Wednesday, January 15, 2014

Surprise Year-End Bonus

Since we are trying to fund much of our retirement income from our dividend-bearing stocks, I often use the analogy that the stocks we own are like our employers and the dividends they pay represent our salary.  When a stock increases its dividend, it is equivalent to receiving a pay raise.

This year, one of our "employers" gave us an unexpected year-end bonus.  Canada Bread Company (CBY-T) currently offers an annual dividend of $2.00 per share, paid quarterly at the beginning of January, April, July, and October at $0.50/share.  Then came the amazing surprise–In mid December, Canada Bread Company announced a special dividend of $8/share to distribute extra revenue that they generated in 2013!  This one-time payout was 4x more than the sum of all the dividends that we received throughout the entire year.  We had missed this announcement when it was made and therefore were not expecting this additional allocation.  Imagine our surprise when this money showed up in our account at the beginning of 2014.  It was Christmas all over again.

Based on the current price, which is hovering around the $70 mark, the yield for CBY is around 2.9%, which is below our target dividend yield when picking stocks.  However we bought this stock at the beginning of the year when it was selling just under $50, providing an actual yield for us of around 4%.  So even before this special dividend, we were quite happy with this stock.  It not only provides a decent yield but has given us some value growth as well.  The bonus has just been the icing on the cake.  What real "employer" gives such generous bonuses these days?  Thank you, Canada Bread Company!

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