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November Dividend Income Report

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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 rather cash some juicy dividends!

dividend income report

Portfolio Holdings

I’ve been reading lots of negative headlines recently. Lowe’s (LOW) closed stores, Bombardier (BBD.A.TO) and General Motors (GM) have gone through massive lay-offs and a bunch of companies have declared dividend cuts (BUD, LB, OMI, GE, BPL and so on…). Over the past 3 months, stock markets haven’t been very kind to investors either:

November Dividend Income Report

Source: Ycharts

I admit that my own account has shown stronger numbers a few months ago. But still, I really don’t understand the wind of panic. When you have a strong investment process in place, you are always better off to ignore the noise and keep your money where it works best; in the market. It’s even better when you are a dividend growth investor; you get paid to wait! Let’s take a look at what November had in store for me.

Numbers are as at December 1st 2018:

Canadian portfolio (CAD)

Company Name Ticker Market Value
Alimentation Couche-Tard ATD.B.TO $5,996.78

 
Andrew Peller ADW.A.TO $5,847.35
National Bank NA.TO $4,848.00
Royal Bank RY.TO $5,845.20
CAE CAE.TO $5,396.00
Enbridge ENB.TO $7,029.26
Fortis FTS.TO $4,568.85
Intertape Polymer ITP.TO $5,067.00
Lassonde Industries LAS.A.TO $4,263.84
Magna International MG.TO $4,641.70
Cash $802.42
Total   $54,365.20

My account shows a variation of +$1,025.70 (+2%) since the last income report.

I’m quite happy with my Canadian portfolio so far. In the past few weeks, Canadian banks have published their earnings and they were quite positive! They are definitely my favorite picks in the financial sector.

Royal Bank (RY) posted another solid quarter as Personal & Commercial banking (+10%), Capital Markets (+14%) and Wealth Management (+13%) showed strong performances. The bank shows double-digit growth compared to last year, but net income and EPS is also up 5% from Q3. RY core business (P&C banking) results were driven by solid growth in residential mortgages, commercial lending and deposit products. Their insurance segment is smaller ($318M net income), but is growing fast too at +20%.

Fortis (FTS) posted a great quarter and management announced a dividend increase to make everybody smile. Strong performance at the U.S. utilities during the third quarter of 2018 was driven by capital investment at ITC as well as favourable electricity sales at UNS Energy associated with weather. FTS is probably one of the most solid utilities on that list.

Management was quite reassuring after Enbridge (ENB) beat both EPS and revenue estimates. The company completed the sale of $5.7B of non-core assets and still has $1.8B of assets on the block. While ENB suspended its DRIP plan, management claims no additional equity capital was required to fund the current $22 billion secured growth program. ENB generates more cash flow and management expects to meet its 2018 guidance. You can put ENB on your dividend growth list for 2019.

Numbers are as at December 1st 2018:

U.S. portfolio (USD)

Company Name Ticker Market Value
Apple AAPL $5,535.98
Disney DIS $5,197.05
Garrett Motion GTX $34.50
Gentex GNTX $5,292.20
Hasbro HAS $4,186.00
Honeywell HON $4,696.00
Lazard LAZ $4,092.24
Microsoft MSFT $6,653.40
Resideo Tech REZI $103.15
Starbucks SBUX $5,671.20
Texas Instruments TXN $4,992.50
United Parcel Services UPS $4.265.72
Visa V $7,085.50
Cash $866.53
Total   $58,672.28

 

The US total value account shows a variation of +$1,304.93 USD (+2.2%) since the last income report.

While AAPL is getting hammered right, left, and center; I have other stocks pushing my portfolio higher. Fears around Texas Instruments (TXN) has been dissipated as the stock gained almost 11% since its lowest point at $90.18. Tech stocks from this list will continue to kill it next year.

Disney (DIS), one of my favorite cyclical stock, increased its dividend by 5%. I would have preferred a strong pay raise, but I’ll definitely take it! DIS will be a killer stock to hold next year with their streaming services, a new Star Wars and Frozen 2 (oh, I probably forgot a few Marvel movies!).

Starbucks (SBUX) shares are finally back on a growth trend as results were better than expected. Global comparable sales by region: Americas +4% vs +2.9% expected, China/Asia-Pacific +1% vs. +0.1% consensus, EMEA +2% vs. +1.0% consensus. The company opened 604 new stores in Q4 (mostly in China, but it expects to open more stores in Italy in 2019). Starbucks Rewards loyalty program grew to 15.3 million active members in the U.S., up 15% year-over-year.

Finally, Visa (V) met analysts’ expectations with EPS up by 34% and revenue growth of 10% (missed by $10M). The company showed double-digit growth in payments volume, cross-border volume and processed transactions for Q4 and full-year. Ask me for the definition of perfect dividend growth and I’ll tell you $V! Visa did it again with another +19% this quarter! Dividend almost doubled in 3 years…I think you can forgive the low yield!

Dividend Income: $288.40 CAD (up $90.33 or +46%)

November Dividend Income Report

To be fair, my money wasn’t fully invested back in November 2017. If I remember correctly, I had about $76K out of the $108K invested. Still, I’ll take the +46% dividend increase with a smile! The real comparison will start in January as my portfolio was fully invested in January 2018.

Let’s take a look at which companies paid me this month:

Canadian Holdings Payouts: $58.80 CAD

  • Royal Bank: $58.80
  • *National Bank paid the dividend on November 1st but it was included on my October report. This is why it’s not showing here.

U.S. Holding Payouts: $172.80 USD

  • Resideo Technologies: $7.21
  • Hasbro: $28.98
  • Apple: $22.63
  • Lazard: $44.88
  • Texas Instruments: $38.50
  • Starbucks: $30.60

Total payouts: $ 288.40 CAD

*I used a USD/CAD conversion rate of 1.3287

Since I started this portfolio in September 2017, I have received a total of $2,904.35 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

Another interesting fact, my total portfolio shows a value of $132,323.06 CAD, a 22% increase since I started investing that money last year. This means that it would take a value drop of 17% to bring me back to my original amount. I think this is a great example that shows that waiting is not always the best strategy.

The key is to find companies that will not fail you and keep increasing their dividend (instead of cutting them!). I recently wrote a quick guide on how to avoid companies that are about to declare a dividend cut. You can read it here

5 Best U.S. Consumer Stocks

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I’m following-up on yesterday’s post about my Five Favorite Canadian Consumer Stocks with my top five on the U.S. market.

Five years ago, I created Dividend Stocks Rock. The idea was to build the most comprehensive and effective dividend investing platform. Throughout the past five years, our portfolios did very well (see for yourself). A key part of this success is attributed to asset allocation.

Both consumer defensive and consumer cyclical are two key sectors to build a strong dividend growth portfolio. The first sector will provide you with a shield against major fluctuation while the latter will add some spice to your investment recipe. Here are my favorite consumer stocks:

Disney (DIS)

Disney is the king of content. In 2006, IT bought Marvel for $4 billion. Six years later, Disney sealed another $4 billion deal with the Lucasfilm purchase. Both deals prove Disney’s incredible ability to generate billions of dollars with purchased content. Their latest acquisition, Fox assets, will bolster their content universe to a whole new level. Over the past five years, DIS blockbuster movies and theme parks showed strong potential and have driven both revenues and earnings up. Now that the company announced it will stream ESPN along with the rest of its content in 2019, DIS just unlocked another world of opportunities.

Disney (DIS)

Source : DIS Q4 2018 report

As the company mastered the art of cross-selling, Disney has become an incredible cash flow machine. Its free cash flow has increased significantly in the past five years. Disney just found another way to use its universe of content through streaming. By launching two new services in 2019, the company will become a great complement to Netflix (NFLX). It will not compete against Netflix, it will simply use its popularity (and the fact NFLX developed this market) to surf on the streaming wave. The acquisition of Fox assets will add more fuel to this money-making machine.

Gentex (GNTX)

Gentex makes auto-dimming mirrors to improve drivers’ vision at night. The mirrors automatically darken to eliminate headlight glare for drivers. With a 92.3% market share and thousands of patents to protect its technology, GNTX is far ahead of any other company in this sector. The company also benefits from stricter regulations in Europe to sell its SmartBeam technology enabling a vehicle’s bright headlights to go on and off automatically.

Gentex (GNTX)

Source: GNTX investors presentation August 2018

Gentex is the leader of its sector with its products on the way to becoming industry standards. On top of that, it shows a stellar balance sheet with barely any debts. If this is the case, GNTX could continue its impressive sales growth for the next 10 years. The company also benefits from being the first to offer this high-quality product. This leads to higher margins for early adoption and puts Gentex #1 in automakers minds for future orders. Gentex is set to continue its growth for at least a decade, not to mention that its current situation makes it a great potential candidate for an acquisition.

Starbucks (SBUX)

Starbucks is one of the recent success stories in the consumer space. Founded in 1971 by the opening of the first coffee shop at the iconic Seattle Pike Market, it now operates 28,000 stores (and counting) in 77 countries. Starbucks is known for its stellar customer experience and its variety of beverages. It built a reputation of listening to its customers and using technology (Facebook, Twitter, mobile payment) to continuously improve its in-store experience.

Starbuck's (SBUX)

Source: SBUX investors presentation June 2018

Starbucks has built one of the most successful restauration chains (coffee) in the U.S. It can now use this core business to generate steady cash flow and fuel growth across the world. The company intends to open 500 to 600 new stores yearly in China for several years to come. SBUX has a strong business model and has proven it can export it in other countries. In 2018, the coffee maker even had success selling its products in Italy! SBUX adapts its menu, restaurant and opening hours according to its client tastes rapidly. This flexibility is being driven by their membership application that gives continuous feedback and data to management.

VF Corporation (VFC)

Founded in 1899, VF was first a glove and mitten company. Today, it is over $12 billion in sales and has about 30 different brands in outdoor and action sports, jeans wear, image wear, and sports wear business. VF recently entered the workwear market with the acquisition of Williamson-Dickie in 2017. While VFC has a growth-by-acquisition strategy, it is not afraid to sell brands not suited for its vision anymore. It sold Vanity Fair (2007), John Varvatos (2012), and Contemporary Brand (2016), while focusing on trendy outdoor & actions sportwear apparels (North Face, Timberland, Vans and Lee and Wrangler). VFC is spinning off its denim brands (Lee and Wrangler) into a new business with revenue reaching $2.5B. Both businesses will pay a dividend. It will be interesting to see how it goes.

VF Corportion (VFC)

Source: VFC Q2 2019 investors presentation

How does a glove and mitten manufacturer become a world leading outdoor and action sports apparel company with over $12 billion in sales? We are talking about active brand portfolio management. In a world where fashion evolves at a rapid pace and where brand power means pricing power, VF Corporation cracked the code. While many investors would disregard VFC due to a yield around 2%, keep in mind the company nearly doubled its payout in the past 5 years.

Home Depot (HD)

Home Depot is the world’s largest home improvement retailer by market cap ($229 billion). Founded in 1978, HD is a success story with currently 2,200 stores across the U.S. HD is known for its obsession for client service and this is probably why it has been able to grow so fast since its creation.

Home Depot (HD)

Source: HD Q3 2018 infographic

HD has an impressive sales book over $100 billion. The company benefited from the current strength in the home improvement market with a high-single digit annualized revenue growth rate over the past five years. One of the key element is its online success with double-digit growth over the past five years. Its site is amongst the largest ecommerce ones. In the past decade, HD focused on creating seamless renovation services to invite more homeowners to renovate their houses. It also focused on a strong online presence using renovation pictures through social media platforms like Pinterest.

How’s waiting working for you?

Investing when the market is high is not a simple task. You may think you found the right company, but the stock is clearly overvalued. Therefore, you wait until the market offers you an opportunity.

Last year, I didn’t hesitate to invest over $100K in the market. I did it while the market was at an all-time high.

I didn’t blink. I didn’t flinch. Do you know why? Because I know something. A truth. The simple truth of investing: Five years from now, those companies will trade at a higher price.

I’d like to tell you more about my investing methodology by sharing with you my top five stocks to hold for the next five years. Therefore, you won’t have to wonder if they will drop in the next six months – you will lock them in for a long period of time. Join me at my webinar and I’ll share not only five US dividend stocks I like, but five Canadian ones, too!

Click here to register to the webinar (email required)

 

Disclaimer; I’m long all the above (DIS, GNTX, SBUX, VF, HD)

Featured Image Source: Pixabay

5 Canadian Consumer Stocks Rewarding their Shareholders

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Five years ago, I created Dividend Stocks Rock. The idea was to build the most comprehensive and effective dividend investing platform. Throughout the past five years, our portfolios have done very well (see for yourself). A key part of this success is attributed to asset allocation.

For our Canadian portfolios, we went against the current and diminished our energy position to a minimum. To this date, I’m still not a fan of energy dividend stocks. I keep a very small amount of companies on my watch list.

On the opposite, I’m a big fan of both consumer defensive and consumer cyclical stocks. The first sector adds stability to your portfolio and provides investors with steady dividend growth. The latter is all about growing through healthy economies. A mix of both was definitely a winning strategy for the past five years. Here are five of my favorite consumer (defensive or cyclical) companies on the Canadian market.

Metro (MRU.TO)

Metro operates over 600 grocery stores under banners such as Metro, Super C and Food Basics. It is mainly active in Quebec and Ontario. Metro also has a pharmaceutical sector operating 250 drugstores under banners such as Brunet, Clini Plus, and Pharmacy & Drugs basics. Finally, Metro operates a pharmaceutical distributor named McMahon, which has about 200 affiliated pharmacists. Metro completed the acquisition of Jean Coutu in May of 2018.

Metro has put a strong emphasis on its private-label brands which sell for 20% less than original products. In a world where price is the first consumer driving decision factor, this is a key advantage. We like the recent acquisition of Jean Coutu as we believe it will give additional stability in Metro’s business model. Plus, the company has the possibility of unlocking values to shareholders by spinning-off its real estate business. Metro is well established in two provinces with strong economies; Quebec and Ontario. Metro is also pushing its online services to gain additional customers.

Magna International (MG.TO / MGA)

Magna International is more than an international automobile part supplier; it also designs, develops, manufactures, assembles and engineers automobile parts. Magna sells to OEMs (original equipment manufacturers) across 26 countries. It offers a wide variety of 86 products that go from seating to roofing systems.

Source: MG Q3 2018 investors presentation

MG is a leader in the auto parts industry and this serves it well as many manufacturers tend to concentrate their processes with fewer suppliers, offering wider product ranges. This is exactly where Magna stands in the market. While MG relies on Detroit automakers for about 50% of its sales, the overall automobile business is looking brighter. Magna has done several partnerships with European manufacturers. Finally, there is a high switching cost for automakers to change manufacturers such as Magna. This makes its niche a highly repetitive and stable market.

Intertape Polymer (ITP.TO)

Intertape Polymer Group manufactures and sells a variety of paper and film-based pressure-sensitive and water-activated tapes, polyethylene and specialized polyolefin films, woven coated fabrics and complementary packaging systems for industrial and retail use.

Source: August ITP investors presentation

With the rise of online shopping, the packaging industry should benefit from this tailwind. ITP expects to reach $1.5 billion in sales by 2022. Intertape is #1 and #2 in its main market in North America and shows international expansion opportunities. Management also expects to grow by acquisition to expand its current line of products, consolidate its activities, and open additional doors in international markets.

Andrew Peller (ADW.A.TO)

Andrew Peller owns wineries in British Columbia, Ontario and Nova Scotia. The company is definitely part of my favorite consumer defensive stocks on the Canadian market. ADW not only produces its own wine, but also markets it along with other products. It owns several brands like Peller Estates, Trius, Hillebrand, Thirty Bench, Sandhill, Copper Moon, Kalona Vineyards Artist Series VQA wines and Red Rooster. Currently it has an estimated 14% share of its total wine market and a 37% share of domestic wines.

Andrew Peller is known to grow its revenues through acquisitions. Since 1995, management invested over $114M to purchase 14 vineyards. The company built a solid relationship with provincial liquor stores, but also maintained company-owned retail stores in Ontario. In late 2017, it acquired 100% of three estate wineries located in British Columbia’s Okanagan Valley. ADW used $79M from its credit facility to complete those acquisitions.

Alimentation Couche-Tard (ATD.B.TO)

Alimentation Couche-Tard is the largest convenience store operator in Canada and 2nd largest in North America. While constantly expanding its presence in the US and Europe, it successfully built a convenience store including daily use products. Many stores are also combined with fuel service stations. ATD operates 12,081 stores (7,863 in North America, 2,708 in Europe and 1,510 internationally). Instead of simply selling chips and beers, ATD focuses on a superior offer including fresh food, private labels and strong product concept offerings.

Source: Alimentation Couche-Tard 2018 investors presentation

An investment in ATD is definitely not for an income producing stock. However, if you are looking at the long-term horizon, your dividend payouts will grow in the double digits for a while and you will enjoy a strong stock price growth. ATD potential is directly linked to its capacity to swallow and integrate more convenience stores. ATD shows a perfect combination of the dividend triangle: revenue, EPS and dividend strong growth.

This list includes many low yielders. How can I build my retirement income with them?

If producing income with your portfolio is your priority, this article probably left you empty handed (besides ITP.TO). Unfortunately, there is a price to pay for quality and the first indication is often a low yield. It has become more complicated to identify safe high yielders. If you are looking for them, you might want to take a look at my latest articles covering 5 stocks with 5%+ yield.

Also, keep in mind that low yielding stocks often offer high growth potential. Take a look at the following graph and you will notice how the four low yield stocks mentioned in this article crushed the TSX in the past five years:

Source: Ycharts

How’s waiting working for you?

Investing when the market is high is not a simple task. You may think you found the right company, but the stock is clearly overvalued. Therefore, you wait until the market offers you an opportunity.

Last year, I didn’t hesitate to invest over $100K in the market. I did it while the market was at an all-time high.

I didn’t blink. I didn’t flinch. Do you know why? Because I know something. A truth. The simple truth of investing: Five years from now, those companies will trade at a higher price.

I’d like to tell you more about my investing methodology by sharing with you my top five stocks to hold for the next five years. Therefore, you won’t have to wonder if they will drop in the next six months – you will lock them in for a long period of time. Join me at my webinar and I’ll share not only five US dividend stocks I like, but five Canadian ones, too!

Click here to register to the webinar (email required)

Disclaimer: We are long all of the above.

What The Last 5 Years Taught Me About Investing

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I didn’t know it back then, but 2013 was a crucial year in my life. At that time, I had been the happy owner of The Dividend Guy blog for the prior 3 years (I bought it in 2010). While I was building my online business, I was also managing a portfolio worth over $100M for my wealthy clients. I remember that back then, many of my clients were nervous about the stock market. The 2008 crash was very fresh in their memories and we were already talking about Greece’s debt problem and a potential Euro Zone explosion. I kept telling them that it was a good time to invest in the market. Not because I wanted to make more money on their backs, but because it was true. I was investing all my money in the market myself. When I look back on this period of my life, I realize that I’ve learned a lot about investing.

Today is always the right day to invest – but have a plan

Back in 2013-2014, many experts agreed that it was probably the worst time to invest in the stock market. I went back in time and found those marvels:

“Of course, with stocks at all-time highs, some seem to have nowhere to go but down.”

~Business Insider

“At ValuEngine.com we show that 77.8% of all stocks are overvalued, 45.2% by 20% or more. All 16 sectors are overvalued; consumer staples by 17.6%, retail-wholesale by 26.4% and utilities by 9.8%.”

~ Forbes

“The market has jumped nearly 30%. This means the stock market’s rally has been based solely on people paying more money for the same amount of earnings — this is known as “P/E multiple expansion.”

~ Motley Fool.

At that same time, I bought 3 of the best performing stocks in my portfolio: Apple (AAPL), Disney (DIS) and Lockheed Martin (LMT). Please note that while AAPL was in a slump, DIS and LMT were trading at their 52-week high. Yet, “today” was still the right day to buy them:

Source: Ycharts

It’s a blessing that I kept investing, right? But I didn’t do it without a plan. I didn’t pull out the newspaper and pick a few companies off of the “favorite editor’s picks” list. I’ve built a complete and proven investment process based on academic studies and my personal experience.

As a private banker, I had access to tons of studies and I called on some of the finest brains in the industry to validate my theories. This is how I invested my money with confidence. Last year, I disclosed my personal return and proved that I beat the market between 2012 and 2017. My latest income report also shows that I’m on the right track to beat the market once again in 2018. I have had similar results with my portfolio models at Dividend Stocks Rock too.

There is no magic in my returns. I’m not a genius. I’m not a guru. I’m just a serious investor with a solid plan. The longer you wait, the more you leave money on the table. All stocks are on sale today; you just have to wait 10 years to realize it.

Dividend cuts happen even during bull market – make sure you don’t suffer

When we ride a bull market, it seems that bad news doesn’t hit the front page that often. You might think that since 2013, dividend cuts have been rare. Which kind of companies would fail their shareholders when:

Unemployment keeps reaching new lows,

Interest rates offer cheap loans,

The economy keeps growing,

Companies keep beating analysts’ estimates,

The government lowers taxes,

Etc.

Well it happens more often than we like to pretend. The last 5 years haven’t been a walk in the park for everybody. The oil industry was greatly affected by the plunge of the oil barrel prices due to overproduction. 2014-2016 has been a dark time for many Canadian Oilsands companies:

Source: Ycharts

The energy sector isn’t the only industry that suffered many dividend cuts. More recently, we had giants such as General Electric (GE), Owens & Minor (OMI) and Anheuser-Busch Inbev (BUD) cutting down their distributions.

The last 5 years taught me that no company is solid enough to avoid dividend cuts. Investors must track their holdings on a quarterly basis and make sure their investment thesis remains valid. If you have doubts; don’t wait and get rid of the rotten apples.

2013 – a turning point in my life

At the beginning of this article, I told you that 2013 was one of the most important years of my life. But that wasn’t because I had a great career in the private banking industry or because I built a successful blog. 2013 was the year I built Dividend Stocks Rock; my dividend investing platform.

Since the platform was a success, this service enabled me to take a sabbatical year in 2016 to travel the world for twelve months. I grew my business during that year and I was also able to quit my day job when I came back in 2017. It’s been a little over a year that I’ve been living my dream life as I help other investors learning the ropes of building a strong dividend growth portfolio generating safe revenues.

The reason my investing strategy works, the reason why DSR works for others is because I apply a simply, yet efficient, set of rules. I don’t overthink, I don’t change my plan, I don’t permit guesses. DSR has been built on the very same foundation I use to manage my portfolio. As a result, I invested the totality of the commuted value of my pension plan ($108K in 2017) using exclusively DSR tools.

Two companies to hold for the next 5 years

Keeping both lessons in mind, I’d like to leave you with two great companies that may or may not seem overvalued right now, but will definitely be  trading at a higher price 5 years from now. I’m fairly confident both companies won’t cut their dividends during that time and are most likely going to hike their payouts each year going forward.

You can download my analysis of Microsoft (MSFT) and Nutrien (NTR.TO).

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