At the beginning of each year, I build two virtual portfolios. One includes twenty strong US dividend stocks and the other one ten Canadian dividend payers. They are built using my 7 investing principles and they show a strong appetite for growth. I started this tradition in 2012 and here are my results so far:

2012

US portfolio total return: +12.37%

CDN portfolio total return: +14.69%

2013

US portfolio total return: +35.27%

CDN portfolio total return: +19.80%

2014

US portfolios total return: +8.24%

CDN portfolio total return: -1.93%

How do I pick my stocks?

As you can see, creating a great amount of wealth year after year doesn’t come by luck. Some may say it was a great bullish market; however, my portfolios often beat the market (the Canadian market was only up 3.02% in 2012 while my portfolio generated 14.69% return). I don’t pretend to be a guru and do make mistakes. In 2012, I picked RadioShack (RSH) and in 2014, I picked Black Diamond Group (BDI.TO). Both stocks performed horribly in my portfolio. But the overall selection did well and better than most portfolios and indexes.

I usually start my research in December, one month before publishing the book. The first step is to pull out a list of stocks following a strict set of rules. They include earnings, revenues and dividend growth over three and five year periods. The point is to pick companies showing a similar trend for the three data streams (earnings, revenues and dividend growth). This is a good indicator that the company hasn’t played around with accounting principles and generated a big year to fool investors. Then, I look at the dividend yield and dividend payout. Here again, I’m looking for a reasonable yield but my main point of focus is a low payout ratio. My goal is to make sure no company in these portfolios would cut their dividend during the year I select them.

This first filter usually gives me about 50 to 150 stocks per market. Companies with stellar fundamentals will be picked first. It is pretty rare to find a company that is strong everywhere. These are picked automatically. Then, I look at sectors and trends for each fundamental studied. The stronger the trend, the better the chances I will pick the stock. Considering the sector also avoid taking too many companies in the same basket and this forces me to make choices. A classic example is when I search through Canadian stocks. Usually 4 to 6 banks appear and there is always one or two other financials like insurance companies or conglomerates that are added to the list. It doesn’t really make sense to pick 6-8 financials in a 10 holdings portfolio. This is why I try to take 2 or 3 maximum (usually two banks and another financial). I have to leave the others and make a choice for that year.

Once I’ve pulled portfolios together, I look at each stock’s latest quarterly report. I want to make sure the data I’ve pulled out from the past 3 and 5 years are a good mirror of what will happen in the following 12 months. Sometime, you pick a company right before it fails. This usually happens when you only base your investing process on past data. It’s important to look at what has been published recently and how recent events will influence the company in the near future. There will always be uncontrollable news such as the drop in oil prices endured since late in 2014. Nobody saw this coming and that’s part of the game. Then again, this is the idea of not having all companies coming from the same industry.

What’s the purpose of selecting 30 stocks for each year?

The goal behind the Best 2015 Dividend Stocks eBook is to give investors a starting point for their research. We always look for new stock ideas and most investors don’t really have the time to do proper due diligence. While these stocks are not to be taken as recommendations, much of the research has been done for you and the book provides fundamentals data along with my investing theory. I even provide potential risks for each of them. I could have written 5 pages worth of analysis per company and bored you to death. Instead, I’ve condensed all my research into a single page per stock. This is how you get the best of both worlds with the Best 2015 Dividend Stocks eBook.

What are Your 2015 Best Dividend Stocks Results so far?

Stock ideas are only fun when they generate returns, right? Hahaha! As at January 30^th 2015, my US portfolio is in line with my benchmark showing only -0.22% behind the Vanguard Dividend Appreciation ETF (VIG) and my Canadian portfolio beats the benchmark by 4.48% (I use iShares Dow Jones Canadian Select Index Fund ETF (XDV)). While true it’s only a month and stocks are showing great fluctuations as new quarterly results are being published every day. However, this seems to be another great start for 2015.

Are you ready to start your portfolio?

If you are looking to start your dividend growth portfolio or simply improve your existing one with fresh ideas, this book is definitely for you. That’s 40 pages worth of solid information for only $4.99.

This year, I offer both versions: PDF or Kindle.

 Click on the button below for the PDF file:

Click here to buy the Kindle version (Amazon link) 

This week, I opened up my personal stuff and shared my 2015 resolutions. I’m happy to say that I’ve stick to it for the first money at least! Hahaha! I’ve also reviewed a special investment vehicle paying 10% dividend. I’m also glad to see the oil barrel going back up as my portfolio is now showing more than 6% return since the beginning of the year! Not to mention Disney (DIS) which reported a great quarterly report, it was +8% on that day!

Here’s what you need to read this weekend:

My Own Advisor published a list of ETFs to buy if you want to build a well-balanced core portfolio. It’s a great list since you have both US and CDN ETFs to choose from. I personally use ETF to benchmark my performance.

Write Your Own Reality talks about Loyal3, an investing platform allowing you to buy stocks without fees! I definitely need to take a serious look at this platform. The number of stocks is limited (64), but they offer several great stocks such as Apple (AAPL), McDonald’s (MCD) and Disney (DIS).

Dividend Growth Investor makes a list of 6 quality dividend stocks for long term investors. My favorite is Johnson & Johnson (JNJ), but I hold 4 of them in my DSR portfolios.

Dividend Ladder looks at European dividend stocks. I’m not too keen on investing in Europe (since I know better North American markets) but he suggests some interesting options.

Lanny at Dividend Diplomats just bought Citizens & Northern Bank (CZNC). Low PE ratio, high dividend yield, seems interesting!

Tired of hearing about oil price? Why not target an industry that might benefit from a low gas price? Div Hut looks at the transportation industry and found some interesting dividend stocks. Unfortunately, dividend yield is apparently low in this sector…

Dividend Elephant bought… an ELEPHANT! He bought shares of Microsoft (MSFT). I prefer Apple (AAPL) if I had to buy a techno stock, but the recent dip in price makes it interesting.

A Special Mention to….

My Dividend Growth reviews his portfolio and shares with us the fact that he is… INVESTING OVER $2,500 PER MONTH. Wow… I can only dream about this day! When you think some people say they can’t start saving, this guy is a true inspiration!

Enjoy the weekend!

Mike

Would you like to invest in a product that pays a 10% dividend yield and is built on banks and other blue chips?

This is what Dividend 15 Split Corp (DFN.TO) offers: a group of 15 companies where you can hold Class A and preferred shares. When I looked at the list of the 15 companies, I understood it was a select group: Bank of Montreal (BMO.TO), National Bank of Canada (NA.TO), Sun Life Financial (SFL.TO), Bank of Nova Scotia (BNS.TO), CI Financial Corp. (CIX.TO), TELUS Corporation (T.TO), CIBC (CM.TO), BCE Inc. (BCE.TO), Thomson Reuters Corporation (TRI.TO), Royal Bank (RY.TO), Manulife Financial (MFC.TO), TransAlta Corporation (TA.TO), Toronto-Dominion Bank (TD.TO), Enbridge Inc. (ENB.TO) and TransCanada Corp (TRP.TO). The list is pretty solid and the yield is even better, so… what could be wrong with split corps?

Never Trust a Broker

If a broker wants to sell you something, it’s probably because it’s really good… for his pocket! This is the case with most structured products. As you have probably figured out by now; an investor holding those 15 companies in his portfolio would not come to a 10% yield. The Dividend 15 Split Corp is able to generate such high yield because it is a structured product; a clever mix of shares and options that produce high returns… for the brokers. These products show lots of smoke to the investors but are built to generate generous commissions to any broker selling them. This is why these products make it on the market anyway.

As the company’s portfolio doesn’t generate enough to pay a 10% yield and cover the firm’s management fees, the remaining cash has to be found elsewhere. Since this portfolio would generate around 5% dividend yield, the mutual fund company (yes, DFN is in fact a mutual fund company) trades the underlying securities and writes call options on them too. These operations also trigger additional costs to the investors as even performance bonuses for traders are included in the “creation of wealth process”.

Okay, this doesn’t look that good… but what about the 10% yield???

When I hear about something that is too good to be true, I always check its return over the past 10 years. So here’s what the DFN.TO graph looks like:

As you can see; lots of fluctuation and a loss of 8.50% in value over 10 years. I guess the good news is the 10% dividend yield remained during the whole period. Still, during the same period, the Canadian market grew by 60% excluding the dividend (if you held Canadian banks for the past 10 years, I don’t have to convince you made a lot more than the Split Corp).

So the structure is not the best thing for an investor and the return is not impressive… are you still going to argue with the 10% yield? All right, check out what happened when things turn sour. Here’s another split share corp that was very popular prior to 2008:

This is the chart of the US Financial 15 split corp (FTU.TO). The stock lost almost everything while US banks took a hit but bounced back. Why FTU wasn’t able to get back on track like the underlying stocks? Because the firm was too busy trading the stocks and writing options that they completely lost the investors’ capital.

So Are Split Corps a Good Investment?

For any type of investments (stocks, ETFs, structured products or funds), I always rely on my 7 investing principles I follow to succeed. The first one is “high yield doesn’t equal high returns” and the third one is “A dividend payment today is good, a dividend guaranteed for the next ten years is better”. Using these two principles; I’d tell you that a split corps would never be part of my portfolio. But if you don’t like my investing principles, you can also argue with the most prolific investor of all time, Warren Buffett who once said:

Never invest in a company you don’t understand.

If you think you understand how traders write their call options and trade those stocks to make money for you (and not for them), good… I don’t! What I understand is only how they make those trades to generate fees for the firm…