Friday, June 28, 2013

Updated Investment Goals at Q213

In one of my first posts in January, I outlined my three investment goals for 2013. Since it's officially the end of the second quarter, it's time to provide another update of how I'm progressing toward my goals.

1. Get Rid of Non-Dividend Growers
Since getting rid of Power Financial Corp in Q1, I'm still at 50% of this goal, as I continue to hold on to Transalta.  I briefly considered selling Transalta before their ex-dividend date earlier this month, but held on and watch it drop a bit further. It's still a stock I'm looking to sell, I'm just waiting for a better price to pull the trigger. Despite the 8% dividend yield, Transalta hasn't grown their dividend in years, and likely won't given industry conditions.

2.  Increase my Dividend Income and Total Portfolio Value by 25%
Due to some contributions to my TFSA, RRSP, and my unregistered portfolio, along with some strong returns from my US dividend growers, my portfolio value is up by 20.4% from its value at December 31, 2012. There's also some US dollar currency gains that have inflated my return number. With respect to dividend income, I'm closing in on my goal, with dividend income up 23% from YE12. By shifting some US capital around in H213, and through regular dividend increases, I expect to overshoot this goal by year end.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
Due to a recent drop in telecomm share prices in Canada, US dollar appreciation compared to the Canadian dollar, and strong performances by a couple of my US holdings (i.e. Western Union and Microsoft),  I've already increased the percentage of my portfolio invested in US stocks from 20% to 26.98%. I'll have to keep an eye on how this turns out at YE13, as the US/CDN exchange rate makes it difficult to predict.

The last goal I set forth in my January post was to blog at least once a week. I've had a difficult time thinking of topics to write about each week. I've missed a couple weeks at this point, but still average a post a week. Although I'm happy to see the great majority of my stocks have gained ground in the first half of 2013, I'm having an increasingly difficult time find good companies to buy at reasonable valuations, particularly US based companies. I'm hoping the Canadian market stays depressed over the summer, so I can add to some holdings I'm particularly excited about.

Bought Potash Corp (TSX: POT) and Telus (TSX: T) for RRSP

Verizon is coming, Verizon is coming! With news that Verizon was looking to enter the Canadian wireless market via acquisition of a couple bit players, the market over-reacted and sent shares of the big three Canadian telecomm players down on Wednesday and Thursday. Don't get me wrong, I think Verizon can make a splash as a carrier in Canada, particularly out west where they could offer subsidized handsets at cheap prices and free US roaming. However, having watched Rogers and Telus shares drop over 10% in two days, I decided to stock up with some more Telus shares that came with a mighty 4.6% dividend yield. Even if they lose some market share to Verizon down the road, Telus will remain a great wireless company. Plus, my bet is that if Verizon ever gets to be too dominant of a threat to the incumbents, the federal government will come riding to the rescue with protectionist measures.

While the Canadian market slumped, I also initiated a position in Potash Corp ("POT") that I'm pretty excited about. I've had Potash on my watch list for six months, during which time they've twice increased their dividends, and reported very solid results. Despite the good results and strong metrics, the market has sent their shares near a 52-week low.  I like this industry leader that provides me with some diversification into a new sector. With a yield of 3.5%, and a reasonable P/E of 15, I'm happy to add this great Saskatchewan company to my RRSP portfolio.

Although I originally had the extra cash in my RRSP pegged to buy some shares in US companies, with the Canadian dollar slumping compared to its US counterpart, I decided to invest in Canadian companies instead. It feels great to buy quality companies at discounted to wait and watch the dividends roll in :)

Wednesday, June 19, 2013

Bought: National Bank of Canada

With the proceeds of my sale of SNC Lavalin Group (“SNC”) shares last week, I decided to increase my holdings in National Bank of Canada (“NA”) in my TFSA. There were a couple reasons I felt comfortable investing more in NA:
-          The dividend yield (4.7%) coupled with the payout ratio (38%) and history of dividend growth (10% over last year, and 8% average over the last 5 years) are all very appealing to me.
-          Part of my goals for this year was to increase investments in companies where I was comfortable buying more stock at any time. National Bank falls into this category being a systematically important bank in Canada, given its history of impressive results, and based on the dividend numbers above.
-          Compared to its peers, NA trades at a lower P/E (8.7X), thus giving me a larger margin of error.
-          Compared to SNC, NA has a clear business reputation, and the yield is better than double of that provided by SNC.

All in all, I’m very happy with the redeployment of my capital from SNC to NA. I’m hoping NA’s stock stays flat for a while, as I’m looking to exit a position in Dundee REIT to add more shares of NA (or TD) in my TFSA.

Wednesday, June 12, 2013

Sold: SNC Lavalin Group

SNC Lavalin Group ("SNC") represents one of the few dividend growth stocks I've ever sold.  However, when the price rose above $45 earlier this week, I didn't hesitate in selling a position in my TFSA. My two main reasons for selling are the low dividend yield (about 2.0% at the time I sold earlier this week) and their ongoing ethics/bribery/corruption problems. Of the two, I could have looked past the low dividend yield (due to the impressive history of dividend growth), had the company not continually been in the media for all the wrong reasons over the past 18 months.

What's most depressing is that I still believe in the long-term potential of this Canadian construction company. Having said that, I tend to believe the nature of the projects they bid on globally leads them to tricky situations...and they haven't proven less than adequate at handling these ethical dilemmas. Even with new anti-bribery/corruption policies and processes in place, my bet is that their reputation will take them decades to restore. 

As a side note, I still hold a small position in SNC in my non-registered account, but it's likely one I'd think of selling as well if the price of SNC stays strong. There are simply better, more ethical, larger yielding Canadian dividend growth plays.