Since 2012, I’ve initiated a tradition on this blog. Each year, I make a selection of 20 U.S. dividend growth companies and 10 Canadian ones. The goal is to build two portfolios of strong holdings that will beat the benchmarks. I’ve always used the same benchmark for the past four years:
VIG: Vanguard Dividend Appreciation ETF. VIG seeks to track the investment performance of the Dividend Achievers Select Index.
XDV: iShares Dow Jns Cnd Slct Dvdnd Indx Fnd. XDV seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the Dow Jones Canada Select Dividend Index (the Index) through investments in the constituent issuers of such Index. The Index consists of 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index.
I’ve selected both benchmarks because they are good and reliable examples of a dividend growth portfolio. If I wasn’t selecting my own stocks, I would probably buy thsse two ETFs to create a dividend portfolio.
Each year; I put myself to the test
Some people may think I put this list of stocks together the way you build your hockey pool for the season. Well it’s a little bit more complicated than that. I take about 2 months of research putting my information together and analyzing companies. Each company has to go through the 7 investing principles of dividend growth investing. These principles have been proven by several academic studies and tested through several years of investing. Then, I work on the selections to make a whole portfolio. It would be easy for me to aim at a specific industry and try to hit a home-run by selecting a sector as a whole. Instead, I’m doing my best to pick among various industries to make sure my selections as a whole could stand up as a portfolio. The idea is to show investors how they can successfully build a portfolio, anytime of the year.
By revealing and tracking my performance year after year, I put myself to the test. I think it’s important to be transparent and to show my readers how I’m doing. If not, what’s the point of reading my stuff right? For all that you know, I might be the worst investor in the world and you read about my theory… This is why I’m not afraid to share my findings with you and follow-up on my results.
I don’t expect to be right all the time. In fact, I’m quite surprised to see how often I’ve beaten the benchmarks since 2012. But what is important to me is to be transparent about how I select my picks and how they perform throughout the year. It’s a risk I’m willing to take ;-). My results are as at December 30th around 2pm (couldn’t wait for the market to close!).
U.S. Best 2016 Dividend Stock Picks +12.37%
Source: Dividend Stocks Rock
As you can see, my portfolio shows a return of +12.37% which is 2.92% over the VIG performance and 2.92% over the S&P 500. 14 picks out of 20 beat the benchmark and only three companies show a negative return. We are not talking about one super flying stock improving the overall average, we are definitely talking about a solid portfolio, built to perform.
The key in this selection has probably been a few bold picks that severely unperformed in 2015. Companies such as Union Pacific (UNP), Chevron (CVX), Walmart (WMT), Caterpillar (CAT), Genuine Parts (GPC) all showed worse than -20% in 2015. I’ve looked at all of them and found that the market was overreacting for nothing. This is why they were part of my selections for 2016 and they have been doing quite well.
Disclaimer: We own 16 of these companies in our Dividend Stocks Rock portfolios. 9 out of 12 of our portfolios have beaten their benchmark since 2013. You can see our portfolio returns here.
Canadian Best 2016 Dividend Stock Picks +20.98%
Source: Dividend Stocks Rock
I’m definitely proud of my performance on the Canadian market as I’m beating the XDV by 2.38% and even the S&P TSX by 3.26%. 5 out of 10 picks beat my benchmark and only one pick is showing a negative return. Here again, the great performance of this list is not solely due to a single pick. There are several great companies which performed well throughout 2016.
I must admit that selecting SNC Lavalin was a bit of a long shot, but I actually bought it for my personal portfolio for the same reason. I was convinced the engineering firm would do everything they could to avoid a trial and receive a 10 year ban penalty and it seems it will avoid it after all. Companies like Emera (EMA.TO), Telus (T.TO), Royal Bank (RY.TO) & TD Bank (TD.TO) continued to be solid as a rock. I also did a similar play as I did with UNP with Canadian National Railway (CNR.TO). I believe the beginning of 2016 was the right time to purchase railroads as they had suffered enough and they can only bounce back.
Disclaimer: We own 8 of these companies in our Dividend Stocks Rock portfolios. 9 out of 12 of our portfolios beat their benchmark since 2013. You can see our portfolio return here.
You Missed 2016 book? The 2017 is ready!
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Nice results with your portfolio! job well done
Thx ATL!
It seems my investment process is working well. While it’s not perfect, it provides me with a solid base to invest my money :-).
cheers,
Mike
Well done, although the stock performances you show are price returns, not total returns. The numbers should be a few points higher.
Hello Bernie,
you are right. However, I also use the price return for my benchmark. Assuming my portfolio yield is about the same than my benchmark, it would not affect my performance overall. This is why I used the price return.
Still, it would mean more money in your pocket if you invested in those picks 🙂
Cheers,
Mike
If you can beat the indexes, that’s half the battle. Otherwise why even create your own portfolio? Nicely done, Dividend Guy. You had some solid picks for last year. We will have to see how 2017 goes!
hey Dividend Reaper,
thx for stopping by!
However, it’s important not to chase return either. It is very possible to not beat your benchmark for a few years in a row. Trying to beat it each year will eventually lead to investing mistakes. I rather stick to my investment plan and hope it will bring strong results.
Cheers,
Mike
Love the returns and beating the index. Good luck in 2017 and may your stocks continue to pay and grow!
Hey Dividend Noob,
Thx for your comment!
Each year, I’m a little nervous to put my selection to the test. After all, I could miss my target each time I post picks publicly.
cheers,
Mike
Interesting read. Beating the market is such a hard thing to do sometimes. My portfolio fluctuates drastically as it’s value is quite small and some shares are volatile.
Investing in a small portfolio is always difficult. You could easily beat the market by 10% or lag it drastically!
Cheers,
Mike