May 2015 Investment Report

***

Grandchildren

Cassie at the theatre

Another benefit of retirement – time with the grandkids – taking Cassie to the movies.

 

***

May Results

The Canadian economy continues to falter and fall behind the US.  Fortunately for me, the weaker Canadian dollar is working in my favour.  The TSX fell by almost one and a half percent while the US markets were up one percent.

I’m not into making political statements, but I saw an interesting article (CLICK HERE) that shows the economy under our current government has performed the worst since the Great Depression.  Numerically that is absolutely true, but the article points out there are other factors to consider.  With an election in Canada this fall, it will be interesting to see if the Canadian economy, which has been weak for a long time, will improve with an expected change in government.

My portfolio grew by 1.32% for the month, thanks mainly to the strong US dollar (or weak Canadian dollar, depending on your perspective), bringing my YTD portfolio growth to just over 6% compared to around 2 1/2 per cent for the TSX and S&P.  The Dow is up just over 1% for the year.

Stripping out the effects of the exchange rate, I actually had a loss on my Canadian stocks of close to 2% , but over a 1% gain on my US stocks.  As mentioned in an earlier post, the TSX is being distorted right now by a runaway stock (Valeant Pharmaceuticals Intl Inc – VRX) which appears to be trading at unrealistic levels.

My net worth took a small hit this month, but is still ahead of my net worth on retirement date eleven months ago, so my retirement financials still look good.

 

***

Sold in May

I made some sales in May and will sit on the cash until I see a good buying opportunity. I likely won’t wait until fall, as I usually do, because I would rather have my money earning dividends if possible.

Here is a list of my May transactions – all sales – and a brief explanation of each:

TRI – Thompson Reuters (Canadian)

This stock sat right at the bottom of my previously published list of Canadian stocks.  The dividend was well below my preferred threshold of 3% and had a high (over 24) PE ratio.  Although off its 52 week highs, it is well above its 52 weeks lows.  I have a very substantial capital gain since returning to Canada last year and have had an average annual return of 15% plus dividends.

MO – Altria (US)

I purchased MO a number of years ago when it was one of the Dow 30.  It subsequently spun of its international business into PM (noted below).  It has been a high dividend payer with lots of capital appreciation, which has made me keep it, in spite of not meeting my rigid criteria – especially the ValueLine A++ rating.  It ranked quite low on my recent analysis so I thought it was time to cull it and stick to my strategy.

PM – Philip Morris (US)

I acquired PM as a result of the above spin-off.  It too had good capital appreciation and good dividends, but it ranked even lower than MO, so time to say goodbye.

NVS – Novartis (US)

Novartis has done very well for me. It still meets most of my criteria, but because of good capital appreciation its dividend is now below my 3% preferred limit. It also ranked very low on my list of stocks in the earlier post.  I have had a 24% average annual gain since buying it a few years ago.

DD – Dupont (US)

DD has been a bit disappointing with less than a 6% average annual gain plus dividends. Its dividend has dropped below my 3% limit and ranked right near the bottom of my list.

Other stocks are in my sights for disposal.

COP has dropped to A+ with Valueline which is still good, but below my criteria.  I would not buy it right now, but I have not sold it yet because of its high dividend and reasonable short term capital potential. If it goes up a bit in the near future, I will sell it.

UL sits right a the bottom of my US rankings.  It meets all of my criteria which makes it a hold for now, but it may have run out of steam and it has a high PE ratio.  I will watch it closely for the next month or so.  I have already sold enough to bump up my cash so I don’t want too much more sitting idle right now.

ENB has a dividend yield below my 3% target and has a high PE ratio. I have a sell order in on ENB with a limit price, so when the price is back up, I hope to sell it and replace with higher yield stocks.

***

Current Holdings

As a result of the above transactions, my current holdings are down to 33 stocks.  Eventually I would like to have 30 stocks so I will continually look for low performers to cull.

Canada US
BCE Inc. BCE ConocoPhillips COP
Bank of Montreal BMO Cisco Systems, Inc. CSCO
Bank of Nova Scotia BNS Intel Corporation INTC
Canadian Imperial Bank of Commerce CM Johnson & Johnson JNJ
Enbridge Inc ENB Kimberly Clark Corp KMB
Fortis Inc FTS The Coca-Cola Co KO
Great-West Lifeco Inc. GWO Lockheed Martin Corporation LMT
Husky Energy Inc. HSE McDonald’s Corporation MCD
National Bank of Canada NA Merck & Co., Inc. MRK
Power Financial Corp PWF Public Service Enterprise Group Inc. PEG
Metaux Russel Inc RUS PepsiCo, Inc. PEP
Royal Bank of Canada RY Pfizer Inc. PFE
TELUS Corporation T Procter & Gamble Co PG
Toronto-Dominion Bank TD Royal Dutch Shell plc (ADR) RDS.A
TransCanada Corporation TRP AT&T Inc. T
Total SA (ADR) TOT
Unilever plc (ADR) UL
Verizon Communications Inc. VZ

***

Future Returns

A group of financial experts (remember how useful financial experts are) have put together some guidelines as to what to expect for future returns on the Canadian Stock market as well as some guidelines for future bond returns, interest rates, etc.

The interesting number is an expected return (long term average) of 6.3% on the Canadian market.  That actually feels to me like a good number based on historical returns that have been around 7.5%

HERE is the article:

http://www.theglobeandmail.com/globe-investor/investment-ideas/projection-assumption-guidelines-provide-realistic-return-expectations/article24574135/?utm_medium=Newsletter&utm_source=Personal%20Finance%20Reader&utm_type=text&utm_content=PersonalFinanceReader&utm_campaign=126735173

 

***

May Stock List

This month’s list – A++; dividend above 2%; 10 year dividend growth

Note I have sorted by dividend yield and put those with above 3% yield at the top.

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3% Yield           
Royal Dutch Shell ‘B’ RDSB A++ 5.93 6.5 13.34
AT&T Inc. T A++ 5.39 4 13.97
Total ADR TOT A++ 5.25 8 13.16
Verizon Communic. VZ A++ 4.41 3 13.13
Chevron Corp. CVX A++ 4.06 10.5 22.45
Occidental Petroleum OXY A++ 3.94 17 48.09
Public Serv. Enterprise PEG A++ 3.61 3 15.35
McDonald’s Corp. MCD A++ 3.43 23 21.12
Exxon Mobil Corp. XOM A++ 3.35 9.5 19.38
Procter & Gamble PG A++ 3.3 10.5 19.76
Pfizer, Inc. PFE A++ 3.26 5.5 23.22
Coca-Cola KO A++ 3.2 9.5 20.11
Unilever PLC ADR UL A++ 3.19 8 22.45
Kimberly-Clark KMB A++ 3.15 8.5 21.51
Lockheed Martin LMT A++ 3.13 22.5 16.88
Baxter Int’l Inc. BAX A++ 3.08 12 16.28
Emerson Electric EMR A++ 3.05 7.5 15.63
Int’l Business Mach. IBM A++ 3 19.5 11.95
Merck & Co. MRK A++ 3 1.5 17.17
2 to 3% Yield 
Johnson & Johnson JNJ A++ 2.93 11.5 16.79
PepsiCo, Inc. PEP A++ 2.89 12.5 21.18
Intel Corp. INTC A++ 2.86 23.5 15.61
Du Pont DD A++ 2.76 2.5 17.57
Qualcomm Inc. QCOM A++ 2.74 29.5 15.24
Novartis AG ADR NVS A++ 2.69 15.5 23.08
Deere & Co. DE A++ 2.68 15.5 17.27
Microsoft Corp. MSFT A++ 2.62 28 18.17
Wal-Mart Stores WMT A++ 2.58 18 15.69
3M Company MMM A++ 2.53 6.5 20.08
Boeing BA A++ 2.53 11.5 17.93
Raytheon Co. RTN A++ 2.49 10.5 15.74
Texas Instruments TXN A++ 2.45 28 18.56
Automatic Data Proc. ADP A++ 2.41 13.5 21.93
Travelers Cos. TRV A++ 2.37 6 10.85
Chubb Corp. CB A++ 2.3 9 13.38
Colgate-Palmolive CL A++ 2.24 12 24.58
Infosys Ltd. ADR INFY A++ 2.2 31.5 16.76
Schlumberger Ltd. SLB A++ 2.17 13.5 23.6
Bristol-Myers Squibb BMY A++ 2.15 2.5 40.52
Smucker (J.M.) SJM A++ 2.15 10 21.42
United Technologies UTX A++ 2.15 14 17.02
Home Depot HD A++ 2.11 19.5 21.67
Union Pacific UNP A++ 2.1 20.5 16.79
Dover Corp. DOV A++ 2.06 9.5 18.83

 

***

Happy Investing

***

Advertisements

About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
This entry was posted in Commentary. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s