Small Cap Dividends

David Berman of the globe&mail wrote a short entry in his Market Blog about small cap dividends in the US Russell 2000.

"You don't often hear a lot about small capitalization stocks and dividends – largely because small cap stocks aren't usually associated with dividends, the domain of more mature companies. However, Steven G. DeSanctis, small-cap strategist at Bank of America Merrill Lynch, made a number of interesting points about this group."

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Where to Find Dandy Dividends:

Dan Dorfman in The Huffington Post wrote an article on how an investor can look beyond meager interest yields to dividends from corporations.

"In this vein, the newsletter has compiled a list of companies it monitors that are bucking the dividend-cutting trend and have raised their payouts in the past six months. Among them are eight dividend dandies that the letter currently designates as buy recommendations. Aside from their dividend power, a big extra plus is envisioned in all eight cases--the prospect of double-digit share appreciation over the next 12 months."

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A Two Step Process for Dividend Freezes

Dividends Value posted an article last week that focused on what to do with a dividend stock that fails to raise its dividend or cuts its dividend.

"I hate to sell a stock. When I buy a stock, my intention is to hold it forever and enjoy its ever-growing dividend income. Unfortunately, it doesn’t always work that way. Sometimes a stock changes and no longer fits in my income portfolio. It could be a company that cuts its dividend or in some cases freezes its dividend. Let’s take a look at a two-step process designed to help us determine if we should sell a stock after a dividend freeze."

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Dividends & Gold Can Lead to Permanent Wealth

At Dividends Anonymous we're always searching for content relevant to Dividend Addicts on dividends and other income producing investment strategies.

Offshore Inn; a site for international real estate, oversea jobs, asset protection and overseas retirement, at first might not appear to be a site visited by investors addicted to dividends, but they have a very relevant article on their site about investing in dividends and gold as long-term investing strategies.

"Dividends create wealth in two ways. First, they provide cash flow that you can either use for living expenses or to reinvest: That means there’s no more having to sell shares, often at a depressed price, to meet your monthly bills, or to finance a vacation or home remodeling.
Second, if you buy shares with high dividend yields, there’s a good chance that the market will eventually notice the superior [dividend] payouts, and revalue the shares so that their dividend yield is back down around the market’s average. For a dividend yield to go down in this manner, the stock price has to go up. Once that happens, you have received dividends and capital gains."

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New Portfolio Emphasizes Stocks with Strong, Secure Dividends:

Value Line Investment Survey has decided to create a model portfolio that is composed of stocks with above average dividend yields as the 78 year old Value Line moves with the sign of the times.

"The new 20-stock portfolio — comprised of companies that pay dividends at least one percentage point more than the median stock Value Line follows — includes two New York corporate giants, drug maker Bristol-Myers Squibb, whose stock has a 6% yield, and Con Ed, which pays a 6.2% yield."

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Beware of Dividend Yields That Look Too Good to be True:

Jennifer Lowe publishes an article on What Investment that points out a few cautions to investors eventhough the market has rebounded from recent lows.

"Even in supposedly defensive areas, some companies will need to address pensions deficits or seek help with contracts. A warning last month from the Pensions Regulator, that pensions must come before dividends, shocked many companies with pension funding deficits. Companies with dividend yields of six per cent or more are being given little credit in their share prices for the payout. Low share prices relative to the cash paid out by companies are a stock market signal to boards to be more prudent with cash."

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Opportunity in Battered REIT Market:

Want to meet a dividendaholic (an investor addicted to dividends)? Meet Ross Meredith, 63-year-old retiree from Salt Lake City Utah who has been invested in real estate investment trusts (REITs) for more than thirty years.

"Now, with commercial real estate teetering, the good times are long gone. Real estate mutual funds, which mostly hold REITs, have been the worst-performing domestic stock fund category of late. They're down more than 50 percent over the past 12 months, including 15 percent year-to-date, according to Morningstar Inc. Real estate funds are middle-of-the-road based on five-year performance, with an average annual loss of 3.9 percent. But these days, Meredith mostly likes what he sees in REITs - even if he finds it "terrifying" to try sorting those mostly likely to rebound from the ones that will continue foundering."

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Credit Union Dividend Warning:

Laura Slattery of The Irish Times wrote an article on the current problems facing credit unions as they experience losses in the current global equity market decline. Credit Unions aren't mentioned often by investors, but lots of individuals are exposed to them through workplace incentives to save, invest and borrow.

"...the huge fall in investment values would result in substantial writedowns in credit unions' assets for the financial year ending in September 2009, with the result that a number of credit unions would be unable to pay a dividend next year."

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Diversification and Dividends:

David Templeton, author of Disciplined Approach to Investing, published an article featuring a recent article from Barclays Global Investors titled, Is Diversification Dead?

The article is published on David's blog via Scribd and Dividend Addicts can read it for insights into how diversification can help or hurt your dividend portfolio.

"This flight to quality and demand for liquidity causes investors to flock to the safest investments. For fixed income this tends to be government bonds and for equities it tends to be high quality equities. These high qulaity equities tend to be large cap blue chip dividend growth stocks."

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Rail Fundamentals:

A lot of dividend investors like to brag about how great their stocks are, but few go into detail of the fundamentals that make them compelling long-term investments.

themoneygardener, a Dividend Addict wrote an article on Canadian Pacific Railway (CP) and his reasons for liking the stock over the long-term.

"Right now, one stock that I am watching intently because I want to add to my position is Canadian Pacific (CP). I was not as interested in CP when it was trading at $86.00 back in July of 2007, but now that the stock is trading below $40.00 I believe CP is ripe for an attractive long term investment. So other than the reasonable valuation, why am I so bullish on Canadian Pacific?"

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The Dividend Daredevil Portfolio:

Rob Carrick of the Globe&Mail publishes an article for the daredevil in every Dividend Addict. By targeting Canadian equities with dividends yields in the 7-12% range he's compiled a portfolio of significant yield that might just outperform the market.

"Sensible investors who are tired of bad news and hate surprises, you're excused. The dividend stocks we're going to look at here are strictly for people who understand that dividend cuts are a distinct possibility and that share price carnage may ensue. There are few investor errors that are more bush league than jumping on a stock just because it has an astronomical dividend yield. We're talking here about anything in the rough area of 7 to 12 per cent, more for income trusts. Yields rise as share prices fall, so a very high yield means an extreme level of investor pessimism about a stock."

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Which Dividend Stock for Income?

Gavin Oldham publishes an article in the Telegraph asking the question, "Which shares for income?" contrasting two dividend payers: BT and BP

"With the equity market close to a six-year low and with equity yields at historically high levels compared with gilts, the temptation is there for investors to switch into shares: not only in the hunt for income but also factoring in that one day the equity market will recover. The challenge is, however, to find those rewards without shouldering too much risk; because whereas cash savings can face risk of default, it is in equities that you face investment risk."

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Aussie Bank Cuts Dividend:

Australia's Bank of Queensland announced yesterday they were cutting their first half dividend by 26% as the bank joined other Australian banks in reductions to their dividends.

"Australian regional lender Bank of Queensland Ltd (BOQ.AX, BOQ) cut its first-half dividend on Thursday, joining the nation's bigger banks in trimming payouts as companies preserve capital due to global financial crisis. But the bank struck a note of optimism, saying it expects to see a pick up in its net interest margin in the second-half helped by lower cost of funds. Bank of Queensland kicks off what is expected to be a challenging reporting period for banks with analysts expecting a further increase in bad debt charges."

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Consumer Brands Offer Sweet Payouts:

Investors addicted to dividends likely have a consumer staples stock in their portfolio because of the predictability and sustainability of payouts from companies whose products are in high demand.

"Makers of consumer staples like garbage bags, soap and soda have been sweetening their dividends during the recession and are expected to continue boosting their payouts in coming months, a striking contrast with the cuts made by many other industries. Coca-Cola Co. (KO) and Kimberly-Clark Corp. (KMB) are two large consumer brands that raised their dividends recently. There are likely to be more in the pipeline. Investors and analysts are counting on hikes from companies ranging from Procter & Gamble Co. (PG) to Clorox Co. (CLX)."

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Difficult Times for Dividend Investors:

Richard Shaw publishes an article at SafeHaven on income investing from dividends discussing dividend cuts and the S&P Dividend Aristocrats.

"In practice lately, however, the equity income theory isn't working so well. Dividends are being cut at an historic rate, particularly among banks, but to some degree in other industries as well. Dividend investing isn't for everybody, but it is attractive and important to some, particularly those who rely on their portfolios to generate cash flow to support their lifestyle."

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Should You Bank on Preferred Shares?

Gary Norris of the Canadian Press published a column on preferred shares with a comparison to GIC's that currently yield 2-3% at best.

"For investors seeking secure income in an era of 2 to 3% GIC rates, the banks have a deal: 6% or more annually of tax-advantaged payouts, resetting in five years well above whatever the five-year government bond is paying then. But in preferred shares, as in everything, buyer be aware."

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Dividends at Tax Time:

Nilus Mattive at Money and Markets wrote a post about dividends and tax time that many dividend addicts might find interesting as they prepare their tax packages for the government.

"As much as I hate to say it, yet another tax day is rapidly approaching. Like me, you’re probably busy wrestling with all the forms and trying to figure out all the convoluted rules and regulations. That’s why I’ve decided to devote today’s story to the subject of dividend taxation. I can’t say it’s the most exciting topic I can think of, but it is something you should understand … even if you’ve already filed your taxes or use the services of a professional."

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Canadian Stalwarts with Rising Dividends:

Aryeh Katz at Investopedia publishes an article on four Canadian dividend stocks with competent management, healthly balance sheets and rising dividends.

"Amid the gloom of last year's markets, there were actually a number of companies trading on the Toronto Stock Exchange (TSX) that raised dividends. Take it as a sign of both management's confidence and a healthy balance sheet, and consider them for purchase. Dividend-paying companies outperform their non-dividend counterparts over the long term."

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Low Debt Dividend Stocks:

Dividends Value presents a list of screened dividend stocks that carry a low debt load and carry a number of other important metrics.

"With the dramatic market declines over the last 18 months, most dividend stocks appear to be fairly priced on a historic basis. However, when you consider the record number of dividend cuts and near-term prospects, many of the lower valuations are justified. So how do you sort through the massive Dividend Stock list to find the companies worthy of consideration? One method is to use a stock screen to focus on the stocks with characteristics that we are looking for. Let’s put together a stock screen with the following criteria..."

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Yield, Payouts & Dividend Strategies:

Norm Rothery, author of the Stingy Investor, provided links to two articles published Credit Suisse from a few years past on dividends and their relevance to various investing situations.

I would encourage Dividend Addicts to download and read the two PDF files for current and future reference as they're both well written and give good context for the current environment for dividend paying stocks.

High Yield, Low Payout
Canadian Dividend Yield Strategy