Let’s talk about salary

Why pay transparency matters, plus Norm’s top stock picks

  1 Premium content image

by

Online only.

  1 Premium content image

Steve Paikin devoted a portion of his show, The Agenda, to the idea of salary transparency and how it might help workers. You can see the segment on TVO’s YouTube channel under the title “Opening Up About Money.”

He asserts that inquiring about salaries is a social faux-pas in Canada. But it is something that I’ve been doing shamelessly for many years because the data empowers rather than impoverishes employees.

As the Globe and Mail‘s Brian Milner pointed out on the program, Gordie Howe discovered, after many years, that he was being grossly underpaid after talking to other hockey players. Salary transparency helps to nip such situations in the bud.

So, don’t be shy about breaking the money taboo if you’re an employee.

On the other hand, transparency is less beneficial from the owner’s point of view because without it they can hire talented people at below market rates.

It’s a problem that the CEOs of public companies neatly avoid because their pay packages are disclosed to investors. Much like the children of Lake Wobegon, CEOs think they’re all above average and demand above-average pay. As a result, average CEO pay ratchets up from year to year.

Similarly, salaries in the public sector are also public and have been on the rise in recent years. You can look up the salary of any public servant in Ontario that makes more than $100,000.

For instance, Mr. Paikin made $314,261.63 in 2015. While he was modest enough to avoid mentioning the figure in the program, it seems likely that someone with Mr. Paikin’s talents would be able to earn even more in the private sector.

If salary transparency is good for CEOs and public servants, it should be good for private sector workers too.

Unfortunately, such disclosure won’t help writers too much because they are generally poorly paid and their jobs aren’t very secure these days. I’ll pass around the tin cup later.

Safer Canadian Dogs

Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.

The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.

My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.

Here’s the updated Safer Dogs of the TSX, representing the top yielders as of October 18. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase – barring some calamity.


Name Price P/B P/E Earnings Yield Dividend Yield
National Bank (NA) $45.67 1.61 13.12 7.62% 4.82%
CIBC (CM) $101.08 1.85 9.79 10.22% 4.79%
Power (POW) $28.63 1.09 11.7 8.55% 4.68%
BCE (BCE) $60.57 4.23 19.17 5.22% 4.51%
Shaw (SJR.B) $26.38 2.14 9.56 10.46% 4.49%
Emera (EMA) $46.85 1.97 14.45 6.92% 4.46%
TELUS (T) $42.79 3.14 17.9 5.59% 4.30%
Bank of Nova Scotia (BNS) $70.78 1.68 12.44 8.04% 4.18%
Bank of Montreal (BMO) $85.21 1.47 12.62 7.92% 4.04%
Royal Bank (RY) $83.53 1.98 12.14 8.24% 3.97%

Source: Bloomberg, October 18, 2016

Notes

Price: Closing price per share

P/B: Price to Book Value Ratio

P/E: Price to Earnings Ratio

Earnings Yield: Earnings divided by Price, expressed as a percentage

Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage

As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)

One comment on “Let’s talk about salary

  1. I believe that salary disclosure is good for the employer when the employee is paid for their worth to the company.

    Reply

Leave a comment

Your email address will not be published. Required fields are marked *