Tag Archives: dividend growth

May Investment Income Update (+0.86%)

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Welcome to my May 2012 Investment income update. For anyone new to this site I generally try to post Investment Income Update close to the beginning of each month as an exercise in tracking my success at building a dividend growth portfolio. This year on of my goals is to grow my investment income by 20% using three basic pillars: dividend growth, strategic income reinvestment and finally by changing my asset mix. Assuming I can increase the amount of investment income generated faster than inflation and salary growth each year then I will be generating a larger and larger income stream over time. I like to think of this as my own personal pension plan. Without further ado here is this months investment income update.

May was a reasonable month for investment income growth through new purchases, however there was a large reduction in income from fixed income and dividend ETF’s (presumably as these funds rolled over their investments into lower yielding investments. This is a common problem with fixed income investments that is largely avoided when holding dividend growth stocks. Of course the possibility of a dividend cut is always available. With a little bit of luck and some research hopefully we can avoid that.

  • Dividend Growth (-0.90%)First of all not unexpectedly there were no dividend increases in the month of May. None of the stocks I own raised there dividends last May either. The negative dividend growth shown here highlights 3 different issues:
    1. How I track my investment income.
    2. How products choose to distribute investment income.
    3. Risks inherent in certain income producing products.

    I will quickly explain how each of these factors can lead to unpredictability in investment income.

    First, Since my investment income tracking is actually a projection (projected investment income) of what dividend income I should receive in the next 12 months, there are imperfections in the calculation. projected investment income is calculated by multiplying currently announced dividend by number of dividend periods in the year for each investment that pays a dividend. This works great for investments that pay predictable dividends such as dividend growth stocks. But if the income payed in each dividend period is not uniform this will cause the projected dividend income to bounce up and down. Perhaps a better way to track the investment income of such vehicles would be to use the trailing twelve month dividend payout, I will consider this as a future modification.

    Second certain products, ETF’s in particular may not pay the dividends evenly in each dividend payment period. XDV.TO is a good example of this, it seems to pay the dividends that have come in in a particular month causing significant variations in its payout ratio from month to month. This value then gets multiplied by 12 for the number of dividend payments in the year and thus can fluctuate widely. CDZ.TO does a better job of smoothing out the ups and downs, however do to portfolio re-weighting and other factors it also does not actually pay an ever increasing stream of income. However from year to year in a good dividend growth environment the trend should be to flat or rising dividends on a yearly basis.

    Finally most of the fixed income funds will eventually need to cut their payouts if interest rates are perpetually declining as they will be rolling over into new bonds at lower interest rates. This provided extra reductions in my investment income. What follows is a list of the ETF’s that had reductions in investment income.

    iShares Advantaged High Yield Bond ETF CHY.TO was down 8.3%, iShares Dow Jones Canada Select Dividend Index ETF XDV.TO down 10.1%, iShares S&P TSX Canadian Dividend Aristocrats CDZ.TO down 1.33%, iShares DEX Short Term Bond Index Fund XSB.TO down 1.1%, iShares DEX Real Return Bond Index Fund XRB.TO down 8.0%

  • New Purchases (+1.28%) Dividends received from Northland Power NPI-UN.TO also as there have been significant pullbacks in many stocks I am following. I added to my position of TCL.A this was the major contributor to the new purchase income.
  • Investment Mix (+0.0%) Again nothing to add here, due to the current volatile environment in the markets the funds which I am intending to convert into income holdings are below the level that I had set as the desired amount. I am going to have to make a decision about whether moving them to the income portfolio can provide me better results than leaving them where they are. I am strongly leaning toward yes as the answer in that case I should just cut my losses and begin deploying them into income positions

    • gvb

Investment Income May’s Conclusion

May was a slow month for dividend increases and a lot of headwinds were provided by the reductions in dividends in my income and dividend ETF’s. I don’t expect that these will provide much further downside and more likely will actually move back up over the remainder of the year. (At least the dividend funds). Finally there are some more attractive valuations appearing lately within the dividend paying universe this is allowing me to selectively purchase stocks which are sporting higher yields and more potential for capital gains. I am not deluded into thinking that valuations in general are cheap however if you are wondering why look no farther than the following article in the Globe and MailYes Virginia, The S&P 500 is overvalued written by Norman Rothery. I am a fan of the Shiller P/E as a way of determining relative valuation and also like to use CAPE in my calculations of company valuations. Now it would be nice to have the Shiller P/E for the S&P TSX as well for comparisons sake…

Until my next investment income update hope you are progressing on your path to becoming DividendRich

Full Disclosure: Long all securities listed in this article

For a full list of my current dividend income holdings click here

If this article is enticing you to act please read my Disclaimer

Enbridge Dividend Increase Declared +16%

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Enbridge Inc. Today announced a dividend increase of 16% brining its quarterly dividend to $0.285 from $0.245. This marks the 17th consecutive year of dividend increases for Enbridge.

Enbridge distributes natural gas to households and businesses and transports gas liquids through an extensive pipeline network in Canada and the United States. The company is organized into five business units. They are Liquids Pipelines; Gas Distribution; Processing and Energy Services; Sponsored Invenstments and Corporate.

Enbridge is in the Energy sector and Oil & Gas Storage & Transportation industry. It is a member of the S&P Canadian Dividend Aristocrats index.

Full Disclosure: None

For a full list of my dividend income holdings click here

Trancanada Dividend Increase +4.7%

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Today Transcanada Corporation (TRP.CA) declared a 4.7% dividend increase on its quarterly dividend from $0.42 cents to $0.44 cents. This marks the 12th consecutive yearly dividend increase for the company. The dividend has been raised from $0.80 annually in 2000 to the new level of $1.76 currently. This works out to an annualized dividend increase of 6.8%. It is worth noting that there was a dividend cut from $1.12 to $0.80 in early 2000.

TransCanada Corporation owns TransCanada Pipelines Limited and derives income from natural gas transmission, energy transmission, electric power generation. Its operations are predominantly in Canada, the United States and Mexico. TRP has it’s headquarters in Calgary Alberta.

TransCanada Corporation is in the Energy sector and Oil & Gas Storage & Transportation industry. It is a member of the S&P Canadian Dividend Aristocrats Index.

Full Disclosure: Long TRP

For a full list of my dividend income holdings click here

January Income Update (+0.21%)

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One of my goals for 2012 is to grow my investment income by 20%. In an effort to achieve that goal I plan to track my projected 12 month investment income on a monthly basis. I currently am not planning on releasing my exact dollar amounts but instead will work on a percentage basis. What follows here is my first in the series of posts about the income generated. Sites that I follow like Million Dollar Journey and Dividend Growth Stocks have their Net worth update and Dividend income update

I will flesh out the methodology used for each income update as I progress. This tracks income across all my investment accounts as that is how I record and calculate it. It does not track savings and checking accounts nor does it subtract the costs of my debts. Most of the investments that are to be tracked are meant for long term investing purposes, however there are some portions that may be sold as a general re-organization of my balance sheet. If this happens in the future I will adjust accordingly. Methodology will be presented at that time.

Since this income update covers all my portfolios it includes income from 3 main sources. Stocks, Bonds and Cash. Unfortunately to complicate things parts of the income are generated from etf’s, and mutual funds this complicates matters because depending on the fund or ETF they do not always have consistent payouts throughout the year. To make matters worse some of my holdings are in foreign currency and therefore will be affected by currency fluctuations. All of this leads the tracking of income to be more volatile than I would like. There will be months where dividend income goes down even though no company has cut their dividend. Currently my Holdings only lists individual stocks which I own. It doesn’t cover every other investment. I may modify this in the future especially if I determine that I am posting about instruments other than dividend stocks.

Alright, enough of the small talk lets get into the data. Since my goal is to grow my investment income by 20% in 2012 this means I need to grow income at a monthly compounded rate of 1.53%. I plan to achieve this income growth through 3 methods: Dividend growth, New purchases, and changing my investment mix.

  • Dividend Growth (+0.15%) During January one of my stocks CNR.TO increased it’s common dividend by 15% Also some different ETF’s changed their monthly payouts. Generally speaking the Bond ETF’s had slight decreases in their payouts and the stock ETF’s maintained or increased their dividend payouts.
  • New Purchases (+0.06x) Dividends received from Northland Power NPI-UN.TO and Algonquin Power Utilities AQN.TO were reinvested using a brokerage DRIP program (whole shares only) It is generally not my policy to enroll in drip programs
    as I would rather reinvest all my dividends in stocks which I deem to be attractively valued when purchased, it also complicates tracking yield on cost, and book values. However with these stocks I have continued the drip because I still feel that my allocation is low for my current purposes.
  • Investment Mix (+0.0%) This is where a large portion of my income gains should be generated this year however in January I did not make any changes to my overall investment mix. This will require transferring funds between accounts and finding new income generating investments which are attractively valued to invest in. Changing my investment mix achieves 2 main goals, 1. It causes investments in capital appreciation focused low income generating mutual funds to be replaced by income generating ETF’s and Stocks. 2. As I move a higher percentage of my holdings out of mutula funds the result is that the MER I am paying as a percentage of my total assets should fall. Sales of mutual funds which are transferred to my income strategy will be included here in future posts.

In conclusion my increase in income of only 0.21% During January was below my goal by a significant margin. Contributing factors include currency fluctuations, slow progress on identifying new investment opportunities to replace my existing none income holdings, and fluctuations in the payouts of the ETFs and bond funds. My trouble identifying investment opportunities stems from a strong run up in the stock market which has caused deteriorating value metrics I am hopeful that as the year progresses there will be some stock market corrections that will provide buying opportunities. Hopefully I will have more to report in my next income update.

10 Canadian Dividend Growth Stocks with a 10 year Yield on Cost of 10%

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Looking at yield on cost for a dividend growth stock can often identify stocks that warrant further investigation.  In keeping with my desire to provide readers more exposure to Canadian dividend stocks I decided to demonstrate that there are relatively high yielding dividend growth stocks in the Canadian stock universe.. As always please note that this is not a recommendation to purchase these securities. Always do your own due diligence on any stock purchase. Personal blogs and websites are no substitute for proper
research and security analysis, or for consultation with a financial adviser. I am not a financial adviser nor am I certified or qualified to give financial advice.

Here is a list, I didn’t have to stretch too far to make it although I dropped a couple names that had shortcomings such as a recent dividend cut or did not pay a dividend in the beginning of the 10 year interval. And I did leave one name in that didn’t pay a dividend at the start of the 10 year period.

Overall this list represents a variety of sectors and the characteristics very widely from low yield high dividend growth (SNC.TO) to medium yield medium dividend growth (FTS.TO) and finally high yield low growth. (REF.UN). The only thing that these stocks have in common is a fairly regular history of growing their dividends.

SNC Lavalin (SNC.TO)
Yield 1.9% | Dividend Growth 10 year 25.0% | Yield on Cost 10 year 10.3%

SNC Lavalin is a construction and engineering company in the Industrials sector. From the company’s website:

SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure, and in the provision of operations and maintenance services.

IGM Financial (IGM.TO)
Yield 4.7% | Yield on Cost 10 year 10.3% | Dividend Growth 10 year 10.4%

From the IGM website:

IGM Financial is one of Canada’s premier personal financial services companies, and one of the country’s largest managers and distributors of mutual funds and other managed asset products, with $122 billion in total assets under management. Its activities are carried out principally through Investors Group, Mackenzie Financial Corporation and Investment Planning Counsel. IGM Financial Inc. is a member of the Power Financial Corporation group of companies.

IGM is in the Financials sector and Asset Management & Custody Banks industry.

Fortis (FTS.TO)
Yield 3.6% | Dividend Growth 10 year 9.5% | Yield on Cost 10 year 10.7%

From the Fortis website:

Fortis Inc. is the largest investor-owned distribution utility in Canada, serving more than 2,000,000 gas and electricity customers. Its regulated holdings include electric utilities in five Canadian provinces and two Caribbean countries & a natural gas utility in British Columbia. It owns non-regulated hydroelectric generation assets across Canada and in Belize & Upper New York State. It also owns hotels & commercial real estate in Canada.

Fortis is in the Utilities sector and Electric Utilities industry.

National Bank (NA.TO)
Yield 4.2% | Dividend Growth 10 year 13.0% | Yield on Cost 10 year 10.7%

Canada’s sixth largest bank. Serves Consumers, small, medium and large business. It has a full array of operations including retail, corporate and investment banking.

National Bank is a profitable company in the Financials sector and Diversified Banks industry.

Telus (T.TO)
Yield 4.2% | Dividend Growth 10 year 13.9% | Yield on Cost 10 year 10.8%

Canada’s second largest phone company after Bell Canada. Provides wireline, wireless and television services throughout Canada.

Telus is in the Telecommunication Services sector and Integrated Telecommunication Services industry.

Canadian Real Estate Investment Trust (REF-UN.TO)
Yield 4.0% | Dividend Growth 10 year 2.1% | Yield on Cost 10 year 11.5%
From CREIT’s website

CREIT is a real estate investment trust focused on accumulating a portfolio of high-quality real estate assets and delivering the benefits of real estate ownership to Unitholders. The primary benefit is a reliable and, over time, increasing monthly cash distribution. CREIT owns a diversified portfolio of retail, office and industrial properties.

Canadian Real Estate Investment Trust is a profitable company in the Financials sector and Diversified REITs industry.

Rogers Communications (RCI-B.TO)
Yield 4.0% | Dividend Growth 10 year 39.6% | Yield on Cost 10 year 13.2%
From the Rogers website

Rogers Communications Inc. is a diversified Canadian communications and media company engaged in three primary lines of business. Rogers Wireless is Canada’s largest wireless voice and data communications services provider and the country’s only national carrier operating on both the world standard GSM and HSPA+ technology platforms. Rogers Cable is the second largest Canadian cable services provider, offering cable television, high-speed Internet access, and telephony products for residential and business customers, and a retail distribution chain which offers Rogers branded wireless and home entertainment services. Rogers Media is Canada’s premier group of category-leading broadcast, specialty, print and on-line media assets with businesses in radio and television broadcasting, televised shopping, magazine and trade journal publication and sports entertainment.

Rogers Communications is in the Telecommunication Services sector and Wireless Telecommunication Services industry.

Home Capital Group (HCG.TO)
Yield 1.9% | Dividend Growth 10 year 31.2% | Yield on Cost 10 year 17.9%
From it’s website:

Home Capital Group Inc. is a holding Company and operates through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposit, mortgage lending, retail credit and credit card issuing services. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Quebec and Nova Scotia.

Home Capital Group is in the Financials sector and Thrifts & Mortgage Finance industry.

Keyera Corporation (KEY.TO) * (starts at 5/26/2003)
Yield 4.3% | Dividend Growth 10 year 5.9% | Yield on Cost 10 year 18.4%

Keyera is one of the largest independent natural gas and natural gas liquids midstream businesses in western Canada.

Our operating businesses provide a range of gathering, processing, fractionation, storage, transportation and marketing services to the oil and gas industry. As a “midstream” business, Keyera is not engaged in exploration and production; rather we focus on providing essential services to producers and delivering natural gas liquids and other related products to key markets across North America. We provide these services through our two integrated business lines: Gathering and Processing, and the Liquids Business Unit. The Liquids Business Unit consists of the NGL Infrastructure and Marketing segments.

Keyera is in the Energy sector and Oil & Gas Refining & Marketing industry.

Reitmans (RET-A.TO)
Yield 5.5% | Dividend Growth 10 year 23.8% | Yield on Cost 10 year 36.1%

From the Reitman’s website

In the early 1900s, Herman and Sarah Reitman ran a small department store in Montreal. They would be extremely proud to see that their children and grandchildren have taken their family operated business to such levels and transformed it into one of Canada’s largest fashion retailers.

The Reitmans Company was founded after a second store opened in 1926. Since then, a number of stores have opened every year, and other banners have emerged, namely Smart Set, RW&CO., Penningtons, Addition-Elle, Thyme Maternity and Cassis. Today, the Company operates over 950 stores throughout Canada. Reitmans (Canada) Limited is a publicly traded company listed on the Toronto Stock Exchange (TSX: RET, RET-A).

Reitman’s is a profitable company in the Consumer Discretionary sector and Apparel Retail industry.

Final thoughts
In summary even though Canada has a smaller pool of public companies than are available in other countries there are companies with solid records of dividend growth. The 10 companies presented here represent a subset of companies that have grown their dividends consistently and quickly enough to have a ten percent yield on cost after ten years.

One final note is that just because these companies have a 10 year yield on cost of 10 percent doesn’t mean that they will have one 10 years from now KEY.TO didn’t even pay a dividend at the beginning of the period and RCI.B ramped up from an initial yield of .05% to a yield of 4.0 % currently. Dividend growth of 40% is likely not sustainable over the long term.

Are you aware of other Canadian companies with yield on cost of 10% or more after 10 years?

-DtB

Full Disclosure: Long RET.A and SNC

For a full list of my dividend income holdings click here