About

The Connolly Report (about dividend-paying common stocks and their dividend growth) has been published since 1981 by Thomas. P. Connolly, BCom. ('64) toward the end of February, April, June, August, October and December. Sorry. The print edition is closed to new subscribers. There is no internet edition, but I'm thinking of one…in late Fall 2007.

Postal address: T. Connolly, 607-185 Ontario St. Kingston, ON K7L 2Y7
Sample copies of my current report are usually available a $10 bill.

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MENTIONS in the PRESS

The information and opinions on this site should not be considered investment advice. The information is intended to be for educational purposes. I used to be a Business teacher, certainly not an investment advisor. No particular security or investment product is recommended or has ever been recommended. I supply some data: you make the decisions. Opinions can change without notice. Opinions offered here can never be a substitution for independent analysis and due diligence. This site may contain forward-looking statements. Your guess as the future value of any security is as good as mine. Forecasting is dangerous enterprise. There are risks involved with investing. As Peter L. Bernstein says in Against the Gods, “Investors must expect to lose occasionally on the risk they take. Any other assumption would be foolish.” 284

My retirement plan is very simple. When they are value priced, I buy common stocks of companies which have a good record of increasing dividend payments and hold them for the rising income.
Here's an example: We bought our BC Gas (now Terasen and sold to Americans in fall 2005 forcing us to sell our shares: Damn Yankees) in April of 1995 for $6.85. The dividend grew from .45 to $.84 a share¹. Our yield on those shares was12.3% (.84/6.85). The price of Terasen had quadrupled too. And, after the collapse of the stock market in the spring of 2000, Terasen rose over 90%. (In times of market turmoil, investors like dividend-paying stocks.) But we had to sell to the Americans…Duke Enegery wanted this great Canadian company and the BC Liberal government changed the law to allow them to buy it. Walter Gordon would be turning over in his grave!
Can you think of a better retirement asset? Growing income. And no MER. And no maintenance or maturity date. I don't understand why people switch to bonds in retirement. Have you ever known a bond to increase its interest rate? I don't buy bonds, or G.I.C.s. I seek to produce consistent returns from safer dividend-paying common stocks rather than risk the chance of stellar ones that might come with go-go stocks.
¹ That right. As interest rates have been falling over the last decade or so, my income has been going up. You might have the thought, after reading about Terasen (formerly BC Gas), that I was cherry picking the data. I'm not. I can supply a dozen different example from stocks in my list with similar results. If you click on this link it will bring you to a page where my whole list of stocks is compared five years later. Some yields have doubled in this five year period. You have to wait a few years for your common stock dividends to really grow, but once the dividend growth kicks in…WOW…the yields are terrific.
Here's one more example I just computed as the Bank of Montreal announced a second dividend increase for 2004 as I key this in early September 2004. Our BMO dividend goes up to .44 a quarter in November 2004 ($1.86 a year). In February 2004 our payment was .35 That is a 25% increase in one year. The yield on our $5.78 price in 1985 is now 30% (1.76/5.78). The price of BMO has more than quadrupled too. We paid $9,250 for 400 shares in 1985: with two, two for one, stock splits in 1993 and again in 2001, we now have 1600 shares valued at $86,400. We are not selling: we are holding for the 30% yield and future dividend increases.
Here's another example. In 2005, Fortis shares split 4:1. We originally bought our first 500 Fortis shares in March of 1995 at $24.62 a share…some $12,300 in total. In the fall of 2005, ten years later (you have to be patient with this strategy), Fortis mailed us our new 1,500 share certificate (the 4:1 split). In total we now have 2,000 shares of Fortis. As I key this the price of FTS is close to $25…about what we paid for our 500 shares originally. Now our 2,000 shares are worth $25 times 2000 = $50,000. That's not all. In early 1996, I thought Fortis was still a good buy, so we added to our position with another 500 shares. They too are valued at $50,000. So, we have $100,000 in Fortis…just one stock in a portfolio of some 10 stocks. All, but one, have done the much same thing. We're not selling. This investment yields 9.4%. Work it out. Fortis' dividend after the split is 64¢ a share. We have 4000 shares now. Our annual income from the Fortis shares is 4000 times .64 = $ 2,560. That's about what we paid for our original 500 shares. In 2006, if Fortis increases its dividend again, and I expect it will (in 2005 the dividend increase was 12.5%) our income will go up too. Can you think of a better retirement asset?

Financial planners, because they know little about stocks, sell most people mutual funds. Then, when retirement comes, they recommend withdraws from the funds of 4%, 5% or 6% each year. Mutual funds are not noted for providing income, so retirees can begin eating into capital right away. When the market collapses, as itdid in 2000-2002, retirees worry they will not have sufficient capital to fund retirement.
I have no such worry. My strategy does not depend upon capital appreciation. It counts on dividends. The common stocks I own begin with higher yields and, with annual dividend increases, as the example above illustrates, the yields grow. When it comes to retirement, I live from the income. I don't need to count on the capital gains. Appreciation of the stock price, however, will occur as the dividends increase. These gains are my retirement bonus…the extra trip each year or helping the kids with their mortgage payments.
How dependable are the dividends, you ask? Well, I only buy stocks of companies which have solid earnings, utilities, banks, life insurance companies and pipelines mostly. And further, I want companies which have paid dividends for a least a decade, preferably more: 25 years is a good standard. Dividends are surer than capital gains. The idea of growing income is so simple. I don't understand why more folks don't do it. Think about these ideas.

Increasing income is the key. Say you are 50. Assume further that you buy a common stock with a 5% yield and that over the next few decades the dividend grows at 4% a year. By the time you are 69, you will be getting over 12% on your money. Consider this too. If the common stock with the growing income is in your RRIF, once your yield is over 7.3% in your RRIF (the minimum required withdrawal at age 71), you will not ever have to touch the capital (sell stocks) in your RRIF. Whether the market goes up or down is irrelevant. The growing dividends will supply your retirement income. It's simple.
Some sixty Canadian companies increase their dividend each year: learn which companies, understand dividends, discover dividend increases. Dividend-paying common stocks are safer. Some companies have had double digit dividend growth for years. You'll be delighted when you discover the essence of dividends. Some more information on this retirement strategy will be available at dividendgrowth.ca from time to time.
Here's why you have to get out of mutual funds and learn to invest on your own. “Between 1984 and 2002, the stock market index made returns of 12.2 per cent a year. The average mutual fund investor made 2.6 per cent.” Hard to believe, eh! Margaret Wente Globe and Mail p. p.A23 December 11, 2003 Margaret drives a SUV!

Temporary e-mail: connolly@kos.net