March 2014 Mid Month Report


Leaving the crowd – Three months to retirement (March 7, ITT)

Just a bit of analysis to make sure I’m still on course.  Always good to have some reassurance as I will have no employment income after July.

A Contrary View

Here is an article that tries to cast doubt on the investing strategy I employ.  It has some good points, but it uses selective examples. For one thing, it assumes you are picking from all dividend stocks, whereas I only pick from high quality dividend stocks.  I have the track record to defend my strategy – and the retirement funds to prove it.  See the analysis below. Still it makes for good reading.  Click HERE.


 Long Term Returns

I just completed a thorough analysis of my portfolio from January 2008 to December 2013.  During this six year period, the markets have been through the biggest crash in modern history an, most recently, the biggest bull market in recent years.  My portfolio returns during this period were 7.43% annual average.  During this same time the Dow Jones rose 24% for an annual average return of 4% and the TSX rose only 4% in total, with an average annual return of well under 1%.


Short Term Returns

Comments on suggested stocks

As you know I run a monthly screener of stocks that fit my criteria:  A++ (as rated by ValueLine), dividend yield of at least 2% and 10 years history of dividend growth.   Canadian stocks do not get the same attention as US stocks with ValuLine, so I adjust the criteria on rating. The first list I published was in the Fall of 2011.

US Stocks

Lockheed Martin LMT
Lilly (Eli) LLY
Royal Dutch Shell ‘A’ RDS/A
Raytheon Co. RTN
Sysco Corp. SYY
Unilever PLC ADR UL
ConocoPhillips COP
Kimberly-Clark KMB
Northrop Grumman NOC
Du Pont DD
Johnson & Johnson JNJ
Intel Corp. INTC
Abbott Labs. ABT
Novartis AG ADR NVS
PepsiCo, Inc. PEP
Procter & Gamble PG
McDonald’s Corp. MCD
Illinois Tool Works ITW
Gen’l Dynamics GD
Chevron Corp. CVX
Emerson Electric EMR
Medtronic, Inc. MDT
Automatic Data Proc. ADP
3M Company MMM
Coca-Cola KO
Home Depot HD
Honeywell Int’l HON
Colgate-Palmolive CL
United Technologies UTX
Wal-Mart Stores WMT

Canadian Stocks

TransAlta Corp. TA.TO
Bank of Montreal BMO.TO
Can. Imperial Bank CM.TO
Royal Bank of Canada RY.TO
Thomson Reuters TRI.TO
TELUS Corporation T.TO
Bank of Nova Scotia BNS.TO
Nat’l Bank of Canada NA.TO
EnCana Corp. ECA
TransCanada Corp. TRP
Toronto-Dominion TD.TO
Enbridge Inc. ENB.TO

At the time I owned most of these stocks, but have since sold some as they slipped from the criteria (eg. SYY, LLY).  A couple of the Canadian ones I was hesitant on – TA looked suspect to me and I never bought it – good thing because it tanked.  ECA – I finally bought it for the yield, but I sold it when I realized it was going nowhere – the dividend has since been cut.

However, if you bought all of these stocks in equally weighted values, here is what your results would be. (Sept 1, 2011 to March 12, 2014)

US portfolio:

Capital gains of 71% plus an average yield of 2.89% per year for an average annual gain of 30.8%.  This compares to an alternative of investing in ETFs which track the markets – S&P (SPY) of 30.2% per year including dividends and Dow Jones (DIA) of 24.7% per year including dividends.  Had you cherry-picked only the highest yielding stocks your results would be even better.  Your 2.89% yield on cost would be 4.87% on original cost.

Canadian portfolio

Capital gains of 31.9% for an average annual return of 12.75% plus dividends of 3.9% for a total of 16.6% compared to the Toronto market (ETF-XIU) of 11.0 % per year including dividends.  Dropping out ECA and TA would make these results look even stronger.  Your 3.9% dividend yield on current market would actually be 5.2% on original cost.

Note: the US has been in a bull market most of this 30 month period with a few pullbacks.  The Canadian market has not had the same success.

This analysis continues to validate my strategy as being at least as good as the market in the long run.  My main objective as I head into retirement is income generation and capital preservation.  So my expectations for growth, is to have modest gains in up times, but be protected from large losses in bad times.   I am always testing my strategy to see that it’s working and adjust if necessary.  Right now I am very satisfied with both the long term and the short term results.



About borgford

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