Sunday, January 16, 2022

14 Monthly Paying Canadian Dividend Growers for 2022

The 15th and last day of the month are special to me as I receive dividends from some companies in my portfolio that pay monthly. On the 15th, I receive dividends from Granite REIT, Canadian Apartment REIT, CT REIT and Realty Income. On the last day of the month, A&W Revenue Royalties Income Fund pays me my monthly distribution. If you get pleasure from seeing regular dividends coming into your portfolio each month, and you especially enjoy seeing them grow over time, the following table might be of interest to you. 

Using the Canadian Dividend All-Star list from December 31, 2021, I determined the monthly dividend growers for 2022. To be included, companies had to pay a monthly dividend, increase their distribution at least once in the last 12 months, and have a minimum 5-year history of annually increasing their payouts. From the 93 companies appearing on the initial Canadian Dividend All-Star list, there were only 15 who paid dividends monthly (the rest are quarterly payers). Sadly, I had to remove Chartwell Retirement Residences who had not raised their distributions in almost two years <- probably a good thing given the pandemic they have been navigating. The resulting 14 companies included nine real estate investment trusts (REITs). As the payout ratios and valuations of REITs are usually calculated based on funds from operations (FFO) or adjusted funds from operations (AFFO), looking at the EPS payout is not particularly relevant for these companies. For your browsing pleasure, here are the 14 monthly dividend payers heading into 2022:

CompanyDividend Growth Streak1-Yr Stock Price ReturnDiv Yield % (CAD)

[USD Ex = 1.2641]
1-yr DGR
3-yr DGR
5-yr DGR
TTM EPS Payout Ratio %
Granite REIT1135.30%2.94%3.30%3.30%4.40%23%
Allied Properties REIT1016.20%3.87%3.10%2.80%2.50%59%
Canadian Apartment REIT1019.90%2.42%2.10%2.40%2.60%20%
Canadian Net REIT1020.00%4.25%17.40%14.20%13.30%35%
Firm Capital Property Trust REIT1025.20%6.55%1.90%3.50%3.80%26%
First National Financial Corp100.20%5.65%14.80%6.80%6.60%64%
InterRent REIT1026.40%1.98%5.00%6.30%7.10%15%
CT REIT910.50%4.85%3.80%4.10%3.90%169%
Parkland Corporation9-13.90%3.55%1.70%1.70%1.80%135%
Savaria Corporation932.50%2.61%4.40%9.10%17.80%105%
Global Water Resources Inc.813.80%1.72%1.00%1.00%2.50%225%
Badger Infrastructure Solutions Ltd6-16.40%1.98%5.00%6.40%10.10%n/a
Killam Apartment REIT537.90%2.97%1.70%2.60%2.80%29%
Summit Industrial Income REIT572.20%2.40%3.00%2.50%2.00%9%

As with any other screen, the above list is simply a starting point for further research. Clearly, a deeper dive is required based on the average EPS payout ratio over 70%. That said, the above list had an average return of 20% in 2021, including a 3.4% dividend payout and appears to be growing distributions by about 5% yearly, all very impressive figures.

As always, if you know of any other Canadian monthly dividend payers with a history of boosting their payouts, please reach out to me so that I can correct the above list. 

Monday, January 3, 2022

Portfolio Results for 2021 & Goals for 2022

My portfolio suffered through the storm during early stages of the pandemic, as evidenced by my results from 2020  when my forward dividend income increased by $1,675, and my dollar-weighted average organic dividend growth was only 0.85%. Based on those relatively weak results compared to my historic standards, I set a modest goal to increase my forward dividend income by $3,000 in 2021, while targeting a dollar-weighted average organic dividend growth rate of 5%. As the worse of the storm passed, and the rainbow emerged, I ended up raising my forward dividend income by over $4,300 in 2021, and realizing a dollar-weighted average organic dividend growth rate of 9.23%

How did I manage to put up such lofty results? First, I'll be honest and say a lot of it was luck. One of my largest holdings, A&W Revenue Royalty Income Fund raised their payout from 10 cents per month to 15.5 cents per month during 2021, which definitely helped both my dividend growth rate and forward dividend income. When OSFI finally allowed the Canadian banks to raise their dividends and buy-back stock after their year end results, all five of my bank holdings boosted their payouts between 10.3% and 25.5%. Lastly, if you have followed my transaction journal, you likely noticed that my strategy of buying stock monthly, and adding to my winners, has helped grow both the forward dividend income and average dividend growth rate of my portfolio. 

Based on my results from 2021, and knowing I have more cash in my RRSP than I'd like right now (I received the proceeds from American Tower's purchase of Coresite's shares on December 31st), I'm aiming for a pretty lofty $4,600 increase in forward dividend income in 2022, while keeping my targeted dollar-weighted organic dividend growth rate at 5.0%. It's probably a good time to mention than I continue to count all US-dollar dividends I receive at a 1-to-1 exchange rate as if they were Canadian-dollar dividends. This impacts 15 of my 36 investment holdings. 

I made the most of my down time over the holidays and calculated some portfolio metrics for 2021 that I thought I'd share with you below.

- My internal rate of return on my portfolio in 2021 was 26.5%. Although this sounds awesome, it's a mere 4.5% higher than the 22.0% benchmark return, I get from calculating 66% of the Canadian dividend aristrocat ETF 'CDZ' and 34% of the US S&P dividend ETF SPY (the actual weights of Canadian and U.S. holdings in my portfolio). 
- The value of my portfolio rose by 33.3% in 2021, far better than the 6.7% in 2020. National Storage Affiliates and Microsoft were two of my best performers.
- The dividend yield of my portfolio was 3.4% in 2021, down from 3.9% in 2020, 3.9% in 2019, 4.2% in 2018 and 4.0% in 2017. The increase in the value of my holdings and larger amount of cash than usual at year end both drove the portfolio yield downward.
- Cash represented 4.4%, of my portfolio at year 2021, up from 4.2% at year end 2020, much higher than the 1.6% at year end 2019, and 2.7% at year end 2018. Receiving the value of my Coresite holding in cash on the last day of the year was a big driver of the relatively large amount of cash.
- My holdings raised their dividends 48 times during 2021, with Realty Income doing so 5 times, and A&W Revenue Royalties providing the largest percentage increase (55.5%).
- I conducted 23 trades in 2021, including 4 sells. This is down from 32 trades in 2020, and close to the 24 conducted in 2019. Going forward, I think averaging about two trades a month seems appropriate. 
- I ended the year with 36 positions, down from 37 in 2020, and down from an all-time high of 40 positions at year end 2019. I'd like to see this number keep declining each year.

I'll remember 2021 as a stellar year in terms of my investment results, even if it was a challenge on many other fronts. I wish all of you the best of luck in 2022 and hope everyone gets their rainbow and associated pot of gold this year!

Wednesday, December 22, 2021

7 Canadian Companies Providing Dividend Growth Guidance

In 20172019, and last year, I shared a list of Canadian companies that provide dividend growth guidance. I've decided to update this list as I find dividend growth guidance, specifically when it is expressed as a percentage, useful in helping me assess the capital allocation plans for companies, introducing a soft control by which to judge management's actions, and assisting me in projecting the organic dividend growth rate of my portfolio for 2022. 

The table below could be considered a starting point for further research. Please, let me know of any other Canadian companies that provide dividend growth guidance. I'll gladly update the table with your input. Lastly, the percentage beside the company's ticker symbol in brackets is the amount of the 2021 dividend increase.

TC Energy Corp (TRP - 7.4%)                     
Dividend growth of 3-5% (down from 5-7% previously)
Emera Inc (EMA - 3.9%)
Dividend growth of 4-5% per year through 2024
Telus Corp (T - 5.2%)
Dividend growth of 7-10% per year through 2022
Capital Power Corp (CPX 6.8%)
Dividend growth of 5% per year through 2025
Fortis Inc (FTS - 5.9%)
Dividend growth of 6% per year through 2025
Brookfield Renewable Partners (BEP.UN - 5.0%)
Annual distribution increases of 5-9%
Brookfield Infrastructure Partners (BIP.UN - 5.2%)
Annual distribution increases of 5-9%

For those of you with a sharp eye, you may notice two companies missing from last year's list. Enbridge and Algonquin Power & Utilities Corp. Sadly, both companies moved away from providing percentage-based dividend growth guidance in their recent investor day presentations. Enbridge indicated that over the next three years, their dividend growth will be "up to level of medium-term DCF (distributable cash flow) / share growth". On the same slide of the presentation, the company indicates that they expect DCF growth per share to be in 5 to 7% range over the same time period. I chose to drop them from the above table as including the qualifier "up to" and knowing the company makes some subjective judgements in calculating their DCF each quarter. Similarly, Algonquin moved away from providing the crystal clear 10% dividend growth guidance, to indicating that their dividend growth will be based on "Sustainable long-term payout ratio target of 80-90% of normalized earnings". It is worth noting that the company expects their adjusted EPS growth from 2022 - 2026 to be between 7-9%. Again, given the company can wiggle anywhere within a 10% band of "normalized earnings" (another non-GAAP term), I don't feel comfortable including them in the above table.

As more companies start to move away from providing clear, percentage based dividend growth guidance, I may have to draft another entry to cover some companies who refer to a special ratio, or another less structured way to provide guidance on their distribution growth. It's definitely sad to see Algonquin and Enbridge move away from providing simple dividend growth guidance. 

Sunday, December 12, 2021

Never Selling a Stock

Despite having my annual 'Canadian Companies that Provide Dividend Growth Guidance' post almost complete, I decided to switch course and post about a tweet that has been caught in my mind for the past two weeks.

Before explaining the benefits and drawbacks of never selling a stock holding, I can't recommend highly enough following The Conservative Income Investor's blog, twitter and Seeking Alpha page. I'd go as far as to guess that subscribing to Tim's Patreon would likely pay literal and figurative dividends. 

The most obvious benefit of never selling a stock is nicely summed up in Tim's tweet: the lost return on a potential winner could not only be devastating for your portfolio's prospects, it could be an error of commission for which you never forgive yourself. Having sold a position in Home Depot in 2012 for $63 (representing an ~150% gain after five years of holding the company), it's been heart-breaking to see it march up to the current price of $415. Had I not sold, Home Depot would represent my largest position, and would have been a steady gainer and dividend grower over the past nine years. Sadly, I've sold many other companies that went on to produce huge gains for more patient investors than me. 

A couple other benefits that come to mind if one chooses not to sell any holdings are the time savings from not worry about when to sell, no taxes would be due if investments are held outside of registered accounts, no transaction costs from selling, and having a more diversified portfolio assuming you continue to buy shares in other companies.

The biggest drawback I think to following Tim's advice is that your portfolio holdings would balloon to a number that would make it difficult, if not impossible, to monitor your various investments. Having cut my number of holdings down from 40 to 37 in the past year, I still hold too many positions to monitor each effectively. The other material downside I see to never selling is continuing to hold companies that changed their strategic direction to something you don't support or have an opinion on. As an example, if I continue to hold the shares of Orion Office REIT that were spun off after the VREIT and Realty Income merger, I'd be making a bet on the recovery of the commercial office space market in the United States, something I feel particularly ill-equipped to do. 

Other drawbacks in never selling shares is companies you hold include not being able to take advantage of tax loss harvesting (assuming positions are held in unregistered accounts), having position sizes that don't reflect your current convictions, and potentially lacking liquidity to take advantage of market displacements. 

Although I haven't come to any conclusions as to whether I'll start following the "never sell" advice from the Conservative Income Investor's tweet, it's something I'll continue given the pain and lost return of selling a big winner is difficult to overcome.

Friday, November 26, 2021

My Three Smallest Stock Holdings

After my last entry explored my three largest holdings, I thought it would be fun to write about my three smallest positions. Do these companies represent my lowest convictions? Am I uncomfortable with holding these companies? Why do I keep these positions in my portfolio? These are questions I think the below descriptions will help answer.

Smallest position: Orion Office REIT Inc. (using USD / CAD exchange rate of 1.28)

A couple days after Realty Income completed their acquisition of VEREIT earlier this month, Orion Office REIT was spun-out and the shares appeared in my account in a ratio of one for every 10 Realty Income shares I own. Based on the preliminary financials, this looks like a stable office REIT.  Since I received the shares, they’re down about 20% as other Realty Income holders see a small number of shares in this pure-play office REIT appear in their accounts and subsequently get rid of them. My instinct was to sell them as soon as I received them, but I held back thinking I’d wait to see where the shares settle price-wise. That was probably a poor decision, but without any big plans to invest in US stocks at the moment, I can afford to take some time to see how Orion does in the short-term.


Second smallest position: Omega Healthcare Investors, Inc.

Omega has a couple factors contributing to being my second smallest position. The fact the share price is down over 30% since reaching it’s 52-week high earlier this year is a material contributor. Omega has at least one operator of their assisted living and nursing facilities in bankruptcy proceedings at the moment. I haven’t added to my position since 2015, given my lack of conviction that the company can return to the type of distribution growth they did in their best days, boosting distributions by a penny each quarter. Instead, distributions have been flat for over two years now, despite the company still bragging about their streak of distribution growth. I’ll admit that I have considered selling this REIT multiple times, but it is hard to replace their current 9% yield, that is covered by FFO even during difficult times due to covid-19 and rent collection challenges from operators. I could still see myself getting rid of this in the next couple months, if an opportunity to reinvest the capital with better growth prospects presented itself.


Third smallest position: The Coca-Cola Company

For context, my level of comfort holding onto my shares in Coca-Cola is much, much greater than Omega. Their sales have bounced back nicely from coronavirus linked lows, to around the level they were back in 2019. That said, their elevated EPS payout ratio is a bit scary (102% currently), as is the fact that shares are selling for 26X earnings. Although I haven’t added to my position since initiating it in 2014, I have thought about adding lately. Yes, their dividend growth is barely tracking inflation, but the performance of their shares over the last two years has been resilient. Given this might be a nice play on finally getting over the covid-19 pandemic throughout the world, I could imagine adding a small amount to this position in the short-term so that it would be approximately equal to my next smallest position, the Canadian Imperial Bank of Commerce.


In summary, it wouldn’t shock me to sell either Orion or Omega before year end, as opposed to Coca-Cola where I’d consider adding. It was interesting for me that all my smallest positions are US companies, but maybe shouldn’t have been given limited funds each year to invest in my RRSP.