Trades Galore – December Dividend Income Report

In September of 2017, I received slightly over $100K from my former employer which represented the commuted value of my pension plan. I decided to invest 100% of this money in dividend growth stocks.

Each month, I publish my results on those investments. I don’t do this to brag. I do this to show my readers that it is possible to build a lasting portfolio during all sorts of market conditions. Some months we might appear to underperform, but you must trust the process over the long term to evaluate our performance more accurately.

As you know, I also take the opportunity during my monthly income report to add some commentary. This time, the trades I made in the last couple of weeks.

Performance in Review

Let’s start with the numbers as of January 3^rd, 2021 (before the bell):

Original amount invested in September 2017 (no additional capital added): $108,760.02.

• Portfolio value: $224,255.41
• Dividends paid: $4,071.92 (TTM)
• Average yield: 1.82%
• 2021 performance: +16.78%
• SPY= 28.75%, XIU.TO = 28.05%
• Dividend growth: +3.14%

Total return since inception (Sep 2017- Dec 2021): 106.19%

Annualized return (since September 2017 – 52 months): 18.17%

SPDR® S&P 500 ETF Trust (SPY) annualized return (since Sept 2017): 18.36% (total return 107.60%)

iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 12.19% (total return 64.63%)

Trades Galore!

If you have been following my portfolio for a while, you know that I’m not the kind of investor who makes a lot of trades. I typically make 2-3 trades per year. But after reviewing my latest DSR PRO report, I acted on various fronts. I’ve made a total of 5 trades, and all were free of charge thanks to National Bank’s $0 commission brokerage service.

• I’ve started reducing my exposure to the information technology sector and will continue this in 2022.
• I got rid of a dividend laggard that has had no dividend increases since 2019.
• I’ve transferred a few USD to my CAD account.
• I’ve made an interesting play coming from the DSR best 2022 stock picks.

SOLD 21 shares of Apple (AAPL)

It is not a secret that I have too many dollars invested in AAPL!  What you see in this portfolio is only a part of my total investment. I’ve made the decision to track this portfolio since I can’t add capital to it (it’s a locked-in RRSP). This portfolio shows the true power of dividend growth investing without having the benefit of additional money bolstering the dividend results.

Therefore, from time to time, I must sell a few shares of Apple. I use the proceeds to rebalance my portfolio. Apple’s weight in my portfolio is still slightly over 10% after this transaction. This is a level I’m comfortable with. In this situation, I always think about what would happen to my portfolio if Apple (or any other holding) dropped by 40%.

I’ve discussed what is the role played by Apple in my portfolio here:

SOLD 5 shares of Microsoft (MSFT)

Like my situation with Apple, Microsoft has been an excellent performer since I bought shares in 2017. Microsoft is about 6% of my total investment. I’m comfortable with this position but I needed a few extra dollars to complete my purchases. This trade was more about reducing my exposure to the information technology sector.

I like investing in various sectors and maintaining a maximum allocation of 20% for each of them. This is a trick you can use to make sure your portfolio is well balanced across several sectors. If anything bad happens to a specific industry, you’ll be able to count on other companies to compensate. With 32% of my money invested in one sector, it’s about time I started selling some shares! One major change that happened in 2021 was the modification of our classification for Visa. It used to be part of financial services, but it is now classified under the tech sector. Between you and me, I’d break down Visa as 1/3 tech, 1/3 financial and 1/3 consumer discretionary!  Nevertheless, more trimming will be done in 2022 to reduce my exposure to this sector.

SOLD 102 shares of Lazard (LAZ)

I have shared my feelings about LAZ with you in the past. This is a great asset manager that offers an interesting exposure to merger & acquisition activities (50% of Lazard’s revenue is linked to financial advisory services such as M&A, consulting, and debt restructuring). LAZ has been a laggard in my portfolio for both dividend growth (none since 2019) and overall performance. I was ready to forgive a dividend growth pause for 2020, but I was expecting a higher paycheck in 2021. The company could have done it through a special dividend as management has done that several times in the past or to simply increase the quarterly payment. None of this happened. While the dividend triangle isn’t that bad, I couldn’t accept such poor performance with no dividend growth when I can invest that money in a Canadian bank!

My investment thesis around Lazard was all about getting involved in M&A activities and investing in an asset manager showing resiliency during market crashes (they increased their market share during the 2008 financial crisis). Unfortunately, Lazard has proven to be volatile and hasn’t been able to continuously report solid results. This has reflected on both the stock price performance as well as their dividend growth. I’ve found a better option right inside my portfolio as I have increased my position in National Bank which has been one of my favorite banks for a long time.

BOUGHT 41 shares of National Bank (NA.TO)

There are several reasons why I wanted more exposure to National Bank. First, this is a great replacement for Lazard. Both companies are operating in the same sector while having a different business model. National Bank offered the second-largest dividend increase among all Canadian banks with a 23% paycheck raise in 2021. After this increase, NA is still showing one of the lowest payout ratios of the oligopoly. This means more dividend growth to come. Recently, NA has been seeking additional growth vectors by investing in emerging markets such as Cambodia (ABA bank) and in the U.S. through Credigy. Finally, when you look at the dividend triangle, you can get a feeling that NA is heading in the right direction.

On top of showing a strong dividend growth profile, National Bank is also among the “least expensive” banks when you look at its PE ratio and Forward PE ratio. With both numbers under 11, it’s hard to go wrong with this one. The yield is lower than Lazard’s (3.60% vs 4.30%), but I know National Bank will make sure my dividends are sheltered from inflation in 2022!

BOUGHT 116 of Activision Blizzard (ATVI)

The final trade I made in December was a Christmas gift from me to me. ATVI has taken a rough beating in 2021. After showing impressive growth, the company revealed an ugly side: a culture of sexual misconduct and harassment. Management is paying the price for closing their eyes to the unacceptable.

After receiving lots of love from the market in 2020 (the stock jumped by 56%), Activision Blizzard is stuck in a big storm (pun intended). ATVI surfed the pandemic bull market as many players jumped on their games during lockdowns. The number of players kept rising and so did the stock price. What happened in 2021? The stock dropped by 28.5%! There was a lag in the release of many video game titles, but there was more important stuff than lagging revenue to this story. The CEO knew for years about sexual-misconduct incidents at the company and failed to disclose them to the board. Following the report, many employees have walked out. One employee estimates current participation in the walkout at 200 workers, and they’re demanding that Kotick be replaced as CEO. You know what it means when key employees leave the boat in the videogame industry; it’s your future growth that is leaving.

While this situation must be addressed and fixed rapidly, I doubt it will have a long-term impact on ATVI videogame franchises such as Call of Duty, World of Warcraft, Overwatch and Diablo to name a few. The company remains a dominant player in a growing industry.

I’ve put more details on ATVI in this video below:

Let’s look at my CDN portfolio. Numbers are as of January 3^rd, 2021 (before the bell):

Canadian Portfolio (CAD)

Company Name	Ticker	Market Value
Algonquin Power & Utilities	AQN.TO	6,193.53
Alimentation Couche-Tard	ATD.TO	19,027.00
Andrew Peller	ADW.A.TO	4,781.76
National Bank	NA.TO	11,669.24
Royal Bank	RY.TO	8,055.00
Brookfield Renewable	BEPC.TO	1,955.10
CAE	CAE.TO	6,382.00
Enbridge	ENB.TO	7,955.01
Fortis	FTS.TO	6,041.97
Intertape Polymer	ITP.TO	7,896.00
Magna International	MG.TO	7,164.50
Sylogist	SYZ.TO	5,375.13
Cash		184.71
Total		$92,680.95

My account shows a variation of +$8,813.12 (+10.5%) since the last income report on December 3^rd. Don’t get all excited; most of that “gain” is coming from a transfer from my USD account to my CAD account. Overall, both portfolios did well, but I didn’t finish the year on a huge value spike either.

Here’s my US portfolio now. Numbers are as of January 3^rd, 2021 (before the bell):

U.S. Portfolio (USD)

Company Name	Ticker	Market Value
Activision Blizzard	ATVI	7,717.48
Apple	AAPL	13,317.75
BlackRock	BLK	12,817.84
Disney	DIS	6,970.05
Gentex	GNTX	8,189.75
Microsoft	MSFT	18,497.60
Starbucks	SBUX	9,942.45
Texas Instruments	TXN	9,423.50
VF Corporation	VFC	5,930.82
Visa	V	10,835.50
Cash		0.00
Total		$103,642.74

The US total value account shows a variation of +$782.85 (+0.76%) since the last income report on December 3^rd. I would have shown a larger growth, but I transferred about $3,000 USD to my Canadian account to buy more National Bank.

My Entire Portfolio Updated for Q4 2021

Each quarter, we run an exclusive report for Dividend Stocks Rock (DSR) members who subscribe to our very special additional service called DSR PRO. The PRO report includes a summary of each company’s earnings report for the period. We have been doing this for an entire year now and I wanted to share my own DSR PRO report for this portfolio. You can download the full PDF showing all the information about all my holdings. Results have been updated as of January 2022.

Download my portfolio Q4 2021 report.

Dividend Income: $595.14 CAD (+20% vs December 2020)

That’s what I call finishing the year with a bang! The 20% dividend growth isn’t just companies that felt like Santa. This is a combination of several dividend increases, the addition of new positions and the increase of some others. In 2021, I’ve increased my position in Alimentation Couche-Tard and VC Corp on top of adding a few shares of Brookfield Renewable.

Speaking of which, one of my goals in 2022 will be to increase my position in Brookfield Renewable. The company took a big hit in 2021. While most investors complain there aren’t any deals on the market, I like to think some companies still offer a good discount. BEPC is one of them.

Here’s the detail of my dividend payments.

Dividend growth (over the past 12 months):

• Fortis: +5.94%
• Enbridge: +3%
• Magna Intl: +7.45%
• Sylogist: 0% (red flag!)
• Alimentation Couche-Tard: +162.4% (I’ve increased my position)
• Intertape Polymer: +9.49%
• Brookfield Renewable: new
• Visa: +17.19%
• Microsoft: +10.71%
• VF Corp: +37.76% (I’ve increased my position)
• BlackRock: +13.77%

Canadian Holding payouts: $399.29 CAD

• Fortis: $52.97
• Enbridge: $134.44
• Magna Intl: $38.06
• Sylogist: $52.13
• Alimentation Couche-Tard: $39.49
• Intertape Polymer: $65.88
• Brookfield Renewable: $16.32

U.S. Holding payouts: $154.27 USD

• Visa: $18.75
• Microsoft: $37.20
• VF Corp: $40.50
• BlackRock: $57.82

Total payouts: $595.14 CAD

*I used a USD/CAD conversion rate of 1.2695

Since I started this portfolio in September 2017, I have received a total of $15,009.13CAD in dividends.  Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added into this account other than retained and/or reinvested dividends. Therefore, all dividend growth is coming from the stocks and not from any additional capital being added to the account.

Final Thoughts

I finally came around to selling Lazard in December. I know, no surprise there. By selling LAZ to buy shares of ATVI, I’m reducing my portfolio dividend yield. However, I also sold some Microsoft & Apple to buy more National Bank. Overall, I expect my yield to be about the same, but I like the upside potential brought by Activision while National Bank will likely do a much better job than Lazard in the financial sector!

I’ll keep an eye on Gentex and Sylogist which have also recently forgotten to increase their dividend payouts in 2021. GTNX has no debt and shows some interesting growth vectors while SYZ.TO has a new CEO that is all about growth by acquisitions. This will require a bit more analysis, but I’m willing to be patient with both.

Cheers,

Mike.

Google+