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|
|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.|
|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%)|
|XBB.TO||iShares DEX Universe Bond Fund||$3.29||$3.33||$0.04||1.2%|
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!
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|
|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|
|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|
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!
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|
|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|
|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|
|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.
|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|
|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
|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|
|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.
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
|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|
|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.
|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|
|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.
|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|
|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.
Enbridge Income Fund Holdings Inc.
|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|
|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
|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|
|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.
|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|
|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.
|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|
|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
|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|
|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.
|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|
|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.
|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|
|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.
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
|Projected Annual Dividend for 2018||$1.65000|
|Market price as of July 06, 2018||$31.84|
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.
|Projected Annual Dividend for 2018||$0.98880|
|Market price as of July 06, 2018||$18.13|
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.
|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|
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.
|Projected Annual Dividend for 2018||$2.24|
|Market price as of July 06, 2018||$46.41|
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.
|Projected Annual Dividend for 2018||$0.24|
|Market price as of July 06, 2018||$27.23|
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%.
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.
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
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.
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
- 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.
The following table summarizes the above discussion:
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
It’s that time of year where we start looking at investment goals for the new year.
I didn’t really have any goals F2016, except to become a member of thediv-net.com, which I’m happy to say that I was successful in accomplishing! I also mentioned in several posts in F2016 that up until recently I had lost focus on my investment portfolio. Well, for F2017, I plan on changing that trend.
To that end, the goals!
Goal 1: Increase TFSA Contributions
I have been an infrequent contributor to my TFSA for the past 2+ years. To pay off my business school loan, and to purchase a new house with my family, I made some significant withdrawals. Taking into account the $5,500 contribution limit for F2017, I have a little over $40,000 in contribution room in my TFSA. My goal for F2017 is to contribute to at least 50% of that limit, or $20,000.
Goal 2: Minimize Taxes
My investments fall into five investment books: a taxable margin account, a tax-free account, a tax deferred account, a certificated account, and a LIRA. My second goal for F2017 is to minimize taxes by consolidating investments into my tax deferred and tax-free accounts, where it is sensible to do so.
Selecting which investments go into tax sheltered accounts is not a trivial task. On the one hand, moving investments from my taxable account will defer any taxes payable (in the case of my RRSP), or eliminate taxes completely (in the case of my TFSA). However, tax sheltered accounts have a disadvantage in that any losses cannot be used to offset capital gains. This means that I will have to take a close look at the investments to ensure they are good fit to go into an account where I am unable to do any tax loss harvesting. Put another way: I have to ensure I am comfortable (financially, and psychologically) to move investments, confident that they will not go down in value to the point where I sell them at a loss.
That said, Goal 1 and Goal 2 are complementary: by moving investments from my taxable margin account to my tax-free account, I can easily come within throwing distance of Goal 1.
Moreover, by moving my US investments from my margin account to my tax deferred RRSP, I will reap an immediate 15% cost avoidance: US based stocks are not subject to the (15%) withholding tax on US dividends, which means I will receive the full amount of dividends from my US holdings.
Goal 3: Rebalance my Total Fund to my Target Allocation
When I started investing in earnest in F2012, I had a very rigid target allocation. The past few years I have deviated very far from that. So my third goal (and arguably the most important) will be to revisit my investment policy statement, and determine the appropriate asset mix for my investments.
Goal 4: Increase Passive Income by 5%
As I am a dividend investor, passive income is my primary goal for investing. Following my December 2016 results, I will be baselining my F2016 income, with a goal of beating that income by 5% this year.
I plan on accomplishing this goal through three key strategic activities:
- Re-allocation. I know for a fact that my portfolio is overweighted in some areas. Once I complete Goal 3, I will be reallocating funds to other holdings, to increase exposure to some of my more successful dividend holdings.
- DRIP Investing. I plan on increasing exposure to DRIP investments, as they provide a frictionless vehicle for quickly growing dividend income.
- TFSA Contributions. As mentioned with Goal 1, I plan on increasing my TFSA exposure. This increase will undoubtedly bring more passive income into the total fund.
Goal 5: Update and Expand Investment Research
Many of my investment research posts are horribly out of date. As the calendar year is starting, many companies I follow will be releasing their annual results in the coming months. I plan on updating all of the companies I follow based on F2016 results. Moreover, I am targeting to analyze at least four new companies this year.
And there you have it; the F2017 goals! I would love to hear what everyone else’s goals are for F2017.
Onwards and upwards!
Earlier this year I was helping my brother out with his financial planning, and one key element of the planning was to cut expenses. Cutting expenses is an important factor of any planning session, since any reduction in expenses boosts your disposable income by an identical amount: save $5.00, and you suddenly have $5.00 to redeploy elsewhere. At the time, he was paying $14.95/month in banking fees at a major Canadian bank, which equates to $179.40/year. When I asked him why he paid the fees, he really didn’t have an answer. Like many individuals, he took fees as a given–albeit a horrible one–and paid them every month. With some nudging, we managed to move all of his accounts to Tangerine, and he now has an extra $14.95 every month in his pocket. By the way, if you decide to open up your own account at Tangerine, please use my referral key: 16176076S1 .
Of course, it is not always possible to move all of your banking. I have the lion’s share of my accounts at Tangerine, however I also have an account at BMO because my mortgage is with them, I have a US Dollar Chequing account there, and I use BMO InvestorLine as my discount brokerage. Having an account there just makes things easier. But, even having an account, there are ways to avoid the monthly fees. For my own plan, if I keep a minimum balance of $2,500 in the account, the fees are waived.
Now, I gave that bit of background, because Bank of Montreal is increasing the minimum balance you require to waive fees as of December 1, 2016. Here is a snaphot (as of November 29, 2016) of the proposed fee increases:
|Plan||Current minimum balance||New minimum balance||Difference $||Difference %|
As with everything, the need to pay for fees is all about opportunity cost. As a consumer, I have two choices:
- Pay a monthly fee, and use the minimum balance as I see fit.
- Do not pay a monthly fee, and lock up the minimum balance with BMO.
Let’s look at the annual banking fees, relative to the minimum balance to avoid paying those fees:
|Plan||Monthly Fee||Annual Fee||Minimum Balance (Old)||Cost Yield (Old)||Minimum Balance (New)||Cost Yield (New)|
In the above, the Cost Yield column represents the percentage cost based on the minimum balance, to avoid paying the fees. So, for the Plus Plan, by keeping $2,500 in the account, I am avoiding $131.40 in fees per year, or 5.3% of the locked in money. Put another way: if I can find an investment that pays me at least 5.3%, I would be better off taking the $2,500, investing it in the investment, and using the proceeds to pay off the monthly fees. However, that 5.3% doesn’t take into account taxes. My marginal tax rate on dividends is 25.38% according to the tables on taxtips.ca, so in reality I need to find an investment that yields at least 7.0% (since 7.0%, less 25.38% taxes, would yield me 5.3%).
Now, years ago when I was faced this decision, it was hard to find an investment that would guarantee me 7.0% return (with an acceptable level of risk). The other wrinkle was that many ETFs or companies pay dividends quarterly, which means the income stream from the investment would be “lumpy” relative to the frequency of payments. But with the increase in BMO’s minimum balance, things change. Here are the updated tables using the December 1, 2016, minimum balances:
|Plan||Monthly Fee||Annual Fee||Minimum Balance (new)||Cost Yield (new)||After Tax Cost Yield (new)|
My specific plan is the Plus plan, so I now have two choices: find an investment which gives me a guaranteed 5.9% return on $3,000 (which would give me $177.00, or $132.07 after taxes), or keep $3,000 locked at BMO, and avoid $131.40 in annual fees. Given that this $3,000 is a good place to stash emergency funds, and I wish to preserve safety of principal, at this point I feel it is still safer to keep the “ransom money” with BMO to avoid the fee. It is because of the savings that I call this the “indirect dividend”: I can either claim a dividend by investing the capital, or I can save the fee by locking the money away. Either way, I am “making” money off of locking away a fixed amount of capital.
Of course, there are ways to improve the above analysis. For one, if I purchased the shares in my TFSA, then there would be no tax implications, so I could focus on the Cost Yield, not the After Tax Cost Yield. Another possibility is preferred shares, which I spoke of in an earlier post. Over the next few weeks I will continue this analysis to see if there is a better way to obtain overall higher returns.
Onwards and upwards!