Financial Jungle

As any dividend investor will attest to, the regimen of successful dividend investing involves building a watch list of terrific companies with a long history of rising dividends, but only buy when they are cheap. How do you know when they’re cheap? There is a number of matrices out there at your disposal, but the 2 simplest are:

• Buy when P/E is trading near the historical low.
• Buy when yield is trading near the historical high.

If you’re like me, you’ll find it daunting to decipher the historical dividend payments and earnings to arrive at the highs, lows and averages. Fear no more. There is an excellent little tool that you must throw into your bag of tricks. It’s called, BigCharts. Not only does BigCharts show off the dividend growth of your favourite dividend stocks, it presents the rolling dividends, rolling earnings, historical P/E ratio and historical yield in neat little charts. Forget tables. They’re too discrete. Aspired dividend investors will want historical yield presented in a continuous graph in order to experience or feel the personality of the stocks over a long period of time.

Let’s take an example. Judging from Royal Bank’s historical yield, it’s currently trading at an attractive level yielding a historical high, 3.5%. Simply by gliding BigCharts’ cursor along the 10-year historical yield chart, you can quickly reckon and appreciate the rare but brief moments when Royal Bank traded near this seemingly tantalizing level over the past decade. If history repeats itself, the bargain price won’t remain on the table for long, and probably won’t return for several years. For full disclosure, I bought a bunch of Royal Bank shares yesterday.

One quibble I have with BigCharts is its fragile runtime on Internet Explorer; the Java applet crashes whenever I enter a Canadian stock symbol. It seems to work better on FireFox, so I downloaded a copy just to run BigCharts. Don’t forget to prefix “ca:” in front of your Canadian stock symbols. i.e. “ca:ry”.

Another thing to watch out for is that BigCharts uses trailing 12-months but my preference is forward yield. Nevertheless, the method used is irrelevant as long as it’s consistent. Royal Bank’s forward yield is 3.81%.

Please check it out and let me know what you think. If you have an even better tool, please share.