In September 2017, I received slightly over $100K as a result of the commuted value of my pension plan. I decided to invest 100% of this money into dividend growth stocks. Each month, I publish my results. I don’t do this to brag; I do this to show you it’s possible to build a portfolio during an all-time high market. The market will crash… eventually. In the meantime, I’d rather cash some juicy dividends!
The Yield Isn’t Important (to me)
Funny story, I’ve been told a couple of times (on Seeking Alpha) that my moniker (The Dividend Guy) should be replaced by the “Total Return” Guy. I don’t really get why since the whole purpose of investing is making money right? My goal is to generate a positive total return (capital appreciation + dividend). If I wanted to see money deposited monthly, I would have simply bought an annuity and get my paycheck. Making sure my capital is growing (along with dividends) is only a rationale approach to investing. I want to make sure my wife and kids will have more money to manage if I ever pass away. Not just some rundown companies paying 8% yield and losing 105% in value year after year until the company finally cuts its dividend.
I’ll go one step further just for fun with this column about dividend yield. I don’t mind about the dividend yield. My portfolio generates roughly 2.5% yield now. I know, you can cough and tell me it’s not a real yield. But that’s mostly because my portfolio jumped in value over the past 2 years. My yield on cost (dividend payment today divided by my original investment) is probably around 3.5% now.
What really matters (TO ME) is the dividend growth. First, I don’t need to withdraw money immediately. Therefore, I don’t need my portfolio to generate lots of income. I just need my portfolio to generate a growing income stream for the future.
Tracking dividend growth ensures that most of my companies are doing well (if not, why would they increase their distributions?). This is my number one signal to make sure my investment thesis is still valid. An absence of dividend growth is definitely a red flag telling me I need to investigate further.
I understand that yield is important when you are retired and you expect your portfolio to generate enough income so you can enjoy a stress-free retirement. At that point, yield does matter, but not at all cost. In fact, you are probably better off with a portfolio yield of 3.5%-4% with a steady capital appreciation and withdraw a total of 4- 5% of your portfolio (e.g. selling a few shares) each year. If you aim at an 8% withdrawal rate, no matter if you want to do it through dividend yield or by selling shares; you are going to bleed your portfolio out rapidly. Here’s more information on how to manage a higher yield portfolio at retirement.
New! My Income Report in Video
If you don’t feel like reading, you can now jump into my monthly market commentary on Youtube:
Numbers are as of September 6th 2019 (before the bell):
Canadian portfolio (CAD)
| Company Name | Ticker | Market Value |
| Alimentation Couche-Tard | ATD.B.TO | $7,165.52
|
| Andrew Peller | ADW.A.TO | $5,955.25 |
| National Bank | NA.TO | $5,080.80 |
| Royal Bank | RY.TO | $6,041.40 |
| CAE | CAE.TO | $6,750.00 |
| Enbridge | ENB.TO | $7,257.88 |
| Fortis | FTS.TO | $5,509.35 |
| Intertape Polymer | ITP.TO | $5,406.00 |
| Lassonde Industries | LAS.A.TO | $3,757.95 |
| Magna International | MG.TO | $4,811.80 |
| Sylogist | SYZ.V | $2,167.00 |
| Cash | $334.84 | |
| Total | $60,237.82 |
My account shows a variation of +$1,039.34 (+1.8%) since the last income report.
August was the month where banks were discussing their results. While some missed the mark, I was “lucky” enough to have shares of two banks showing great results.
National Bank is still a winner
National Bank posted a strong quarter with results supported by growth from all segments. Personal and Commercial net income was up 11%. Rising 4% from a year ago, personal lending experienced growth, particularly due to mortgage lending, while commercial lending grew 7% from a year ago. Wealth Management was up 5% as the increase is driven mainly by growth in fee-based revenues. Financial Markets was up 2% attributable mainly to the global markets revenue category. U.S. Specialty Finance and International was up 28% attributable to the expansion of ABA Bank’s banking network.
A 2nd dividend increase for Royal Bank
RY posted another strong quarter with mid-digit growth and its second dividend increase of the year. Results for the quarter ended July 31, 2019 reflect strong earnings growth in Personal & Commercial Banking, Wealth Management, and Insurance, partly offset by lower earnings in Capital Markets and Investor & Treasury Services amid challenging market conditions. Q3 net interest income was C$5.05B, up from C$4.84B in Q2 and C$4.60B in the year-ago quarter; growth driven by volume growth in Canadian Banking and U.S. Wealth Management. Provision for credit losses ratio on loans of 27 basis points, fell 2 bps Q/Q, and rose 4 bps Y/Y.
You can read about how I managed my portfolio as a Canadian (e.g. mixing both CDN and US investments): Investing the Canadian Way – Tricks I use to Boost My Returns. I discuss my sector allocation, how I manage currency fluctuations and my favorite sectors.
Numbers are as of September 6th 2019 (before the bell):
U.S. portfolio (USD)
| Company Name | Ticker | Market Value |
| Apple | AAPL | $6,611.68 |
| BlackRock | BLK | $5,946.08 |
| Disney | DIS | $6,247.80 |
| Garrett Motion | GTX | $30.78 |
| Gentex | GNTX | $6,377.90 |
| Hasbro | HAS | $5,105.54 |
| Lazard | LAZ | $3,618.96 |
| Microsoft | MSFT | $8,403.00 |
| Resideo Tech | REZI | $71.20 |
| Starbucks | SBUX | $8,123.45 |
| Texas Instruments | TXN | $6,340.50 |
| United Parcel Services | UPS | $4,484.40 |
| Visa | V | $9,236.50 |
| Cash | $287.44 | |
| Total | $70,885.23 |
The US total value account shows a variation of +$3,045.87 USD (+4.5%) since the last income report.
While there are still lot of uncertainties around the commercial trade war and the interest rate yield curve, the market seems to always find a way to go higher. My portfolio value is up 11.5% (total, converted in CAD) vs last August. Most of my growth has been found among my US holdings.
The current earnings season has pushed many of my holdings to higher levels. I don’t want to get over excited about this short-term gain a we all know how fast the wind can turn. What is nice about the current value of my portfolio is that it can now take a ~30% hit and get back to my original invested amount. This gives me a nice margin of safety going forward.
At this point, I’m debating selling GTX and REZI as they are the results of spin-offs from Honeywell (HON), which I sold last year to buy BlackRock. Those are small amounts and a part of it will be eaten by fees, but I’m better off seeing those as dividend payments instead of shares. They don’t add any value to my portfolio right now.
My entire portfolio quarterly updated!
Each quarter, we run an exclusive report for Dividend Stocks Rock (DSR) members 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 giving all the information about all my holdings. Results have been updated as of September 10th.
Download my portfolio Q3 2019 report.
Dividend income: $354.05 CAD (+31%)
I show an impressive dividend growth for August as I bought my shares of National Bank (NA.TO) last year in August. The increase would have been around 11% excluding National Bank’s dividend payment. Still, I’ll take the double-digit pay raise, wouldn’t you?
Here is the dividend growth detailed. The growth is compared to August 2018 (not necessarily a recent dividend increase):
- Alimentation Couche-Tard: +25%
- Royal Bank: +8.5%
- Texas instruments: +24%
- Hasbro: +8%
- Apple: +5.5%
- Lazard: +8%
- Starbucks: +0%
- Currency factor: +2%
When you combine both dividend growth and capital growth in this portfolio, you get great results! I’ve never been looking for high yielding stocks. I think the balance between dividend growth and capital growth is important in one’s portfolio.
Canadian Holdings payouts: $126.35 CAD
- National Bank: $54.40
- Alimentation Couche-Tard: $10.75
- Royal Bank: $61.20
U.S. Holding payouts: $172.19 USD
- Texas instruments: $38.50
- Hasbro: $31.28
- Apple: $23.87
- Lazard: $47.94
- Starbucks: $30.60
Total payouts: $354.05 CAD
*I used a USD/CAD conversion rate of 1.3224
Since I started this portfolio in September 2017, I have received a total of $5,607.35 CAD in dividend. Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added int his account (it’s a LIRA). Therefore, all dividend growth is coming from stocks and not from additional capital.
Final thoughts
My portfolio has had a great since I started (more on this here). This recovery is so strong that I can now take a 30% hit on my portfolio I would still have a few hundreds over my original amount. This shows you how it’s impossible to know when and by how much the market will crash.
That’s awesome. Thanks for the major breakdown. Looks like your yield on cost is great. Hopefully that can continue to climb
Thx!
It should continue to go up as most of my holdings increase their dividend by more than 5% per year on average 🙂
Cheers,
Mike
Interesting when you talk about total return instead of yield.
Unfortunately, lot of beginners (with a low capital) prefer buy high yield share instead of dividend growth stocks. But when those high yields shares cut their dividend (like CBL Associates recently), you lose tremedous amount of money…
Don’t be to greedy, it’s my moto when I invest.
Alex (from France)