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In this series I’m going to take a look at the Canadian Banking Sector. If you talk to most Canadian dividend growth investors I think you will find that Canadian banks make up a significant portion of their portfolio. Canadian banks have reasonably high dividend yields, have performed well historically and they used to have very impressive dividend streaks with strong dividend growth until the global financial crisis hit.
When the crisis hit, the Canadian banks held their dividends steady while they navigated through the troubling times. Compared to other foreign banks, Canada stacked up very well, as a lot of other banks were cutting their dividends. Now that the financial crisis is over the Canadian banks have started increasing their dividends again and dividend investors are hoping that the banks get back to their old ways.
The Canadian banking industry is made up primarily of the “Big Six”:
… Continue reading An Introduction to the Great Canadian Banking Series (Part 1 of 10)
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I like to invest in undervalued dividend growth stocks that have a sustainable competitive advantage. Today I’m going to talk about the second part of this phrase as I’ve already written quite a bit about how I determine target prices and how to identify undervalued dividend growth stocks.
Warren Buffett is famous for investing in companies with a sustainable competitive advantage and even coined the term “wide economic moat”. The phrase refers to the difficulty of invading a castle with a wide moat. The same theory applies to companies. If a company has a wide moat then it is difficult for its competitors to gain market share or take profit from the company the same way it is difficult to invade a castle with a wide moat.
Characteristics of wide moat companies are having an established and well known brand, or having pricing power with a large portion of market demand. These help act as barriers against companies
… Continue reading Wide Moat Stocks In The US Dividend Champions List
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In the first part of this two part series I went over six different factors that affect dividend growth. Today I’m going to use TELUS and Caterpillar as examples of how I use these different influences to estimate future dividend growth.
I like to invest in undervalued dividend growth stocks with strong competitive advantages. I have a fairly strict investing criterion that I use to select dividend growth companies. One of my many investing criterion is annual dividend growth of 8% or more. Finding past dividend growth rates is fairly easy and this can help predict future dividend growth, but there is more to it than just past rates.
Companies with a public dividend policy
In some rare instances a company will make estimating dividend growth easy by announcing their dividend policy. A good example would be TELUS, which recently announced that it will target a payout ratio of 65% to 75% and annual dividend growth of 10% for the next three years. They plan on increasing the dividend twice
… Continue reading How to Estimate Future Dividend Growth (Part 2 of 2)
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In this two part series I am going to go over how you can estimate the future dividend growth of a company. In this first part I’ll go over six different factors that affect dividend growth. In the second part I’ll go over how to use these influences to estimate future dividend growth with some examples.
Factors that affect dividend growth
If a company is not making money or unable to grow earnings, then it is unlikely they will be able to continue future dividend increases for long. This is a fairly obvious influence, but an important one. If the company isn’t growing don’t expect sustained dividend growth.
The payout ratio tells you what percentage of earnings are paid out in dividends. Generally speaking the lower the better. If a company is only paying out a small portion of its earnings as dividends say 30%, then they will have money left over to pay for future dividend increases, pay for other growth projects, pay
… Continue reading How to Estimate Future Dividend Growth (Part 1 of 2)
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The Canadian Communications Industry is made up of only a few key players. Today I’ll be looking into Shaw Communications and seeing how its future expected dividend growth compares to some of its competitors, namely Telus, Rogers Communications and BCE.
A quick look at the Canadian Dividend All-Star List tells me that Shaw Communications has increased their dividend for 10 consecutive calendar years in a row. For a Canadian company this is an impressive streak. Telus has a streak of 9 years, Rogers Communications has a streak of 8 years, and BCE has a streak of 4 years. All of these companies have increased their dividend within the last year so when the year is over I expect them to move up one year on the list. For Shaw Communications this would make 11 consecutive years of increasing dividends.
Dividends have been steadily increasing over the years which are good signs, but it looks like the significant dividend growth occurred
… Continue reading Looking for Dividend Growth in the Canadian Communication Industry: Shaw Communications
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A question I often get asked is how do I decide what stocks to buy? The answer isn’t a simple one, but I’ll do my best to break it down. My process involves reviewing various companies and setting target prices. My dividend growth investing criteria is broken into two parts. First I complete a dividend stock analysis to determine if it is a company worth owning. What makes a company worth owning? Well I’m a long term investor so I’m looking for companies with a competitive advantage that have a history of increasing their dividends and earnings. I also want reasonable debt levels and a sustainable dividend among other things.
If after I’ve completed a dividend stock analysis and I decide that I’d like to own the company I perform various valuation tests to come up with a reasonably cheap target price. Then I wait… and wait. My target prices are usually based on various measures that in the past would have resulted in opportunities to buy shares in 2 or
… Continue reading Deciding Which Stocks To Buy: Dividend Growth Investing Criteria
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If you look at my retirement goals you’ll see that I want to have a growing stream of dividend income to support me in retirement. In order to meet my goals I’m looking for a dividend growth rate (DGR) of 8%. This is an ambitious rate in my opinion. Don’t get me wrong, I think it is entirely possible, but it is not an easy thing to achieve. My early retirement dreams are tied to dividend growth, so being able to predict future dividend growth is very important to me.
I use a lot of historical averages in my analysis of dividend stocks, so I was excited to discover an article on Seeking Aplha: Dividend Growth Rates: Using The Past To Estimate The Future by Dividend Growth Machine that studied the correlation between past dividend growth rates and future rates.
The study looked at the 10 year DGR of US companies from 1991-2001 and compared them to the 10 year DGR from 2001-2011. The
… Continue reading Can Past Dividend Growth Rates Be Relied Upon To Predict Future Rates?