Not too long ago, I told you I had 108K to invest in the stock market. If you didn’t follow me through summer time, I received this money when I quit my job to work full-time on my investing websites. This money was what my pension plan was worth and I decided to take it with me instead of leaving it for a small pension.
Many of you told me I should be patient and that I should wait for the next market crash. Fair point: we are at the summit of a bull market, and there is no other way to go but down…or is there?
Source: Ycharts
What My Portfolio Looks Like Now
I told you that my strategy was to buy as many companies as possible within the first month. I kept my promise. I’ve invested 70% of this account in the first 4 weeks. My portfolio is already well-diversified as you can see from this chart:
Numbers have been converted in US dollars. At the time of writing this post, I have invested $21,126 CAD into four different companies and $45,398 USD into nine companies. Each position is equally weighted for about $5,000 CAD each. The Canadian average dividend growth portfolio stands at 1.78%, while last year dividend growth average was 14%. The US part shows an average yield of 2.53% and last year’s dividend growth at 13%.
As you can see, I don’t focus on dividend yield but rather on dividend growth. Why? Because winter is coming.
The Only Way to Shield My Money Against the Next Correction is to Hide Behind the Strongest Army: Dividend Growth Soldiers
You know that I’m an eternal optimist and that I really believe we will continue to ride this bull market for a while. I’ll play nice and agree with you just for a few minutes. But what will happen if the market crashes in the upcoming months? After all, we have almost finished going through the worst two months of the year.
Nothing. Nothing will happen. Not to my portfolio anyway.
When I carefully picked those 13 companies, I made sure that both of them were not only strong dividend growers, but that they also had two other things in common:
#1 Each company must show strong growth vectors for the future.
#2 Each company must have plenty of room for future dividend raise.
When I write down my investment thesis for each stock, I make sure I find solid growth vectors. I’m not looking for companies that are simply surfing the current bull market. I’m looking for companies that will grow based on what they are doing differently.
Then, I make sure each company has a strong dividend triangle. Growing revenues lead to growing earnings that lead to growing dividends. I also review payout and cash payout ratios to make sure management wasn’t playing with shareholders’ sentiments with generous increases that will suddenly stop. I am not looking at old timers increasing their dividend for the past 40 years; I prefer younger ones like the Dividend Achievers. I even look at companies that started raising their dividend during the latest bull market (less than eight years). Why? Because I don’t want to miss great opportunities like Lazard (LAZ), Starbucks (SBUX) and Disney (DIS).
Dividend Growth Stocks are Perfect for the Next Winter
The reason why I’ve picked only dividend growth stocks for this portfolio is because I know payments will keep coming in. I’m no fool; I know that at one point, the market is going to drop. Look at how it reacted over time:
Source: Ycharts
When I look at the latest wave, I have a feeling it will hurt when it hits the bottom. However, I know how strong my companies are and I know that all of them will continue to pay their juicy distribution.
Aren’t You Curious?
I bet you have been reading this post all the way to here wondering when I will share my list, right? So without further delay, here’s the list of my holdings:
Canadian Stocks (CAD)
| Ticker | Company Name | Sector | Value | Yield |
| ADT.B | Alimentation Couche-Tard | Consumer Defensive | $ 5,083.46 | 0.61% |
| ADW.A | Andrew Peller | Consumer Defensive | $ 5,042.25 | 1.48% |
| RY | Royal Bank | Financial | $ 5,889.00 | 3.71% |
| LAS.A | Lassonde Industries | Consumer Defensive | $ 5,082.00 | 1.01% |
| Cash | Cash | $ 19,936.00 | 0.00% |
US Stocks (USD)
| Ticker | Company Name | Sector | Value | Yield |
| DIS | Disney | Consumer Cyclical | $ 4,455.45 | 1.58% |
| GNTX | Gentex | Consumer Cyclical | $ 4,724.67 | 1.99% |
| HAS | Hasbro | Consumer Cyclical | $ 4,445.90 | 2.36% |
| HON | Honeywell | Industrial | $ 4,607.35 | 2.08% |
| LAZ | Lazard | Financial | $ 4,590.00 | 3.64% |
| MSFT | Microsoft | Techno | $ 4,586.98 | 2.20% |
| QCOM | Qualcomm | Techno | $ 4,283.20 | 4.26% |
| SBUX | Starbucks | Consumer Cyclical | $ 4,742.14 | 1.79% |
| TXN | Texas Instruments | Industrial | $ 4,589.00 | 2.70% |
| UPS | United Parcel Service | Industrial | $ 4,370.80 | 2.81% |
| Cash | $ 10,426.67 | 0.00% |
Readers, I’d like to know what you think of my choices. Do you have any suggestions?
Being from the U.S. I’m not as familiar with the CAD stocks. I don’t like paying the 15% CAD tax on the dividends that I’m charged by my brokerage. The U.S. list is of high quality. Not your typical dividend stock list with so much emphasis on industrial and cyclical companies, but a good list none the less. I hold MSFT and UPS. Agree that it’s a tough time to invest while the market is reaching new highs, but you have to get in and stay in rather than wait for a pull back. Good luck. Tom
Hello Tom,
I didn’t want to replicate my existing portfolio. This new money helps building a bigger portfolio that is more diversified. It is quite a challenge to do it now, but I know dividends will continue to be coming in!
Cheers,
Mike.
“I don’t like paying the 15% CAD tax on the dividends that I’m charged by my brokerage”
You do get a tax credit for that so the end result is that it is wiped out, less you are in a retirement account with those dollars. Just use a standard taxable brokerage account for the stocks that you wish to hold that are not US stocks.
Heya Mike, thanks for the post. I was wonderring, is there a reason why you chose to invest $5000 per company? That buys you about 20 companies. Could also have gone for 30, right? 🙂
Also, can I find your reasoning for the TXN buy somewhere? I have been looking at this company myself for my portfolio and would love to read your thoughts on it. Thanks.
– SD
Hello SD!
I rather to keep the number of different holding low. The less stock I have in my portfolio, the easier it is to follow them. Plus, if I buy 30 in this portfolio + the 13-15 stock I already hold elsewhere, I might as well just buy a dividend ETF. My return won’t be much different.
Here’s my article on TXN:
https://seekingalpha.com/article/4112006-super-powered-dividend-stock
Cheers,
Mike.
Hi Mike,
interesting list. A few sectors like health, chemicals or energy are not represented. Why? E.G. BASF or J&J look like good dividiend growth stocks to me.
In the technology sector I chose Intel and IBM over Qualcomm and Microsoft some years ago but I agree from a growth perspective your choice may prove to be more compelling. Being German I own Deutsche Post instead of UPS.
Finance stocks I mostly try to stay away from as the technological disruptions in this industry seem hard to predict.
Will certainly look at some of your choices, which are not so familiar to me.
Cheers
Klaus
The reason why I do not hold JNJ in this portfolio is it because it’s already in my RRSP (retirement) account. I agree with you, it’s a good stock to hold.
It will be interesting to see how INTC and IBM will fight against MSFT and QCOM in the future. I don’t think IBM will go anywhere, but I like INTC.
Cheers,
Mike.
have you considered stop-loss orders in case there’s a serious, short term correction?
I will not use them. If there is a correction, I’ll just wait. I will not touch this money for another 29 years, I’m in no hurry.
Hi Mike,
Thanks for sharing your list. I am also an American investor who does not invest in Canadian stocks. I chose Apple (AAPL) over Microsoft because I don’t like MSFT as a company or their products. I chose IBM because they are turning the company around and should have a good future. Same for General Electric (GE). I would also consider Iron Mountain (IRM), Medtronic (MDT), and Watsco (WSO) although I have not subjected these companies to your evaluation process. Thanks again for including us along for the ride.
Hello Mel,
Thank you for your list! I’m not sure about GE though. I really think this company is going nowhere and will eventually be forced to cut its dividend. We will see!
Cheers,
Mike
Not really sure on what the future for QCOM would be at this point in time and I can’t see anybody predicting it. Other than the dividend it just does not have any allure and more problems with lawsuits than any normal company would like. I had it for a year and sold it and don’t regret it one bit.
Hello Ed,
Qcom is my “gamble” for this portfolio. I like to catch a falling knife once in a while. But I agree with you, it’s not the safest pick around.
Cheers,
Mike.
Do you choose DRIP (Dividend reinvesting program) or do you choose to receive cash dividend?
I am receiving cash for now, but will move all of them to DRIP once my portfolio is complete.
Cheers,
Mike