Airgas: A Superb Stock To Own in the Chemicals Sector

Posted by David Hunkar on 5 March 2013, 5:01 am

One of the best sectors to own during any market is the chemical sector. Though they are cyclical chemical stocks tend to perform well in the long-run. In the mid-cap chemicals space, one of the names investors can consider is Airgas Inc (ARG). The company is an industrial gas distributor with a solid track record.

The excellent performance of Airgas since 2000 is shown below:

Click to enlarge

Source: Yahoo Finance

A brief overview from the corporate site:

Airgas, Inc. (NYSE: ARG), through its subsidiaries, is one of the nation’s leading suppliers of industrial, medical and specialty gases, and hardgoods, such as welding equipment and related products. Airgas is a leading U.S. producer of atmospheric gases with 16 air separation plants, a leading producer of carbon dioxide, dry ice, and nitrous oxide, one of the largest U.S. suppliers of safety products, and a leading U.S. supplier of refrigerants, ammonia products, and process chemicals.

Airgas was founded in 1982 by Executive Chairman Peter McCausland and became a publicly-traded company in 1986. Through strategic growth initiatives and more than 400 acquisitions, Airgas has become one of the premier industrial gas companies in the U.S., with an unparalleled packaged gas distribution platform. More than 15,000 employees work in approximately 1,100 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also markets its products and services through eBusiness, catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base.

Currently Airgas has market capitalization of over $7.0 billion and a dividend yield of 1.59%. Last year the company had total revenues of around $5.0 billion and the profit margin is around 7.0%.

According to the company’s data, a $1,000 investment on Dec 19, 1986 would be worth $103,500.04 today with dividends reinvested yielding a superb return of 10,275.94%.

Also a $1,000 investment made on January 2, 2000 would be worth $ 12,662.55 for a return of 1,176.39% assuming dividends were reinvested.

Note: Dividend yields noted are as of Mar 1, 2013

Disclosure: No Positions

Five Reasons to Buy Dividend Stocks

Posted by David Hunkar on 4 March 2013, 5:33 am

Of all the ratios that are available to evaluate a company, dividend yield is probably one of the best ways to measure the performance of the company. Since dividends have to be paid out of a company’s profits there are not many ways to manipulate this figure unlike others. Any company that does not pay dividends is betting on growth to take the stock price higher. Hence these stocks may not suitable for all investors. If a company’s strategy or idea fails to take off or a competitors appears leading to loss of market share, a company’s stock can get killed. Hence it is always a wise strategy for conservative to look for companies that pay at least some amount of dividends.

While there are plenty of reasons to invest in dividend stocks, the following are five of them:

Dividends give some form of return to a shareholder. This return can be used by the shareholder any way he wants.This freedom does not come with non-dividend payers.
Companies that hoard cash and do not pay dividends hold all the power that technically should be belong to shareholders. For example, a company that pays no dividends and hoards billions dollars of earnings can determine how it wants to spend that money. Case in point is Apple which has literally billions in cash and investors are fighting in vain to get Apple to payout more. Other companies simply squander the money on dubious acquisitions.
Dividends paid out to shareholders can be reinvested to boost total returns due to the effect of compounding.
Based on the “bird-in-the-hand” theory dividends are preferable to capital gains since the former is certain and the later is uncertain and may or may not occur in the future.
Dividend payouts on a regular basis such as quarterly is a great way to generate income from investing in equities. This is highly desired by investors such as senior citizens who need the income for living. Holding even millions of a non-dividend paying stock will not give any periodic income.

The following chart shows the strong performance of five solid dividend-payers since 2000:

Click to enlarge

Source: Yahoo Finance

The current dividend yields of the above five stocks are listed below:

1.Company: Kellogg Co (K)
Current Dividend Yield: 2.91%

2.Company: Cullen/Frost Bankers Inc (CFR)
Current Dividend Yield: 3.18%

3.Company: Colgate-Palmolive Co (CL)
Current Dividend Yield: 2.17%

4.Company: 3M Co (MMM)
Current Dividend Yield: 2.45%

5.Company: Southern Co (SO)
Current Dividend Yield: 4.37%

Note: Dividend yields noted are as of Mar 1, 2013

All the stocks yield above 2% in dividends and are very good picks for the long-term.

Disclosure: No Positions

Why Invest In Canadian Dividend Stocks

Posted by David Hunkar on 4 March 2013, 5:07 am

Many Canadian companies generally tend to have higher dividend yields than their peers south of the border. For example, the dividend yield of the benchmark S&P/TSX Composite Index was 3.3% at the end of February relative to just 2.5% for the S&P 500 according to FT market data. Since Canada is mostly a natural resources-based economy, Canadian equity markets are home to hundreds of resource firms in the mining and related sectors. Hence when looking for investment opportunities in Canada, it is wise to avoid the speculative plays such as start-up gold miners, oil exploration companies, etc. and instead focus on the well-established dividend paying stocks. The reason for this suggestion is that unlike in the U.S., dividends account for a substantial portion of the total return of Canadian stocks.

The following charts show the significance of dividend returns in the total returns of the S&P/TSX Composite Index:

Note: Returns shown above are based on Canadian dollars.

Source: The Role of Dividends in Income Portfolios, Practice Essentials Canada, Indexing 201, S&P Dow Jones Indices

Dividends accounted for about one-third of the total returns of the S&P/TSX Composite Index with price appreciation contributing the remaining two-thirds since 1956 as per the research report by Standard & Poor’s. As the above chart shows, from 1956 to 2012 dividends have made up about an astonishing 38% of the total returns of the S&P/TSX Composite Index.

Ten Canadian stocks trading on the US markets with yields of more than 2% are listed below for consideration:

1.Company: TELUS Corp (TU)
Current Dividend Yield: 3.62%
Sector: Telecom

2.Company: BCE Inc (BCE)
Current Dividend Yield: 5.01%
Sector: Telecom

3.Company: Manulife Financial Corp (MFC)
Current Dividend Yield: 3.49%
Sector: Insurance

4.Company: TransCanada Corp (TRP)
Current Dividend Yield: 3.85%
Sector: Oil & Gas Transportation

5.Company: Enbridge Inc (ENB)
Current Dividend Yield: 2.81%
Sector: Oil & Gas Transportation

6.Company: Bank of Novo Scotia (BNS)
Current Dividend Yield: 3.84%
Sector: Banking

7.Company: Bank of Montreal (BMO)
Current Dividend Yield: 4.62%
Sector: Banking

8.Company: Canadian Imperial Bank of Commerce (CM)
Current Dividend Yield: 4.53%
Sector: Banking

9.Company: Royal Bank of Canada (RY)
Current Dividend Yield: 3.95%
Sector: Banking

10.Company: Toronto-Dominion Bank (TD)
Current Dividend Yield: 3.81%
Sector: Banking

Note: Dividend yields noted are as of Mar 1, 2013

It should be noted that Canada gives preferential treatment to stocks held in qualified US retirement accounts such as IRAs with respect to withholding taxes on dividends. Canada does not withhold the usual withholding taxes on dividends from Canadian companies if the stocks are held in these accounts. Hence in addition to high dividend yields offered by Canadian firms, this tax policy provides an added incentive for US investors to invest in Canadian dividend stocks.

Disclosure: Long all five banks noted above.

Two Ways To Invest in Foreign Financials Without Going Abroad

Posted by David Hunkar on 3 March 2013, 3:38 pm

One way to invest in foreign financial companies is via their American Depository Receipts if they are listed on the US markets.Recently I came the KBW Global Financials (ex-u.s.) Index created by investment bank Keefe, Bruyette & Woods. The components of the index include some of the major global financials that US investors can access easily thru ADRs.

Definition of the KBW Global Financials (ex-u.s.) Index:

The Index is currently comprised primarily of American depository receipts. The Index is a modified market capitalization weighted index that seeks to reflect the performance of approximately 60 non-U.S. financial companies that are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services.

The components of this index at the end of February are listed below with their current dividend yields:

S.No.	Index Component	Ticker	Dividend yield as of Mar 1, 2013
1	ACE Limited	ACE	2.29%
2	Aegon	AEG	4.62%
3	Aspen Insurance Holdings Limited	AHL	1.89%
4	Alterra Capital Holdings Limited	ALTE	2.08%
5	Aviva PLC	AV	7.65%
6	Allianz SE	AZSEY	4.35%
7	Brookfield Asset Management Inc	BAM	1.56%
8	Banco Bradesco	BBD	2.91%
9	Banco Bilbao Vizcaya Argentari	BBVA	5.64%
10	Corpbanca	BCA	6.90%
11	Banco de Chile	BCH	3.62%
12	Barclays Capital, Inc	BCS	2.24%
13	BBVA Banco Frances SA	BFR	0.00%
14	Banco Macro SA	BMA	0.00%
15	Bank of Montreal Group of Cos.	BMO	4.62%
16	Bank of Nova Scotia	BNS	3.84%
17	Banco Santander-Chile	BSAC	3.92%
18	Banco Santander Brasil SA	BSBR	4.75%
19	BanColombia SA	CIB	2.49%
20	Canadian Imperial Bank	CM	4.53%
21	Credit Suisse Group	CS	2.99%
22	Deutsche Bank Securities	DB	2.13%
23	Gafisa ADS	GFA	0.00%
24	Grupo Financiero Galicia SA	GGAL	0.00%
25	HSBC Holdings PLC	HBC	3.28%
26	HDFC Bank Ltd. ADS	HDB	0.61%
27	Desarrolladora Homex	HXM	0.00%
28	Icici Bank	IBN	1.37%
29	ING Groep NV	ING	0.00%
30	Bank of Ireland	IRE	0.00%
31	Inversiones y Representaciones S.A. (IRSA)	IRS	10.35%
32	US Itau Unibanco Holding SA	ITUB	3.23%
33	Orix USA Corp	IX	1.00%
34	Kookmin Bank	KB	1.78%
35	China Life Insurance	LFC	1.22%
36	Lloyds TSB Group	LYG	0.00%
37	Manulife Financial	MFC	3.49%
38	Mizuho Financial Group	MFG	3.33%
39	Montpelier Re Holdings Ltd.	MRH	1.89%
40	Mitsubishi UFJ Financial Group	MTU	2.62%
41	Nomura Holdings	NMR	0.82%
42	PartnerRe Ltd.	PRE	2.87%
43	Prudential PLC	PUK	2.73%
44	A.F.P. Provida SA	PVD	8.02%
45	Royal Bank of Scotland Group	RBS	0.00%
46	Royal Bank of Canada	RY	3.95%
47	Shinhan Financial	SHG	1.70%
48	Sun Life Financial Services	SLF	5.09%
49	Sumitomo Mitsui Financial Group	SMFG	3.03%
50	Banco Santander	SAN	11.58%
51	Toronto-Dominion Bank	TD	3.81%
52	UBS AG	UBS	0.70%
53	Westpac Banking Corp	WBK	4.38%
54	Woori Finance Holdings Co., Ltd.	WF	1.81%
55	XL Group plc	XL	1.94%

Source: KBW

One cannot invest directly in the index. However the PowerShares KBW International Financial Portfolio ETF (KBWX) is based on the KBW Global Financials (ex-u.s.) Index. This ETF has a small asset base of just over $2.4 million and the 12-month yield is 5.15%. The fund was launched in late 2010 and in one year the fund is up by about 27% which is close to the return of the KBW benchmark index.

Note: Dividend yields noted are as of Mar 1, 2013

Disclosure: Long many companies noted in the table above.