Our Mid-Year Dividend Growth Portfolio Updates

Jul. 13, 2019 2:09 AM ETAAPL, BCE, BLK, BNS, BRK.B, CVS, ENB, EWC, IVV, QCOM, RRX, RCI, TD, TRP, TU, VIG, WBA, BRK.A39 Comments32 Likes
Dale Roberts profile picture
Dale Roberts


  • I manage the retirement portfolios for my wife and me.
  • While there is some stock selection combined with ETFs, the consistent approach is very passive with no moves other than adding to existing holdings.
  • I ignore the news and all market prognosticators. I will stick to the notion that they do not know the future.
  • The portfolios continue to perform very well, taking full advantage of the rising market trends in Canada and the US.

After a lacklustre 2018, thanks to the December Santa Claus rally that turned upside down (Santa was very grumpy and stingy), the markets have rebounded in 2019 with a very robust rally. So much for sell in May and go away, as well.

Canadian stocks have attempted to keep pace with the US markets for the first time in a long time. We'd have to go back to 2016 to find a year when the Canadian Broad market indices (EWC) outperformed the US broad market (IVV). Thanks to portfoliovisualizer.com, here's the US market (IVV) vs. the Canadian market represented by the iShares Canadian Dollar ETF (XIC). The period is for 2019 to end of June 2019.

The Canadian dollar is up vs. the US dollar in 2019.

Portfolio 1 is IVV - US

Portfolio 2 is XIC - Canada

What's up with bonds?

Well up would be the operative word. Bonds have delivered a nice boost to the portfolios. While stocks and bonds can go down together, they can certainly go up together as well.

We hold three Canadian bond ETFs. Yes, I keep it simple by using Canadian bonds to manage the risks. There can certainly be many benefits with the additional diversification added by the US and international bonds. I'd have to admit to having a REIT shortage (portfolio hole) as well. Perhaps I should re-read my own articles such as The More 'Complete' U.S. And International Stock And REIT Growth Portfolio.

The three bond holdings are:

  • 1-5 year corporate bond ladder - ETF ticker: CBO
  • Broad based bond universe - ETF ticker: VAB
  • Hybrid corporate bond ETF (investment-grade, higher-yield) - ticker: XHB

For the six months period:

  • CBO offered total returns of 4.9%
  • VAB offered total returns of 6.3%
  • XHB offered total returns of 7.4%

The bond holdings which are largely VAB and XHB have contributed to portfolio gains in 2019. Of course, the chatter of a rising rate environment is over with rate cuts and holds dominating the conversations and messaging from the Fed and Bank of Canada. Yes, it appears most everyone got most everything wrong about the bond markets over the last several years. No one knows where the stock or bond markets or gold or oil will go. To guess is futile. To guess in the bond market would have made one "shorten up" and then in turn lessening the contribution of the bond component.

My Canadian Wide Moat 7 Dividend Portfolio

My readers will know that in my personal retirement portfolio, I hold a basket of just seven wide-moat/oligopoly Canadian stocks. For some background on that very concentrated (and some would say risky) approach, please have a read of The Dividend Growth Wide Moat 7 From Canada.

The oligopoly banking sector is "covered" by the Big 3 of Toronto-Dominion Bank (TD), Royal Bank of Canada (RBC) and Scotiabank (BNS).

The telco space is dominated by the Big 3: Bell Canada (BCE), Telus (TU) and Rogers (RCI). I hold Bell and Telus.

Canada's two big pipelines are Enbridge (ENB) and TransCanada Pipelines (TRP).

That basket of seven continues to outperform the benchmark Vanguard Canadian High Dividend Yield ETF. Here's the Wide Moat 7 vs. VDY for 2019 to end of June 2019.

The Wide Moat 7 is Portfolio 1

We see slightly better total returns with a lesser drawdown, though certainly it has been a smooth ride in 2019. If we look at the minor correction in 2018, we see that the Wide Moat 7 held up better than the benchmark.

But more important than the total return, or even the drawdown, is the dividend income received from those seven big dividend payers. I am in a transition stage as I left behind my pay cheque just over one year ago. At times, I will need those dividends for spending. You can read more on my one year look back, and this new life-work stage with Cut The Crap Investing - One Year Later.

The dividend growth has continued for all of the seven holdings. Here's a look back from 2014 to end of June 2019. The following is calculated with dividend reinvestment.

Portfolio 1 is the Wide Moat 7

Portfolio 2 is VDY

There is greater income and greater dividend growth with the Wide Moat 7. And in 2016 when VDY experienced a dividend reduction, the Wide Moat 7 offered some solid dividend growth. The concentrated portfolio is offering lesser drawdowns and greater dividend stability.

I do not expose my wife's portfolios to the concentration risk of the Wide Moat 7; she holds VDY and TSX 60, ticker XIU, in her personal and spousal accounts.

Total Returns For Our US Holdings

For our US holdings, I skimmed 15 Dividend Achievers (VIG) back in early 2015. I bought 'em without further evaluation, and I continue to hold 'em without any evaluation or guesswork. We'll trust the original portfolio construction, and we'll trust the management of those 15 companies.

Here are those 15 Achievers vs. the benchmark VIG from 2015 through to the end of June 2019. The Achievers are not rebalanced from an equal weight start. We let the winners run.

We see that the 15 companies essentially track the total index. It is mostly in a period of outperformance, but every now and then, a few of the holdings get hit hard, and being a concentrated portfolio, it can revert back to the index line. The strategy or goal is to have a portfolio that will deliver greater performance (less drawdown) in a major market correction. We have not seen any real test for the portfolio and US markets over the last five years.

In the first half of 2019, the Achievers 15 is greatly underperforming VIG at a rate of 12.8% vs. 18.6%. Walgreens (WBA) and CVS (CVS) continue to put pressure on the portfolio. Here are the returns of individual assets for 2019 to the end of June.

We see former loser Qualcomm (QCOM) now enjoying some better days. I need our last two losers of WBA and CVS join the party. I am sticking with those two even though CVS is in a dividend hold state. Walgreens has just increased its dividend for the 44th year of such wonderful behaviour, and perhaps that company is on its way to Dividend King status. CVS and Qualcomm have been removed from VIG. Remember this is a smart beta fund.

On the income front, the Achiever 15 (Portfolio 1) has offered greater income and dividend growth. Though once again, this is a total return approach and shares will also be harvested when the time comes.

We also have three picks by way of Apple (AAPL), BlackRock (BLK) and Berkshire Hathaway (BRK.A) (BRK.B). Berkshire is a generous position in my wife's spousal retirement account.

Apple has had a good 2019 delivering 26.5%, BlackRock at 21.3%, while Berkshire struggles with a 4.4% return. I hold Apple and BlackRock in my main RRSP retirement account.

The total returns

My personal retirement account has delivered 11.8% for the year to end of June and 13.2% to date. Once again there are some bonds in the mix that will lessen the overall returns, but I am certainly in that Balanced Growth Sweet Spot. These are time-weighted returns; I have shaved a few .00%'s with the cashing in of a few dividends. And given the robust rally, I certainly could have taken more of the gift that the markets offered.

And for my personal account, the big Canadian Dividends are the main focus. Though at some point, I am prepared to also harvest shares from the Wide Moat 7.

For my wife's combined retirement accounts, to end of June, the returns are 8.3%, and to date 10%. Her accounts are being weighed down in 2019 by that Berkshire holding and by Walgreens. She also has a more generous bond allocation. Sizeable moves in either direction can occur of course with more concentrated portfolios. No worries, the performance of her accounts offer a generous beat of blended benchmarks over the last three, four and five years and beyond. Many of the growth Achievers are concentrated in her main retirement account. Have a read of My Wife's Freaky Concentrated Market-Beating US Dividend Growth Portfolio.

It's been a very boring and solid year. How was your first half of 2019?

Author's note: Thanks for reading. Please always know and invest within your risk tolerance level. Always know all tax implications and consequences. If you liked this article, please hit that "Like" button. Hit "Follow" to receive notices of future articles.

This article was written by

Dale Roberts profile picture
Dale Roberts is the Chief Disruptor at the Cut The Crap Investing blog. Cut The Crap will introduce Canadians to the many sensible low fee investment options in Canada. Canadians currently pay some of highest investment fees in the world. Dale will help Canadians on the path to creating their own low fee portfolios or direct them to the lower fee managed portfolio solutions. Dale was a former Investment Funds Advisor and Trainer at Tangerine Investments, and is a still recovering former award-winning advertising writer and creative director. Dale has been writing on Seeking Alpha from 2013, covering asset allocation, dividend investing and retirement. As always past performance is not guaranteed to repeat. You should always conduct your own research or speak to a financial advisor. If you don't know what you're doing, don't do it. Dale's articles are not investment advice.

Disclosure: I am/we are long BNS, TD, RY, AAPL, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, ABT, BLK, WMT, UTX, LOW, NKE, PEP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.