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!
Keep your eyes on the prize
This is my last income report for the year as my December report will be written in January, and I have no clue what will happen on the market for the next 3 weeks… and we all know how things turn fast! While 2019 should fall into the “good year” category, if you missed the first 4 months of trading, you missed the entire recovery if your Canadian, and you left more than half the growth on the table if you are American.
Source: Ycharts
Many investors keep wondering when the right time is to invest. Can you blame them when you look at the above graph? All I see is lines bouncing up and down from month to month. Trying to figure what your next move is in such an environment could be difficult. Are we going toward a recession or another economic expansion? Your bet is as good as mine.
Since there is no clear indication of what is really happening (there has never been one and never will), I suggest shifting the focus. Here’s what I look at instead:
This graph represents the accumulated dividend paid in my pension account since I started investing this money in 2017. Keep in mind I didn’t add a single penny to this account. Therefore, the dividend growth is purely coming from the cheque I received when I quit my job.
Keeping my eyes on the dividends received helps clear the noise. I don’t have to figure if my portfolio will lose $5,000 or win $3,000 over the next month. I only wonder by how much my dividend paychecks will increase. It’s a stress-free way to look at my portfolio as I know the next bar on this graph will be higher than the previous one.
Tracking your dividend growth is just step one of investing with confidence.
Numbers are as at December 10th 2019 (before the bell):
Canadian portfolio (CAD)
|
Company Name |
Ticker | Market Value |
| Alimentation Couche-Tard | ATD.B.TO | $7,468.24
|
| Andrew Peller | ADW.A.TO | $4,830.60 |
| National Bank | NA.TO | $5,578.40 |
| Royal Bank | RY.TO | $6,267.00 |
| CAE | CAE.TO | $6,840.00 |
| Enbridge | ENB.TO | $8,267.35 |
| Fortis | FTS.TO | $5,258.88 |
| Intertape Polymer | ITP.TO | $4,740.00 |
| Lassonde Industries | LAS.A.TO | $3,297.21 |
| Magna International | MG.TO | $4,928.70 |
| Sylogist | SYZ.V | $1,960.15 |
| Cash | $831.15 | |
| Total | $60,447.68 |
My account shows a variation of -$33.72 (flat) since the last income report.
There were many Canadian companies declaring their earnings in November. Some of them were great, some others not so much. Overall, my portfolio value didn’t move as good performances from some were offset by bad quarters from others. Here is the recap of what happened.
Difficult times for Andrew Peller
ADW disappointed the market with decreasing earnings and weak growth for this quarter. Net earnings were impacted by a one-time cost for professional fees and early retirement costs in the second quarter. The introduction of new products and brands and solid performance across the majority of the company’s well established trade channels were offset by increased competition from new subsidized low-priced imported wines, softness in the personal winemaking market and lower export sales due to trade and political disputes between Canada and China. As the company invested massively in the past couple of years, we should see the results coming in 2020.
Intertape Polymer hurts my portfolio
ITP is down ~8% since my last report. The company is busy integrating its latest acquisition, so growth mostly came from previous transactions. The company missed both EPS and revenue growth expectations, and this is why the stock price is down this quarter. Gross margin increased to 21.8% from 20.5% primarily due to an increase in spread between selling prices and combined raw material and freight costs, partially offset by the dilutive impact of the Maiweave acquisition. The EPS decrease was mostly due to higher cost of interest and taxes. Cash flows from operating activities increased $35.3M to $48.4M mainly due to a smaller increase in accounts receivable primarily due to the timing of revenue invoiced in the third quarter of 2019.
National Bank is killing it (again)
NA enjoys a healthy economic situation in Quebec and is thriving once again. It beat both EPS and revenue growth expectations, and management announced its 2nd dividend increase of the year. The Personal and Commercial segment’s total revenues were up 3% owing to growth in loan and deposit volumes. The Wealth Management segment’s revenues were up 4% owing to growth in mutual fund revenues and trust service revenues. The Financial Markets segment’s revenues were up 14% owing to growth in the Global Markets revenue category. Furthermore, the USSF&I segment’s total revenues grew 22%, essentially due to revenue growth at the ABA Bank subsidiary.
Royal Bank faces some challenge
RY missed market expectations, and its shares dropped on earnings day. Results 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. However, the bank didn’t perform that well compared to Q2 as net income was up $33M with higher earnings in Personal & Commercial Banking, Wealth Management and Insurance, largely offset by lower earnings in Capital Markets and Investor & Treasury Services. Q3 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 at December 10th 2019 (before the bell):
U.S. portfolio (USD)
| Company Name | Ticker | Market Value |
| Apple | AAPL | $8,274.52 |
| BlackRock | BLK | $6,958.98 |
| Disney | DIS | $6,579.45 |
| Garrett Motion | GTX | $30.15 |
| Gentex | GNTX | $6,603.50 |
| Hasbro | HAS | $4,632.20 |
| Lazard | LAZ | $3,881.10 |
| Microsoft | MSFT | $9,081.60 |
| Resideo Tech | REZI | $52.55 |
| Starbucks | SBUX | $7,333.80 |
| Texas Instruments | TXN | $6,100.00 |
| United Parcel Services | UPS | $4,471.18 |
| Visa | V | $9,146.00 |
| Cash | $621.73 | |
| Total | $73,666.76 |
The US total value account shows a variation of $2,709.09 USD (+3.8%) since the last income report.
My US portion was fueled by great news in November. Here are some results from my holdings:
Disney is on its way to heaven
DIS posted a solid quarter and everybody is excited about Disney +. The company mentioned that Disney + subscriptions on the first day (Nov 12th) beat all expectations. Strong results were also supported by Fox assets acquisitions. Revenue by segment: Media Networks, $6.51B (up 22%); Parks, Experiences and Products, $6.66B (up 8%); Studio Entertainment, $3.31B (up 52%); Direct-to-Consumer and International, $3.43B (up 316%). Broadcast was an unexpected strength in Media Networks revenues, coming in well ahead of schedule at $2.27B. Expect more growth going forward!
Microsoft offers steady growth
MSFT once again presented astonishing results in Q3 to their investors. Revenue variation by segment: Productivity +13%, Intelligent Cloud +27% and Personal computing +9%. The company returned a total of $7.9M to shareholders, a 28% surge from last year. Although MSFT reported a strong performance, intense competition has started to arise across the globe and could lead to a margin decrease or lower revenue. On a shorter-term note, products like LinkedIn and Office 365’s revenue both brought a 25% increase to the table, further expanding MSFT’s reach on a computing world.
Starbucks is another strong performer
SBUX posted another solid quarter and increased their dividend by 14% this quarter. Global comparable store sales rose 5.0% during the quarter to top the +3.9% consensus estimate. The average ticket was up 3% and transaction growth was 2% during the quarter. Global comparable sales were up 6% for the Americas and U.S., while international comparable sales rose 3%. Active membership in Starbucks Rewards in the U.S. increased 15% to 17.6M during the quarter. SBUX opened 630 net new stores in FQ3 to take its store count to 31,256 stores at the end of the quarter. Starbucks expects FY20 global comparable sales growth of 3% to 4%. EPS of $3.00 to $3.05.
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: $359.50 CAD (+25%)
The bulk of the difference is explained by the recording of my National Bank payment on in my October report in 2018 instead of 2019. If I combined both months together, I show a dividend increase of 5%.
Here is the dividend growth detailed. The growth is compared to November 2018 (not a necessarily a recent dividend increase):
- National Bank: +9.7%
- Royal Bank: +7.1%
- Apple: +5.5%
- Hasbro: +8%
- Texas Instruments: +16.9%
- Lazard: +6.8%
- Starbuck: +13.9%
- Currency fluctuation is minimal
When you combine both dividend growth and capital growth in this portfolio, you get great results! I 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: $117.40 CAD
- National Bank: $54.40
- Royal Bank: $63.00
U.S. Holding payouts: $182.94 USD
- Apple: $23.87
- Hasbro: $31.28
- Texas Instruments: $45.00
- Lazard: $47.94
- Starbuck: $34.85
Total payouts: $359.50 CAD
*I used a USD/CAD conversion rate of 1.3234
Since I started this portfolio in September 2017, I have received a total of $6,506.18 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
In the upcoming weeks, I’ll take a close look at each of my holdings. I want to make sure that each of them are still on track with my investment thesis and will be able to increase their dividend in 2020. I’m also building cash from both accounts that will be shortly used to rebalance my portfolio. I have a few smaller positions where I should put my money to work.
TDGB –
You hit it on the head with Disney on that quick elevator up, that is for sure. In addition, their movies are simply KILLING it at the box office, just $Billion hits after $Billion hits. Incredible.
Question is – will the streaming business be successful (I think s) and ultimately – where do we end up – in dis-aggregated streaming networks, which ultimately defeat the purpose of cutting cable, in a way, if you wanted only “one” streaming service… interesting.
-Lanny
The funniest part about humans is that we keep repeating our own mistakes right? I discussed how streaming services will look exactly like the cable bills in a few years. People cut down the cable, save ~$80/month to now subscribe to 6-8 services for $5-15/month! haha!
In any case, Disney is just adding a new revenue stream to an already successful business. I don’t see how it will hurt them 🙂
Cheers,
Mike