Enjoying the fruits of smart saving and investing.
Thank Goodness that year is over!!
The US markets were only marginally better with drops of 1% to 2% depending on the index you use (See CNN Money summary)
With the Canadian dollar continuing to weaken, mainly due to low prices of oil and other commodities, my US portfolio bolstered my returns and I ended the year with a respectable gain of just over 10% on my non registered portfolio. Stripping out the effects of the exchange rate, my portfolio in absolute terms was down by about 2.5% for the year.
As I mentioned in earlier posts, I took control of my RRSP (IRA for American readers) from the portfolio manager who was doing a poor job, and I am now trying to repair some of the bad choices he made. That portfolio is down slightly more than the Canadian market, but since assuming control I have reversed some of the downside with some corrective moves and I expect to do much better in 2016. Advice – avoid professionals – they talk the market better than you, but they won’t outperform you.
Assuming we are not in crash mode (I doubt we are), 2016 should be considerably better than 2015 as we seldom have two bad years back to back. “As goes January, so goes the year.” January 2015 was a poor month and the year was even worse. We will test that idiom again at the close of next month.
Dividends and Yield
In spite of a tumultuous year on the markets, my dividends continued to grow. The yield on my Canadian securities is 4.82 per cent and on my US stocks it is 3.85 per cent. Because all of my holdings increase their dividends per share regularly, my actual cash payments increase regularly too. I currently receive more than enough dividends on which to live and do not have to count on capital gains or worry about capital losses.
Question from reader:
Brenda in the Middle East asked the following questions – my responses are in red.
1 I just noticed that I have over the years I have managed to buy several chunks ($40,000) of RDS.A rather than RDS.B as you had recommended (WHOOOPS!!). Are they different and should I consider selling what I have and swapping A for B?
RDS.A and RDS.B are almost identical but each represents a different history. They usually have almost the same price and dividend. Here is how Valueline describes the two issues:
Royal Dutch Shell American Depository Receipts began trading on July 20, 2005 following a vote by stockholders of Royal Dutch Petroleum and Shell Transport &Trading to unify the company. The Royal Dutch Shell ‘A’ issue represents Royal Dutch Petroleum’s former 60% interest in assets and earnings and the ‘B’ classification represents Shell’s former 40% interest.
Valueline has not issued a new report on “A” this year but does have a current report on “B”.
If you have one vs the other, it really doesn’t matter.
- Is RDS.B still A++. Are you getting rid of some of your oil stocks for some reason? I know COP was downgraded but was RDS too? Are you afraid that oil won’t recover?
RDS.B has dropped to A+, which is still OK. I have not purposely disposed of any oil stocks. I switched my COP to CVX because of the COP downgrade to A+. I recently sold some RDS and TOT to take a tax loss against my capital gains on some other stock sales. Oil continues to drop because of oversupply. It will recover, but we likely won’s see much improvement in 2016. As long as they keep issuing dividends, I will not worry too much as that is my focus. But if they cut dividends I may have to reconsider.
- You mentioned in a recent post that you would never buy BNS preferred shares. If I own BNS does that mean that I have preferred shares? What does “preferred shares” mean?
I buy and sell common shares. BNS, as a Canadian bank is a good long term play and I will continue to hold my common share in BNS. By broker, who until recently managed my RRSP portfolio, bought some preferred shares and I was pissed off, because I don’t like preferred shares and now I am stuck with an unnecessary loss on these holdings. Common shares represent the real ownership of a company and get to share in any profits (dividends or capital gains) but also any losses. Preferred shares normally have a fixed dividend which provide a “guaranteed” dividend, but that dividend will not go up, nor will they share in any additional profits. They get their dividends first (thus preferred). There is usually little to no capital gains, but occasionally will have capital losses, which mine now have.
You won’t really have to worry about preferred shares because they never appear on my suggested list.
4 Once on your blog, you posted a link to a very handy site that allows you to type in any stock symbol and then tells you what the dividend growth has been for the past 10 years. Several times I’ve combed through your blog to find that link but I can’t seem to find it. Do you remember where you posted it?
I must say I am having a difficult time finding this link. The best way to find dividend history is to look at any of the readily available financial sites – I mainly use Yahoo for this, but Google and Money have the same type of feature.
Here is an example using RDS.A:
Bring up the quote, click on historical prices on the left menu list, then click the “Dividends only” circle and “get prices” and you will see the dividend per share as far back as Yahoo has the data. You will see here that RDS.A has paid 0.94 per share for the past 7 quarters and it was at 0.9 before that, etc. They have not increased the dividend in almost two years, but they haven’t cut it.
- Related to the subject of past dividend growth, if someone says that dividend growth has been 15% for the past 10 years, does that mean that 15% has been the average per year (I hope it isn’t 15 divided by 10 years) ? And would I be right in assuming that that is a flat 15% without compounding?
As noted above, dividends are issued on a dollars per share basis (not yield). Check out a few shares using the above site to see. My criteria is that this dollars per share keeps going up – forever and never stops. Some companies have decades of doing this.
So a 15% dividend increase (dividend per share) is often accompanied by a growth in share price, leaving the yield close to what it was before.
What usually happens is that the share price keeps increasing and thus the yield (dividends per share divided by share price) can often look very flat. But the actual dollars paid is increasing. If the share price actually drops – like RDS – then the yield gets larger, but the actual money paid stays the same.
- Do you personally check your dividends to make sure that they haven’t gone down in value from quarter to quarter or is there some other way to know if this has happened?
I monitor dividends paid frequently. If the dividend per share drops, it is usually big news on any of these stocks. Encana did that a while ago and it made big news. Any major company does not want to cut dividends because of the dramatic effect on the market. Some may delay increases for a while – eg, INTC waited two years before increasing, so they wouldn’t have to worry about cutting. Apple used to issue dividends then cut it and then stopped altogether. The market was not happy and the shares took a big hit. Apple has recently started issuing dividends again.
My Current Portfolio
(includes my selections as well as left over securities from an old broker)
|Canadian Stocks that mainly fit strategy||US Stocks that mainly fit strategy|
|CA;ACO.X||ATCO LTD CL-I NV||US;CSCO||CISCO SYSTEMS INC|
|CA;AGU||AGRIUM INC||US;CVX||CHEVRON CORP|
|CA;BCE||BCE INC||US;EMR||EMERSON ELECTRIC CO|
|CA;BMO||BANK OF MONTREAL||US;IBM||INTL BUSINESS MACHINES|
|CA;BNS||BANK OF NOVA SCOTIA||US;INTC||INTEL CORPORATION|
|CA;CM||CDN IMPERIAL BK COMMERCE||US;JNJ||JOHNSON & JOHNSON|
|CA;CVE||CENOVUS ENERGY INC||US;KMB||KIMBERLY CLARK CORP|
|CA;ENB||ENBRIDGE INC||US;KO||COCA COLA CO|
|CA;FTS||FORTIS INC||US;LMT||LOCKHEED MARTIN CORP|
|CA;GWO||GREAT WEST LIFECO INC||US;MRK||MERCK & CO INC-NEW|
|CA;HSE||HUSKY ENERGY INC||US;PEG||PUBLIC SERV ENTERPR GROUP|
|CA;MFC||MANULIFE FINANCIAL CORP||US;PEP||PEPSICO INC|
|CA;NA||NATIONAL BANK OF CDA||US;PFE||PFIZER INC|
|CA;POT||POTASH CORP OF SASK INC||US;PG||PROCTER & GAMBLE CO.|
|CA;PPL||PEMBINA PIPELINE CORP||US;T||AT & T INC|
|CA;PWF||POWER FINANCIAL CORP||US;TOT||TOTAL S.A.SP ADR|
|CA;RUS||RUSSEL METALS INC||US;UL||UNILEVER PLC ADR|
|CA;RY||ROYAL BANK OF CANADA||US;VZ||VERIZON COMMUNICATIONS|
|CA;SJR.B||SHAW COMMUNICATION-B NV|
|CA;SLF||SUN LIFE FINANCIAL INC||Slipped from criteria – may have to dump|
|CA;SU||SUNCOR ENERGY INC NEW||US;RDS.A||ROYAL DUTCH SHELL ADR-A|
|CA;TD||TORONTO DOMINION BANK||Inherited from broker – looking to dump|
|CA;TRP||TRANSCANADA CORP||CA;BCE.PR.D||BCE INC-CUM RED 1ST PF-AD|
|CA;BNS.PR.A||BK NOVA SCOTIA F/RT PF-19|
|Fixed Income instruments (inherited from broker)||CA;ENB.PR.B||ENBRIDGE INC 4%-B PFD|
|CA;BIP.UN||BROOKFIELD INFRA PTNR LPU||CA;ECA||ENCANA CORP|
|CA;REI.PR.A||RIOCAN REIT T/U SER-A PFD||CA;TA||TRANSALTA CORP|
|CA;CBO||ISHRS 1-5Y LADD CP BD ETF||CA;TCK.B||TECK RESOURCES LTD -B- SV|
|Company||Ticker||Financial Strength||Dividend Yield||Dividend Growth 10-Year||Current PE Ratio|
|Automatic Data Proc.||ADP||A++||2.53||13||26.06|
|Deere & Co.||DE||A++||3.05||15.5||17.99|
|Exxon Mobil Corp.||XOM||A++||3.86||9.5||19.76|
|Illinois Tool Works||ITW||A++||2.36||12||17.64|
|Infosys Ltd. ADR||INFY||A++||2.19||27.5||17.86|
|Int’l Business Mach.||IBM||A++||3.8||19.5||10.78|
|Johnson & Johnson||JNJ||A++||3.07||10.5||16.14|
|Merck & Co.||MRK||A++||3.43||1.5||14.71|
|Novartis AG ADR||NVS||A++||3.13||14.5||21.33|
|Procter & Gamble||PG||A++||3.41||10||20.21|
|Public Serv. Enterprise||PEG||A++||4.33||3||12.52|
|Unilever PLC ADR||UL||A++||3.08||8||20.37|
|Company||Ticker||Domicile Code||Financial Strength||Dividend Yield||Dividend Growth 10-Year||Current PE Ratio|
|Bank of Montreal||BMO.TO||CA||B++||4.34||8||11.77|
|Bank of Nova Scotia||BNS.TO||CA||A||4.96||10.5||9.66|
|Can. Imperial Bank||CM.TO||CA||A+||4.93||7.5||10.37|
|Can. Natural Res.||CNQ.TO||CA||B++||3.17||23.5||93.63|
|Jean Coutu Group||PJC/A.TO||CA||B++||2.45||10.5||14.71|
|Magna Int’l ‘A’||MGA||CA||A||2.05||6.5||9.11|
|Manitoba Telecom Svcs.||MBT.TO||CA||B+||4.51||3.5||22.9|
|Nat’l Bank of Canada||NA.TO||CA||B++||5.29||11.5||8.94|
|Pembina Pipeline Corp.||PPL.TO||CA||B++||6.22||4.5||25.37|
|Royal Bank of Canada||RY.TO||CA||A||4.42||11.5||10.97|
|Shaw Commun. ‘B’||SJRB.TO||CA||B+||4.49||28.5||13.58|
|Company||Ticker||Domicile Code||Financial Strength||Dividend Yield||Dividend Growth 10-Year||Current PE Ratio|
|Novartis AG ADR||NVS||CH||A++||3.13||14.5||21.33|
|Siemens AG (ADS)||SIEGY||DE||A||4.04||13.5||9.58|
|AstraZeneca PLC (ADS)||AZN||GB||B++||4.18||13.5||25.75|
|Brit. Amer Tobac. ADR||BTI||GB||B++||4.07||14.5||16.31|
|BT Group ADR||BT||GB||B++||3.11||2.5||14.52|
|Rio Tinto plc||RIO||GB||A||7.53||10.5||8.9|
|Vodafone Group ADR||VOD||GB||B++||4.55||14||40.11|
|Willis Group Hldgs. PLC||WSH||GB||B++||2.76||10||15.67|
|WPP PLC ADR||WPPGY||GB||A||3.12||17.5||15.54|
|Tenaris S.A. ADS||TS||LU||B+||3.71||16.5||49.57|
|Philips Electronics NV||PHG||NL||B+||3.62||10||24.78|
|Unilever PLC ADR||UL||NL||A++||3.08||8||20.37|
Happy New Year and Happy Investing!!!