OPTIMISM #20 - November 9, 2020

Dear clients and friends,

What a day.  You are being rewarded for your patience.

The Canadian broad market (TSX) is up 1.19%.  My dividend stocks are up 4.42%.

They say you can’t beat the market but our cherished dividend payers often quietly do.

Don’t be surprised if it dips tomorrow.  It’s normal behavior after a day like this.

John Lowe at TC Energy (Formerly TransCanada Pipeline), an insider, bought a further 5000 shares for $195,000  USD.  He probably thinks it’s a good deal.  I do too.

Rob Jacobucci, another VP at TC Energy, bought 2460 shares as well.

It (TRP) closed today at $53.39 per share and has been as high as $76.58 during the past 12 months, and as low as $47.05.

For each share you own you get $3.24 per year, for a current yield of 6.4%.  Not bad. 

It was $2.94 per share last year, just increased 8%.  When is the last time you got an 8% pay raise?

Over the past ten years, that yield has averaged about 4.3%, so that income stream is on sale today.

They have increased their dividend sixteen consecutive years.

The payout ratio is 76%, meaning that for every dollar they earn, after all expenses, 76 cents goes to pay the dividend, a fairly healthy 24 cents gets reinvested in the company.  For a utility type company, that is pretty healthy.

My guess it is down because the new US President wants to shut down TC’s Keystone Pipeline, which I understand is 95% built and provides many good paying jobs on both sides of the border.

My next guess is it will get done, either because of the political backing caused by an energy shortfall, or just sweeping it under the rug they way our federal government has with the Transmountain Pipeline, now very much under construction, yet nobody is talking about it.

Great article in the NY Times about Okanagan wine attached.  We are being discovered.  Thank you for the link Martin & Richard.

I got thinking more about people I have met over the years. Back in about 2005 I met a couple, they were each 79 at the time, and about a quarter of their money, was in one stock.  It happened to be 20,000 shares of Scotiabank.  I asked them if they thought having so much in one stock was appropriate from a risk point of view. 

They paused in near silence and looked at me and spoke like I was a child.  He called me “son” and said “… this is the Bank of Nova Scotia we are talking about here.”  He even said it slowly, as if I was having trouble grasping the concept.  By then they had owned the stock for two or three decades, spent the income happily each quarter, paid lower than normal taxes and watched the shares grow in price.  The concept of it being risky did not even seem to occur to them. 

Life is funny.  

As always, speak you to your Portfolio Managers about the pros and cons of owning more great dividend paying stocks.

Its been a hectic year for investing.  Thank you to Linda for the reminder that “this too shall pass”.

Have a great week.