April 2018 Portfolio Update

Another month behind us and another month of awaiting investment opportunities. All the same, this was a strong period for dividend income earned, so there’s some solace to be found in that. Besides, my portfolio isn’t designed for constant activity; not needing to be constantly making moves is the beauty of it all.

CAD Dividends

USD Dividends

Dividend Summary

The month of April has generated $436.53 CAD and $13.48 USD. Although I have only been tracking monthly income this year, I would be remiss not to mention that this is the highest monthly total I have earned to date. I hope to continue saying that as time goes on.

April is evidently a dividend-growth heavy month for me. Of the 12 companies in this update, five of them included a bump for this payout. The obvious standout is TD which generously upped the ante for shareholders by 11.67%. I recently covered TD in greater detail as this increase also represented a doubling of Yield On Cost (YOC) for me. This was a significant milestone for my portfolio as TD was actually the first individual stock I purchased when I embarked on this journey back in 2009.

The laggard of the month in terms of increases was WMT. The company boosted its payout by a paltry 1.97%. Since I purchased it back in August of 2015 in the ~$65 range, the company has provided three increases; 2.04% in 2016, 2.00% in 2017, and now by a paltry 1.97%. In years past, WMT had routinely offered up double digit increases for investors. Still, perhaps the company is making the best use of funds on hands as it wages war with Amazon.com, Inc. (AMZN) online. I own both companies and of everything happening within my portfolio, the eCommerce shift is one of the most transformative and certainly most interesting to observe.

WMT’s recent move to pick up 77% of Flipkart for ~$16B symbolizes its commitment to investing for the future rather than attempting to rest on its laurels. While the company currently has a huge brick-and-mortar presence, particularly in the U.S., it understands that the risk of getting left behind as the online marketplace grows is just as tangible as any of its Supercentres. Flipkart’s founders both previously worked at AMZN and, interestingly, the company also began with an emphasis on online book sales. The company is headquartered in India which is where it focuses its presence. As a shareholder, I am content to see WMT investing in opportunities such as this, as much as I love dividend income. I believe getting the online business right will be critical as this is where the source of future dividends will be derived.

Opportunities in a Frothy Market

I continue to be interested in finding opportunities with companies that pay an elevated dividend of +4% while also having shown a commitment to strong dividend growth. I currently own three utilities in FTS, CU, and H. At the time of writing, these are each down year-to-date between 7-15%, possibly as a result of interest rates being subject to increases over the coming months and years. Nevertheless, when I look at the precipitous drop CU has had since the beginning of the year while it yields ~4.5% on any given day based on market activity, and which sports over 40 years of consecutive dividend growth, I have to say the spectre of adding to my position is tempting. I have purchased the company in three tranches since late 2015 and will be likely to take another stab soon if this weakness persists.

Having said this, many stocks have had a weak start to 2018 and I would be receptive to adding to my financials as well if they continue trending lower. I picked up 15 shares of BNS back in January and have them on my watchlist. If they see the low $70s CAD, I’d be very receptive to increasing that stake as well.

As I have previously discussed, one of my chief themes for investing in 2018 has been to double down on what I already own rather than to open net new positions. I believe I have done well to identify best of breed companies and take stakes in them over the past nine years of my investing life. Now I want to build on those stakes and continue growing my dividend snowball organically. Part of being a good investor involves keeping an eye on the companies you own and staying abreast of developments. Sometimes that means being quick to respond if the market unnecessarily offers a low price for a good name. Other times that means just keeping up a few times a year on the new products a company in the portfolio is offering to decide whether they are trending in the direction you support. Keeping my active positions to 24 or less allows me to do all of this without being stretched too thin.

Conclusion

April was my quietest month of the year in terms of market activity. Although I enjoyed quite a few dividend increases, I didn’t actively make any investments. Rather, it was an opportunity to simply be patient and accumulate some cash on the sidelines. With my bank account currently offering up 2.5% in interest, I was at least earning a decent return when compared with rates over the past few years.

Overall, I am quite satisfied with the returns I earned in April. It bears emphasizing that this is income I did not have to actively go out and work for. It is entirely the result of investments I have made. Investors often tout the adage that it takes money to make money and I can tell you that as a dividend growth investor, that proof is in the pudding.

Full Disclosure: Long TD, REI.UN, KO, BCE, CM, BNS, T, RCI.B, CP, CSH.UN, PEP, WMT, AMZN, FTS, CU, H