Blue Chip or Blue Chimp?

Some big news went down last week in Canadian business. Manulife Financial is a billion dollar insurance company that's had the wind taken out of its sails this week by recording a loss of 2.4 billion. Manulife was one of the bluest of blue chip stocks in Canada at one point, but was hit hard in 2008-2010 as it's stock price went from $39 to just over $9 within 13 months. It's never fully recovered like the other blue chips have.

As an investor, it's important to research a company before investing your hard earned money. I look at how well the company did during 2008 and 2009, and observe how fast they recovered. I also look at past dividend growth. If the dividend doesn't go up each year, I look elsewhere. I don't study charts, ripples or tea leaves for that matter because the stock market is driven by the most unpredictable force on earth... people. That's why I like investing in boring stocks like utilities because everyone has heating and power bills to pay. My other favorites are Canadian bank stocks. Unless you're an eccentric millionaire that keeps your money under a mattress, you're going to have bank accounts and mortgages and the bank is always going to make money off of you. Might as well pay yourself when you pay your mortgage and bank fees.

 Nothing is certain in business and Manulife is the proof. When I started investing last year, Manulife was on my radar as a blue chip to add to my portfolio. As I read more books and articles, I learned that Manulife commited the ultimate sin.... they cut their dividend in half! Now in doing that, they proved that the company was in trouble and as a dividend investor it's the best way to know when to sell off your shares and invest elsewhere. Companies always have bad times, it's unavoidable. So if a company doesn't raise the dividend for a year, it's less offensive then slashing it. Manulife will come back eventually, but until I see some solid dividend growth over the next few years, my money will be invested elsewhere. Now for some good news.


Bell announced they had an increase in second quarter profits and increased their common dividend by 5%. So that means my yield on BCE went from  6.25% to 6.57%. That might not seem like much, but it's one of many dividend increases to come. And since I have 30 years of dividend increases to look forward to, I can patiently wait and watch my yield grow. Is Bell a good company to invest in? Absolutely! Can Bell crash and burn over the next few years? Absolutely! No company is 100% guaranteed to succeed, but your due diligence as an investor is to read the news, find out what's happening and evaluate your findings. It's an important part of self investing and is well worth the price you pay for someone else to do it for you.

Do you own shares in Manulife? Do you plan on buying in while it's this low?