Q2 2019 Dividend Report

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My Background

Each investor faces a different set of circumstances. Now 32, 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 stands out as it is far more predictable that a healthy company might increase its dividend by 6% than to make any sort of prediction about stock price volatility in the near term.

On this basis and from my initial foray into the markets with TD, I’ve built a portfolio of 27 cash flowing equities. My goal is ultimately to have a stock market portfolio that 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 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. The companies I own are committed to rewarding shareholders and I love nothing more than to reinvest back into them to further increase the compounding power in my portfolio

I made two purchases of dividend-paying companies this quarter. They are both top notch companies, the only sort I ever really want in my portfolio.

Please note that all Canadian companies are owned in CAD on Canadian exchanges. KO and JNJ are owned in CAD within my portfolio, though they reside on the NYSE.

CAD Dividends

Company CAD Payments ($) Div Increase (%)
Toronto-Dominion Bank (TD) 59.20 10.45
RioCan Real Estate Investment Trust (OTCPK:RIOCF) 93.96
The Coca-Cola Company (KO) 71.02 2.56
Johnson & Johnson (JNJ) 80.00 5.56
BCE Inc. (BCE) 174.35 4.97
Canadian Imperial Bank of Commerce (CM) 16.80 2.94
Corby Spirit and Wine Ltd. (OTCPK:CBYDF) 50.60
Bank of Nova Scotia (BNS) 87.00 2.35
TELUS Corporation (TU) 38.15
Rogers Communications Inc. (NYSE:RCI) 27.50 4.17
Fortis Inc. (FTS) 72.00
Canadian Utilities Ltd. (OTCPK:CDUAF) 84.54
Canadian National Railway Company (NYSE:CNI) 8.06
Canadian Pacific Railway Limited (CP) 3.90
Hydro One Ltd. (OTC:HRNNF) 62.79 5.00
Chartwell Retirement Residences (OTC:CWSRF) 15.00 2.04
Metro, Inc. (OTCPK:MTRAF) 4.00
Brookfield Renewable Partners L.P. (BEP) 132.36

USD Dividends

Company USD Payments ($) Div Increase (%)
Waste Management Inc. (WM) 21.79
McDonald’s Corporation (MCD) 20.71
Yum! Brands (YUM) 13.93
Yum China (YUMC) 3.98
PepsiCo, Inc. (PEP) 8.12 2.96
Walmart Inc. (WMT) 13.52 1.92
Visa Inc. (V) 2.13
AbbVie Inc. (ABBV) 40.02

Dividend Summary

My tallies this quarter include C$1,081.23 and U$124.20, which combine for a currency-neutral grand total of $1,205.43. This is my highest quarterly total yet. The Canadian figure is slightly down from Q1, but that was expected since I received a special dividend from CBYDF back in January for just over C$100 which wasn’t repeated this time around.

It feels nice seeing the U.S. figure top $100 for the first time ever. Given that I live in a border-town beside the U.S., I have a general goal of earning a few thousand per year in USD, which could eventually finance my day excursions and other outings South of the border.

Standout

This was the first dividend boost I have received from RCI since initiating my position back in 2015. I had initiated that position at the same time I made my first purchase of TU (which since that time has provided eight dividend increases) and been underwhelmed by RCI’s dividend growth, despite its capital appreciation. I am hoping this signals a return to dividend growth moving forward, as the company’s management feels more comfortable with its debt position.

Quarterly Buys/Sells

I am pleased to say that I once more did not sell a single stock over the course of this quarter. My goal always has been—and remains—to compound my dividend growth via regular purchases of high quality equities. I view building my portfolio as akin to growing an apple tree. If I expect more, larger apples each year, then it is imperative to keep the tree healthy and avoid cutting from the limbs for short term purposes.

My market activity was tepid overall with only two buys, though it feels good to remain on the buying side of the equation.

TELUS Corporation (TU): I grabbed an additional 20 shares for a total of C$999.95. With the quarterly dividend of C$0.5625, I am expecting C$11.25 quarterly or C$45.00 annually from this purchase.

The Walt Disney Company (DIS): Following the announcement to join the streaming arena with Disney+, I initiated a position in DIS with 10 shares at a cost of U$1,353.24. On the U$0.88 semi-annual dividend, I am expecting U$8.80 roughly every six months or U$17.60 annually. I discussed my rationale for this purchase in greater detail in my May 2019 Portfolio Update.

Q3 2019 Stock Considerations

It is easy to feel like a broken record as far as the market’s elevation, but I’ll say it again: real buying opportunities remain difficult to find. I feel like ever since kicking off my dividend growth journey in 2009, the market has been on a relatively unimpeded march higher. There have been a few hiccups along the way, no doubt, but the real bargains aren’t there at the moment where I’d like them.

For example, I would love to add more stock to my V position, but over the past five years it has run from the mid $50s to the mid $170s:


Data by YCharts

Heading into the coming months (and still without a crystal ball), I hope to continue nibbling at growth opportunities while acknowledging the downside to overpaying on a purchase. I can certainly empathize with Warren Buffett’s sentiment that deploying large amounts of capital at the moment is a challenging prospect.

Cash Position

As long as it remains true that the market is strong, I hope to continue building cash while still putting bits of it to work over time. Heading into Q3, I’ll be earning 2.4% on parked capital. I find this to be an acceptable rate of return at the moment given interest rate movements.

Conclusion

It has been a solid quarter on the dividend front. Any time a new high is reached, it feels great. It is important to never take for granted the steady cash flow provided by high quality companies. Good times are great, but there are no givens in the investment world.

Dividend increases remain relatively lower in comparison with 2018 which provided a bonanza of out-sized boosts, as it seems the party related to the tax-decrease for U.S. companies last year has calmed.

I have plenty of cash I’d like to invest if the market will provide some favorable opportunities. Even if it doesn’t, I intend to remain active with a few targeted selections along the way. Every dollar deployed is one step closer to financial independence.

Thank you for reading.

Ryan

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, CWSRF, MTRAF, BEP, ABBV, DIS. 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.