Friday, October 23, 2015

Thoughts on the MoneySense Retirement All-Star Stocks for 2015

The only magazine I subscribe to is MoneySense. Each year, my favorite issue lists the 100 Retirement All-Star Stocks. The focus is on dividend stocks that have delivered a steady stream of income year after year. The best stocks are given an 'A' while the second best group are given a 'B'.  From 2007 (when the first list of was published) to 2015, 'A' stocks have generated a 117.5% return (included re-invested dividends), while 'A' and 'B' stocks increased 67.2%. In comparison, the S&P/TSX Composite Index ETF (XIC) increased 25.1% while dividend-oriented iShares Canada Select Dividend ETF (XDV) rose 35%.

Although the weighting of their ranking method is not released, only quantitative criteria are used in their calculations. Quantitative factors include dividend yield, dividend growth, P/E, dividends/earnings, debt/equity, price / cash flow, price to book, one-year return, and five-year return.

Seven companies were given an 'A' grade this year:
Bank of Montreal
Bank of Nova Scotia
Genworth MI Canada
Great-West Lifeco
Power Corp of Canada
Sun Life Financial
Toronto-Dominion Bank

HOLY FINANCIALS BATMAN! Three out of the seven companies are banks, two are general insurance companies (GWL and Sun Life), Genworth is a mortgage insurer, and Power Corp of Canada is a financial conglomerate (which I tend to think of as an asset manager). Although any one of the seven would make a good addition to a portfolio, you'd definitely want to make an effort to further diversify outside of the financial sector.

Fourteen companies were given a 'B' grade in 2015:
Brookfield Asset Management
Finning International
First Capital Realty
IGM Financial
Industrial Alliance Insurance
Manulife Financial
National Bank of Canada
Potash Corp of Saskatewan
Power Financial
SNC-Lavalin Group
TMX Group
Whitecap Resources

Again, financials play a huge role in the 'B' list accounting for nine of the fourteen companies. The non-financials contain some interesting names like ATCO (watch list company), Finning (showing up on many of my Canadian dividend screens), and SNC (I've owned in the past).

It's odd that the only Canadian major bank not represented on either list is Royal Bank, the largest bank in Canada. Another oddity about the list is that it contains ATCO, yet not its subsidiary Canadian Utilities with a higher dividend yield and better 5-year performance which was given a 'D'.  The last observation is that MoneySense once again gave Rogers Communications, their owner, a 'D'. Obviously, there's something to be said for demonstrating editorial independence!

Do you own any of the retirement all-star stocks for 2015? If you had to buy just one of them, what would it be?

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