Tag Archives: NYSE:MGA

Increase Your Dividend Yield By Recognizing Dividend Stock Valuation

Too many investors ignore stock valuation when they purchase dividend stocks for income. There’s a tradeoff. They simplify the investing process by averaging into quality businesses but risk having a higher average cost for their dividend investment. Consequently, a higher cost leads to a lower initial dividend yield (and lower subsequent yield on cost when the dividend stocks increase their dividends).

How do you tell a dividend stock’s valuation?

Some investors do not know how to value dividend stocks. Understandably, there isn’t a clear-cut formula to determine if dividend stocks are undervalued, fairly valued, or overvalued. Too many factors come into play, including the stability of the business’s earnings or cash flow, the historical valuation, the growth rate in the future, the safety of the dividend, etc.

Fortis stock's fair value range by Yahoo Finance in November 2021
Source: Yahoo Finance – Fortis stock’s fair value range

If you’re not sure about how to determine if a stock is cheap or not, use the analyst consensus price target as a guide. Although sometimes there are big changes for these price targets after an earnings report, it’s still better than ignoring the valuation factor altogether.

Read More

3 Simple Tips to Build a Safe Dividend Income

Do you want a dividend income stream that will increase every year? Here are some simple tips to check for the dividend stocks you’re interested in. The order to check matters because if the dividend stock doesn’t pass checkpoint one, it’s out. 

Don’t slip up. You can keep your dividend income safe by following these 3 simple tips!

Does the dividend stock have a track record of dividend payments?

Notably, this checkpoint allows dividend stocks that have a track record of maintaining or increasing their dividends to pass. Though we prefer stocks to increase their dividends every year, we understand that sometimes the macro environment forces stocks to freeze their dividends. It is a great feat to even maintain dividends during stressful times. 

For example, to be prudent, the regulators forced the big Canadian banks to freeze their dividends around the time of the last financial crisis in 2009 and 2010. Once again, the regulators forced the banks to freeze their dividends. Even the best of the bunch, National Bank of Canada (TSX:NA) has maintained the same quarterly dividend for seven consecutive quarters so far, whereas prior to the pandemic, it increased dividends every two quarters. 

Again, the dividend freeze is no fault of the big banks. National Bank has maintained or increased its dividend every year since at least 2002. Now, that’s a track record!

Depending on your comfortability, you might seek dividend stocks that have maintained or increased dividends for at least five, 10, 15, or 20 years. 

If a dividend stock hasn’t made consistent dividend payments for at least five consecutive years, it’s out. The five-year test would include the stressful pandemic period that we’re experiencing, which is a decent test of resilience/defensiveness for a dividend stock.

Read More

How to Deal With Laggards in Your Dividend Stock Portfolio

We would love to invest in winners only. But that’s not how real-life investing is like. Sooner or later, it’s inevitable to run into a laggard in your dividend stock portfolio.

Sometimes, laggards provide underperformance but still a positive return. Other times, laggards outright decline over multiple years, standing out like a sore thumb in an otherwise well-performing diversified dividend portfolio.

Here are several ways to deal with laggards. Below, I’ll revisit some of my mistakes as examples to learn from.

Read More