- I've made four stock purchases this quarter with one being a new addition to the portfolio.
- I have once again hit a new record for dividend income.
- I am in a solid position heading into the home stretch of the year.
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 of 2009. I purchased 40 shares (80, split-adjusted) of Toronto-Dominion Bank (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 endeavour 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 came 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.
|Company||CAD Dividends ($)||Div Increase (%)|
|Toronto-Dominion Bank (TD)||53.60|
|RioCan Real Estate Investment Trust (OTCPK:RIOCF)||93.96|
|The Coca-Cola Company (KO)||68.07|
|Johnson & Johnson (JNJ)||75.15|
|BCE Inc. (BCE)||166.10|
|Canadian Imperial Bank of Commerce (CM)||15.96|
|Corby Spirit and Wine Ltd. (OTCPK:CBYDF)||50.60|
|Bank of Nova Scotia (BNS)||65.60|
|TELUS Corporation (TU)||36.75||3.96|
|Rogers Communications Inc. (RCI)||26.40|
|Fortis Inc. (FTS)||68.00|
|Canadian Utilities Ltd. (OTCPK:CDUAF)||78.66|
|Canadian National Railway Company (CNI)||6.83|
|Canadian Pacific Railway Limited (CP)||3.90||15.56|
|Hydro One Ltd. (OTCPK:HRNNF)||59.80|
|Chartwell Retirement Residences (OTC:CWSRF)||14.70|
|Metro, Inc. (OTCPK:MTRAF)||3.60|
|Brookfield Renewable Partners L.P. (BEP)||35.18|
|Company||USD Dividends ($)|
|Waste Management Inc. (WM)||19.77|
|McDonald's Corporation (MCD)||18.03|
|Yum! Brands (YUM)||11.94|
|Yum China (YUMC)||3.32|
|PepsiCo Inc. (PEP)||7.89|
|Walmart Inc. (WMT)||6.63|
|Visa Inc. (V)||1.79|
The third quarter has shown grand totals of $992.83 CAD and $69.37 USD. Tipping the scales at $992.83 in currency-neutral terms, I have once again hit a new milestone and am just shy of a nice rounded four-figure sum. As tends to be the case for us dividend growth investors (DGI), money invested early continues to pay off in increasing amounts over time. Given the nature of these equities, I am confident that this sum will continue to increase routinely on quarterly increments.
Though one of my smallest positions and despite its low yield, CP's 15.56% increase is a welcome sight. The company has firmly planted a stake in the sand and intends to demonstrate to investors that it fully intends to reward shareholders with payments that will increase over time. The two previous increases in 2016 and 2017 amounted to 42.86% and 12.50%, respectively.
The only other increase this quarter came from TU at 3.96% and, while minor on its own, the company tends to increase twice per annum. The January increase clocked in at 2.54% and so the overall increase in payment this year has grown from $1.97 annually to $2.10 or 6.6% in aggregate.
BNS: I rounded out my position by picking up another 20 shares at a total cost of $1,521.95. Based on the current quarterly dividend of $0.85 CAD, I am looking for this purchase to bring in $17.00 or $68.00 annually.
HRNNF: On weakness as a result of the company's shake-up in terms of CEO and Board, I decided to purchase another 60 shares for a total cost of $1,166.75. On the current quarterly dividend of $0.23 CAD, I expect these purchases to generate $13.80 quarterly or $55.20 annually.
BEP: The only net new addition to my portfolio recently, I picked up 105 shares in two tranches for a total outlay of $4,217.35. On the quarterly dividend of $0.49 USD, I estimate this should bring in approximately $67.16 quarterly or $268.65 annually in CAD based on figures taken from the September 28 and with the understanding that there will be fluctuations based on foreign exchange.
While I provided a more detailed look at my reasons for purchasing BEP back in August, I was ultimately looking to diversify my energy and utility holdings. I feel renewables will continue to be an increasing source of energy generation and I enjoy having the opportunity to get ahead of this trend while also earning a substantial dividend payment from the solid infrastructure that the Brookfield companies represent.
Quarterly Dividend Increase: In light of these four purchases across three positions, I have increased my annualized dividend income on a forward basis by $391.84 based on the blended yield of 5.67%. I should note that the dividends paid by BEP in the "CAD Dividends" chart represent only cash flow from the initial 55 shares I purchased as I purchase the final 50 after the ex-dividend date.
Though I strayed somewhat from my Five-Year Plan in making the BEP purchase, I feel it was a solid addition to the portfolio. I do intend for this to be the last new addition for the foreseeable future as I have other companies within my portfolio I would like to increase my position in.
Q4 2018 Stock Considerations
My theme for the moment is really to capitalize on market weakness wherever it comes about. The beauty of owning individual equities within a DGI portfolio is that I can sharpshoot opportunities rather than needing to wait for overall market declines as might be the case if I owned mutual funds or ETFs. In this way, I can bulk up on my solid companies as their prices pull back despite the fact that other companies may have elevated prices.
The Canadian side of my portfolio has continued to grow and will likely remain the overall emphasis for me given that is where I am domiciled. However, the top U.S. stock I have on my mind at the moment is PEP. The company is in an interesting position with Indra Nooyi stepping down after 12 years of service as CEO (though she did serve prior to that as CFO). The company has been well managed over time and I expect it to continue executing well on its vision. I believe foods and beverages of all varieties will continue to be consumed in the manner in which PEP offers them. As they continue to innovate and find opportunities to increase prices, I hope to be a shareholder (and to an increasing extent) for decades to come.
I remain committed to holding as much as 30% of my portfolio in cash if opportunities do not present. At the moment, I am hovering around the 17% mark which is probably reasonable at this point in time. I suspect that will creep up a bit if no obvious home runs materialize any time soon.
I still earn 2.5% from my high-interest savings account and while the cash may be idle, it is not altogether stagnating.
Adding nearly $400 in forward annualized dividend income feels great for a single quarter. I look forward to continue compounding that over time as I fuel my growing dividend snowball.
With one quarter left on the books, my portfolio stands in a healthy position to exceed all expectations I had at the start of the year.
Thank you for reading and I look forward to continue sharing this journey with you.
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.
This article was written by
Analyst’s Disclosure: I am/we are 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, MTRAF, BEP. 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.
All Canadian companies owned in CAD on Canadian exchanges.
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