Investor Clinic’s mission is to help people become more informed investors. And one of the best ways to do that is to help them help themselves.
Each week, readers send me dozens of questions on a range of investing topics. I choose certain questions to answer in my column – often with input from analysts, tax experts and others – when I believe they will be of interest to other readers.
But I also receive a lot of relatively straightforward questions that people could answer themselves – if they only knew where to look.
That’s where today’s column comes in. I’ve compiled a list of some of the most common questions I receive and provided some tips for finding the answers. Learning to track down information is one of the key steps to becoming a successful investor, and all it takes is an internet connection and a few minutes of your time.
Do you know if [insert company name] has said anything about [insert subject] recently?
You’d be surprised how often people ask me questions that they could easily answer by reading the company’s own press releases. Whether it’s a dividend announcement, stock split, acquisition or some other corporate development, publicly traded companies are required to issue a release so the information is widely disseminated. You can find press releases posted in the investor relations section of the company’s website. To make the process automatic, consider signing up for the company’s e-mail news alerts. That way, you won’t miss anything.
Have you written about [insert company name or subject] recently?
A couple of weeks ago, a reader asked me why shares of Brookfield Infrastructure Corp. (BIPC) had been outperforming units of Brookfield Infrastructure Partners LP (BIP.UN). It was a great question – which I’d already answered in my column a few days before. If you’re a Globe Unlimited subscriber, the fastest way to find out whether a topic has been covered is to go to globeandmail.com, click on the little magnifying glass at the top right and enter the author’s name or a few relevant keywords in the search box. You can also change the search option to “most recent” from “most relevant” to get the latest stories.
How sustainable is the dividend paid by [insert company name]? The payout ratio looks outrageously high.
If you’re trying to gauge the sustainability of a company’s dividend, don’t rely on the payout ratios published by financial websites. These numbers are generated automatically and lack any nuance or context, which in some cases can make them look worse than they actually are. Instead, go to the investor relations section of the company’s website and read its annual reports and recent investor presentations. The utility Fortis Inc. (FTS) is a great example: The website has a historical chart of the company’s dividend payout ratio, and the annual report provides additional detail regarding how the payout ratio is measured. (Fortis provides both an “actual payout ratio” based on basic earnings per share and an “adjusted payout ratio” that excludes one-time items affecting EPS.) If you read investor materials, you’ll also see that companies with relatively predictable cash flows – such as Fortis, Algonquin Power & Utilities Corp. (AQN), Emera Inc. (EMA) and TC Energy Corp. (TRP), among others – also provide guidance regarding expected future dividend increases, which provides another layer of comfort regarding the sustainability of their current dividends. (Disclosure: I own all of these stocks personally and in my model Yield Hog Dividend Growth Portfolio. View it online at tgam.ca/dividendportfolio.)
How can I find out what stocks are in a certain ETF?
Exchange-traded fund companies publish a list of each of their ETF’s holdings. Usually, googling the name and symbol of the ETF you are interested in will take you directly to the page for that particular ETF, where you can click on “holdings” to see the constituents and percentage weights for each stock. You’ll also find important information here such as the ETF’s management expense ratio (which measures the annual percentage cost of owning the ETF), the total return (including dividends) over various periods, the fund’s historical distributions and the dividend yield.
What do you think of [insert company name]? Should I buy the stock?
I never provide personal stock recommendations to readers by e-mail, and I don’t suggest investors buy a stock based solely on one of my columns or my model portfolio, either. Rather, I try to give people information they can use – along with the many other sources available – to come to a decision on their own. By looking up company press releases, news stories, dividend data and other information, investors can empower themselves and become more informed – and, ultimately, wealthier – investors. I hope this column will provide a good start.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
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John Heinzl