Not so long ago, I released my Best 2014 Dividend Stocks Book including what I think will be the most profitable investments on both American (20 picks) and Canadian (10 picks) markets. Last year, I beat both markets and intend to reproduce my performance again this year.

But picking stocks at the beginning of the year and making a monthly follow-up is only a part of showing you what we call “accountability”. The real meaning of this word usually happens when you put your money where your mouth is. And this is what I did last week when I added a new stock to my portfolio: Gluskin Sheff (GS) which is traded on the TSE.  You may not be familiar with this Canadian wealth management company and this is why it makes the choice even more interesting. I hope you will discover this great company today!

 

Gluskin Sheff (GS) Business Description:

Gluskin Sheff + Associates is one of the first Canadian private wealth management companies founded. GS manages investment portfolios for high net worth clients as well as institutional investors, foundations and municipalities. They claim to be “Stubbornly unconventional”. Founded in 1984 by Ira Gluskin and Gerald Sheff and 24 other private clients, the company is still owned at 26% by senior management and employees.

I can appreciate the fact that 26% of shareholders have an even bigger interest in the well being of a company than the average investor. For these people, GS is their whole financial life.

 

GS Stock Graph

GS Stock Graph

As you can see, GS has already showed some great upside in 2013 going up by 96% in the past 12 months. But let’s dig further to see what is so interesting about this company…

 

GS Dividend Growth Graph

GS Dividend Growth

If I didn’t get your attention with a 1 year return of 96%, I’m sure I just did with this hectic dividend graph. This looks more like a cardiogram than a dividend payout graph, right? This is explained with the interesting habit of Gluskin Sheff to distribute special dividends in September. These spikes in dividend payments are explained by the distribution of extra cash coming from the company’s performance. I’ve taken away the special dividend to come up with another graph:

GS quaterly dividend paid

As you can see, for the past 5 years, the company has continuously increased its dividend payment to shareholders. Now, we will see what the total dividend paid yearly looks like:

GS Total dividend paid

Quick note: don’t always count on the special dividend payment. While it was quite substantial for four out of five years, GS definitely missed their revenue target in 2012 and only paid a small $0.06 as special dividend. This is quite a difference when you look at 2011 ($0.9375) and 2013 ($1.40!). The special dividend is directly related to the total assets under management along with performance fees. Since 2012 wasn’t a great year for GS, the extra dividend sucked.

The Company Ratios and Financial Info:

 

Ticker
GS
NameGluskin Sheff + Associates Inc
Dividend Metrics
Current Dividend Yield2,68
5 year Dividend Growth23,82
1 year Dividend Growth194,12
Company Metrics
Sales Growth (1 year)60,62
Sales Growth (5 year)3,47
EPS growth (5 year)8,04
P/E ratio18,08
P/E Next Year15,31
Margins growth#VALUE!
Payout ratio83,66
Return on Equity93,83
Debt to Capital Ratio0

 

Gluskin Sheff Upcoming opportunities and dangers:

They recently declared a special dividend in September of $1.40 per share. This represents about 5% dividend yield with this payment only. The company evolves in a highly profitable market and the company has become appealing to other big players for a takeover. I also like the fact that private clients tend to be more loyal than average. The 2013 numbers were very interesting and if the company continues to post such results, you can bet on another great year on the market.

The main GS downside would be to count on an important special dividend in September. This payment is volatile and depends on how efficient the GS team is on the market. If we have a good year in 2014, the Gluskin Sheff dividend payout will continue to be juicy. This is one company that could pay 6% in your portfolio without jeopardizing its overall return.

 

Final Thoughts on Gluskin Sheff

I already like financials as they represent a very interesting sector considering the current economy. In addition to that, GS is evolving in the wealth management industry, which I believe is the future of financial services. GS seems to be operating in the right industry at the right time and its numbers are there to support the overall enthusiasm.

As a bonus on holding this company, there have been rumours about a potential sale of the company in 2013. While it seems that it is not the intention of management at the moment, it could represent another great upside if a hostile bid would come to the table. Since we know wealth management is a small world, it could be a great opportunity for a bigger player to buy this well managed company.

This is why I decided to put my money where my mouth is and add Gluskin Sheff to my portfolio.

 

Disclaimer: I own shares of GS

 

 

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2 Comments   |  

2 Comments

Mark
January 20, 2014, 9:29 am

Your Q dividend and total dividend graphs are the same.

DivGuy
January 21, 2014, 7:47 am

Hello Mark,
thx for this! the graph has been fixed now.

Regards,

Mike

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