Podcast 264 - SCORE STOCKS & BUILD A CONSTANTLY RISING RETIREMENT PORTOLIO

Welcome to Safe Dividend Investing’s Podcast # 264 on February 28th of 2026. 

My name is Ian Duncan MacDonald, and I am the author of 7 investment books. My seventh investment book, Achieving Financial Independence Safely - 200 NYSE Stocks Analyzed and Scored" became available January 3rd on Amazon. You can easily find it by searching in Amazon or Google for "Ian Duncan MacDonald books". For more information safe investing go to www.informus.ca

I have been retired for 20 years and living very well off my investments. My high net worth continues to grow year-after-year along with my high income. I own no ETFs, no mutual funds or bonds. How is the constant growth in my portfolio possible? Why have I never had to sell any of the stocks in my portfolio to maintain my life style?

100% of my portfolio is in financially strong, high dividend paying stocks. Even when the share prices declined in the market crashes of 2008 and 2020 my dividend income grew and was not impacted.

I select the stocks by scoring them.  Years can go by without my seeing any need to make changes to my safe portfolio of 20 stocks. In this week's podcast I discuss the 8 scoring factors I use to asses stocks.

 My background was in building commercial risk scoring systems that rated millions of companies for banks, insurance companies and trade suppliers. To me stocks are just another form of commercial risk,

Ian Duncan MacDonald
Author and Commercial Risk Consultant,
President of  Informus Inc
                              2 Vista Humber Drive
                               Toronto, Ontario
                                Canada, M9P 3R7
                                 Toronto Telephone - 416-245-4994
                                   imacd@informus.ca

Transcript

Podcast 264

Safe Dividend Investing

28 February 2026

Greetings to investors all around the world. Welcome to Safe Dividend Investing’s Podcast #264, recorded on February 28 of 2026. My name is Ian Duncan MacDonald. I am the author of seven investment books. My latest book “Achieving Financial Independence Safely – 200 NYSE Exchange Stocks Analyzed and Scored” was available for delivery from Amazon on January 3rd. To learn about the benefit of this book and my other six investment books, please visit my website www.informus.ca.. Alternatively, you can also do a Google or Amazon search for "Ian Duncan MacDonald books”. Reviews by readers and sample chapters are available at Amazon.

There are about 14,500 North American stocks traded on stock exchanges. If you had an objective to build a portfolio of the 20 financially strongest stocks paying the highest dividend yields, you would need to eliminate the other 14,480 stocks. Using the following 8 information elements that are common to all stocks you can easily reveal your best 20 stocks through a process of elimination. The data is free, and easily accessible through sources like Yahoo Finance: 

(1)    The current share price of a company.

(2)     What the share price of the company was 4 years ago.

(3)    The company’s Book value.

(4)    How many investment analysts rate the stock as a buy.

(5)     The average daily volume of the company’s shares traded 

(6)    The stock’s dividend yield percent.

(7)    The stock’s Price-to-Earnings ratio.

(8)    The Company’s Operating Margin

The first element to employ in building your strong portfolio would be the current price of a stock.  It is important because the stock market is not a warehouse with set prices.  The stock market is an auction vehicle.  You place a bid for a stock. If your price is high enough, someone who owns the stock will think you are paying too much for that stock. They will then sell it to you for a profit. 

 For every buyer there must be a seller, and for every seller there must be a buyer, otherwise a transaction cannot take place. You must know the current price of a stock, to make an acceptable bid for it.

A high price for a stock, shows that many investors have placed bids to buy that stock.  Supposedly, the higher the stock price, the lower the financial risk, the greater its potential and the less volatile the stock.  Of course, there are always exceptions. 

You are far more likely to see a $2 stock double to $4, within a few months, then you will ever see a $200 stock double to $400.  Most high-priced stocks have very stable prices that move only a few cents up or down in a day. Thus, you may use selectors to eliminate both very low and very high prices.

In my IDM stock scoring matrix that I supply with my books, a stock priced at $100 or greater, earns a top score of 10. Stocks scoring under $5 a share, which are commonly referred to as “penny stocks”, earn a score of 3 or less.  

The second element, the historical price of a stock reveals a stock’s stability and its trend. Using the stock price 4 years ago as a benchmark allows you to see whether the share price has grown or shrunk.  You seek stocks whose stock price trend indicates that you can expect their share price to increase. Increasing share prices translate into increased wealth. 

While seeking this historical trend information you are forced to look at charts that not only graph out stock prices but show you the consistency of dividend payments and prices going back for decades. Did the company even exist 4 years ago? Few new companies survive their first five years. Stability is important in the selection of financially strong stocks. A stock that was priced at $100 four years ago would also earn a top score of 10 points.

When you compare the current share price to its historical price, if the current price of a stock was double what it was 4 years ago, it would earn an additional  top score of 10 points.  If the current price were fifty percent or less than the price 4 years ago it would earn only 2 points

The third element is the book value of a stock, which is a calculated figure, arrived at by accountants.  They add all the assets of the company and then subtract depreciation and other liabilities. The remaining net figure is then divided by the number of company shares outstanding. If resulting amount, the “book value”, is a higher figure than the current share price, it indicates that the stock’s shares can be bought at a bargain price. It would also earn a top score of 10.

What is the” real value” of a company? It certainly is not the book value. If a company had to be liquidated or sold, its true value would be revealed because something is only worth what someone is willing to pay for it. That price is dictated by the laws of supply and demand. The value could be more or less than then the book value or the stock market share value.  Often those working on acquisitions would be willing to pay a price based on the profits of a company. For example, ten times the annual profit figure.

The fourth element is the dividend yield percent. Dividend paying stocks give you two possible opportunities to make a profit. One is the dividend amount paid. Two is how much the stock’s share price increases. Few companies paying a dividend yield greater than 9% achieve a total stock score of more than 50 out of a possible100.

For the executives in a company there is a fine balance between investing too much of your profits in a company’s growth, or too much in its dividend payout. Perhaps a company’s executives may see little benefit in reinvesting their profits in the company. This could be warning to investors looking for a constantly increasing share price in a stock.

 The fifth element is a company’s operating margin. Dividends are paid out of a company’s operating margin. Be wary of a company with an operating margin so low, that they must be borrowing money to order to maintain the expectations investors have in receiving their dividend payouts.  They borrow knowing that cutting historically paid out dividends is almost guaranteed to cause the share price to drop. The officers and directors of the company not only own shares, that would decline in value if the share price dropped, but they are often given bonuses, contingent on the share price reaching a certain target amount.

The total composite score for a business should always be the deciding factor in buying a share not how large their dividend payout is going to be.

On the positive side, when a company with a high operating margin pays a high dividend amount it is an indication that it has the surplus funds to weather any unexpected downturn in the economy. There are many strong, established companies who have paid generous dividends for 10 years or more though recessions and pandemics. While their share prices may drop temporarily in a market crash the patient investor anticipates that the share prices will again reach new highs in the future.  The typical recession lasts about 9 months and the gap between recessions is about 50 months.

The sixth element is the price to earning ratio. A price-to- earnings ratio can not be calculated if the company is unprofitable. It has no earnings.

 If the price of a stock is extremely high, and the profits are very low, you can often see a price-to earnings ratio of several hundred to one, or even a thousand, to one. If the price of the stock is low and the profits are higher you will see good ratios of less than 10 to one.  

The way I like to look at price-to earnings is, if the ratio were 50 to 1 it would take 50 years of profits to pay for the stock I am about to purchase.  If it were 8 to one, it would take only 8 years of profits to pay for stock.  The low number makes it a much safer purchase. 

Usually, stocks with ratios of 15 to one or lower are stocks available at a reasonable price.  When you see stocks trading at ratios of 50 or more, they are considered overpriced and you are more likely to experience a large share price loss in the future.  

Those speculative stocks that jump from perhaps $40 to more than $400 in a few weeks, are often based on the hype of their future high potential earnings. When the high earnings are not achieved, they can quickly decline to $40 or lower.  Such gyrations can create huge losses for those who jumped in too late and paid too much for the stock. They lose money when their fear of a loss causes them to quickly jump out.   

Those first in who got out in time may have made a fortune. However, by the time the ordinary investor hears about the chance to get rich fast, by buying this “hot” stock, “that everyone is buying” it is usually too late.  By then, those first in are now out.  Timing of the entry and exit from a speculative stock has left many investors penniless.

Patience and stock scoring are critical, in picking financially strong dividend stocks that will grow at a logical, steady rate, protect your wealth for decades to come while providing a steady income from high dividends.

The seventh element is the average daily volume of shares traded. A stock that trades only a few thousand shares a day is both difficult to acquire and to sell. You might wait days before you can acquire all the shares you wish to buy. It requires increasing the buying price more than you may have anticipated and lowering it when you want to sell those shares. Low trading stocks are generally ignored by analysts because they believe few investors are interested in them. 

The small number of shares being traded daily is an indication that investors see little potential for the share price to increase. However, new information about the stock’s potential can impact the share price. It is not unusual to see the share prices of traditional low-priced stocks jump by 25% or more in a day as an investor anxious to buy the stock offers a high enough a price to encourage an investor who own the few shares of the stock to part with those now in demand shares.

Blue Chip Stocks that trade millions of shares in a day rarely show dramatic price fluctuations. Their price changes are usually seen as moving dramatically when they change 1% to 3% in a day. Blue chip stocks are not bought because of their high dividends or their potential for quick high share price growth. They are unlikely to pay a dividend yield as high as 2%. They are bought because of the solid, long term, financial strength they give to a portfolio. 

Many blue-chip stocks issue preferred shares that pay higher dividend yields. However, many of these preferred shares can go for days without one share being bought or sold. If they do trade, it is often only a few thousand shares. So, while they may pay better dividends than the common shares issued by these companies, they are not recommended by analysts.

Unlike common shares preferred shares are like bonds. They are directly impacted by interest rates. When interest rates climb to 5% those investors holding preferred shares paying a fixed dividend of 3% will see the price of their preferred shares drop rapidly. The preferred share holders are attempting to sell what are now unattractive shares whose value can easily drop to half of what they paid for the preferred shares.

While the preferred shares may have been issued at $25 a share the odds are that more than 90% of them over time will lose half their share value. If interest rates should drop below the fixed 3% dividend rate, the company that issued the preferred shares has the right to buy them back at their then share market value to reissue them at a lower dividend rate.

They are considered preferred because they receive their dividend payouts ahead of common shares. They also rank ahead of common shares in creditor payouts if the company issuing that should ever go bankrupt. These two benefits are hardly worth the capital losses often seen in their share price. It is the rare bankruptcy of a public company that ever has enough capital to pay common or preferred shareholders even one penny. 

The eighth and final element is the recommendations by analysts. That an analyst would even rate a stock, can be a positive sign. Most stocks are not rated by analysts. An analyst who rates a stock as a “Buy” or a “Strong Buy” do influence investors in buying stocks. Their recommendations, can cause, a share price to increase. Their recommendations can be considered, in anticipating a future price for a stock you intend to buy.

How accurate analysts are in predicting future share prices is another question. No one can accurately predict future share prices. Analysts like everyone else are just making guesses based on their experience and some “research”. The more analysts rating a stock as a “buy” the more confidence stock buyers might have in purchasing a stock. However, it is like an election where you are predicting whether millions will place more votes for one candidate than another.

You are just as capable as any analyst in predicting whether a stock is going to increase in value and payout an ever-increasing dividend. Take a stock like Enbridge (stock symbol ENB) traded on both the New York and Toronto Stock Exchanges. The stock is now trading at $52.39 (US $) and its dividend yield percent of 5.44% is paying a quarterly dividend of 94 cents. Almost 3,000,000 shares were traded today.

In 2000 the stock was trading at $3.00 and paying an 8-cent dividend Its share price and dividend payout have climbed steadily for 26 years. Even during the market crash years, the dividend continued to increase.

Today there were 14 analysts from all the major North American banks rating Enbridge. They predicted its share price would rise to between $48 and $76. The average was $58.08. When you look closely at the analysts’ win rates you find the best analyst had been accurate in her predictions 76% of the time and the least accurate analyst was right minus 1.9% of the time. I don’t think you need an analyst to tell you that if you hold Enbridge in your portfolio for the next ten years that the share price and the dividend payouts will most likely increase.

What is most important about analyst ratings is that 43% of the analysts recommended the stock as a ‘buy’, 57% recommended it as a ‘hold’ at their current predicted price. Not one analyst recommended that the stock be sold. If you were a new self-directed investor this would give you added confidence in your choice. When you consider their analyses with your analysis you can feel confident that purchasing such a stock would strengthen your portfolio and be a reliable source of income.

As a self-directed investor using the free information that is available it is not difficult to build a strong ever growing stock portfolio that will pay you between 6% and 9% in dividend income for the rest of your life. As a self-directed investor you will know exactly what you are invested in and why YOU chose those stocks. Over a lifetime you will not only sleep better at night but save your self hundreds of thousands of dollars in investment advisor fees.

That is all for this week.

The End