Thursday, March 31, 2016

Update on 10 Canadian Dividend All-Stars for 2016

Instead of a boring, cut and paste, repetitive entry recapping my March portfolio activities (sold Inter Pipeline Ltd., bought a little more Enbridge Income Fund, received two dividend raises from Bank of Nova Scotia and Realty Income), I thought it would be fun to take a look back at my 10 stock picks for 2016 from the Canadian Dividend All-Star list. Before the markets opened in on January 4th 2016, I used the above-mentioned spreadsheet to pick 10 stocks, one from each sector represented on the list.

Before presenting the results, my disclaimers from the initial entry remain quite valid. Certain sectors contained only a small number of potential companies, namely Real Estate (3) and Technology (2). Additionally, my knowledge of the Basic Materials and Technology sectors is extremely limited...and even that might be giving myself too much credit. Therefore, my picks in those two sectors were based mainly on financial ratios and technical information. Lastly, I only own three of the companies I selected (Enbridge, Telus, and Bank of Nova Scotia), and would need to perform more due diligence on any of the remaining seven companies before committing capital to it.

Without further delay, here are the results of my picks through three months.

Although the 8.6% average total return (assuming an equal weight for each pick) is impressive, some context is needed. The S&P/TSX Composite Index was up 3.8% (excluding dividends) over the same period. Adding 400 to 600 basis points to account for dividends results in a comparable gain of 4.2 - 4.4%. A more apt benchmark, the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (TSE:CDZ) rose 3.5% (excluding dividends) and made three distributions that bump its total return up to 4.6%.

One observation that makes me quite happy is that the three companies which I own (ENB, T, BNS) all returned over 10%. That said, my best pick Metro, which operates grocery stores, one of which is literally across the street from my house, did not impress me enough to invest in, probably due to their paltry 1.2% dividend yield (the lowest of the 10 companies). Its also interesting to note that my picks from the sectors where I feel least knowledgeable, Agrium (Basic Materials) and Evertz Technologies (Technology) performed the worst. There is probably something to be said with sticking to companies in sectors you understand.

I would be remiss if I did not mention a pick I made when a fellow blogger from my area asked for my top investment pick for 2016 (thanks again for including me R2R!). My pick, TransCanada Corporation, is up 13.5% (including a recently increased dividend) from the start of the year. Although I thought about increasing my stake in TransCanada when it was on sale in January, I did not have the conviction to pull the trigger. TransCanada's recently announced acquisition of Columbia Pipeline Group for $13B was definitely not on my radar of possibilities at the start of the year. That said, if the transaction helps move the company away from power generation, and causes management to be more focused in their capital allocation decisions, it could be beneficial going forward.

Although March was a slow month for my investment holdings, my "picks" are over achieving my wildest expectations. Maybe next year I should put some money behind my picks?

How have your stock picks heading into 2016 performed? 


  1. Always happy to see a Canadian bank in the mix. I just added to my RY earlier this week and continue to like the large Canadian banks going forward. Thanks for sharing.

    1. Thanks for stopping by Keith. I'm still holding onto my overweight position in RY as I'm having a hard time identifying more attractive opportunities. As a long-term investment, it's hard to bet against the big Canadian banks.

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