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 into dividend growth stocks.
Each month, I publish my results. I don’t do this to brag. I do this to show you it is possible to build a lasting portfolio during an all-time highly valued market. The market will inevitably go down, as it did in 2020. But I continued to enjoy cashing consistent and growing dividends despite that negative market action! And, most importantly, I stayed fully invested in the market and have enjoyed the market recovery in 2020 that has continued into this new year of 2021.
Performance in Review
Let’s start with the numbers as of April 7th, 2021 (before the bell):
- Portfolio value: $206,455.47
- Dividends paid: $3,836.66 (TTM)
- Average yield: 1.86%
- 2020 performance: +20.3%
- SPY=18.17%, XIU.TO = 5.27%
- Dividend growth: +7.7%
Total return since inception (Sep 2017- Mar 2021): 90.04%
Annualized return (since September 2017): 19.62%
SPDR® S&P 500 ETF Trust (SPY) annualized return (since Sept 2017): 17.03%
iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 10.46%
Follow Your Stocks
A lot of dividend investors apply the good old “buy & hold” technique and take great pride in showing patience with their laggards. After all, if you pick a company after doing your due diligence, it’s only natural to give management some time to work their magic. When I add a new stock to my portfolio, I don’t follow it closely in the following months. The work was done prior to the trade and then, you must trust the process.
However, part of that process is to review each of my holdings quarterly. I want to make sure each of them is in line with my investment thesis. But, reading 30+ quarterly financial statements is a daunting task. So, I’ve designed a tool to help us stay on top of things each quarter. I’ve entered all my holdings into the new DSR PRO portfolio builder (this includes my pension plan, but also all my other accounts) which gives me my asset allocation, but also PRO ratings, and dividend safety score for each stock.
When I reviewed my portfolio, I immediately noticed two things:
#1 PRO ratings on my stocks look very good as most of them are buys or exceptional buys.
#2 I have some work to do on stocks with weaker dividend safety scores.
I know upfront that the red portion (dividend safety score of 1) is linked to my shares of Disney (DIS) and CAE (CAE / CAE.TO) which both have suspended their dividends in 2020 amid the pandemic. So that’s fine and I’ve made my peace with those. However, this time I was also showing a stock with a dividend safety score of 2! I gasped and then went through my listing to identify this bad boy.
Hasbro (HAS) lags… everywhere
I discussed in my last report that I was disappointed by Hasbro. The company was set for a great future, but several events hurt the company. The Toys’R’Us bankruptcy, the pandemic, and the acquisition of eOne were too much to handle and management has failed to increase the dividend since 2019.
This explains the downgrade in Hasbro’s dividend safety score. Off course, the company has a solid balance sheet and the dividend isn’t at risk. However, my investment model is based on a strong dividend triangle:
#1 Revenue increased a bit, but most of it is linked to the addition of eOne.
#2 EPS is going sideways.
#3 The Dividend growth policy has been shelved for now.
Hasbro still has some options to generate growth, but I’ve decided not to hold onto it. The stock is also part of some of our portfolios at DSR and we will proceed with changes in the coming weeks. As you can see, I’m not in a hurry to make trades. I would rather take my time to ensure a logical move.
It hurts to sell, I get it
One good reason to wait and keep underperforming stocks is that you get paid for your patience. If the dividend comes in, you can look the other way. However, this “dividend bribe” is also taking opportunities away from you. In Hasbro’s case, I didn’t lose money when I sold. In fact, the dividend has protected my money since 2017. Unfortunately, when compared to the S&P 500, I realize I could have done so much better.
We have discussed this several times as it sucks to sell at a loss. We would like to keep our stocks forever because we see the potential. But, when I look at my current asset allocation, I have become aware of being heavily invested in consumer cyclical (22.6% of my portfolio).
Nevertheless, I have waited until HAS has shown 6 consecutive quarters with the same dividend to pull the trigger on the sale. I had hoped that with the integration of eOne, the company would generate growth again. In fact, management expects double-digit revenue growth for 2021. One part of me fears that I may regret selling “too early”. Nobody wants to sell a stock and see it surge a few months later. Hence the procrastination.
How did I finally convince myself to pull the trigger? I used my favorite trick which is the intriguing next buy!
What’s my trick? Get Excited!
There is nothing better than getting excited about another company to trigger action. While I didn’t like Hasbro that much, I wasn’t in a hurry to sell it either. I was running on “hope”. Did I ever tell you that “hope” is a bad investment strategy?
Then, I thought of my recent article about renewable energy. I then looked more closely and reviewed each company I had mentioned in the video below. The industry growth potential is undeniable and it’s far from being linked to some “hope”. Overall, I may be quitting too fast on Hasbro, but I’m confident that my new pick will do as good (if not better) going forward.
I decided to add Algonquin (AQN.TO / AQN) to my portfolio.
AQN trades on both the Canadian and US markets as well. It pays its dividend in USD. What I like the most about AQN is its balance between its regulated business and its renewable energy arm. The company generates steady cash flow from its gas distribution lines, water connections and electric distribution lines. The regulated services group shows over 1 million customer connections that are primarily in North America.
Then, it grows its renewable energy business with investments in solar panels, wind turbines and hydroelectric generators. Its diversified assets of hydroelectric, wind, solar, and thermal facilities have a combined gross generating capacity of approximately 1.5GW, with approximately 85% of the energy sold through long-term contracts averaging 13 years in duration.
With a budget of $9.4B in CAPEX, AQN has several new projects coming on line through 2024. These include more acquisitions, pipeline replacements and organic CAPEX. The utility counts on its regulated businesses to grow its revenue once those projects are funded. AQN shows a double-digit earnings growth potential for the foreseeable future but expect a short-term slowdown due to the current recession.
Another Trade
Two weeks ago, I followed the ViacomCBS (VIAC) debacle. I bought some shares in late March in my Retirement (RRSP) account. The stock price started to decline after the announcement of an equity issue of Class B common shares and mandatory convertible preferred shares. The arrival of 20 million new shares was the first spark to a significant sell-off. Then, the stock continued to drop as Archegos Capital (a hedge fund) was forced to sell more than $20B in stocks on Friday amid a margin call. VIAC lost 50% of its value in a single week.
VIAC is working on its own streaming service. The raise of capital sparked the sell-off, but we think it was a smart way to cash in on a high valuation to support spending in its new streaming business. The media company is known to create blockbuster TV series, and let’s hope it continues to do so going forward.
Let’s look at my CDN portfolio. Numbers are as of April 7th , 2021 (before the bell):
Canadian Portfolio (CAD)
| Company Name | Ticker | Market Value |
| Algonquin Power & Utilities | AQN.TO | 6,993,57 |
| Alimentation Couche-Tard | ATD.B.TO | 14,561.04 |
| Andrew Peller | ADW.A.TO | 6,287.78 |
| National Bank | NA.TO | 6,818.40 |
| Royal Bank | RY.TO | 6,949.40 |
| CAE | CAE.TO | 7,446.25 |
| Enbridge | ENB.TO | 7,446.25 |
| Fortis | FTS.TO | 5,449.95 |
| Intertape Polymer | ITP.TO | 8,670.00 |
| Magna International | MG.TO | 7,900.90 |
| Sylogist | SYZ.TO | 5,983.95 |
| Cash | 3.63 | |
| Total | $84,462.87 |
My account shows a variation of +$9,994.54 (+13.42%) since the last income report on February 1st. Most of the increase comes from the sale of Hasbro shares to invest in AQN.
Now that the earnings season is over, I have fewer updates for the Canadian stocks this month. However, here’s a big one for Sylogist. I know many doubts about this one due to its hectic earnings over the past couple of years. Patience is paying off big time now!
Sylogist… I told you so!
Here’s what I wrote last month:“In October, the company closed on a $40M credit facility that can be used for acquisitions, strategic initiatives, and general corporate purposes. Management is now looking for more acquisitions to bolster its business.”
Things are moving fast for Sylogist (SYZ.TO) these days. This stock has been on our buy list for a while now and patience has paid off!
First, Sylogist has received conditional approval to list its common shares on the TSX under the trading symbol SYZ. Final approval of the listing is subject to the company meeting certain customary conditions of the TSX. This will give the company more exposure and likely more market love.
Second (and most importantly), SYZ announced the acquisition of Municipal Accounting Systems for $37.8M. This is a perfect example of a bolt-on acquisition for the company.
Two things I got from the press release:
“…we expect it to be immediately accretive for Sylogist, growing both our top-line revenue and adjusted EBITDA run rates by approximately 20%.”
Bill Wood commented, “Not to be lost in the exciting news related to acquiring MAS, an expanded credit facility provides additional resources to readily pursue other strategic and transformative acquisitions.”
Here’s my US portfolio now. Numbers are as of April 7th, 2021 (before the bell):
U.S. Portfolio (USD)
| Company Name | Ticker | Market Value |
| Apple | AAPL | 12,116.16 |
| BlackRock | BLK | 10,943.94 |
| Disney | DIS | 8,537.85 |
| Gentex | GNTX | 8,544.60 |
| Lazard | LAZ | 4,563.48 |
| Microsoft | MSFT | 14,871.60 |
| Starbucks | SBUX | 9,617.75 |
| Texas Instruments | TXN | 9,729.50 |
| VF Corporation | VFC | 6,778.08 |
| Visa | V | 10,932.50 |
| Cash | 0.00 | |
| Total | $96,635.46 | |
The US total value account shows a variation of +$1,211.44 (+1.3%) since the last income report on February 1st. Please note I transferred all my USD cash and the proceeds of my Hasbro shares sale to my Canadian account.
With the Hasbro Vs Algonquin trade, I’m able to reduce my exposure to US stocks and get closer to the 60% US – 40% Canadian stocks mix I had originally targeted for my portfolio.
My entire portfolio updated for Q1 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 December 2020.
Download my portfolio Q1 2021 report.
Dividend Income: $623.59 CAD (+6.2% vs March 2020)
I show a 6.2% dividend increase from March’s 2020 report. This is pretty good considering that more than 50% of my portfolio is invested in US stocks and that the currency exchange rate last year was 1.4158 vs 1.2624 this year! I also have Magna International (+7.5% dividend increase in the past 12 months) and Intertape Polymer (+6.8% dividend increase in the past 12 months) that pay in USD.
Here’s the detail of my dividend payments.
Dividend growth (over the past 12 months):
- Fortis: +8.7%
- Enbridge: +3%
- Sylogist: +25%
- Magna Intl: -5.9% (currency fluctuation as MG pays the dividend in USD)
- Intertape Polymer: -7.2% (currency fluctuation as ITP pays the dividend in USD)
- Visa: +6.7%
- Lazard: paid last month
- Starbucks: paid last month
- Microsoft: +9.8%
- VF Corp: +38% (more shares)
- BlackRock: +13.8%
Canadian Holdings November payouts: $332.86 CAD
- Fortis: $50
- Enbridge: $134.44
- Sylogist: $52.13
- Magna Intl: $37.27
- Intertape Polymer: $59.02
U.S. Holding payouts: $230.30 USD
- Visa: $16.00
- Lazard: $47.94
- Starbucks: $38.25
- Microsoft: $33.60
- VF Corp: $39.69
- BlackRock: $57.82
Total payouts: $623.59 CAD
*I used a USD/CAD conversion rate of 1.2624
Since I started this portfolio in September 2017, I have received a total of $11,889.20 CAD 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.
Final Thoughts
After the first quarter of 2021, I’m happy about my results. I’ve sold UPS and HAS to rebalance my portfolio toward strong Canadian positions. In terms of returns, my Q1 2021 is lagging the markets’ performance. My portfolio is up 7.5% this year while SPY total return is at 8.98% and XIU at 11.09%.
Is this a problem? Only if you demand short-term results. It’s more than fair that my portfolio may lag a bit in 2021 after outperforming since 2017. After all, I have almost no exposure to the energy sector which is a big factor in the Canadian market performance so far this year.
In my opinion, short-term results don’t mean much. In fact, even a 3-5-year record isn’t enough to determine if an investing approach works. With most DSR portfolios dating back to 2013, we can start seeing the power of dividend growth investing. I know it feels like it may be magic, but it feels good to see it happening in real-time!
Cheers,
Mike.
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