Thursday, May 2, 2013

Dividend Growth Portfolio, April 2013

The stock market is soaring to new highs. Chasing yield is the new fad, like dotcoms around the turn of the century, and housing in 2005-2007. People are buying dividend paying equities without adequate research, believing that getting paid 10% somehow is a good return for low risk. On top of this, good securities are getting bid up, thus driving yields broadly lower. REITs are yielding where utilities used to be. Utilities are yielding where out-of-favor stocks used to be, etc.

As a dividend growth investor, I do invest in higher yielding assets, but my strategy does not revolve around absolute yield. Historical data shows the highest yielding equities do not even have average performance, let alone best. At best, yield chasing yields mediocre returns. At worst, its odds are not much better than roulette.

Where do I see the best value at the moment? I've mentioned these in the past, but I still continue to see good value in the defense and health care insurance industries. To add to those, now I also see attractive value propositions in energy and financials.

At these levels, be careful when committing new money. Buy in increments, and keep some cash on hand, continue to look for opportunities.

New Purchases 
($ amount represents forward estimated yearly dividends of new shares)
Scotiabank - $4.80 (DRIP reinvested shares)
Toronto Dominion Bank - $71.28
Fidelity Spartan 500 Index Fund - $0.44 (DRIP reinvested units)


Intrinsic Dividend Changes 
($ amount represents change in forward estimated yearly dividends based on dividend increase)
Kinder Morgan Inc - $2.00 (quarterly div +2.7% from 37 to 38 cents)
Johnson & Johnson - $36.00 (quarterly div +8.2% from 61 to 66 cents)
Exxon Mobil - $30.00 (quarterly div +10.5% from 57 to 63 cents)
Southern Company - $4.90 (quarterly div +3.6% from 49 to 50.75 cents)
Fidelity Spartan 500 Index Fund - $6.73 (quarterly div +7.9% from 27 to 29 cents)

March 2013 Annualized Dividend: $4722.83

+ $76.08 (from new purchases)
-  $0 (from sales)
+ $79.63 (from intrinsic changes)

April 2013 Annualized Dividend: $4878.54

End of 2013 Goal: $4700 to $5000
Whisper Goal: $5500

YTD Dividends Received: $1389

2013 Dividends Received Goal: $4200
Whisper Goal: $4600


  1. When you say:

    New Purchases
    Toronto Dominion Bank - $71.28

    Does that $71.28 mean it is yearly dividends you'll receive?

    I kinda jumped the gun with a high yielding stock: Pitney Bowes. Might be buying into a dying company?

    1. yes that's right. the amount is the forward yearly dividends i would receive from the newly purchased shares if no increases occur. i'll make a note in future posts.

      for me, PBI is a stay away due to its business mainly coming from a dying mail industry. its not something i want to get involved in long term. doesnt mean its not a buy. it could be undervalued just based on the amount of people who hate it. just not my thing :)

  2. I don't know why people are chasing after yield either. Capital appreciation is important too as long as you don't need the income right away. I find a lot of companies I want to buy this year happen to be US companies for some reason. Definitely bullish on financials too. I think Canadian banks are sitting on a gold mine of mortgages. The low interest rate environment in the last several years have pushed up the price of homes which also created larger mortgages. If bank's earnings are this good at current rates, I bet they're going to be even better when rates start to move up and all those mortgages, even the fixed ones, have to renew their terms at some point in the future :D