payout ratio of just over 50%. For long term income investors, this stock is a potential addition to one’s portfolio.
McDonald’s (MCD) has cemented its place in the restaurant industry as the world’s #1 fast food chain and has insulated itself from its competition, making it the perfect long term buy. The company is the perfect example of consistency- pulling in an average of $4.5 billion in profits each year and never missing a quarterly dividend payout. In 2011, McDonald’s boosted its dividend from $0.61 per share to $0.70 which gives it a payout ratio of 48% and a 3% yield. With a solid market presence and consistent profits, this stock is perfect for dividend reinvestment.
Verizon (VZ) is another certain buy as the leader in the cellular industry and owner of a 55% to 45% joint venture with Vodafone (VOD) which is one of the leading telecoms in the world. Its dividend currently pays out quarterly at a payout ratio of 231% and $0.50 per share which makes it ideal for income investors interested in dividend reinvestment. Verizon’s net revenues average $1.5 billion per quarter and its latest dividend totaled $1 billion paid out to its investors, signaling that the company pays a lion share of its income to its shareholders.
General Electric (GE) is another worthy dividend stock that should be bought if you have the room for it in your portfolio. The company produces energy infrastructure, home appliances and participates in the development of new energy efficient technologies. General Electric consistently exceeds $10 billion in profit every year but only pays out dividends of $0.17 per share at a ratio of 50% which is expected to increase as the company secures its place in the power infrastructure market. I expect this investment to become more lucrative over time as General Electric finds itself with more money to distribute to its shareholders.
Each of these stocks is the perfect addition to any income investor’s portfolio as they all provide consistent returns, security, and consistency. Taking a position in any of these companies will ensure long term results that grow more lucrative as time passes by and you reinvest your returns into a larger share of the company. Each company pays a handsome dividend and shows the prospect of a growing dividend over time. General Electric is beginning to show signs that its dividend is on the rise as well, making it a worthwhile investment for the long haul.
http://seekingalpha.com/article/322738-5-new-dividend-ideas-to-consider-now
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.
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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.
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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
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