In September of 2017, I received slightly over $100K from my former employer which represented 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 is possible to build a lasting portfolio during an all-time highly valued market. The market will inevitably go down, as it did in 2020. But I continued to enjoy cashing consistent and growing dividends despite that negative market action! And, most importantly, I stayed fully invested in the market and have enjoyed the market recovery in 2020 that has continued into this new year of 2021.
Performance in Review
Let’s start with the numbers as of February 1st, 2021.
- Portfolio value: $186,954.06
- Dividend paid: $3,904.73 (TTM)
- Average yield: 2.09%
- 2020 performance: +20.3%
- SPY=18.17%, XIU.TO = 5.27%
- Dividend growth: +7.7%
Total return since inception (Sept 2017): 72.01%
Annualized return (since September 2017): 17.2%
SPDR® S&P 500 ETF Trust (SPY) annualized return (since Sept 2017): 14.66%
iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 7.57%
Sector allocation calculated by DSR PRO.
Recent Trades: Rebalancing; Selling UPS, More ATD.B.TO
I traded two stocks in January. I sold my shares of UPS (UPS) and bought more Alimentation Couche-Tard (ATD.B.TO). I’ll get to the reason why I’ve identified those companies to trade in a second. But first, there was a global reason why I wanted to move USD to CAD. This trade was first and foremost about portfolio management.
Rebalance your portfolio when necessary
In 2017, I split my pension plan into two parts between my Canadian and American holdings when I created this portfolio. Three years ago (February 2018), my portfolio was 41% CAD and 59% U.S. Last month, I was almost at 33% CAD and 67% U.S. While this overexposure to the U.S. market paid me well, it also means currency fluctuations highly influence my returns. It was time to move a few thousand dollars back to Canada!
From a sector point of view, it would have been preferable to pick a stock in the technology, financial services, or consumer cyclical sectors. However, I believe there is more room for growth among those stocks. Also, my tech sector is being used as a protection against potential lockdowns due to the virus. If everything shuts down, technology stocks will hold the fort.
I then looked at my DSR ratings for all stocks. I found two companies with weak ratings: UPS and Lazard. I have discussed UPS a few times in the past updates. This company did well in 2020, but the shadow of Amazon is growing behind UPS. This threat is real, and I wonder how long UPS can continue to grow and protect its margins as Amazon is building a logistics army with trucks and planes.
On the other hand, Lazard didn’t increase its dividend in 2020. I almost decided to sell both. I will keep Lazard for a few more quarters to see what management decides to do. A similar process is in motion at Hasbro (HAS) which is another company that forgot to increase its dividend in 2020. At this point, I’m giving them the benefit of the doubt due to the pandemic. However, I will not tolerate this situation much longer.
There are too many great companies on the market, and I would rather be buying those which will thrive. In the meantime, I sold my position in UPS. Among the three candidates, UPS is the one that is the least interesting to me currently.
Buying more of ATD
I combined the proceeds from the UPS sale with the remaining cash coming from dividends to buy 187 shares at $37.15. ATD was already one of our top picks for 2021 before the “Carrefour saga” happened. Within a few days, Couche-Tard made an offer to buy France’s third largest employer, lost 10% of its valuation, and saw the French Government say “non, merci” on the offer. The results? An amazing buy opportunity!
Management confirmed their plans to grow and double their 2019 net earnings by 2023. I would never bet against this management team.
I’ve discussed the convenience store chain on my YouTube channel recently.
Let’s look at my CDN portfolio. Numbers are as of February 1st, 2020 (before the bell):
Canadian Portfolio (CAD)
|Company Name||Ticker||Market Value|
My account shows a variation of +$4,130.17 (+6.47%) since the last income report on January 1st.
This is not a real increase in value. While my portfolio value declined, I moved USD into my Canadian account to purchase more shares of ATD. This transaction enabled me to bring back my Canadian holdings to 37% and my US holdings down to 63%. It’s not perfect yet, but it’s a step in the right direction!
Here’s my US portfolio now. Numbers are as of February 1st, 2020 (before the bell):
U.S. Portfolio (USD)
|Company Name||Ticker||Market Value|
The US total value account shows a variation of -$7,806.26 (-7.8%) since the last income report on January 1st.
As opposed to my Canadian portfolio, my US holdings haven’t declined by 8% in value. A good chunk is attributable to the UPS / ATD transaction. Many companies declared their earnings in January. Here are a few comments on them.
Apple beat both EPS and revenue growth expectations with double-digit growth. Revenues broke down as follows: iPhone, $65.6B (+17%); Mac, $8.67B (+21%); iPad, $8.44B (+41%); Wearables, Home and Accessories, $12.97B (+30%); Services, $15.76B (+24%). The company posted a record month for revenue ($111B), which is not bad for a one-trick pony. I’m always amazed to see how fast Apple is growing two new businesses within its portfolio (wearables and services). Another element of good news happened in China. After posting a disappointing (and worrisome) quarter (-29% sales decline), Apple came back in force with a sales jump of +57% (21.3B).
BLK posted another strong quarter with double-digit EPS, revenue, and dividend growth. They had quarterly net inflows of $126.9B, with $78.8B from iShares ETFs. Evercore ISI estimated BlackRock’s Q4 net inflows were $94B for the quarter in a Jan. 8 report. Assets under management were $8.68T vs. the $7.81T at Sept. 30, 2020. For the full year, BLK posted net inflow of $391B driven by 5% organic asset growth and 7% organic base fee growth, led by record flows in cash, active equity and alternatives and continued momentum in fixed income. Technology services revenue increased $31M, which is primarily a reflection of higher revenues from Aladdin.
GNTX posted impressive results with double-digit growth and beat on both earnings and revenue expectations. Automotive net sales grew 20% Y/Y to $521.6M which was supported by a strong performance of auto-dimming mirrors shipments (+14%). The Company repurchased 2.5 million shares of its common stock during the fourth quarter of 2020 at an average price of $31.82 per share. Do I have to remind you that GNTX doesn’t have any long-term debt? This means all cash is used for R&D, share buybacks and, you guessed it, dividends!
Microsoft did it again and posted remarkable results. Sales were up double-digits with strong performances coming from all segments: Productivity and Business Processes +13%, Intelligent Cloud +23% (including Azure growth at 50%), and even Personal Computing showed +14% sales increase (driven by Xbox at +40%). Management expects to keep-up the pace for the rest of its fiscal year and expects to end with double-digit revenue growth. Such strong results were enough to impress financial analysts as many of them raised their price targets for MSFT.
It was a bit more difficult for Starbucks this quarter as the world’s best coffee maker posted comparable store sales down 5%, driven by a 19% decrease in comparable transactions, partially offset by a 17% increase in their average ticket. Comparable sales in the Americas declined 6% to miss the consensus expectation of a drop of 4.2%. International comparable sales were down 3% vs. a -1.3% consensus. On a positive note, active membership in Starbucks Rewards in the U.S. rose 15% to 21.8M during the quarter. The company opened 278 net new stores in the first quarter of fiscal 2021.
Texas Instruments (TXN)
TXN posted a robust quarter with double-digit growth and a beat on all expectations. Analog sales were up 9% on the quarter and 25% on the year. Embedded Processing increased 11% and 14%, respectively. The company attributed the revenue performance to strength in the automotive, personal electronics, and industrial markets. Cash flow from operations totaled $6.1B for the year with FCF of $5.5B. TXN aims to return all its FCF to shareholders. The company returned $6B in 2020 through share repurchases and dividends.
VF Corporation (VFC)
The market punished the VFC stock price, but the company reported results in line with expectations. Active segment revenue decreased 9% including a 6% decrease for Vans. Outdoor segment revenue decreased 5%, including flat revenue for The North Face. Work segment revenue increased 8%, including a 9% increase for Dickies. VF ended the third quarter of fiscal 2021 with inventories down 14 percent compared to the prior year. The company expects full-year revenue of $9.1B to $9.2B vs. $9.2B consensus and EPS of $1.30 vs. $1.34 consensus. Adjusted free cash flow of $650M is anticipated vs. prior guidance for more than $600M.
Visa did better than expected despite declining revenue. Net revenues in the fiscal first quarter were $5.7 billion which is a decrease of 6%, primarily driven by the year-over-year decline in cross border volume, partially offset by growth in payments volume and processed transactions. At least, payments volume, cross-border volume, and processed transactions growth all improved compared with the previous quarter, the company said in its earnings release. Cash, cash equivalents and investment securities were $18.2 billion as of December 31, 2020.
I think they have enough reserves to weather this speedbump in their growth.
My entire portfolio updated for Q4 2020
Each quarter, we run an exclusive report for Dividend Stocks Rock (DSR) members who subscribe to our very special additional service called DSR PRO. The PRO report includes a summary of each company’s earnings report for the period. We have been doing this for an entire year now and I wanted to share my own DSR PRO report for this portfolio. You can download the full PDF giving all the information about all my holdings. Results have been updated as of October 2020.
Dividend Income: $67.72 CAD (-39% vs January 2020)
There isn’t much here, is there? January was already a “poor” month for distributions in my portfolio, but it’s even worse now that Disney (DIS) suspended its dividend! I only received two dividends this month.
Here’s the detail of my dividend payments.
Dividend growth (over the past 12 months):
- Andrew Peller: +41% (I added shares in 2020)
- Gentex: +4.3%
Canadian Holdings November payouts: $31.53 CAD
- Andrew Peller: $31.53
U.S. Holding payouts: $28.20 USD
- Gentex: $28.20
Total payouts (December): $67.72 CAD
*I used a USD/CAD conversion rate of 1.2835
Since I started this portfolio in September 2017, I have received a total of $11,004.93 CAD in dividends. Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added into this account other than retained and/or reinvested dividends. Therefore, all dividend growth is coming from the stocks and not from any additional capital.
February will be busy as both Lazard and Hasbro will post their earnings. I will not be trigger happy, but I’m not going to be uber patient either. So far, they are the weakest positions in my portfolio, so change is inevitable.
I was looking for an excuse to add some good Canadian utilities to my portfolio so maybe one of those two companies will give me what I’m looking for. On top of that, this would help me reduce my exposure to two sectors (financials and cyclicals) and in addition allow me to move more USD into CAD. Looks like we have a trade brewing here.