June 2018 Portfolio Update

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Includes: CBYDF, CDUAF, CNI, CWSRF, FTS, HRNNF, JNJ, MCD, PEP, RIOCF, V, WM, WMT, YUM, YUMC
by: Get Rich Brothers

Summary

June was a solid month for dividend income.

My cash position continues to swell, bolstered by a high interest rate.

Dividend growth was steady once again.

As a dividend growth investor (DGI), I am driven to keep track of both my inflows and outflows. Increases in investment income represent one measure to assess whether I am winning or losing the game of money. While I have been diligent to track my progress on a quarterly and annual basis over the past few years, through 2018 I have also been providing monthly income updates.

Please note that all Canadian stocks are owned in CAD on Canadian exchanges.

CAD Dividends

Company CAD Dividends ($) Div Increase (%)
RioCan Real Estate Investment Trust (OTCPK:RIOCF) 31.32
Johnson & Johnson (NYSE:JNJ) 74.09
Corby Spirit and Wine Ltd. (OTCPK:CBYDF) 50.60
Fortis, Inc. (NYSE:FTS) 46.75
Canadian Utilities Limited (OTCPK:CDUAF) 53.10
Canadian National Railway Company (NYSE:CNI) 6.83
Hydro One Ltd (OTC:HRNNF) 46.00 4.55
Chartwell Retirement Residences (OTC:CWSRF) (TSE: CSH.UN) 4.90

USD Dividends

Company USD Dividends ($) Div Increase (%)
Waste Management, Inc. (NYSE:WM) 19.77
McDonald's Corporation (NYSE:MCD) 18.03
Yum! Brands, Inc. (NYSE:YUM) 11.94
Yum China Holdings, Inc. (NYSE:YUMC) 3.32
PepsiCo, Inc. (NYSE:PEP) 7.89 15.22
Walmart Inc. (NYSE:WMT) 6.63
Visa Inc. (NYSE:V) 1.79

Dividend Summary

In June, my dividend growth portfolio generated $313.59 CAD and $69.37 USD. It's a wonderful thing seeing totals this high as it has taken years of accumulation to reach this point. This is money that rolls in passively whether I get up in the morning to work or not. It is mine to, if I were to decide, spend on everyday goods and services to keep the engine of my life ticking. Eventually, that is the goal.

My strategy at this stage in the game, mind you, is to keep reinvesting these funds into dividend-paying equities to compound my growth over the long term. One of the key tenets to building the snowball of dividend wealth is to continue adding fuel to the fire by reinvesting the proceeds of investment returns.

The standout dividend increase this month was PEP. It rewarded shareholders with a whopping +15% increase which is a very welcome sign of financial well-being. I have been toying with the idea of doubling down on my investment in PEP and this provides some added confidence that the company is operating well on all cylinders. Dividends send signals to investors of how the company perceives its own performance both in terms of the immediate future and whether it feels the need to shore up capital if expecting a rough patch. For a mature company such as PEP, 15% suggests the company is in very good shape.

Slight Market Opportunities

Although the start to 2018 has been the most prolific of my investing career, June was a relatively slow month for freshly invested capital. At the beginning of the month, there was a pullback offered up with Bank of Nova Scotia (NYSE:BNS) stock which allowed me to nibble for 15 shares at a price of $76.97. On the current quarterly dividend of $0.82, this should bring in $12.30 quarterly or $49.20 annually.

I continue to keep my eye on BNS, as at the time of writing, it is in the ~$74 range. Having picked up my original shares back in 2015 for ~$58, this is one company I have actually been averaging up with. That's typically not my investment style as I prefer to get deep value where it is available. However, this is one of those forever names that I am okay buying on the way up if it means getting a full position established at a reasonable starting dividend yield of over 4%, which I have.

The way I look at BNS is that it is a company with stable finances which tends to reward shareholders twice per year with dividend raises ranging from mid-2% to around 4%. From Fiscal 2014 through Fiscal 2017, the company managed a compound annual growth rate of over 6% dividend growth. A solid starting yield coupled with mid-to-high growth offers a solid recipe for investment success.

Within my traditional wheelhouse of investments, the only other area that I still feel is ripe for investment is within the utilities. FTS and CDUAF would still be attractive to me around their current levels and particularly if they would take another dip. It seems the environment related to rising interest rates has spooked investors and provided some opportunity for a dividend growth investor with an eye to the future. Interest rates will always fluctuate, but a tried, tested, and true business model is what counts.

Good News From My Bank

As I have mentioned, my preferred method of holding liquid funds awaiting deployment within the stock market is to maintain cash balances in a high interest savings account. My bank had been paying me 2.5% since early February and this special rate was intended to last only until the end of June. The bank has extended the offer, though, and so I will continue receiving 2.5% on my cash through December 31 of this year.

As a result of this increased rate, I am all the more content to be a bit more patient when it comes to sitting on the sidelines and waiting for opportunities. While I believe it is important to continue investing to bolster dividend returns over the long run, 2.5% in this market is decent for idle cash. The fact that I have access to this money at any time is one of the major reasons I employ this strategy.

Conclusion

June took a slower pace in terms of acquisitions after a frenzied start to the year. Adding to my BNS stake was an important measure, and I remain receptive to adding more as July kicks off. Remaining flexible with my investment capital outlays is the key at this stage.

While I still feel the markets are rather elevated overall, there are pockets of weakness where I feel investment is presently attractive. My approach is to be patient at the moment, and I will continue to be on a situational basis.

Thank you for reading.

Disclosure: I am/we are long RIOCF, JNJ, CBYDF, FTS, CDUAF, CNI, HRNNF, TSE:CSH.UN, BNS, WM, MCD, YUM, YUMC, PEP, WMT, V.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.