I took a pause from updating my Best 2014 Dividend Stocks portfolios over the last couple of months as I felt it was redundant to repeat the same stuff over and over again. Now that we are approaching the final countdown to the end of 2014, it was time to make a last update before we pull out the final numbers. For the first time this year, both my portfolio lag their benchmarks. This sucks… but as many portfolio managers do in real life, I’ve followed my convictions and this time, I headed in the wrong direction.
Oil is Killing my Portfolios, Is it the Same for You?
Since August, the price of a barrel oil is on a free fall. Arab countries, led by Saudi Arabia, decided to increase their production in order to keep their market share. They have seen Canadian oil sand and American energy independence policy coming their way and are afraid to lose money. Since it costs a lot less to produce oil in their territories than extracting it in North America, it created a panic in this industry.
I have other underperforming stocks in both portfolios, but if I take away those related to the oil industry, the US portfolio would beat its benchmark by 2.25% instead of lagging by 0.07% and the Canadian portfolio would also beat the benchmark by 0.67% instead of lagging by -4.14%…
This is not an excuse, it just explains a lot about portfolio management! If I had played safer, I would not have this problem in both portfolios. Still, there are also other good moves I made! Let’s take a deeper look at both portfolios…
Best 2014 US Dividend Stocks Lagging by 0.07% but Yielding 1.16% More
While the portfolio is a bit behind the benchmark, my overall performance will probably be better than the VIG. The VIG is only yielding 1.88% as my portfolio pays a 3.14% dividend yield. Considering the dividend yield, I have 7 stocks out of 20 that will show a 20%+ total return unless there is major bad luck in the last 25 days of the month!
Apple (AAPL) made a real come back this year by showing the industry that they are still in the race for the best mobile device while keeping very high margins (compared to the leader of the industry, Samsung).
Genuine Parts (GPC) surprised the market with great financial results. The automotive industry in general is picking up and GPC’s strategy of growing through both acquisitions and generating internal growth is a success.
Lockheed Martin (LMT) focused on growing earnings in 2014 and pleased investors. It is somewhat able to deal with US Government budget cuts and continue to generate a decent return. Current geo-political tensions should help the company to keep going this route in 2016.
Lorillard (LM) started a slow but consistent rally after the announcement of purchase by Reynolds American (RAI). According to many investors, LM is still trading at discount considering the whole deal. Is there money to be made from this stock before the deal closes? Check it out!
PepsiCo (PEP) showed steady growth and the rumor of spinning off their snack business is pushing the stock higher. PEP is a classic dividend payer to hold in your portfolio but as opposed to Coca-Cola (KO) it was able to generate growth in 2014.
Wells Fargo (WFC) is currently up by 18.57% and pays a 2.60% yield. Therefore, it has pretty good chances to show a total return of 20% at the end of this year. This is a strong bank that currently reaps the benefits from being strong throughout 2008 credit crisis.
Wisconsin Energy (WEC) has been part of my Best dividend stocks since 2012 and was never excluded. Throughout this period, the stock went up by 42% and the quarterly dividend payout went from $0.30/share to $0.39/share. It’s less than the S&P 500, but it is a strong performance for a utility company.
Many Bad Choices in the Canadian Stock Market (-4.14% vs Benchmark)
While I’m pretty happy with my US portfolio results, I’m not too happy with my Canadian portfolio performance. It is true that one stock is down 43% which pretty much annihilates all my chances of beating my benchmark this year. But besides the fact that I was wrong with the price of oil (I thought it would simply hold at the $100 level), I was also wrong (or too quick) about the consumer sector. I thought Dorel (DII.B) and North West Company (NWC) would benefit from a stronger economy. Both stocks are down due to okay but not great results. Nonetheless, they remain strong companies… I guess we just have to be more patient and the span of 12 months wasn’t enough to perform well.
On the good news part, Lassonde (LAS.A) with its purchase of the American Apple & Eves burst by 27%. Royal Bank (RY) impressed with strong results and is nearly generating a 20% total return this year. Telus (T) is the second stock with Lassonde to generate over 20% return in 2014. Now that the cloud of a foreign competitors has dissipated (for now!), the company continued to post solid results and grow its dividend.
Currently Preparing my Best 2015 Dividend Stocks
While the year is about to end, I’ve already pulled my first list of stocks to analyze for 2015. I started this tradition backin 2012. I select 20 US and 10 Canadian stocks for each year. So far, my global portfolio has always beaten my benchmark. 2014 will probably be the first year where my Canadian performance won’t be strong enough to beat the overall benchmark. Still, in three years, 4 out of 6 portfolios (US and CDN) beat the benchmark by great numbers. I am very happy with this performance since the idea of picking stocks for 12 months is to take greater risk than when you pick your stock for a long term horizon portfolio.
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