The wealthy investor The Montrealer March 3, 2006 5980 Let me tell you about Margaret, a very regular sort of woman. Now in her late 70s and still living in her home of at least 30 years, Margaret exudes such inner peace and confidence that one can’t help but comment on it. Her success in life, if she would admit to calling it that because indeed her life is far from over, comes in part from having created and executed an indestructible recipe for financial security. “Some years ago I was impressed by an article on building wealth. It talked about something quite unpopular because it talked about building wealth slowly. That doesn’t sit well with most of us who want instant results. I did my own research and found a money manager who helped me on the technical side so that today I have an income that rises every year by anywhere from 10% to 25%! Most employed people think salary increases of 3% are fantastic!! Moreover, my original capital has grown substantially. If the market declines as it did over the first several years of this decade, I notice but am hardly bothered. “My investment philosophy is old hat. It’s based on shares of companies that pay decent dividends, consistently and predictably. They don’t pay dividends that they can’t afford and they’re careful not to raise the dividends too high. “That’s really all I need to know,” she continued, “because my money manager takes care of the rest.” What she means is that her money management team is looking after the details such as checking the ratios of cash flow, debt to equity, dividend momentum and payout levels, to name a few. “Their responsibility lies in making sure that everything I own is constantly paying me, the owner, for holding the stocks.” Like compounding interest, the 8th wonder of the world, investing in dividend-paying and dividend-rising stocks is well known and rarely applied. Why? Because it takes discipline and flexibility. Once you find the money manager, however, that will hold you to this philosophy of investing, the rewards are incredible. For example, only six years ago, Loblaws paid out 22 cents/share. This year, the company announced and paid out 83 cents/share. This is a 377% increase. To compare, those very same six years ago, a 950-gram box of Cornflakes at Loblaws cost $2.19. This year, a 750-gram box of Cornflakes (950-gram boxes don’t appear to be available anymore), on sale, is $4.19. This is a 91% increase. From Loblaws’ annual report, we read that it is the company’s goal to pay out ¼ of its net profits in dividends. If the company continues to increase its profits, the dividends will increase accordingly. Margaret leaves the hand-wringing to her money manager. “My manager rigorously follows the trends on these shares and will make the ever-necessary decision to continue holding or to sell and move on to another company. Me, I’m off to Vienna for a 2-week holiday!” Imagine that, having an investment philosophy whose results compound year after year with relatively little concern for the direction of the stock markets. It’s simple, it’s elegant and what’s best, it works incredibly well. If you’re interested in learning more about dividend-paying investing or if you’d like a copy of our top 10 dividend-paying stocks, send us an e-mail mentioning this article in The Montrealer and we’ll be happy to forward it to you. The Adena Franz Group has over 15 years’ experience of successful portfolio management and is with the independent firm MacDougall, MacDougall and MacTier Inc. 1010 de la Gauchetière West, Suite 2000 Montreal, Qc H3B 4J1 Phone: 514-394-3771 Email: [email protected] The information contained in this article is for general information purposes only. It does not account for specific investment objectives or the financial situation of any person reading it. Opinions expressed are those of the author and do not necessarily represent the opinions of MacDougall, MacDougall & MacTier Inc. Investors should seek professional advice regarding the appropriateness of investing in any securities discussed or recommended here and should recognize that statements regarding future prospects may not be realized.
