October 2018 Portfolio Update

As we move into the final quarter of the year, the portfolio’s momentum remains strong. It’s always a great feeling when I have some dividend increases, a market purchase, and a new all-time high income total to report on.

CAD Dividends

Company	CAD Payments ($)	Div Increase (%)
Toronto Dominion Bank (TD)	53.60
RioCan Real Estate Investment Trust (REI.UN)	31.32
The Coca-Cola Company (KO)	66.88
BCE Inc. (BCE)	166.10
Canadian Imperial Bank of Commerce (CM)	16.32	2.26
Bank of Nova Scotia (BNS)	85.00	3.66
TELUS Corporation (T)	36.75
Rogers Communications Inc. (RCI.B)	26.40
Canadian Pacific Railway Limited (CP)	3.90
Chartwell Retirement Residence (CSH.UN)	4.90

Dividend Summary

I once more earned a record total for dividend income through the month of October. I raked in $491.17 CAD from a total of ten companies.

It is worth noting that the dividend increases for both CM and BNS are their second of the year. These two Canadian banks tend to bump their payout at least twice per year. For CM, the quarterly dividend has moved from $1.30 to $1.36 and so represents a total gain of 4.62% year-over-year (YOY). BNS has shown healthier growth with its quarterly dividend moving from $0.79 to $0.85 from last October, posting a 7.59% YOY gain.

Market Activity

After taking a breather in September in terms of stock buying, I dipped my toes back into the water with one purchase in October.

After initiating a position in Brookfield Renewable Partners L.P. (BEP) back in July, the share price has steadily pulled back. As that has happened, I’ve continued buying to average down on price as dividend yield has risen. I added 40 shares for a total cost $1,536.35 CAD. On the current quarterly dividend of $0.49 USD, these shares should produce roughly $25 CAD quarterly or $100 CAD annually, subject to foreign exchange fluctuations.

I felt comfortable adding to BEP as the company has an incredibly transparent shareholder-friendly policy of intending to earn 12-15% overall returns to investors while boosting the dividend by 5-9% annually. On a starting yield hovering around the 7% range, there is real cash flow potential if they are able to execute on their plans. Incidentally, CEO Sachin Shah expressed plenty of confidence that they will be able to do just that on the Q3 2018 Earnings Conference Call this past Wednesday:

Overall our strategy remains the same. We look for investment opportunities in our core markets globally, where we can surface 12% to 15% returns on a per unit basis using our operational expertise. We maintained strong access to public and private sources of debt and equity and investment grade balance sheet and surface value through the monetization of mature assets.

This strategy has served us well for almost 20 years and our business has been resilient through multiple investment cycles and the numerous investment trends that have permeated the renewable power sector over that time. As a result, we have delivered 15% total return on a per unit basis to our unit holders since our inception in 1999.

Aside from BEP, many other companies have been on the decline over the past while and so I believe there will still be ample opportunities as 2018 winds down. I highlighted three (including BEP) in my recent Q4 Watchlist article.

In times like these, it is important to have cash on the sidelines ready to deploy. While investing efficiently means sometimes waiting, there are times when it is important to capitalize on opportunities to take advantage of what Mr. Market offers up.

Cash

Although the rising interest rate environment seems to have placed pressure on utility stocks, it bodes well for individuals looking to get more out of what they have sitting on the sidelines. While I am currently earning 2.5% through the end of the year from my bank, I have already been seeing 3% promotional rates being floated around and so I will need to be ready to renegotiate my rate come the end of December.

Part of a healthy financial strategy involves having cash sitting back earning less than it otherwise might. This cash can eventually be used to take advantage of timely opportunities and, most of all, it provides financial security to buffer against the vicissitudes of life.

Conclusion

My monthly dividend income is once again knocking on the door of $500 which would be a solid milestone to achieve. The BEP purchase I made this month should position me to meet that level as I look forward to December, and so I’m already feeling anxious to get those totals counted.

It felt good to get investing again after taking a break in September to build up my cash reserves. Rising interest rates make it slightly more attractive to hold cash in the current environment for those able to finagle a solid rate. However, declining stocks get my trigger-finger ready to double down on positions as the dividend yields are elevated at the moment and so I may well find myself deploying more capital over the remainder of the year.

Full Disclosure: Long TD, REI.UN, KO, BCE, CM, BNS, T, RCI.B, CP, CSH.UN, BEP