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Q1 2020 Dividend Report | Seeking Alpha

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Via SeekingAlpha.com

My Background

Each investor faces a different set of circumstances. Now 33, I have been investing since I was 22 years old. My first investment in individual stocks was made in the heart of the financial crisis back in May of 2009. I purchased 40 shares (80, split-adjusted) of Toronto-Dominion Bank (NYSE:TD). However, for years before making that purchase, I had been researching the best methods available for both wealth creation and preservation.

I don’t believe in taking unnecessary risks and felt the whims of the stock market were too fickle as far as capital gains are concerned to base my aspirations of financial freedom on. Dividend growth investing stands out as it is far more predictable that a healthy company might increase its dividend by 6% than to make any sort of prediction about stock price volatility in the near term.

On this basis and from my initial foray into the markets with TD, I’ve built a portfolio of 33 cash-flowing equities. My goal is ultimately to have a stock market portfolio which provides enough income to cover all of my expenses. While some feel that it only requires 10 companies to achieve ultimate diversification, I believe there is room for a healthy level of redundancy to avoid the hiccups involved with company-specific performance. Regardless, I endeavor to always own the best-of-breed companies in their respective industries. I can live with slower growth if it means greater security for my invested dollars.

This is a strategy I have researched over time and came to trust because it can work for me both as a young investor and likewise carry me through the decades to come. While it may not turn heads at a dinner party, it has proven its value over the past few hundred years and remains as relevant as ever today in our digital age.

Having noted the above, it is truly a great time to be a dividend growth investor. The companies I own are committed to rewarding shareholders and I love nothing more than to reinvest back into them to further increase the compounding power in my portfolio

Please note that all Canadian companies are owned in CAD on Canadian exchanges. JNJ is owned in CAD within my portfolio, though it resides on the NYSE.

CAD Dividends

Company CAD Payments ($) Div Increase (%)
Toronto-Dominion Bank (TD) 59.20
RioCan Real Estate Investment Trust (OTCPK:RIOCF) 93.96
Johnson & Johnson (JNJ) 82.39
BCE Inc. (BCE) 174.35
Canadian Imperial Bank of Commerce (CM) 17.28
Corby Spirit and Wine Ltd. (OTCPK:CBYDF) 66.00
Bank of Nova Scotia (BNS) 90.00
TELUS Corporation (TU) 52.43 3.56
Rogers Communications Inc. (NYSE:RCI) 27.50
Fortis Inc. (FTS) 76.40
Canadian Utilities Ltd. (OTCPK:CDUAF) 87.08
Canadian National Railway Company (NYSE:CNI) 20.13
Canadian Pacific Railway Limited (CP) 8.30
Hydro One Ltd. (OTC:HRNNF) 62.79
Chartwell Retirement Residences (OTC:CWSRF) 15.00
Metro, Inc. (OTCPK:MTRAF) 4.50 12.50
Brookfield Renewable Partners L.P. (BEP) 138.42 5.34
Brookfield Asset Management (NYSE:BAM) 3.83 12.50
Brookfield Infrastructure Partners L.P. (NYSE:BIP) 14.44 6.97
A&W Revenue Royalties Income Fund (OTC:AWRRF) 19.08
Enbridge Inc. (ENB) 20.25 9.76
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USD Dividends

Company USD Payments ($) Div Increase (%)
Waste Management Inc. (WM) 23.17 6.34
McDonald’s Corporation (MCD) 22.32
Yum! Brands (YUM) 15.59 11.90
Yum China (YUMC) 3.98
PepsiCo, Inc. (PEP) 16.24
Walmart Inc. (WMT) 6.76
Visa Inc. (V) 2.55
AbbVie Inc. (ABBV) 44.14 10.28
The Walt Disney Company (DIS) 7.48
Microsoft Corporation (MSFT) 2.61

Dividend Summary

I earned C$1,133.33 and U$144.84 this quarter, coming together for a currency-neutral $1,278.17 grand total. This represents a healthy start to the year-7.82% higher than my $1,185.50 total from Q1 2019 which was also a period in which I received an additional C$101.20 Special Dividend from CBYDF. When removing that bonus from the calculations, my Q1 total increased by 17.88% year-over-year.

Dividends from eleven of my companies had increased payouts during the quarter which contributed to the growth, over and above the fresh capital I put to work. I have been keeping a close eye on dividend news recently given the economic turmoil being experienced around the globe related to COVID-19. Bharat Masrani, CEO of TD, announced last week that the bank currently has no plans to change its dividend policy. This is great news given TD represents one of my largest holdings – one I’ve increased by 150% through March alone.

Quarterly Buys/Sells

This was easily the most active period of my investing career. While three or four purchases in a typical quarter would normally be busy for me, I actually purchased stock on 13 occasions through Q1.

Here’s a quick view of the purchases and their expected forward dividend income:

Stock Market Activity - PurchasesI put C$8,231.05 and U$6,658.44 to work for a currency-neutral total of $14,889.49. At the start of the year and based on how elevated the stock market was, I wasn’t expecting to even invest this much through the entire year. In currency-neutral terms, I am expecting $437.20 in forward annual dividend income from these purchases.

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GOOGL represents a deviation from my standard methodology of purchasing high-quality, dividend-paying stocks, but I decided this one was an exception worth making; GOOGL is on the forefront of huge secular growth trends, not the least of which is cloud computing. Beyond that, many of its brands are household names. For example, the Google search engine, YouTube, and Gmail are just three of a diverse suite of products which consumers use every single day. Even with just a single share to open a position, I’m glad to be on board.

Q2 2020 Stock Considerations

This is the first quarter in a long time where I can finally say there are already opportunities to purchase at current prices as well as the expectation of further pullbacks. It will come as no surprise to anyone when the earnings reports start rolling in from companies that show decimated sales numbers based on the lockdowns permeating the globe.

The stock market has been absolutely ravaged since late February, though there has been a bit of a rebound from the lows:

ChartData by YCharts

While my cash reserves have been eaten away by the large number of purchases made in Q1, I will still be looking to make some more buys. My emphasis will be on building out existing positions rather than purchasing new companies. My portfolio is already broadly diversified across many industries, so I don’t feel there is a need to get exposure anywhere that I do not already have it.

Given that my recent MA purchases have my cost basis just over $300, averaging down there might be a place I’ll focus. I intend to be patient for the time being; however, given we likely have weeks in front of us where companies will be reporting poor numbers from their business units on account of COVID-19. Speaking of which, it is worthwhile to add a word on the topic given its impact.

COVID-19

The onset of COVID-19 and the quarantines taking place represent the greatest black swan event of my generation; it came along out of nowhere and has absolutely upended our way of life. This upheaval has resulted in a virtual halt to what was otherwise a strong economy and stock market. The effects are difficult to quantify at this time given nobody knows how long the present conditions will persist.

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In my view, it isn’t worth making any predictions or spending much time trying to fully assess such an uncertain situation. Rather, I simply hold to my core principles of investing with a long-term mindset and trust that one day life will return to normal.

To date, none of my companies have cut or suspended their dividends. This may well change in the coming days and weeks as the financial toll of COVID-19 deepens. The premier companies will have a chance to shine through if they can maintain and increase their payouts to shareholders over the course of the next year or two.

Now, more than ever, I am glad I’ve stuck primarily with high-quality companies for my investment dollars. I suspect that the majority of those in my portfolio will come through this crisis stronger.

Cash Position

I currently am earning 3% interest from my bank on liquid cash. This is a great rate, considering how low interest rates have fallen in general. I’m not taking great advantage of this, though, as I’ve deployed a large portion of my cash as the markets have tanked.

I feel this is the time to be ready to deploy capital opportunistically rather than building up too much cash.

Conclusion

We are living in unprecedented times. COVID-19 has completely changed the game in terms both of personal daily life and for how businesses conduct their operations.

I have done what I can to take advantage of what I believe – and hope – will represent just a short-term setback in our financial markets. Investing nearly $15,000 across the first three months of the year should set me up to have a good year in terms of dividend income, so long as my portfolio weathers the storm successfully.

Thank you for reading and please stay safe in these challenging days.

Ryan

Disclosure: I am/we are long TD, RIOCF, JNJ, BCE, CM, CBYDF, BNS, TU, RCI, FTS, CDUAF, CNI, CP, CWSRF, MTRAF, BEP, BAM, BIP, AWRRF, ENB, WM, MCD, YUM, YUMC, PEP, WMT, V, ABBV, DIS, MSFT, MA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.




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