Most of this page is from the Connolly Report p.441 of October 1999. I took out a few columns to make the table readable (I have trouble getting tables to work well on the internet) and added a column for prices as of October 8 2004 so that a five year comparison could be made. The five year percent gain/loss is shown too. Realize that this five year period was the start of the secular bear market...the markets were peaking in the fall of 1999. I worked out the average gain on these stocks over the five years was 72%...not bad for a bear market when the S&P 500 was down 4.5% and the average global equity fund lost 1.8% over this period. I also added a column (after the colon) for the 2004 dividend and divided this by the Oct '99 price to get the yield on cost (yoc) of these common stocks. Study this data. Which common stocks were the ones to buy in October 1999 - ones with higher yield or ones with better dividend growth records?
STOCK, yield%, priceOct'99, 5 yrdivgro%; dividend'99, earning'99; Oct04 price, %gain: div04/99price = yield on cost
PacNor Gas 6.2 $18.20 5.0%; 1.12 1.63 Oct04 $19.00 up 4%: .80/18.20=4.4% yoc
TransC Pipe 5.9 $18.85 4.2% 1.12 .89; Oct04 $27.96 up 113%: 1.16/18.85 = 6.2% yoc
Fortis FTS 5.4 $34.10 2.1%; 1.84, 2.29; Oct04 $63.12 up 85%: 2.16/34.10 = 6.3
TransAlta 5.3 $19.05 0.4%; 1.00, 1.25; Oct04 $16.90 down 11%: 1.00/19.05 = 5.3
Sceptre In 5.2 $20.00 16.0%; 1.04, 1.11; Oct04 $6.25 down 68%: .24/20. = .01%
N S Power 5.1 $16.25 1.3%; .83, 1.13 ; now Emera Oct04 $18.28 up 13%: .88/16.25 = 5.4
Westcoast 5.0 $25.65 7.7%; 1.28, 1.66; purchased by Duke Energy in 2002
EdperBras 5.0 $19.75 0.0%; .98, 1.03; now Brascan Oct04 $40.17*1.5 for 3:2 split up 205%: .70/11.85=5.9 split04(3:2)
BCT.Telus 4.6 $30.60 2.5%; 1.40 .02 Oct04 $28.18 minus 6%: .80/30.60= 2.6%
Treasury bill (in October 1999) 4.51% (five year G.I.C. 5.35% 10yr Canada bond 6.1%)
BC Gas TER 4.5 $26.25 5.4%; 1.18 1.89 now Terasen Oct04 $24.70*2 for 2:1 split04 up 88%: .84/13.13= 6.4% split04
Quebec Tel 4.4 $14.85 1.3%; .66, .99 bought out by Telus in June 2000 (I sold at $22.50)
Cdn. Utilities 4.4 $38.80 3.6% 1.72, 3.16 Oct04 $57.90 up 49%: 2.12/38.80= 5.5%
National Bk 4.1 $17.50 12.1%; .72, 1.77; Oct04 $44.65 up 155%: 1.52/17.50 = 8.7%
Manitoba Telecom 4.0 $16.95 0% .68 1.37; Oct04 $42.20 up 149%: 2.60/16.95 = 15.3%
Aliant AIT 4.0 $22.50 0% .90, 1.25; Oct04 $25.54 up 14%: 1.10/22.50 = 4.9%
C I B C CM 4.0 $29.95 13.% 1.20, 2.28; Oct04 $69.25 up 131%: 2.40/29.95 = 8.0%
Enbridge ENB 3.9 $31.00 3.7% 1.21, 1.85; Oct04 $51.50*2 ('99 split 2:1) up 232%: 1.83/31.00 = 5.9%
Bank Mtl BMO 3.5 $53.10 9.4% 1.88, 4.66; Oct04 $56.65 *2 (2001 split 2:1) up 113%: 1.76/26.55 = 6.6% (split01)
Royal Bank RY 3.1 $60.45 10.3% 1.92, 4.97; Oct04 $60.25 *2 (2002 split 2:1) up99%: 2.08/30.22 = 6.9% (split00)
Bank N S BNS 2.9 $33.10 7.7% .96, 2.84; Oct04 $37.20*2 (2004 2:1 split) up125%: 1.20/8.28 = 14.5% (splits99,04)
BCE Inc BCE 1.7 $80.00 .3% 1.36, 13.39; Oct04 $27.64 down 65% not adjusted for NT spinoff
(E&O.E for the above data as I did it quickly in October 2004)
Since a dividend increase is a positive sign of a company's financial strength, the safest purchase, after research, is a stock with a recent dividend increase
(indicated by a "+" sign). Common stocks "above" their ten-year average position in the list are bolded. Best buys involve a dividend increase, a high yield
and a stock "above" its normal position. Generally, I ignore issues "in" position unless there has been a recent dividend increase. Common stocks "below"
their usual position are overvalued: fine to hold, maybe to sell, but expensive to buy. I have no favourite stock. I do not perform detailed analysis on
individual companies. Investigate before you invest. Portfolio selections should reflect your investment objectives, personal preferences, risk tolerance,
diversification views and income requirements.
*"5 yr% divgro": the five year annual rate including 1999 (N.B. In this period there was a dividend reduction in 1999 from
$1.12 to .80 at TransCanada and a dividend elimination for Pacific Northern Gas in September 2000 and a dividend
reduction at Sceptre Investment)
DIVIDEND INCREASES mean safer common stocks - an additional buffer to price shocks.
Fortis up 0.6% to .46 on Dec 1st 1999
Bk N.S. up again this year, 7.5% in total, to .24 on Oct 21st 1999
Value Line's Edition #3 covers three stocks in the Canadian energy industry which are in my list. The Sept 24th issue forecast annual dividend growth out to
02-04 of 7% for TCLP, 2.5% for Westcoast and 1.5% to $1.10 for TransAlta.
Value Line's bank dividend forecasts are: BMO 7.5%, BNS 7%, CM 10.5%, NA 8%, RY 9%
COMMENT: Now that the market indexes have reached correction levels (down more than 10% from a high), more
investors are finally beginning to realize that the slow erosion of prices which began both here and in the States a year ago
April is indeed a bear market. A bull market usually does not end with a bang. As interest rates have been rising, many
stocks in my list have recently hit 52 week lows but not yet as low as summer 1996 prices. Finally some better yields are
appearing. I don't think the carnage is over yet: there's a passel of factors likely to chill stock prices in the months ahead.
We'll still get our dividends, though. (In retrospect, this was not a bad call. The Dow peaked in early 2000 and yields of the
stocks I follow peaked in early 2000 too, BCE, for instance, in March 2000. Our dividend-paying stocks went up as the
market crashed. Investors sought security.)
The Connolly Report is written by Thomas P. Connolly, B.Com. No buy or sell recommendation is made in any security mentioned. E. & O. E. Every effort is made to ensure the material is accurate. The author does not accept responsibility for any inaccuracies. ISSN 0823616 COPYRIGHT Publication mail No. 287393. Published since 1981 toward the end of February, April, June, August, October, December. This print edition is no longer open to new subscribers.