Q2 2018 Dividend Report

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Includes: BCE, BNS, CBYDF, CDUAF, CM, CNI, CP, CWSRF, FTS, HRNNF, JCOUF, JNJ, KO, MCD, MTRAF, PEP, RCI, RIOCF, TD, TU, V, WM, WMT, YUM, YUMC
by: Get Rich Brothers
Summary

I've made five purchases of dividend-paying equities this quarter.

A sale of one of my key holdings provided additional capital to spend.

I provide a summary of all income earned from my dividend-producing equities.

My Background

Each investor faces a different set of circumstances. Now 31, I have been investing since I was 22 years old. My first investment in individual stocks was made in the heart of the financial crisis back in May 2009. I purchased 40 shares (80, split-adjusted) of Toronto-Dominion Bank (NYSE:TD). However, for years before making that purchase, I had been researching the best methods available for both wealth creation and preservation.

I don’t believe in taking unnecessary risks and felt the whims of the stock market were too fickle as far as capital gains are concerned to base my aspirations of financial freedom on. Dividend growth investing stood out, as it seemed far more predictable that a healthy company might increase its dividend by 6% than to make any sort of prediction about stock price volatility over the short term.

On this basis, and from my initial foray into the markets with TD, I’ve built a portfolio of 24 cash-flowing equities. My goal is ultimately to have a stock market portfolio which provides enough income to cover all of my expenses. While some feel that it only requires ten companies to achieve ultimate diversification, I believe there is room for a healthy level of redundancy to avoid the hiccups involved with company-specific performance. Regardless, I endeavor to always own the best-of-breed companies in their respective industries. I can live with a bit slower growth if it means greater security for my invested dollars.

This is a strategy I have researched over time and come to trust because it can work for me both as a young investor and likewise carry me through the decades to come. While it may not turn heads at a dinner party, it has proven its value over the past few hundred years and remains as relevant as ever today in our digital age.

Having noted the above, it is truly a great time to be a dividend growth investor. As I have let the dividends roll into my account since taking myself off of the DRiP at my discount broker, I have had ever-increasing amounts of cash flow to invest to further compound the snowball of wealth.

I made a grand total of five purchases of dividend-paying equities during the quarter - down by one from the previous quarter - which I will detail further below. Each of these will, over time, contribute further to the financial fortress I am building.

CAD Dividends

Company CAD Payment ($) Div Increase (%)
Toronto-Dominion Bank 53.60 11.67
RioCan Real Estate Investment Trust (OTCPK:RIOCF) 93.96
The Coca-Cola Company (NYSE:KO) 66.72
Johnson & Johnson (NYSE:JNJ) 74.09 7.14
BCE Inc. (NYSE:BCE) 166.10 5.23
Canadian Imperial Bank of Commerce (NYSE:CM) 15.96 2.31
Jean Coutu Group Inc. (OTCPK:JCOUF) 42.15
Corby Spirit and Wine Ltd. (OTCPK:CBYDF) 50.60
Bank of Nova Scotia (NYSE:BNS) 32.80 3.80
TELUS Corporation (NYSE:TU) 35.35
Rogers Communications Inc. (NYSE:RCI) 26.40
Fortis Inc. (NYSE:FTS) 46.75
Canadian Utilities Ltd. (OTCPK:CDUAF) 53.10
Canadian National Railway Company (NYSE:CNI) 6.83
Canadian Pacific Railway Limited (NYSE:CP) 3.38
Hydro One Ltd. (OTC:HRNNF) 46.00 4.55
Chartwell Retirement Residences (OTC:CWSRF, TSE:CSH.UN) 14.70 2.08

USD Dividends

Company USD Payment ($) Div Increase (%)
Waste Management Inc. (NYSE:WM) 19.77
McDonald's Corporation (NYSE:MCD) 18.03
Yum! Brands (NYSE:YUM) 11.94
Yum China (NYSE:YUMC) 3.32
PepsiCo Inc. (NYSE:PEP) 15.78 15.22
Walmart Inc. (NYSE:WMT) 13.26
Visa Inc. (NYSE:V) 1.79

Dividend Summary

The second quarter has shown grand totals of $828.49 CAD and $83.89 USD. Coming in at $912.38 in currency-neutral terms, this is easily the best quarter I have had thus far in terms of passive cash flow. The aggressive stance I have taken in terms of adding stocks through the first half of the year is beginning to pay off with increased payments from many of my companies.

Standouts

Having owned PEP since early 2015, the 15.22% dividend increase was both unexpected and quite welcome. It was double my previous highest increase with the stock.

TD provided a dividend bump of 11.67% this quarter, which was the highest since the 2013-2014 period. This company has been outperforming the majority of its peers for years now, and continues to differentiate itself from competitors both in Canada and the U.S. Having already doubled my dividend yield on cost with TD, this is one I fully intend to stick with over the very long term.

I should also mention that PEP and WMT both have two dividend payments during this quarter, and so, the totals are inflated when considering on an annualized basis.

Quarterly Buys/Sells

Please note that all activity was made in CAD on the Toronto Stock Exchange.

BNS: I picked up two tranches of stock for a total of $3,186.70 and 40 shares. Weakness in the price tempted me to continue doubling down on BNS. Based on the current quarterly dividend of $0.82 CAD, I am looking for this purchase to bring in $32.80, or $131.20 annually.

CDUAF: I again used considerable price weakness to average down my cost basis in the company. I picked up 65 shares at a cost of $2,024.95. On the current quarterly dividend of $0.3933 CAD, I expect these purchases to generate $25.56 quarterly, or $102.26 annually.

FTS: As with the above, relative price weakness afforded me the opportunity to average down in this dividend stalwart. I purchased 50 shares of FTS at a cost of $2,091.95. On the quarterly dividend of $0.425 CAD, I have this slated to provide $21.25 quarterly, or $85.00 annually.

Metro Inc. (OTCPK:MTRAF): This was a net new purchase. This company acquired/merged as the parent with the Jean Coutu Group, which I previously held shares in. As a result, I decided to acquire a small stake in MRU, which I likely otherwise would not have truly considered. Nevertheless, it is a solid grocery store franchise with pharmacy operations as well, which tends to raise its dividend at a considerable clip.

I picked up 20 shares at a cost of $866.95. On the current quarterly dividend of $0.18, this should bring in $3.60 quarterly, or $14.40 annually.

Quarterly Dividend Increase: From the five purchases in four stocks above, I have increased my annualized forward dividend income by $332.86. However, it is necessary to subtract out the dividend income loss from the sale of JCOUF stock, which amounts to $118.04 annualized. Observed in net terms, my overall forward annualized dividend increase from the quarter works out to $214.82.

While my stated theme for this year per my Five Year Plan has been to focus on simply doubling down on the stocks I already own, the MTRAF purchase was truly just a swap from a company I already owned into the parent company that now houses it. Aside from this new company, my focus through the remaining two quarters of the year will continue to be buying what I already own and already know well.

Q3 2018 Stock Considerations

The utility sector continues to show signs of weakness. The rising interest rate environment tends to pose a threat to the share price of these companies and comes as a welcome sign to someone such as myself; lower prices mean higher dividend yields. Both CDUAF and FTS have managed over 40 years of consecutive dividend increases; they have shown the ability in the past to succeed in interest rate environments of all sorts. If they continue to offer up juicy dividends, I will not hesitate to continue acquiring.

Over the very long term, I am bullish on the Canadian banking sector in general. I previously chronicled the differences between the Big Five Canadian Banks back in 2015, and continue to hold a thesis that BNS is one of the best of the bunch. Subject to pricing, I am considering adding another 20 shares in the near future.

Cash Position

As I mentioned recently in my June 2018 Portfolio Update, my bank extended its 2.5% promotional rate on my savings to December 31. As a result, I continue to feel comfortable building my cash position, while finding situational opportunities to acquire undervalued equities. I believe a cash position of even up to 30% can be warranted if value prices are difficult to find.

Conclusion

I have again had an acquisitive quarter in the markets. Five stock purchases bringing in well over $200 in net annualized dividend income adds more fuel to the dividend snowball I am rolling. I am actively looking for opportunities to continue investing as my cash position swells.

Heading into the second half of the year, it will be important to maintain my pace of investment to continue with the momentum I have generated.

Thank you for reading.

Disclosure: I am/we are long LONG TD, RIOCF, KO, JNJ, BCE, CM, CBYDF, BNS, TU, RCI, FTS, CDUAF, CNI, CP, WM, MCD, YUM, YUMC, PEP, WMT, V, TSE:CSH.UN.

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.

Additional disclosure: All Canadian companies are held in CAD on Canadian exchanges.

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.