Passive Income Update for September 2019: Broke $1,000!

Coming back from vacation I’ve been swamped catching up at my day job. On top of that, things at work are really ramping up with another person leaving our team (on to bigger and better things within the same company, but different group), and the typical ramp-up of client work coming in for the fourth quarter. It’s times like this that I am appreciative of the “set it and forget it” mentality for investing. That said, in September we broke the $1,000 threshold – which was somewhat expected since this was a quarterly period: typically four-times-a-year companies pay out in March, June, September, and December. But even though we broke $1,000, year over year we were down 3.0% compared to this period last year. On the flip side, we were up 8.2% on a TTM perspective compared to this time last year.

Ticker Company Previous Year Return Current Year Return Variance Variance % Comments
ACO-X.TO ATCO Ltd. $75.32 $80.96 $5.64 7.5%
BAM.N Brookfield Class A (US) $90.87 $99.16 $8.29 9.1%
BBU.N Brookfield Business Partners LP $0.72 $0.74 $0.02 2.3%
CAE.TO CAE Inc. $5.01 $5.58 $0.57 11.4%
CIG50221.TO Sentry Small/Md Cap Income Fund A $39.07 $40.11 $1.04 2.7%
ENB.TO Enbridge Gas $4.60 $5.14 $0.54 11.7% Now receiving cash; last year was DRIP
FTS.TO Fortis Inc. $9.96 $10.96 $1.00 10.0%
HLF.TO High Liner Foods Inc. $152.25 $52.50 ($99.75) (65.5%) Dividend cut
HYG.N iShares iBoxx $ High Yield Corporate Bond Fund $11.14 $11.13 ($0.01) (0.1%) FX
INTC.N Intel $20.96 $22.28 $1.32 6.3%
MCD.N McDonalds $26.24 $30.76 $4.51 17.2%
MFC.TO Manulife $3.41 $4.05 $0.64 18.8%
MGA.N Magna International $43.01 $48.09 $5.08 11.8%
R.N Ryder $13.95 $14.87 $0.92 6.6%
SLF.TO Sun Life Financial $76.09 $138.48 $62.39 82.0%
T.TO Telus $0.53 $0.00 ($0.53) (100.0%) Timing; last year was in September, this year in October
VAB.TO Vanguard Canadian Aggregate Bond Index $62.70 $60.49 ($2.21) (3.5%)
VNQ.N Vanguard MSCI REIT ETF $373.00 $246.43 ($126.56) (33.9%)
VRE.TO Vanguard MSCI REIT $40.69 $57.82 $17.13 42.1%
XBB.TO iShares DEX Universe Bond Fund $3.33 $3.33 $0.00 0.0%
XIC.TO iShares S&P/TSX Capped Composite Index Fund $62.70 $65.70 $3.00 4.8%
XTC.TO Exco Technologies Ltd. $25.50 $54.00 $28.50 111.8%
CNR.TO Canadian National Railway Company $53.75 $53.75 100.0%
TOTAL $1,141.06 $1,106.33 ($34.73) (3.0%)

The two biggest laggards on the income for this month were High Liner Foods and the Vanguard MSCI REIT ETF, which were down 65.5% and 33.9% respectively. The High Liner drop was expected, as they cut their dividend by 50% earlier this year. I use the vanguard position to add real estate exposure to my portfolio, but because it is an ETF there is less predictability in its income. With those drags on the portfolio, there were some increases thanks to Exco Technologies and CN Rail, where I grew the positions compared to last year.

So, not a stellar month, but a good month nonetheless.

Onwards and upwards!


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!


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.


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.


Dividend Increases for the Period Ending July 6, 2018.

There were 4 notable dividend increases, and one company initiating a quarterly dividend, for the period ending July 6, 2018.

A&W Revenue Royalties Income Fund

Ticker AW-UN.TO
Amount $0.13800
Projected Annual Dividend for 2018 $1.65000
Record Date 15-Jul-18
Payment Date 31-Jul-18
Market price as of July 06, 2018 $31.84
Forward Yield 5.18%

The A&W name is well known for its restaurants and world-famous root beer. Despite this, the A&W fund does not directly have any ownership in the A&W restaurants or soda business. Instead, it invests indirectly in the A&W Quick Service Restaurant business. The present structure gives the A&W fund 3% of top-line revenue, paid for by A&W Food Services of Canada Inc.

The fund has been paying a distribution since 2002. Of note, 2007-2010 the fund paid an extra payment per year (13 payments in 2007 and 14 payments in each of 2008, 2009, and 2010) based on the date of record. Other than that, the distributions have been relatively flat, however there has been growth since 2015. Since 2014 CAGR has been 4.0%. The fund most recently increased its distribution in March, and at the current pace is expected to increase 2.4% year over year from 2017.

Enercare Inc

Ticker ECI.TO
Amount $0.08320
Projected Annual Dividend for 2018 $0.98880
Record Date 16-Jul-18
Payment Date 31-Jul-18
Market price as of July 06, 2018 $18.13
Forward Yield 5.45%

As one of North America’s largest home and commercial services and energy solutions companies with approximately 3,800 employees under its Enercare and Service Experts brands, Enercare is a leading provider of water heaters, water treatment, furnaces, air conditioners and other HVAC rental products, plumbing services, protection plans and related services. With operations in Canada and the United States, Enercare serves approximately 1.6 million customers annually. Enercare is also the largest non-utility sub-meter provider, with electricity, water, thermal and gas metering contracts for condominium and apartment suites in Canada and through its Triacta brand, a premier designer and manufacturer of advanced sub-meters and sub-metering solutions.

Enercare has been paying a distribution/dividend to shareholders since 2002. However, following tax changes the company converted from an income trust to a dividend paying corporation in 2009, precipitating a large drop in the cash paid out to unit holders (who became shareholders). For all intents and purposes total growth is measured since 2010 since that gives us a more meaningful comparison.

Taking that into consideration, the dividend has a CAGR of 5.29%. The firm recently increased its dividend in April, and year over year growth is projected at 3.25% higher than 2017.

MBN Corporation

Ticker MBN.TO
Amount $0.08
Projected Annual Dividend for 2018 $0.16
Record Date September 30, 2018
Payment Date October 15, 2018
Market Price as of July 06, 2018 $6.30
Forward Yield 2.54%

MBN is a newcomer to the dividend space, who recently announced its inaugural dividend of $0.08/share. The corporation is the result of a merge between Globalance Dividend Growers Corp., for which Middlefield Limited is the fund manager, and MBN Corporation.

Since this is the inaugural dividend, the projected income for 2018 is $0.16/share, assuming the next record date is in December 2018 (i.e. the next quarter).

Pembina Pipeline Corp.

Ticker PPL.TO
Amount $0.19
Projected Annual Dividend for 2018 $2.24
Record Date 25-Jul-18
Payment Date 15-Aug-18
Market price as of July 06, 2018 $46.41
Forward Yield 4.83%

Calgary-based Pembina Pipeline Corporation is a leading transportation and midstream service provider that has been serving North America’s energy industry for over 60 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada. The Company also owns gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business. Pembina’s integrated assets and commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy sector. Pembina is committed to working with its community and aboriginal neighbours, while providing value for investors in a safe, environmentally responsible manner. This balanced approach to operating ensures the trust Pembina builds among all of its stakeholders is sustainable over the long term. Pembina’s common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. (Sources: Company website, TSX).

Pembina has paid a distribution and/or dividend since 1997, and in October 2010 converted to a dividend paying corporation; for a meaningful comparison our basis starts in 2010. In May 2018 increased dividend by 5.56%, giving us a forward projected annual dividend if $2.24.

Richelieu Hardware Ltd.

Ticker RCH.TO
Amount $0.06
Projected Annual Dividend for 2018 $0.24
Record Date 19-Jul-18
Payment Date 02-Aug-18
Market price as of July 06, 2018 $27.23
Forward Yield 0.88%

I most recently covered Richeleu in this analysis at Seeking Alpha.

Headquartered in Montreal, Quebec, Richelieu Hardware Ltd. is an importer, distributor, and manufacturer of specialty hardware and related products, focused on the North American Markets. Its primary customers are split amongst retail customers vis-à-vis the residential and commercial woodworking industry, home furnishing and office furniture manufacturers, and hardware and renovation superstores.

Richelieu started paying a semi-annual dividend in the third quarter of 2002 and switched to a quarterly dividend in the third quarter of 2003. The firm also issued a 3:1 stock split in 2016 and had its most recent dividend increase of 5.82% in January of this year. Since inception, it has had a CAGR of 16.80%.

 


Notable dividend announcements for the week ending June 2, 2017

Earnings season is wrapping up, and as such companies are making the last of their dividend announcements alongside their quarterly results. At the Dividend Gangster blog we monitor a large selection of companies on the Canadian exchanges, which have a solid history of dividends. For the week ending June 2, 2017 there were five notable companies that announced dividends, where their dividend increased year over year from F2016. There was also one runner-up, whose dividend is in line with F2016, but over the past 10 years has increased their dividend; that said, they still have one more fiscal quarter to increase their dividend to keep up their streak.

Of the five companies (discussed below in alphabetical order) who increased year over year, the average year over year increase was 3.71%. Moreover, three of the five, and the runner up, are all from the Financial Sector. Here are some stocks for your consideration, if you are looking for new companies to add to your portfolio.

CAE Inc.

Since 1947, CAE Inc. (CAE.TO) has been providing training and simulation services and equipment to a number of industries, with a focus on the civil aviation, defence and security, and healthcare sectors. While they are a Canadian firm, they are a global organization, with branches and services offered in over 35 countries (either independently, or through joint ventures).

CAE’s most recent dividend pushes it to a $0.32 annualized dividend, which is 3.23% over its F2016 annual dividend of $0.31. At $0.32, its yield is 1.46% based on the June 2, 2017 closing price of $21.93.

Laurentian Bank of Canada

Top Financial Firms by Market Capitalization

Laurentian Bank (LB.TO) is the smallest bank that announced this week, and being the eighth largest by market cap. In business for over 150 years, it is a mainstay—albeit a smaller one—in the Canadian market, with a focus on small and medium businesses, as well as retail clients. Like most fully integrated firms, it offers a broad suite of services for different customer markets:

  • Retail banking
  • Business banking
  • Capital Markets
  • Financial services (e.g. investment advisors)

Moreover, it has a wholly owned subsidiary—B2B Bank—which focuses on providing banking products to a wide network of financial advisors and brokers.

Laurentian’s most recent dividend of $0.62 pushes it to $2.46 annualized for F2017, which represents a 4.69% yield over the June 2, 2017 closing price of $52.40, and a 4.24% increase over the F2016 dividend of $2.36.

National Bank of Canada

National Bank (NA.TO) is the first bank after the Big Five, as measured by market capitalization. The bank has four key lines of business:

  • Personal and Commercial Banking (e.g. retail, small business, etc.)
  • Wealth management
  • Financial markets
  • US and International Speciality Finance

Like many of the key banks in Canada, it has a national presence, with branches in most provinces. However, one of its key areas of focus is in the Quebec market, where it works with many small and medium size businesses through the Commercial component of its Personal and Commercial Banking line of business.

With the recent dividend announcement of $0.62, its forward yield is 4.55% based on the June 2 closing price of$54.05, which represents an annual $2.30 annualized dividend. Its fiscal 2016 dividend was $2.20, and as such the $2.24 dividend is a 4.55% increase over the previous year.

Saputo Inc.

In business for over 50 years, Saputo (SAP.TO) is a key player in the national and international dairy markets, and manufacturers and distributes a number of dairy based products, including cheese, milk, cream, and cultured products. It is in one of the top four firms engaged in the dairy market in each of Canada, Australia, and Argentina.

From a yield perspective, Saputo is the weakest of all companies reviewed in this article, with a yield of only 1.34%, based on the June 2, 2017, closing price of $44.64. However, its announced dividend of $0.15 for the quarter equates to $0.60 annualized, which is a 5.26% increase over its F2016 dividend of $0.57. That said, based on yield and growth alone, what you an investor loses in yield, potentially makes up for in year over year growth.

Scotiabank (aka The Bank of Nova Scotia)

Of the banks discussed in this article, Scotiabank (BNS.TO) is the only one that falls into the Big Five category of Canadian banks. Its lines of business are split between Domestic (i.e. Canadian) and International Markets:

  • Retail and small business
  • Commercial banking
  • Wealth management

The bank also has a global banking and markets (GBM) line of business which works with corporate, government, and institutional clients. GBM offers commercial/institutional products and services such as trade and/or cash management, corporate lending, underwriting, research, commodity and foreign exchange trading, etc.

The banks recently announced dividend of $0.76 equates to a $3.02 annualized dividend, representing a 4.86% increase over the F2016 dividend of $2.88. Based on the June 2, 2017 closing price, the dividend yields 3.94%, which is the lowest of the banks reviewed in this article which had a year over year increase. However, the low yield is compensated for in the year over year increase, which is the highest of the banks discussed, and second only behind Saputo.

Runner up: Canadian Western Bank

As illustrated previously, Canadian Western Bank (CWB.TO) is the seventh largest financial services firm in Canada, measured by market capitalization. The bank is unique in that it is the only Schedule 1 bank which specializes in mid-market commercial banking, and have a number of key lines of business, including:

  • Speciality business banking services for small- and medium-sized companies
  • Industrial equipment financing and leasing solutions for companies with requirements between $100,000 and $50 million
  • Franchise Finance to help growth of franchisees and franchisors in the hospitality and restaurant industries
  • Commercial equipment leasing with deals ranging $5,000 to $2 million
  • Structured loans and customized leasing
  • Mortgages
  • Wealth and investment management

The most recent dividend of $0.23 equates to $0.92 annualized, which is in line with its F2016 annual dividend. However, as CWB has increased their dividend every year for the past 10 years, it is highly likely that they will increase their dividend next quarter, to keep up their streak.

Closing Remarks

The following table summarizes the above discussion:

Summary

For income oriented investors who are looking for new companies to broaden their portfolio, any of the five companies mentioned above would be worthy additions. With consistent dividend growth over the past 10 years, except for our runner up stock (Canadian Western Bank), all four companies would be great hedges against inflation, whilst helping to provide a steady stream of income.

Notes & Disclosures

  • All figures in Canadian dollars.
  • Long BNS.TO, CAE.TO

Back to Basics

School is done! Which means that I’ll finally have time to dedicate to investing again.

Over the past 18 months I have not been paying attention to my portfolio at all, and as such I haven’t had a chance to revisit the actual performance of the portfolio. Traditionally I have invested in value stocks: good companies with cheap prices, and taking a precursory look at my holdings things have gone well. For example High Liner Foods currently trades at $44.30, compared to my ACB of $15.73. Another strong player has been CCL Industries, which I picked up for $36.66, and currently trades for $107.42. Not all of my picks have been faring as well however: Calian Technologies currently trades at $18.76 from my ACB of $20.29.

But I digress; a detailed analysis of my holdings will come shortly when I sit down to take a look at what I’ve got in my books.

However, before I can revisit my books I’d like to revisit my Investment Policy Statement. I realized that I had a notional idea of what type of balance I would like to have (e.g. 1/3 Canadian Equities, 1/3 Bonds, 1/3 US Equities), but I have been pretty lax in maintaining the balance.

Another issue I had, was in balancing allocations between brokerages and account types. The total complement of all of my securities was held across several brokerages (BMO Nesbitt Burns, BMO InvestorLine, ScotiaMcLeod, Questrade, and some certificated shares where I held the physical stock certificates in my own name), and spanned different categories (margin, RRSP, TFSA). I found that I was spending too much time trying to manage the 3-way split across brokerages and account types. Over the past few months, I’ve cut out my investment adviser (they actually moved from BMO Nesbitt Burns to ScotiaMcLeod, and then back to BMO Nesbitt Burns — which was an administrative nightmare), and moved all investments over to BMO InvestorLine, other than those shares I hold in certificated form. Moreover, I’ve taken a different approach to viewing my portfolio: I now track everything at total fund level vs. individual brokerage house level. This makes the exact allocation across account types (e.g. if I keep a security in my margin, or my RRSP, or my TFSA account) irrelevant, since I now take one snapshot of all holdings.

Whew.

Taking all of that into account, I am going back to basics and revisiting my investment policy statement (IPS), and come up with a new target asset allocation, as well as some constraints. My target asset allocation is show below.

Asset Class Minimum Allocation Target Allocation Maximum Allocation Notes
Cash -5% 5% 10% We allow -5% for margin exposure, but once we break the 10% mark we should be finding something to invest in; while cash is an “option with no expiry date”, after a certain point it does not make sense to keep it as cash because it is not generating income. At the very least, it should be dumped into an HISA or money market vehicle
Equities 35% 50% 60% Traditional public equities.
Real Estate 10% 20% 25% Real Estate is a long-term goal, but in lieu of bricks and mortar investments (e.g. property), I will fulfill this with REITs for now. In the long-term I plan on keeping my condo as an income property, at which point the condo would fall into this category.
Fixed Income 20% 25% 30%
Alternatives 0% 0% 5% Alternative investments would be things such as collectables (stamps, comics, art).
Private Equity 0% 0% 5% I wanted to ensure I had a line item for this, in the event any private equity opportunities come up; e.g. if a friend had a startup and needed investors.
Region Minimum Allocation Target Allocation Maximum Allocation Notes
Canada 40% 55% 65%
US 30% 35% 40%
Global 5% 10% 15%

From the above, I’ve tried to capture every conceivable investment opportunity. No doubt, the majority of my investing will be in public markets, which is why alternatives and private equity have a target of 0%, but I have the option of having up to 5% in each. I treat REITs and fixed income as income streams, which is hwy they take up a good chunk of the portfolio as well. I am looking at total returns which includes any cash flows, which is one reason I am not concerned with the equity being capped at 60%. Finally, the above mix allows me some latitude in finding securities. E.g. I can purchase a US REIT ETF to (1) give me US exposure, and (2) give me REIT exposure. In this way, a single security can satisfy multiple criteria.

I’ve also tried to diversify geographically; for the most part I am very concentrated in the Canadian market. While this is great because it eliminates exposure to currency risk, it also limits the total universe of available investment opportunities.

The goal of this asset mix is to stabilize my returns over time, provide cushion for market shocks, and to provide a steady stream of income. Between condo payments, car payments, and paying off school, the total amount of income I have available for investing has dropped considerably. Because of that, I am dedicating a larger portion of the total asset mix to income vis-a-vis Fixed Income and REITs.

With regards to investment style, I am going to go back to my roots and focus on value investing. Realistically I have not really deviated from that, but with the number of tech IPOs in the past twelve months, I wasn’t sure if I was missing anything. Luckily, it looks like I haven’t! Initially I was kicking myself at not investing into firms such as Twitter of Facebook, but those firms have been taking a beating lately. Given the focus on value investing, the underlying rationale for any investment decision will be:

  • Good firms with strong historical performance. Those firms with strong management, who have exhibited a good history of producing returns for its shareholders.
  • Firms with a solid dividend history. My own portfolio is geared towards income streams, and as such most, if not all, of the firms I invest in must pay a dividend. This restriction also precludes me from investing in growth companies, since those companies usually divert the majority of their income back into the firm to grow it faster, compared with dividend firms who have stabilized (e.g. not in the “growth&;quot phase any longer) and return cash to shareholders.
  • Firms that are cheap. The foundation of “cheap” will be based off of P/E and P/BV multiples. I have built some good models for valuing firms, and I will use those as well, but for the most part I will rely on P/E and P/BV multiples. The reason for this is that multiples provide a snapshot of historical and current performance, whereas valuation models provide a snapshot of estimates and assumptions of the future, which are inherently subject to biases and misinformation.
  • In lieu of equities or fixed income, I will use ETFs where available to park cash and keep the balance. E.g. if I cannot buy bonds, I’ll invest in a bond ETF such as XBB or HYG. Similarly for geographic exposure; to gain US equity exposure, I will purchase VOO or something similar.

So, where do I sit now?

Asset Class Target Weight Variance from Limit
Cash 5.00% 11.57% 1.57%
Equity 50.00% 78.18% 18.18%
Real Estate 20.00% 4.05% -5.95%
Fixed Income 25.00% 6.21% -13.79%
Alternatives 0.00% 0.00% n/a
Private Equity 0.00% 0.00% n/a
Region Weight Variance from Limit
Canada 90.81% 25.81%
US 8.21% -21.79%
Global 0.98% -4.02%

So… Based on my current IPS I am pretty much screwed for the month of March; none of my asset classes or geographic regions are within tolerance. However, I did execute some trades in April, and when BMO InvestorLine posts my statements I’ll revisit and see how we are doing.