Passive Income Update for August 2019: 4.9% YoY Increase, 34% YoY TTM Increase

Our family was on vacation in August visiting Alberta—beautiful province!!—but while we were relaxing, the portfolio was still churning out returns. For the month of August, $509 was received in passive income. The drop relative to previous months can be attributed to this being a “non-quarterly month”: many companies pay quarterly dividends, and only a handful of my holdings pay monthly dividends/distributions.

Ticker Company Previous Year Return Current Year Return Variance Variance % Comments
BMO.N Bank of Montreal $47.50 ($47.50) (100.0%) Moved to CAD account, so captured I BMO.TO
BMO.TO Bank of Montreal $228.48 $296.64 $68.16 29.8%
C.N Citibank $4.11 $4.75 $0.65 15.7%
CIG50221.TO Sentry Small/Md Cap Income Fund A $40.02 $40.02 100.0% Replaces NCE721.TO
DII-B.TO Dorel Industries Class B $20.76 ($20.76) (100.0%) Paid in July 2019
EMA.TO Emera $25.73 $28.25 $2.52 9.8%
HYG.N iShares iBoxx $ High Yield Corporate Bond Fund $11.00 $11.02 $0.02 0.2%
NCE721.TO Sentry Small/Md Cap Income Fund $39.00 ($39.00) (100.0%) Replaced by CIG50221.TO. In 2018 the June transaction was delayed to July, so July 2018 is overstated.
VAB.TO Vanguard Canadian Aggregate Bond Index $64.84 $67.36 $2.52 3.9%
VRE.TO Vanguard MSCI REIT $30.75 $45.59 $14.84 48.3%
WRK.N WestRock $11.24 $12.12 $0.89 7.9%
XBB.TO iShares DEX Universe Bond Fund $3.29 $3.33 $0.04 1.2%
TOTAL $465.93 $509.09 $43.15 9.3%

Overall the trend is still an increase compared to this time last year, but for a true comparison some adjustments need to be made. First, last year Dorel Industries paid its dividend in July whilst this year it paid its dividend in August. Second, some of my shares in BMO were in my US$ brokerage account at this time last year, so I could receive the dividends in USD (which subjected me to currency exchange risk); I’ve since moved those shares to my CAD$ brokerage account. When I adjust (removing Dorel, merging the BMO line entries) to do a true year over year comparison, on a ticker-by-ticker basis I am actually up 9.3%.

On an even better note, trailing twelve-month (TTM) income was $9,600 last month, but with the returns this month and the increases throughout the year, TTM is now $9,700. That gain represents a 1.1% increase month to month, and even more impressive: an increase of 34% over the trailing TTM income in August 2018!

Onwards and upwards!

 


Passive Income Update for July 2019: a 24.6% YoY Increase

Continuing the trend of regular posting, I’ve finished compiling my July passive income update. Year over year, the portfolio was up 24.6% over July 2018, with some caveats.

Ticker Company Previous Year Return Current Year Return Variance Variance % Comments
ACO-X.TO ATCO Ltd. $75.32 $80.96 $5.64 7.5%
ARE.TO Aecon Group $31.25 $36.25 $5.00 16.0%
BNS.TO Bank of Nova Scotia $14.44 $15.13 $0.69 4.8%
CBO.TO iShares 1-5 Year Laddered Corp. Bond ETF $8.20 $0.00 ($8.20) (100.0%) Sold
CIG50221.TO Sentry Small/Md Cap Income Fund A $39.95 $39.95 100.0% Replaces NCE721.TO
DII-B.TO Dorel Industries Class B $10.39 $10.39 100.0%
HYG.N iShares iBoxx $ High Yield Corporate Bond Fund $11.43 $11.57 $0.14 1.2%
LGT-B.TO Logistec Class B $9.08 $9.98 $0.90 9.9%
NCE721.TO Sentry Small/Md Cap Income Fund $77.77 $0.00 ($77.77) (100.0%) Replaced by CIG50221.TO. In 2018 the June transaction was delayed to July, so July 2018 is overstated.
PM.N Philip Morris $149.92 $149.25 ($0.67) (0.4%)
T.TO Telus $12.74 $13.68 $0.94 7.4%
TD.TO Toronto Dominion Bank $67.00 $74.00 $7.00 10.4%
VAB.TO Vanguard Canadian Aggregate Bond Index $58.90 $55.17 ($3.73) (6.3%)
VCN.TO Vanguard FTSE Canadian All Cap Index $156.84 $165.46 $8.62 5.5%
VNQ.N Vanguard MSCI REIT ETF $271.26 $271.26 100.0% Previous year was in June
VOO.N Vanguard 500 Index Fund $30.32 $36.35 $6.03 19.9%
VRE.TO Vanguard MSCI REIT $32.08 $45.59 $13.51 42.1%
VXC.TO Vanguard FTSE Global All Cap Excluding US $292.17 $263.54 ($28.63) (9.8%)
WEQ.TO WesternOne $2.00 $2.00 100.0%
XBB.TO iShares DEX Universe Bond Fund $3.29 $3.33 $0.04 1.2%
TOTAL $1,030.75 $1,283.87 $253.12 24.6%

The 24.6% YoY increase should be taken with a pound–not a grain!!–of salt. As mentioned last month, there was no VNQ.TO payment as expected in June due to timing, and it came in July, so for comparisons $271.26 should be backed out. Also, NCE721.TO was replaced with CIG50221.TO in 2018, however even taking that into account, in 2018 NCE721.TO made double what CIG50221.TO did — the reason for this was timing as well. In 2018, NCE721.TO paid nothing in June but made two payments in July, so for a fair comparison $37.87 should be backed out from 2018’s July numbers.

With that in mind, the real July 2018 comparable income should be $993.05, and the 2019 comparable income should be $1012.61, resulting in only a 2.0% YoY increase. But, trailing twelve month (TTM) income for July 2019 is over $9,600 ,and for July 2018 is over $8,600, so by that measure we are up by 12.4%! Looking at the TTM is an important factor since it smooths out much of the timing issues, demonstrated above.

Onwards and upwards!


Passive Income Update for June 2019

I’ve been pretty lax in updating the blog recently, mainly due to family and work commitments.. But being a dividend focused blog, what better way to re-boot posting with a mid-year update? I will endeavour to start updating my passive income on a monthly basis. That said, June was “okay”.

Ticker Previous Year Return Current Year Return Variance Variance % Comments
BAM.N $92.44 $98.00 $5.56 6.0%
BBU.N $0.74 $0.73 $0.00 (0.6%) FX Impact
CAE.TO $4.49 $5.06 $0.57 12.7%
CBO.TO $8.20 $0.00 ($8.20) (100.0%) Sold
CIG50221.TO $39.84 $39.84 100.0%
DII-B.TO $20.61 $0.00 ($20.61) (100.0%) Timing; will be in July results
ENB.TO $4.52 $0.00 ($4.52) (100.0%) Timing; will be in July results
EPHE.N $8.78 $16.91 $8.13 92.6%
FTS.TO $9.86 $10.86 $1.00 10.1%
HLF.TO $103.97 $52.50 ($51.47) (49.5%) Dividend cut
HYG.N $11.53 $11.58 $0.05 0.4%
INTC.N $20.61 $22.49 $1.88 9.1%
MCD.N $26.68 $31.10 $4.42 16.6%
MFC.TO $3.37 $4.00 $0.63 18.7%
MGA.N $42.77 $48.48 $5.71 13.3%
R.N $13.70 $14.27 $0.56 4.1%
SLF.TO $65.35 $126.49 $61.14 93.6%
VAB.TO $65.26 $61.08 ($4.18) (6.4%) Reduced bond returns
VNQ.N $243.51 $0.00 ($243.51) (100.0%) Timing; will be in July results
VRE.TO $30.75 $45.59 $14.84 48.3%
XBB.TO $3.33 $3.33 $0.00 0.0%
XIC.TO $59.10 $64.80 $5.70 9.6%
XTC.TO $25.50 $36.00 $10.50 41.2%
TOTAL $865.08 $693.12 ($171.96) (19.9%)

Year over year, passive income was down $171.96, or 20%. The bulk of this was due to VNQ paying their dividend in July this year, whereas in 2018 it was paid in June. If we add in the dividend which was paid in July ($205.47) we actually made more year over year ($33.51, or up by 4%).

The other big blow was HLF, which cut its dividend in half earlier this year. HLF represented a large part of my income portfolio; in 2018 at this time it provided $100 in passive income, which has been literally cut in half this year.

In any case, trailing twelve month passive income is in excess of $9,000 whereas last year at this time it was $8,100, so year over year on a twelve month basis we are up more than 11%! I call that a win.

Onwards and upwards!


Portfolio Updates – March 2019

  • Major rebound since the last quarter
  • Overall, now exceeding the benchmark again
  • Passive income still doing well

Monthly Performance Summary

Like many investors in the market, there was a major correction following the dismal performance of Q4 in 2018. Overall the general trend has bee upwards, as illustrated in the monthly performance graph below: every single portfolio posted positive gains, even the margin portfolio which typically has negative gains due to the GE options.

This is a great story to tell as it reinforces the notion that when the waters get choppy, one must stick to their principles and ride out the storm. Also, it puts timelines into perspective: if I panicked—and did not remember that I have a very long (10+ year) time horizon, I may have pulled out of the market in December when everything was dropping and missed out on some great gains. It is also nice to see that, except for March, I beat my own benchmarks in January and February; in March we technically “did” beat at an 1.8% return vs the benchmark 1.7%.

From a trailing twelve-month perspective, things are looking positive as well. The total fund line (solid black) is now trending above the benchmark line (dotted black). The biggest TTM performer is the Certificated portfolio, but I attribute that to the large bump in November 2018 which is bringing up the TTM overall for that one portfolio; from the December 2018 update:

The portfolio that lead the way in Q4 was the Certificated Portfolio, and the huge spike in November can be attributed to Emera which gained 10% in November – and since that holding is the largest in the Certificated portfolio—at 24%—that 10% increase pulled the rest of the portfolio up with it. Another big winner was CAE which jumped quite nicely, spiking from a 12% gain in October to a 31% gain in November. Even after the December crash, the certificated portfolio managed to break even, with only a $1.00 variance between Q3 and Q4. Regrettably, the Certificated portfolio only accounts for 3% of the total fund, so even with its stellar performance it wasn’t enough to pull the rest of the holdings up.

 

Passive Income

Income continues to be strong quarter over quarter. As expected, there was a “loss” in January when measured against the benchmark, but this is nothing new: since the benchmark is composed of ETFs which typically pay quarterly, there are large payouts only four times a year. This compares to my actual portfolio which is made up of various quarterly and monthly dividend payers, which are staggered throughout the year yielding a smoother distribution of income.

The better view is the TTM which smooths out the bumpiness of the benchmark income:

Sadly, the overall trend has been flat/decreasing. This warrants some additional investigation—which I hope to get to in the following weeks—as I have made little change to the composition of the portfolio. However, there are a handful of ETFs which are not necessarily always non-decreasing (i.e. flat or increasing), which may be dragging the TTM numbers down. That said, overall, we are still beating the benchmark which is the ultimate goal.

A new graph I am viewing is the overall distribution of passive income between taxable, tax deferred, and tax-free accounts:

The green bar (green is good!) is passive income which will never be taxed, and it is that bar that I wish to grow over time. The trend has been increasing, and soon I hope to have 20% (if not 25%) of total passive income be tax free within the next 12 months.

Allocation

Sadly, due to competing priorities, I have been unable to invest much new cash into any of the portfolios, so the asset mix is at the whim of the wider markets. Real estate and fixed income are still lagging considerably, and I expect to see that trend maintain itself for at least another 12 months until I can infuse a large amount of capital back into the fund.

Closing Remarks

Overall the quarter did well, simply by staying invested and not worrying about the hem and haw of the wider markets (e.g. forum commentary!). That said, I do expect a drop in passive income in the coming months as I had to liquidate some of the portfolio to pay off 2018 income taxes.

Onwards and upwards!

 


Portfolio Updates – December 2018

Highlights

  • Q4 crushed my portfolio, with a 7.6% loss, even though over $5,000 in cash was added
  • Due to the huge drop in market values, my allocations are closer to target than earlier in the year
  • Passive income up 21.8% year over year

It’s periods like this that I am happy I am a “buy it and forget it” type of investor. Long gone are the days where I would monitor my portfolio constantly and start freaking out about drops in the market; if I was still in that mindset I probably would have started selling pretty early in December 2018.

Monthly Performance Summary

The last quarter of 2018 was brutal for the portfolio. Overall, I completely missed benchmark targets: where the benchmark was down 4.0% for December, the portfolio was down 6.1%, which is roughly 50% worse than the benchmark. Even looking at the quarter as a whole, the fund was down 7.6% vs the benchmark 6.4% — not quite as bad as December, but no matter which way you cut it the fund was down.

The portfolio that lead the way in Q4 was the Certificated Portfolio, and the huge spike in November can be attributed to Emera which gained 10% in November – and since that holding is the largest in the Certificated portfolio—at 24%—that 10% increase pulled the rest of the portfolio up with it. Another big winner was CAE which jumped quite nicely, spiking from a 12% gain in October to a 31% gain in November. Even after the December crash, the certificated portfolio managed to break even, with only a $1.00 variance between Q3 and Q4. Regrettably, the Certificated portfolio only accounts for 3% of the total fund, so even with its stellar performance it wasn’t enough to pull the rest of the holdings up.

No, the biggest drag on returns was the RRSP portfolio, which lost 8.6% over the quarter. This was followed by the LIRA which lost 6.8%, and right behind that was the TFSA which lost 6.7%. What’s interesting is that the LIRA portfolio tracks the benchmark (a variant of the Couch Potato portfolio), and the benchmark was only down 6.4% in the quarter – I attribute the variance there (6.8% vs 6.4%) due to rounding, and being constrained to purchasing whole shares, not fractional. The “rounding friction” leaves money on the table since the LIRA cannot stay 100% invested at all times (e.g. if I receive $35 in dividends but the stock is re-invested at $30, I am leaving $5 on the table, uninvested).

In my June 2018 update I mentioned that GE was a drag on the portfolio as well. Not surprisingly, GE was a large drag in October 2018, losing a little over 70% of its value in that timeframe, but for the other two months of the quarter it was flat.

The above graph illustrates the month over month declines when measured against the trailing twelve-month metric. Even more disconcerting is that over the course of Q4 I invested an additional $5,000 in the fund. So even with an absolute increase of $5,000, the fund still lost 7.6% over the quarter, but I still plan on staying the course, the reason for that being passive income.

For the half year update, I spoke of Aecon being one of the key drags on the portfolio. As I had hoped, when speculators jumped off of the merger wagon the price rebounded nicely in the latter half of 2018.

(Source: bigcharts)

Passive Income

So, the total fund lost a lot in the last quarter, in fact it lost 7.6% — even though I added money. However, as this is a dividend focused fund, a paper loss does not mean much to me when measured against realized gains.

So, even though on a total returns perspective the we did 50% worse than the benchmark (a loss of 7.6% vs a loss of 6.4%), as you can see from the above graph, actual income was much greater than the benchmark. Even though it looks like the benchmark did better in October (which it did, by about $600), in December the fund outperformed the benchmark by over $800. All in all, for Q4 the fund brought in $2,400 vs the benchmark $1,800. And the picture is even better when we revisit the trailing twelve months:

Total income for 2018 is north of $9,200, compared to the benchmark which was a little over $7,500. On a year over year basis, passive income also increased by more than 21% over the same time in 2017. Also, from my 2018 Goals List (link), my goal was to increase passive income by 5%, or to over $8,100 per year. I have more than exceeded that goal, which is a win! I’ll re-iterate what I said in July:

All things being equal, I would rather beat the benchmark on passive returns than on total returns, reason being that I am creating an income fund, not a capital gains fund.

Allocation

The other saving grace is that, because equities did so poorly in Q4, the overall allocation to equities dropped, increasing the exposure to fixed income and real estate.

I did not publish an update for Q3, but even compared to Q2 he balance is better: Equity exposure dropped from over 70% to a little over 60%, and fixed income and real estate increased as well. The $5,000 of additional funding I spoke of earlier primarily went to VRE.TO to increase my real estate exposure, and the plan is working.

However, I am still a far cry from my target allocations. 2019 will be focused on pouring more money into real estate ETFs to force that component of the portfolio up. With concerns over interest rates, etc., in Canada, I actually expect real estate prices to drop, which means I may be able to pick up real estate ETFs on the cheap over the next twelve months.

Closing Remarks

I’ve been very lazy the past 6-9 months, with work and fatherhood taking the majority of my time. That laziness somewhat worked in my favour as I was pretty oblivious to the drop in my portfolio until I sat down to crunch the year-end numbers; I simply wasn’t paying attention to the financial news. Since my focus has been on increasing real estate exposure, any free cash flow I had went straight into VRE.TO.

My concerns about a drop in the passive income from paying off my car did not really materialize. I was worried about the loss of $250 in passive income, but due to my aggressive investing in VRE.TO I made up the difference on the other $5,000+ I had invested.

The bigger question is what I will do this year. For now, I am cleaning things up and looking for gaps in the portfolio, including re-initiating coverage on companies I used to research before; at the very least, to ensure that they are still good investments. A challenge with being a passive “buy it and forget it” investor is sometimes you get antsy when you are not doing anything. Next steps will be to revisit my 2018 goals, plan 2019 goals, and see where that takes me.

Onwards and upwards!


Staying on the FIRE Path

One of the greatest challenges of investing is keeping the long-term plan in sight. If you are like many investors who are on the FIRE path, then you are probably reading blogs on a regular basis, watching financial TV shows, listening to podcasts, etc., to keep abreast of things. Constantly submersing yourself in media is a recipe for the fear of missing out (or “FOMO” as the kids call it these days). However, keeping your long-term goal in view will help you to properly avoid these fears and keep you on the FIRE path.

Over the past few years I’ve seen a number of hot topics, and seen a lot of people make quick money. Two key areas that have constantly crossed my path have been bitcoin (or any coin or ICO based off of blockchain or some derivative), and marijuana stocks. I have read about many folks making tonnes of money off of bitcoin, and when I overheard someone who works at my local cafeteria talking about it—and how she leaves her computer on all the time to mine bitcoin—I knew that bitcoin had hit the mainstream.

Many of my friends also ask me about marijuana stocks. I personally know of at least one person who made over 100x her money by buying penny stocks in the marijuana sector a few years ago, and those stocks are north of $5.00. If you buy for $0.10 and sell for $5.00 you’ve made a 4,900% (yes, four thousand nine hundred percent). To rub salt in my FOMO wounds, she put the money in her tax-free account, which means she walked away with not having to pay any capital gains taxes.

My view is that folks who make tonnes of money off of early trends/hype such as bitcoin or marijuana are either incredibly patient, have a very strong stomach for the potential of losing money, or are incredibly stupid. Of course, one view is that you should always have “play money” for your investments. E.g. if you say that you’ll spend $100/year on any stock you want, you can probably have some fun playing with penny stocks or bitcoin. Heck, you may make a hell of a lot of money. However, for the most part I see a lot of people being sucked into hype because they do fear missing out on the next big thing, on the next “dot com” craze, or some other fad.

For myself, I have a long-term plan, and to support that goal I’ve got several goals and sub-goals, to help keep me on track. Of late, one of my tactical goals is to improve my asset mix. As I mentioned in my previous quarterly update, my focus over the next six months will be to increase my real estate exposure, which is just over 10%, a far cry from my nominal target of 20%. I consider myself disciplined in that I have an investment strategy at hand that forces me to avoid things like bitcoin and marijuana stocks (however, I have been toying lately with allocating 0.10% of my portfolio towards “fun stocks”, which would open me to up being able to invest in anything just for kicks).

However, even when ignoring hype stocks, by my listening to podcasts, reading, and compiling The Dividend Gangster dividend list, I have been exposed to several interesting companies. For example, one company which recently caught my eye is MTY Food Group Inc. (covered in my July 20, 2018 dividend update). The company recently agreed to purchase sweetFrog Premium Frozen Yogurt. The firm also has a fairly solid (albeit short) dividend history with some consistent increases, and depending on the valuation model it is may be considered undervalued. Seeing companies like this ignites a FOMO reaction, and makes me wonder if I should buy some shares of MTY to get in on the ground floor before it shoots up even higher in value, or makes its next dividend increase.

But it is times like this when discipline and keeping your eyes on the long-term goal—sticking to your plan—is most important. I could certainly go out and buy some MTY next week when I make my bi-weekly stock/ETF purchases, and buying it would certainly satisfy the itch of adding another company to my portfolio, and a potentially strong dividend player at that. When I look back at other companies I could have purchased “for a steal” (e.g. I was originally looking at Lassonde when it was $100/share, and it is now north of $200; or Canadian Tire at $90 and it is now north of $160) but didn’t bother, I am reminded of opportunities I missed out on. That said, purchasing common equity would push me further away from my tactical goal of re-balancing the portfolio by building my real estate exposure.

The simple reality is that capital (for most of us, that means plain old money) is a limited resource. To quote one of my professors, strategy is the “allocation of scarce resources”. Within that context, strategy in investing is the allocation of scarce capital, i.e. the money you have to spend. There is only so much money to go around. And when I view my portfolio in that context, the need to balance my portfolio to reduce overall risk by sticking to my target allocation outweighs the need to scratch the investing itch by finding a new company to add to my holdings.

So, when friends and peers ask me about a hype stock (bitcoin, marijuana), or even a non-hype stock (should I buy some BMO for my portfolio?), my first question back to them is, “What are your long-term goals?” If a stock—hype or otherwise—makes sense to add to a portfolio, by all means, do so. But only if it makes sense. Buying to follow the crowd because you’re sacred of not making the quick money is one of the furthest things form investing strategy I can think of.

Onwards and upwards!


Dividend News for the Week Ending August 17, 2018

There were a number of dividend announcements this week, but nothing really material. Of all of the companies that announced, there were none that increased their dividend since their last payout.

Ticker Company Record Date Payment Date Dividend Amount Frequency
APR-UN.TO Automotive Properties Real Estate Investment Trust 2018-08-31 2018-09-17 $0.067000 Monthly
ARX.TO ARC Resources Ltd. 2018-08-31 2018-09-17 $0.050000 Monthly
AX-UN.TO Artis Real Estate Investment Trust 2018-08-31 2018-09-14 $0.090000 Monthly
BTB-UN.TO BTB Real Estate Investment Trust 2018-08-31 2018-09-17 $0.035000 Monthly
CJT.TO Cargojet Inc. 2018-09-20 2018-10-05 $0.212000 Quarterly
CRT-UN.TO CT Real Estate Investment Trust 2018-08-31 2018-09-17 $0.060670 Monthly
CSH-UN.TO Chartwell Retirement Residences 2018-08-31 2018-09-17 $0.049000 Monthly
CUF-UN.TO Cominar Real Estate Investment Trust 2018-08-31 2018-09-17 $0.060000 Monthly
EIF.TO Exchange Income Corporation 2018-08-31 2018-09-14 $0.182500 Monthly
FN.TO First National Financial Corporation 2018-08-31 2018-09-14 $0.154167 Monthly
GDC.TO Genesis Land Development Corp. 2018-08-28 2018-09-12 $0.240000 Ad-Hoc
GRT-UN.TO Granite Real Estate Investment Trust 2018-08-31 2018-09-14 $0.227000 Monthly
H.TO Hydro One Limited 2018-09-11 2018-09-28 $0.230000 Quarterly
HLF.TO High Liner Foods 2018-09-01 2018-09-15 $0.145000 Quarterly
HOM-U.TO BSR Real Estate Investment Trust 2018-08-31 2018-09-17 $0.041700 Monthly
HOT-UN.TO American Hotel Income Properties REIT 2018-08-31 2018-09-14 $0.054000 Monthly
INE.TO Innergex Renewable Energy Inc. 2018-09-28 2018-10-15 $0.170000 Quarterly
IVQ-U.TO Invesque 2018-08-31 2018-09-15 $0.061390 Monthly
KBL.TO K Bro Linen Inc. 2018-08-31 2018-09-14 $0.100000 Monthly
MI-UN.TO Minto Apartment Real Estate Investment Trust 2018-08-31 2018-09-14 $0.034160 Monthly
MRG-UN.TO Morguard North American Residential Real Estate Investment Trust 2018-08-31 2018-09-14 $0.055000 Monthly
MRT-UN.TO Morguard Real Estate Investment Trust 2018-08-31 2018-09-14 $0.080000 Monthly
MRU.TO METRO INC. 2018-09-05 2018-09-26 $0.180000 Quarterly
NWH-UN.TO NorthWest Healthcare Properties Real Estate Investment Trust 2018-08-31 2018-09-17 $0.066670 Monthly
PBH.TO Premium Brands Holdings Corporation 2018-09-28 2018-10-15 $0.475000 Quarterly
PLZ-UN.TO Plaza Retail REIT 2018-08-31 2018-09-17 $0.023330 Monthly
PTG.TO Pivot Technology Solutions, Inc. 2018-08-31 2018-09-14 $0.040000 Quarterly
PZA.TO Pizza Pizza Royalty Corp. 2018-08-31 2018-09-14 $0.071300 Monthly
RCI-B.TO Rogers Communications Inc. 2018-09-14 2018-10-03 $0.480000 Quarterly
SES.TO SECURE Energy Services Inc. 2018-09-01 2018-09-17 $0.022500 Monthly
SGY.TO Surge Energy Inc. 2018-08-31 2018-09-17 $0.008333 Monthly
SMU-UN.TO Summit Industrial Income REIT 2018-08-31 2018-09-14 $0.043000 Monthly
TNT-UN.TO True North Commercial Real Estate Investment Trust 2018-08-31 2018-09-17 $0.049500 Monthly
TOG.TO TORC Oil & Gas Ltd. 2018-08-31 2018-09-17 $0.022000 Monthly
TVK.TO TerraVest Capital Inc. 2018-09-28 2018-10-08 $0.100000 Quarterly
VET.TO Vermilion Energy Inc. 2018-08-31 2018-09-17 $0.230000 Monthly
WCP.TO Whitecap Resources Inc. 2018-08-31 2018-09-17 $0.027000 Monthly
WPM.TO Wheaton Precious Metals 2018-08-29 2018-09-13 $0.090000 Quarterly

That said, Cargojet, First National (covered July 20, 2018), and High Liner provide opportunities for more investigation.

Cargojet Inc.

Ticker CJT.TO
Amount $0.21
Projected Annual Dividend for 2018 $0.85
Record Date September 20, 2018
Payment Date October 5, 2018
Market price as of August 17, 2018 $77.10
Forward Yield 1.10%
Rating AC1
CAGR (since 2010) 6.72%
CAGR (since 2005) 2.47%

Cargojet Inc operates domestic overnight air cargo co-load network in Canada. It provides aircraft service to customers on an Aircraft, Crew, Maintenance and Insurance basis, and operates scheduled international routes for multiple cargo customers. (Source: TSX)

Cargojet has become more interesting in recent years. It is given an AC1 rating because it cut its dividend in 2009, but since then it has been on an upwards trajectory. Even if we exclude the special dividend in 2013, overall it has been increasing since 2010, providing a 6.72% CAGR since then. However, its forward yield is only 1.10%.

High Liner Foods

Ticker HLF.TO
Amount $0.15
Projected Annual Dividend for 2018 $0.58
Record Date September 1, 2018
Payment Date September 15, 2018
Market price as of August 17, 2018 $6.60
Forward Yield 8.79%
Rating A1B2
CAGR (since 2003) 21.83%

High Liner is the leading North American processor and marketer of value-added (i.e. processed) frozen seafood, producing a wide range of products from breaded and battered items to seafood entrées, that are sold to North American food retailers and foodservice distributors. The retail channel includes grocery and club stores and their products are sold throughout the U.S., Canada and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and C. Wirthy & Co. labels. The foodservice channel includes sales of seafood that are usually eaten outside the home and our branded products are sold through distributors to restaurants and institutions under the High Liner, Icelandic Seafood and FPI labels. The Company is also a major supplier of private-label value-added frozen premium seafood products to North American food retailers and foodservice distributors. (Source: Company filings)

I’ve covered High Liner a few times, most recently in March of this year. High liner is very interesting right now as there has been a large drop since the firm announced its quarterly earnings, which has cut the price by about 1/3 the past week, and increased the yield. However, at first glance I do not see the dividend being in jeopardy, so this may be a buying opportunity for an overall great company, which has a compounded annual growth in its dividend if over 20% since 2003.


Dividend News for the Week Ending July 27, 2018

There were some interesting dividend announcments this week.  No increases, but on a year over year basis two companies are projected to exceed their 2017 dividends.

Loblaw Companies Limited

Ticker L.TO
Amount $0.30
Projected Annual Dividend for 2018 $1.16
Record Date September 15, 2018
Payment Date October 1, 2018
Market price as of July 26, 2018 $69.63
Forward Yield 1.66%
Rating AB5
CAGR (since 2011) 4.65%
CAGR (since 1986) 9.68%

Loblaw Companies Ltd is a retailer of food products that also provides drugstore, general merchandise and financial products and services. The company operates corporate-owned stores as well as franchised stores. (Source: TSX)

Loblaw has been paying a dividend for over 30 years (our history only goes back to 1986), and has an impressive 9.68% CAGR since we began recording. The dividend has only been increasing in earnest the past 5 years. However, even over that period the CAGR is a healthy 4.65%.

Waste Connections (Canada) Inc.

Ticker WCN.TO
Amount $0.14
Projected Annual Dividend for 2018 $0.56
Record Date August 7, 2018
Payment Date August 21, 2018
Market price as of July 26, 2018 $101.32
Forward Yield 0.55%
Rating A1+
CAGR (since 2010) 35.25%

Waste Connections Inc is a solid waste services company in North America. The company provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States, and Canada. Source: TSX.

Waste Connections is an interesting company to look at. For one, its dividend is paid in US dollars, so unless you are keeping your holdings in a US account, you will be susceptible to USDCAD currency exchange rate fluctuations. More interesting however, is that this company—in its Canadian form—has only existed since 2016. The dividend history, which stretches to 2010, is based off of the US parent company. The Waste Connections listed on the TSX is the child of acquisitions. That said, the growth is impressive (exceeding 35%), and if you are willing to deal with the low yield, this may be a worthwhile addition to your portfolio.

AECON

Ticker ARE.TO
Amount $0.13
Projected Annual Dividend for 2018 $0.50
Record Date September 21, 2018
Payment Date October 1, 2018
Market price as of July 26, 2018 $15.30
Forward Yield 3.27%
Rating AB2
CAGR (since 2007) 19.57%

Aecon Group Inc and its subsidiaries provide construction and infrastructure development services to private and public sector customers throughout Canada. It also provides services to the energy sector as well as to mining sector. Source: Company Website

I’m not quite what sure to do with Aecon. I own it, and it has been a bit of a roller coaster this year. It was to be acquired which shot the stock up, but then the Canadian government cancelled the buy-out, and the stock fell back to earth. That said, CAGR is almost at 20%, and the yield is decent. However, there has not been a dividend increase since 2017 Q1. Unless Aecon increases their Q4 dividend this year, they will end up going three years of no dividend growth.


Portfolio Updates – June 2018

Highlights

  • Lack of Aecon buy-out triggered large drop
  • TTM income still > $8M which puts us on track to meet our 2018 goal
  • Asset allocation still skewed towards equities

Monthly Performance Summary

As I mentioned in my last update, I purchased some GE call options which expire in January 2020. Those options continue to be the biggest drag on the portfolio. Other than that, the Canadian Government blocked the potential takeover of Aecon which I spoke of in a previous post. When the acquisition was first announced Aecon surged 22% in my portfolio, and since then it has dropped back down to “normal levels”. So, while my net gain on Aecon is practically flat, I did experience a material drop in the portfolio in May.

Interestingly, on a month over month basis both the LIRA and EPSP portfolios are lagging the benchmark, which is odd because those two portfolios are couch potato portfolios, as is the benchmark; one would think that they should be tracking each other. However, the variance could be attributed to a few factors:

The LIRA has not been rebalanced in some time, and there is now some tracking error. The portfolio is overweight a few percent in VXC and underweight 5% in VAB. There is also a growing cash position. The portfolio is due for a manual rebalancing soon.

The EPSP portfolio is combined couch potato and shares of my employer through the stock purchase plan. The stock purchase plan is approximately 33% of the portfolio so the remaining 67% is couch potato. But that means that the 75% equity is skewed, and not a perfect tracker to the couch potato.

On a TTM perspective we have been diverging more and more away from the benchmark. The benchmark TTM for June 2018 is 9.96% whereas the total fund is only 3.77%, a whopping 6% spread. Again, a large percentage of this can be attributed to the material decline in the margin portfolio due to the GE options. The other factor is that the certificated portfolios contain Riocan, and H&R REIT, both of which cut their DRIPs earlier this year, resulting in a drop in both holdings. Since REITs are large proportion of the certificated portfolio, insofar as those positions drop, the overall portfolio drops, increasing drag on TTM returns.

Passive Income

As always, passive income is the primary objective of my portfolio.

Passive income has been “okay” the past few months. As expected, non-quarter months (i.e. January, February, April, May) beat the benchmark, but this leveled out on the quarter months (March, June). The reason for this is that VCN and VXC, which are key components of the benchmark, only pay realized returns once a quarter, but the actual fund has dividend payments and distributions scattered throughout the year. But what we really want to see is the TTM passive income, in the following chart.

The good news here is that I am still beating the benchmark. All things being equal, I would rather beat the benchmark on passive returns than on total returns, reason being that I am creating an income fund, not a capital gains fund. Based on that metric, TTM for the benchmark was around $6,750, whereas our fund broke the $8,000 mark. More precisely, I gained 21% more passive income than the benchmark. All in all, that is an impressive feat in my view.

Allocation

Last but not least, allocation remains a key point of concern.

Equity is still a dominant force in the overall fund, weighing in at north of 70%, well above the 55% target. For the next six months I will be focusing on increasing real estate exposure:

  • This will add some more balance to the portfolio
  • From a passive income perspective, REITs provide a better opportunity than fixed income
  • REIT ETFs are a cost effective addition to the overall fund since I can buy ETFs through Questrade for next to no commissions.

Closing Remarks

The first six months of the year have not been stellar, but they have not been necessarily bad either. At an aggregate, the losses I experienced were expected (e.g. Aecon dropping, GE dropping). But, as a long-term investor I am not overly concerned. I have literally decades for Aecon to increase back in value, and my GE options have over 16 months before expiry which gives plenty of runway for them to recoup any paper losses.

A bigger concern is passive income over the next six months. 3% of the portfolio was reserved to pay off my car in August of this year (the final “balloon payment” from my finance arrangement with the car dealership), which will mark a material loss on the liquid portion of the portfolio since those funds were in my TFSA account. That drop will also remove $250 of passive income from the overall portfolio; not a large amount but it does represent 3% of overall passive income.

As it stands, the TTM passive income positions me to meet my 2018 passive income goal of $8,100/year. However, if we take 3% off of that, I will miss the goal. My hope is that by investing aggressively in REITs to re-balance the portfolio, the higher yield on REITs will make up for the lost passive income.

Onwards and upwards!

 


Dividend News for the Week Ending July 20, 2018

Enbridge Income Fund Holdings Inc.

Ticker ENF.TO
Amount $0.19
Projected Annual Dividend for 2018 $2.26
Record Date July 31, 2018
Payment Date August 15, 2018
Market price as of July 16, 2018 $32.72
Forward Yield 6.91%
Rating AB2
CAGR (since 2011) 9.91%
CAGR (since 2003) 12.01%

Enbridge Income Fund Holdings Inc. is a publicly traded corporation. The Company, through its investment in Enbridge Income Fund indirectly holds high quality, low-risk energy infrastructure assets. The Fund’s assets consist of a portfolio of Canadian liquids transportation and storage businesses, including the Canadian Mainline, the Regional Oil Sands System, the Canadian segment of the Southern Lights Pipeline, Class A units entitling the holder to receive defined cash flows from the U.S. segment of the Southern Lights Pipeline, a 50 percent interest in the Alliance Pipeline, which transports natural gas from Canada to the U.S., and interests in more than 1,400 MW of renewable and alternative power generation assets. Source: Company Filings

The firm has been paying a dividend since 2003 but made a switch to a dividend paying corporation in 2011. Given its long track record it ranks as an A1B3 stock, but for comparison purposes CAGR is better measured since the conversion to a dividend paying corporation. Even then, since 2011 CAGR is an impressive 9.91%.

First National Financial

Ticker FN.TO
Amount $0.15
Projected Annual Dividend for 2018 $1.85
Record Date July 31, 2018
Payment Date August 15, 2018
Market price as of July 16, 2018 $28.80
Forward Yield 6.42%
Rating AC2
CAGR (since 2006) 12.00%

First National is Canada’s largest non-bank lender, originating and servicing both commercial and residential mortgages since 1988. Source: TSX.

FN moved to a dividend paying corporation in 2011, precipitating a cut in its payment to shareholders. Because of the cut, the stock was cut to a C dividend payer rating. That said, it has increased its dividend every year since the conversion, which gives it an overall rating of A1C2.

SECURE Energy Services Inc.

Ticker SES.TO
Amount $0.02
Projected Annual Dividend for 2018 $0.27
Record Date August 1, 2018
Payment Date August 15, 2018
Market price as of July 16, 2018 $7.49
Forward Yield 3.60%
Rating A
CAGR (since 2013) 21.98%

Secure Energy Services Inc is a diversified energy services company providing specialized services to upstream oil & natural gas companies operating in in western Canada and in certain regions in the United States. Source: TSX

SES has a relatively short history but has increased its dividend every year since inception in 2013, except for 2016 where it remained flat. This growth has given it a 22.0% CAGR over that period and earns it an A1 rating.

Vermilion Energy Inc.

Ticker VET.TO
Amount $0.23
Projected Annual Dividend for 2018 $2.72
Record Date July 31, 2018
Payment Date August 15, 2018
Market price as of July 16, 2018 $47.26
Forward Yield 5.74%
Rating B2
CAGR (since 2003) 2.52%

Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing properties in North America, Europe and Australia. Our business model targets annual organic production growth, along with providing reliable and increasing dividends to investors. Vermilion is targeting growth in production primarily through the exploitation of light oil and liquids-rich natural gas conventional resource plays in Canada and the United States, the exploration and development of high impact natural gas opportunities in the Netherlands and Germany, and through oil drilling and workover programs in France and Australia. Vermilion holds an 18.5% working interest in the Corrib gas field in Ireland. Vermilion is targeting production of between 75,000 – 77,500 boe/d in 2018. Source: Company Filings

While not a consistent grower, VET has paid out a dividend every year since 2003 with no drops. This rates it as a B2 dividend payer, with a CAGR of 2.52%.

Exchange Income Corporation

Ticker EIF.TO
Amount $0.18
Projected Annual Dividend for 2018 $2.18
Record Date July 31, 2018
Payment Date August 31, 2018
Market price as of July 20, 2018 $32.10
Forward Yield 6.78%
Rating A2
CAGR (since 2004) 8.32%

The Company is a diversified, acquisition-oriented corporation focused on opportunities in two sectors: aviation services and equipment, and manufacturing. The business plan of the Company is to invest in profitable, well-established companies with strong cash flows operating in niche markets. Source: Company Filings

EIF has paid a dividend for the past 15 years, and except for 2010, has increased it every year since 2004. This was even after converting from an income trust to a dividend paying corporation in 2009, which is normally the time that companies cut the amount paid out to shareholders.

MTY Food Group Inc.

Ticker MTY.TO
Amount $0.15
Projected Annual Dividend for 2018 $0.60
Record Date July 31, 2018
Payment Date August 15, 2018
Market price as of July 20, 2018 $57.04
Forward Yield 1.05%
Rating A1
CAGR (since 2011) 18.77%
CAGR (since 2010) 38.23%

MTY Food Group Inc is a Canadian franchisor operating in the quick service food industry. It franchises and operates corporate-owned locations under different banners and brands offering multiple cuisines such as Korean, Japanese, and Mexican.

I’m very attracted to companies such as MTY which offer an easy to understand business model with great realized returns to shareholders. Since starting its dividend in 2010, it has increased it every year except for 2017. At the current pace, the dividend is projected to increase 30% year over year, paying $0.60/share vs. 2017’s $0.46/share. While the company started paying a dividend in 2010, for comparison reasons we measure against 2011 since that was the first full year of payments. Based on that, the CAGR is 18.8%, which is not that bad.

Cineplex Inc.

Ticker CGX.TO
Amount $0.15
Projected Annual Dividend for 2018 $1.72
Record Date July 31, 2018
Payment Date August 31, 2018
Market price as of July 20, 2018 $29.48
Forward Yield 5.83%
Rating A1B2
CAGR (since 2004) 2.92%
CAGR (since 2003) 19.99%

A leading entertainment and media company, Cineplex (CGX) is a top-tier Canadian brand that operates in the Film Entertainment and Content, Amusement and Leisure, and Media sectors. As Canada’s largest and most innovative film exhibitor, Cineplex welcomes over 70 million guests annually through its circuit of 163 theatres across the country. Cineplex also operates successful businesses in digital commerce (CineplexStore.com), food service, alternative programming (Cineplex Events), cinema media (Cineplex Media), digital place-based media (Cineplex Digital Media), amusement solutions (Player One Amusement Group) and an online eSports platform for competitive and passionate gamers (WorldGaming.com). Additionally, Cineplex operates a location-based entertainment business through Canada’s newest destination for ‘Eats & Entertainment’ (The Rec Room) and will also be opening new complexes specially designed for teens and families (Playdium) as well as exciting new sports and entertainment venues across Canada (Topgolf). Cineplex is a joint venture partner in SCENE, Canada’s largest entertainment loyalty program. Source: Company Filings

Love the movies? Then you’ll love Cineplex. The company has been a mainstay in the Canadian movie industry for decades, paying shareholders since 2003. Initially it was an income paying trust but converted to a dividend paying corporation in 2009. Its CAGR since 2004 (first full year of distributions) is 2.92%, which not stellar, has definitely beaten out inflation. At today’s prices it has a forward yield of 5.83% and may be a worthy addition to your portfolio as an income payer from the entertainment industry.