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Canadian Dividend Investors
1
Focus On Dominant Companies
in Stable Industries
Buy companies with strong histories of profitability
and with a dominant business franchise.
1
Warren Buffett
The profitability of companies operating in some industries in Canada can vary significantly and unpredictably from year to year. For example, the annual earnings of companies operating in the mining industry, or in oil and gas production, will vary depending on fluctuations in world prices for the commodities they produce. When the price of oil falls dramatically, oil producers revenue can also fall to the point where they may experience losses.
In Canada there are four economic sectors that, for a variety of reasons, are relatively stable and profitable. These industries and the companies that dominate them are shown on the adjacent table and will be familiar to most of us.
These companies provide services that are essential to most Canadians and they operate in industries where there is limited competition. As a result, they have sufficent pricing power to ensure that they are consistenly profitable even under difficult economic circumstances. Finally, while it is not impossible for their customers to move to one of their competitors, it is usually inconvenient and time consuming for them to do so.
1. Quote attribued to Warren Buffett. Source unknown.
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