In September of 2017, I received slightly over $100K from my former employer, representing the commuted value of my pension plan. I decided to invest 100% of this money in dividend growth stocks.
Each month, I publish my results on those investments. I don’t do this to brag. I do this to show my readers that it is possible to build a lasting portfolio during all market conditions. Some months we might appear to underperform, but you must trust the process over the long term to evaluate our performance more accurately.
Performance in Review
Let’s start with the numbers as of August 4th, 2022 (before the bell):
Original amount invested in September 2017 (no additional capital added): $108,760.02.
- Portfolio value: $210,118.63
- Dividends paid: $4,284.85 (TTM)
- Average yield: 2.04%
- 2021 performance: +16.78%
- SPY= 28.75%, XIU.TO = 28.05%
- Dividend growth: +3.14%
Total return since inception (Sep 2017- July 2022): 93.20%
Annualized return (since September 2017 – 59 months): 14.33%
Most of my holdings are coming from the Dividend Rock Star List.
SPDR® S&P 500 ETF Trust (SPY) annualized return (since Sept 2017): 13.01% (total return 82.48%)
iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 9.13% (total return 53.64%)
Sector allocation calculated by DSR PRO.
The Month that I Climbed Kilimanjaro
Disclaimer: if you expect a market commentary, you can immediately skip to my Smith Manoeuvre portfolio update. In July, I shut down my computer for 23 days. I didn’t look at the market, I didn’t think about my business, and I completely disconnected. Wow! I have not done that for even 3 days in over 5 years!
I climbed Mount Kilimanjaro with my wife and some friends during that time. After that experience, our three children took another plane and joined us for a safari, and then we finished this crazy trip on Zanzibar Island. The safari is a bucket list item in your life, but I’m sure you’ve seen enough pictures of animals that you don’t need mine. But if you go to Tanzania, Ngorongoro Crater National Park is quite impressive! Zanzibar is a cool island where we chilled and reconnected. But again, palm trees and beaches make nice pictures, but I’m sure you’ve seen plenty of those. But you rarely get to be alone on a mountain for 7 days where the only thing that matters is how you get acquainted with the mountain and its challenges.
Anybody can do one more step
I will share my experience in more detail in an upcoming podcast episode. I still wanted to tell you one story. Richard was a friend of one of my friends and joined our group. Richard and I have several points in common. We are both self-driven and passionate about what we do. In other words, we “go all-in” in everything we do.
Richard was a dynamo in our group. He was the guy thinking about everybody and ensuring we were all good. He wanted to make sure that we were having fun and he encouraged us the entire time. His enthusiasm was contagious, and he had the right mindset for this type of experience. During a particularly challenging moment, he mentioned, “anybody can do one more step”. That line stuck in my head. When it’s rough, you can always do one more step. You may not be able to run 50km, but you can surely make one more step. I will use that story when I coach soccer and face other challenging times in my life. Richard joined in on this adventure as “Bob’s friend,” and he emerged as “my friend” as well.
Smith Manoeuvre Update
Back to investing! I mentioned that I bought Brookfield Infrastructure (BIPC.TO) during my last update. The transaction happened in late June when I bought 9 shares at $54.57. Upon my return, I had another $500 to invest. This time, I selected Great-West Lifeco (GWO.TO). I’m not the biggest fan of life insurance companies but adding 17 shares of GWO at $30.74 (offering a yield above 6%) sounds like an amazing deal. The stock is currently trading at pre-pandemic levels, while higher interest rates will help GWO with its life insurance premium portfolio. Since the company generates a lot of money from wealth management, I expect a few rough years depending on how long this semi-recession-not-yet-a-bear market-in-Canada will last. In the meantime, it fits a perfect profile for the Smith Manoeuvre where the yield is more than the interest I pay, and the capital gain potential is real.
I must initiate a pause in my SM contributions. I will maintain my investment update in the coming months, but I will not add another $500 monthly for a while. My trip to Africa got out of control and I must take a few months to recover financially. When you do a leveraged strategy, you should never invest the money you don’t have. I’m following my own advice. I’ll resume my monthly investments shortly, but I would rather play it safe in the meantime.
Here’s my portfolio as of August 4th, 2022 (before the bell):
|Company Name||Ticker||Sector||Market Value|
|Canadian Net REIT||NET.UN. V||Real Estate||$437.10|
Let’s look at my CDN portfolio. Numbers are as of August 4th, 2022 (before the bell):
Canadian Portfolio (CAD)
|Company Name||Ticker||Sector||Market Value|
|Algonquin Power & Utilities||AQN.TO||Utilities||$7,497.66|
|Alimentation Couche-Tard||ATD.B.TO||Cons. Staples||$20,660.45|
|Magna International||MG.TO||Cons. Discre.||$5,823.30|
|Granite REIT||GRT.UN.TO||Real Estate||$10,211.84|
My account shows a variation of +$4,255.77 (+4.68%) since the last income report on June 24th. It seems it was a good thing I went away for vacation in July as the market decided to bounce back! Who said to sell in May and go away? Let’s hope August get lifted by good earnings results! I’ll spend most of this update on my U.S. stocks and revisit my Canadian stock earnings in September.
Here’s my US portfolio now. Numbers are as of August 4th, 2022 (before the bell):
U.S. Portfolio (USD)
|Company Name||Ticker||Sector||Market Value|
|Texas Instruments||TXN||Inf. Technology||$9,173.50|
|VF Corporation||VFC||Cons. Discret.||$3,627.18|
The US total value account shows a variation of +$6,060.96 (+7.28%) since the last income report on June 24th. There were a lot of earnings during this month. Let’s look at how my companies did!
Activision Blizzard is still waiting to get acquired by Microsoft
It’s a long and painful process and investors must sit on their hands in the meantime. ATVI did a little better than expected, but it doesn’t really matter if the work on getting acquired by Microsoft is on the way. A generous premium is still paid to wait (the stock trades around $80 while the agreed purchase price is at $95). Stay tuned!
Apple has a “bad” quarter, the market is happy.
Apple reported record revenues for Q3 and impressed analysts with its ability to navigate a challenging environment. Numbers weren’t impressive per say with EPS down 8% and revenue up 2%. Considering supply chain issues, lockdowns in China and the fact that Q3 is the weakest quarter for Apple, those are pretty good numbers! Revenue per segment: iPhone revenue of $40.67B (+2.8%), Mac revenue of $7.38B (-10.4%), iPad revenue of $7.22B (-2%), Wearables, home, and accessories of $8.08B (-8%), and Service revenue of $19.6B (+12%). If this is a “bad” quarter, imagine what it will look like when AAPL gets back to full speed!
BlackRock is a market victim, but that’s okay.
BlackRock reported declining revenue (-6%) and EPS (-27%) amid volatile markets for both stocks and bonds. As the markets declined, BLK reported weaker assets under management ($8.49T vs. $9.57T on March 31, 2022). Lower AUM leads to lower revenue. Investors seem to not be in a hurry to invest more money either as BLK reported $69B of quarterly long-term net inflow vs. $114B net inflows in Q1. Technology services, including Aladdin, produced $332M in revenue in Q2 vs. $341M in Q1. Such a steep stock price decline offers a great opportunity for long-term investors.
Gentex disappoints; I’ll wait until the end of the year…
Gentex disappointed the market on July 22nd with its latest earnings. The company missed EPS (-14%) and revenue (+8%) growth expectations. Global light vehicle production in North America, Europe, Japan/Korea, and China decreased approximately 3% compared to last year. Gentex reported weaker earnings as margins shrunk from 35.4% to 32%. Gross margin was impacted by raw material cost increases, labor cost increases, lower than expected sales levels, product mix shifts and ongoing customer order volatility.
Microsoft goes full speed ahead!
Microsoft reported good numbers but fell short of analysts’ expectations with EPS up 3% and revenue up 12%. Results were impacted by $595M worth of foreign exchange headwinds and Windows-related revenue was impacted by $300M due to China’s COVID-related shutdown earlier this year. The company continues to grow through its various segments (Productivity and Business Processes +13%, Intelligent Cloud +20%, Personal Computing +2%), led by Azure and other cloud services’ revenue growth of 40% (up 46% in constant currency). MSFT has no intention of slowing down as it invests in multiple businesses to ensure long-term growth.
Starbucks’ coffee is strong
Starbucks pleased investors with record revenue for the quarter. A strong performance from the U.S. stores offset the China segment’s poor results. Comparable sales in North America increased 9%, driven by an 8% increase in average ticket value. Unfortunately, it wasn’t the same story in China as COVID restrictions pushed comparable sales down by 44%. Fortunately, this is just a temporary situation! Active membership in Starbucks Rewards in the U.S. rose 13% to 27.4M during the quarter.
Texas Instruments – it pays to be conservative!
Texas Instruments killed it this quarter, beating analysts’ expectations. EPS surged by 20% and revenue increased by 14%. Strong results were supported by robust demand across all segments. Management improved their guidance for the third quarter with revenue in the range of $4.9B to $5.30B and earnings per share between $2.23 and $2.51. Numbers are better after management overestimated the impact of lockdowns in China. It pays to be conservative sometimes! Demand for analog chips has not seemed to slow down and TXN should end the year on a strong note!
VF Corporation fails to impress, I remain optimistic
VFC shows growing revenue and income after it recovered from the pandemic crash and yet, the stock trades lower than during the March 2020 market meltdown! On July 28th, VFC reported its latest earnings. It was more bad news for investors as the company failed to impress analysts. The company faces strong currency headwinds as revenue was up 3%, but only 7% in constant currency and Vans sales lagged (down 7%) this quarter. On the bright side, The North Face sales were up 31%. For the fiscal year of 2023, VFC now expects adjusted EPS of $3.05 to $3.15, which implies 4% to 7% growth versus the prior year on a constant dollar basis.
Visa rhymes with double-digit growth
Visa did it again! The company beat both EPS (+33%) and revenue (+19%) growth expectations. Payment’s volume rose 12% Y/Y in constant dollars with cross-border volume up 40% and processed transactions up 16%. Total processed transactions, which represent transactions processed by Visa, for the three months ended June 30, 2022, were 49.3 billion, a 16% increase over the prior year. This is a good indicator that the economy isn’t doing that bad. The company used its extra cash flow to buy back $2.5B of shares (roughly 0.55% of its market cap).
My Entire Portfolio Updated for Q3 2022
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. 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 showing all the information about all my holdings. Results have been updated as of July 7th, 2022.
Dividend Income: $205.81 CAD (+18% vs July 2021)
Please note that I’ve updated my June total dividends as I received $57.07 from BEPC on June 30th. Therefore, my total dividends for June were $542.16, up by 6% vs last year (almost beating inflation!). This increase is mostly related to trades adding shares of Granite, Algonquin, and Alimentation Couche-Tard. AQN and ATD also increased their dividend vs last year and the USD is a little stronger right now.
After 7 months, I’ve received $2,328.24 (about $332/month) in dividends. That’s 10% more than last year! I’ve done a few transactions which improved my yields over the past 12 months and it is starting to show in my report.
Another good point is that while my portfolio is down since January, my dividends are up. This tells me my strategy works and that most companies I invest in are doing fine right now.
Here’s the detail of my dividend payments.
Dividend growth (over the past 12 months):
- Granite REIT: new
- Algonquin: +35%
- Alimentation Couche-Tard: +25.7%
- Gentex: no increase
- Currency factor: +4%
Canadian Holding payouts: $169.53 CAD
- Granite REIT: $33.07
- Algonquin: $96.97
- Alimentation Couche-Tard: $39.49
U.S. Holding payouts: $28.20 USD
- Gentex: $28.20
Total payouts: $205.81 CAD
*I used a USD/CAD conversion rate of 1.2867
Since I started this portfolio in September 2017, I have received a total of $17,280.30 CAD in dividends. Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added to this account other than retained and/or reinvested dividends. Therefore, all dividend growth is coming from the stocks and not from any additional capital being added to the account.
While the NASDAQ is still in bear territory (-19% year to date at the time of this writing), my portfolio shows a strong concentration in the information technology sector (about 30%). My 4 U.S. tech stocks (AAPL, MSFT, V and TXN) all show better results than the NASDAQ. I guess it pays to invest in quality!
However, I’m still overexposed to this sector and must start selling more shares. Looking at all my portfolio combined my largest holding remains Apple with 12.75% of all my investments. Selling another 2.75% would bring my total exposure to this sector to 25% and to 10% for Apple. I feel I’m getting close to the time where I will sell a few more shares of Apple to ensure a strong sector allocation…