Tag Archives: TSX:T

4 Stocks for Safe Dividend Income

Generally, dividend-growth stocks are a conservative way to invest in the stock market. Typically, they’re mature companies that generate sufficient earnings or cash flows to pay a generous dividend and maintain and grow the business.

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This Telecom offers a growing dividend

It’s been a long time since TELUS (TSX:T)(NYSE:TU), the third-largest Canadian telecom has hit my minimum yield target of 4.7%.

The dividend is safe, and the stock is reasonably valued — not a bargain and not excessively expensive. At ~CAD$46 per share, TELUS trades at a P/E of ~16, while it’s estimated to increase its earnings per share (“EPS”) by 6.5-7.1% per year over the next 3-5 years.

Source: FAST Graphs

At current levels, TELUS can deliver 8-11% per year on average over 3-5 years.

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5 Ways to Save and Earn More from Investing Early

Everyone knows the earlier you invest, the more you save. But there’s so much more to it. I’ll also let you in on a little secret about quality companies. Of course, it’s not a complete discussion about investing early if I don’t illustrate the essential concept of compounding…

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The earlier you invest, the more you save

You may think that it is a no brainer that the earlier you invest, the more you save. But actually, there are two aspects to it.

All of you already know that if you start saving $1,000 every year, that in 10 years, you’ll have saved $10,000. If you start saving five years later, in 10 years, you’ll only have $5,000.

The second aspect is that, the earlier you invest those amounts, the sooner your money starts to work for you. And that’s where compounding comes in. I’ll talk more about compounding in the last point.

In essence, if your end goal is to accumulate $5,000,000 of assets, the earlier you start investing, the less money you need to draw out from your own pocket.

However, the bottom line is that you never lose money, which is one of the 5 Important Investing Concepts.

To reduce the chance of losing money, buy quality, stable companies at reasonable valuations. What’s value? Ben Reynolds wrote a great article about Value + Growth + Dividends = Dividend Growth Investing that explains about value and other goodies.

Quality companies become more valuable over time

Quality, stable companies become more profitable and valuable over time. Given the time-value of money, the earlier you invest in a great company, the cheaper it is.

In the 10-year period of August 31 2006 to 2016 Stella-Jones Inc.’s (TSX:SJ) total returns were 814% or an annualized rate of return of 24.8%. $10,000 invested on August 31, 2006 would have grown to $91,407.

Of course, the hard part is identifying great companies early. Stella-Jones have only paid a growing dividend for 11 years. Given that some dividend-growth investors don’t invest in a dividend-growth stock until it has at least a five-year dividend-growth streak, an investor might have bought Stella-Jones six years ago.

Even so, from August 31, 2010 to 2016, a $10,000 investment in Stella-Jones would have grown to $83,933 for a total return of 539% or an annualized rate of return of 36.2%.

So, don’t shrug off a great company just because you missed the first parts of its growth. If it’s really the quality company that it is, it should continue to deliver.

Identifying the right companies for your portfolio is an essential step but don’t forget to check their valuations to ensure they’re not too expensive. If you overpay for even the greatest company, your returns will suffer.

Is Stella-Jones a good investment today? Check out my recent growth stock analysis on Stella-Jones to find out. Read More

How to Know If a Dividend is Safe

To determine if a dividend is safe or not, one must analyze the company that’s paying the dividend. There are multiple things to look for.

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Is the company financially strong?

Dividend companies with financially strong profiles are less likely to cut their dividends. So, invest in companies with credit ratings of BBB+ or better to improve your dividends’ safety.

For example, Telus Corporation (TSX:T)(NYSE:TU) has a BBB+ S&P credit rating.

Are the earnings stable?

As one of the leading Canadian telecoms, Telus also earns stable cash flows and earnings from its subscribers. It has 12.4 million total subscriber connections, including 8.5 million wireless subscribers (about a third of the market), 1.6 million high-speed Internet subscribers, and one million TV subscribers.

Businesses that are dependent on volatile commodity prices, including oil and gas producers and mining companies, will experience volatile earnings. Read More