Long-Term Investing

High Dividend Payers

Markets have been ultra-boring. Lots of indecision, possibly in the anticipation of the infamous May sell off before summer vacations. That’s not too bad though: gives me some time to learn about the markets and hopefully trade successfully in the fall when there’s more action.

By the way, I have a theory about why all the market crashes happen in the fall. Usually the market absorbs all the bad news during the course of the year by (relatively) small adjustments. However in the summer there’s not much market activity going on, and any bad economic or geopolitical news gets carried over to the fall when all the bad stuff hits at the same time. For a couple of months the investors get really depressed. Correct me if I’m wrong, but all major market crashes have happened in September and October.

Back to our sheep… Here’s a small list of high-dividend payers that I’m considering. High dividend payout directly correlates to higher-than-normal risk. These are obviously not recommendations, and to tell you the truth if we were to invest to one or more of these, I don’t know if this would be considered a long-term investment or in the same risky vein as penny stocks.

Dividend yield indicated valid today at market close.

Frontline (FRO) – 22.2%
Pros: Nice yield, relatively good share price history, low P/E, European company.
Cons: Norwegian company so I’m not sure about the taxes and what kind of agreement they have with Canada? Risky industry that has been experiencing declining growth/earnings in the last 2 years.

Corby Distilleries (CDL) – 2.24%
What is this doing on a high-dividend list? They have a special one-time dividend (annual, I think) that brings the total payout to at least 8%.

Latin Discover Fund (LDF) – 33%
Potentially huge yield! Definitely risky. And in addition to the inherent instability in dealing with Latin America, the payout is not really a dividend, but is based on the capital gain at the end of the year.

Penn West (PWT.UN) – 12.93%
An oil and gas income trust.
Pros: Canadian, high yield
Cons: Dividends are taxed as income (thank you Thicken My Wallet for the heads up).

All of these guys except the Latin fund pay one-time special dividends, which makes them even more attractive. The thing is though, both their regular and special dividends fluctuate a lot, pretty much every quarter, or at the very least – every year.

Another concern for me is the tax treatment. We own 7 shares of KMP – another relatively high-dividend payer – but unfortunately they withhold almost 1/2 of the dividends in taxes on the spot! I’m leaning towards Canadian companies at least for this reason. I wouldn’t even mind paying a higher rate on Canadian distributions/dividends, as long as I get the full amount first. It wouldn’t be anywhere near 50% for sure.

In my high dividend/distribution investments I’ll be looking to balance these: yield, share price, tax treatment, industry stability dividend history length and stability.

I’ll post an update when I decide how greedy/fearful I want to be.