Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice on how to spot the top stock picks. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away.
Today’s tip: “How you can profit from our TSI Network ratings: Part 2”
In last week’s Investor Toolkit, we analyzed 4 of the 9 factors we use to assign one of our TSI Network ratings (Highest Quality, Above Average, Average, Extra Risk, Speculative and Start-up) to every stock we recommend in our newsletters, including our flagship publication, The Successful Investor. Click here to read that article.
As we mentioned last week, we award these ratings based on a point system. This week, we’ll examine our remaining 5 factors for finding the top stock picks, and the benefits they offer.
One point for a long-term record of profit. A company that makes money just about every year will survive a lot longer than one that makes money sporadically, if at all.
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One point for a long-term record of dividends. A steady or rising dividend provides a sign of safety. Dividends, after all, are impossible to fake — either the company has the cash to pay dividends, or it doesn’t. Failing or fraudulent companies hardly ever pay dividends.
An example of a company with a long history of raising its dividend is Fortis Inc. (symbol FTS on Toronto), a stock we analyze in The Successful Investor. The company is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also operates power plants in the U.S., Belize and the Cayman Islands, and has other businesses across Canada.
Fortis has now raised its dividend every year for the past 38 years. Its quarterly payout is now $0.29 a share. The annual rate of $1.16 a share yields 3.6%.
One point for an attractive balance sheet, with adequate equity and manageable debt. When bad times hit, debt-heavy companies go broke first.
One point for being able to serve all shareholders. Top stock picks in this area are free of heavy-handed government regulation, free of too much dependence on a single supplier and free from abuse by insiders.
One point for Canada-wide operations, or two points for multinational operations. Companies that are confined to one geographical area are inherently more speculative than those whose operations are more spread out.
A great example of a company with operations across Canada and around the world is Bank of Nova Scotia (symbol BNS on Toronto). The bank is the third-largest of Canada’s big-five banks, behind Royal Bank and TD Bank.
Bank of Nova Scotia is also the most international of the big-five banks. It operates in 50 countries around the world, and gets about 26% of its earnings from its international-banking division. In the latest quarter, this division’s earnings rose 61.5%, thanks to strong demand for business loans in Asia and Latin America.
Next Wednesday, July 13, 2011, Investor Toolkit will look at how you should interpret debt-to-equity ratios.
You can get our latest analysis (including our clear buy/sell/hold advice) on dozens of Canadian stocks—including Fortis and Bank of Nova Scotia—in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.
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The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
