The goal of this portfolio is to build wealth through stock appreciation while earning a steady dividend income. In other words, a passive income machine. During the accumulation years, the dividend income is fully re-invested through synthetic DRIP.
When retirement comes, the strategy per account may change to focus on tax efficiency while earning an income from my portfolio.
The dividend growth stocks I pick for total return are selected using a simple but yet effective stock selection process which leverages the Chowder Rule as a growth marker.
The dividend income stocks I pick for income focus on a combination of yield, dividend increases and dividend growth. A lower total return is expected for those holdings.
One of my rules is to hold 30 or fewer stocks in my portfolio to ensure I can stay on top of my holdings. To better understand my strategy, you need to read my investing rules and leverage my dividend growth stock selection process.
All in all, it has provided me with a portfolio that can beat the index and in retirement, my knowledge of dividend investing will allow me to draw dividend income rather than burn through my hard earned capital.
Portfolio Breakdown by Accounts
During the accumulation phase, dividend growth and total return is what drives my stock selection process and as such you will see very low yield stocks that I would normally not hold in my retirement years.
However, as I approach a pivotal point towards financial independence, I have started switching my non-registered account into a retirment account. That means it will be focused on being tax efficient with a high income. REITs don’t have a part in it.
I put the below table together to have a clear view of my holdings. If you have a lot of high yield, then you have a retirement income portfolio. Nothing wrong with that if that’s what you need but know your income growth to keep up with inflation.
|wdt_ID||Dividend||None||Low Growth (< 6%)||Medium Growth (> 6%)||High Growth (> 10%)||Total|
|3||Low Yield (< 2%)||0.00||2.77||0.00||42.78||45.55|
|4||Medium Yield (> 2%)||0.00||0.00||12.17||5.83||18.00|
|5||High Yield (> 4%)||0.00||0.00||26.05||0.00||26.05|
|7||Aggressive Yield (> 6%)||0.00||3.38||2.52||0.00||5.90|
The accounts below represent holdings across my accounts and our spousal equivalent. My accounts are with RBC Direct Investing for now.
The annual ROR is calculated using my portfolio tracker for a money-weighted return comparison. If your broker provides you with a money-weighted ROR, you can compare yours to my return.
The details of my portfolio are outlined below and you can easily see my sector exposure.
As you know, I don’t put much weight on sector diversifaction as there are too many businesses now overlapping. Take Disney for example, it’s a communication services company now. Visa is a financial company but it’s really a technology company at the end of the day. Industries are more representative of risk. Check out my dividend income reports for the details.
|Accounts||Ticker||Sector||Currency||ROR %||Years Held||Yield||Portfolio Ratio||MarketCapGroup|
|Computershare||TSE:T||Communication Services||CAD||13.01||12.35||5.14||0.31||Large Cap|
|RBC||TSE:BNS||Financial Services||CAD||0.14||0.63||6.46||3.25||Large Cap|
|RBC||TSE:RY||Financial Services||CAD||12.17||11.97||3.86||5.82||Large Cap|
|RBC||TSE:NA||Financial Services||CAD||15.67||10.96||3.78||6.67||Large Cap|
|RBC||TSE:TD||Financial Services||CAD||12.44||10.96||4.31||6.07||Large Cap|
|RBC||TSE:GWO||Financial Services||CAD||23.00||0.83||5.70||1.60||Large Cap|
|RBC||TSE:T||Communication Services||CAD||-1.73||1.32||5.14||2.15||Large Cap|
|RBC||AMZN||Consumer Cyclical||USD||-34.62||1.47||0.00||0.72||Mega Cap|
|RRSP||ATVI||Communication Services||USD||-1.27||1.06||0.00||1.91||Large Cap|
|RRSP||V||Financial Services||USD||19.70||6.88||0.80||1.40||Mega Cap|
|RRSP||COST||Consumer Defensive||USD||21.99||5.45||0.76||5.04||Mega Cap|
|RRSP||BLK||Financial Services||USD||8.50||4.46||2.88||5.47||Large Cap|
|RRSP||MA||Financial Services||USD||12.58||4.33||0.63||3.22||Mega Cap|
|RRSP-S||V||Financial Services||USD||3.49||2.24||0.80||1.47||Mega Cap|
|RRSP-S||GOOGL||Communication Services||USD||-16.17||0.38||0.00||1.81||Mega Cap|
|RRSP-S||TSE:T||Communication Services||CAD||-3.07||0.67||5.14||1.39||Large Cap|
|TFSA||TSE:ATD||Consumer Defensive||CAD||23.74||1.32||0.86||1.54||Large Cap|
|TFSA||TSE:IFC||Financial Services||CAD||13.49||2.24||2.25||2.20||Large Cap|
|TFSA||GOOGL||Communication Services||USD||-15.74||0.38||0.00||1.50||Mega Cap|
|TFSA||COST||Consumer Defensive||USD||14.18||1.80||0.76||0.76||Mega Cap|
|TFSA-S||TSE:IFC||Financial Services||CAD||15.39||5.02||2.25||3.36||Large Cap|
|TFSA-S||TSE:ATD||Consumer Defensive||CAD||18.87||4.75||0.86||3.80||Large Cap|
|Accounts||Ticker||Sector||Currency||ROR %||Years Held||Yield||Portfolio Ratio||MarketCapGroup|
Canadian Stocks – Purchase Rationale
When it comes to choosing a Canadian stock, the list of companies matching my investing criteria will mostly be Canadian Dividend Achievers with a 10% CARG dividend growth.
However, with some industries, it can be difficult to find a match and I have to vary my approach and selection.
You can see my rationale on why I hold each stock in my portfolio and that’s what I use to run a portfolio stress-test. I love companies that operate like a toll booth where there is regular payments made by the customers.
[CORE] – The railway continues to be the primary method of transporting goods across North America and there will not be any new added competition. It’s an oligopoly with competition only coming from the trucking or airline industry. The dividend growth is impressive and it makes up for the low yield. I chose CNR over CP simply because CP was going through management changes when I was ready to buy into the railway.
[CORE] – A strong Canadian bank across Canada with good product offering and technologically on par with other Canadian banks. TD stands above other Canadian banks with its expansion in the US market through TD Ameritrade and other ventures. Regular fees are paid and dividend increases can always be covered by some increase in fees. Good and safe dividend yield and growth.
[CORE] – Same reason as TD. Royal Bank happens to also have some international exposure and a strong wealth management segment.
[CORE] – An opportunistic purchase as it was undervalued against the other big banks at the time. More specifically, it caters to small businesses in the province of Quebec and has cornered that market well. While I would say it needs some improved branding for the consumers, the business will not care as long as they are served well. Did I mention the bank fees :)
[CORE] – The leader in property and casualty insurance growing through acquisition and organic growth. Normal dividend yield but great dividend growth. It passed the 10-10 test and is a Dividend Ambassador. The insurance business is a cash flow business. Even in a bad year, you know they will recover with higher cost the next. It’s like gambling, the house never lose.
[CORE] – station stops around the world. I am late to the party for this company but it has done well. It’s basically a driver tollbooth masquerading as a gas station – huge profit margin on all the items in the stores. It is a true Dividend Ambassador with strong dividend growth offsetting the low yield and supported by the stock growth.
[INCOME] – I hold Telus as it offers strong mobile revenue followed by internet/television revenue. However, it chose to diversify into the healthcare sector as opposed to buy content or sports team like the others. It is also well position to grow customers across Canada and is obviously part of a controlled oligopoly.
[INCOME] – The business is regulated and a necessity with little competition making this utility a toll booth. It’s a leader on the east coast of Canada with growth in the US and Caribbean. Good Chowder Score with consistency over the past 10 years.
[INCOME] – A more recent acquisition as I get my taxable account focused on dividend income. Fortis has done a large US acquiistion in the past which gave the company a footing in the US to grow further while continuing to have a stable business in Canada.
[INCOME] – A strong pipeline operating between Canada, the US and Mexico. It pays a good dividend yield with consistent dividend growth. The Chowder Score is above 10% and the dividend growth is consistent.
[OPPORTUNITY] – An opportunistic purchase in 2022 as it was really beaten down and offered over 6% yield. A yield this high is really never seen with the big banks and in my view the bank will bounce back in the future as it makes the necessary adjustments needed.
[OPPORTUNITY] – An opportunistic purchase in 2022 as it was really beaten down and offered over 6% yield just like BNS. The P/E and yield just simply reached a low point so low that I could not pass on it for the income account.
[OPPORTUNITY] – After the massive drop in value, I added AQN back as an opportunity to earn high yield and wait for the bounce. Investors are not patient and emotional. At this price, a drop in dividend still leaves me with a high dividend … AQN could repeat the 2008 dividend drop followed by growth …
US Stocks – Purchase Rationale
The list of stocks matching my investing criteria will mostly be US Dividend Aristocrats with the exception of the technology sector. That sector is relatively recent to fulfill the requirements for a US Dividend Aristocrat.
[CORE] – I opted to buy into Microsoft as a dominant software company in the operation system and office software. Those two segments alone and the transition to subscription for consumers meant the company was moving to a strong recurring revenue. The cloud segment was in the early stages and proved to be a catalyst to the company’s growth.
[CORE] – While most of the revenue is generated from the iPhone, the tollbooth concept comes from people upgrading their phone regularly (every 2 years) and from the app marketplace where Apple takes a cut of all transactions. Apple is also shareholder friendly with share buybacks and a strong dividend growth.
[CORE] – A solide healthcare companie.
[CORE] – The undisputed subscription leader. Costco gets people to pay to go shop there and the price value offering keeps the subscribers coming.
[CORE] – Texas Instrument is a play on the IoT devices. Homes are generally moving into the space of IoT and needs chips to connect to the internet and do some data processing. It’s also a play on the growth in connected automobiles.
[CORE] – A purchase transaction tollbooth, what else could you want. VISA doesn’t assume any risks from credit card holders and gets paid on all transactions that go through the network. Whether you like it or not, using a credit card is a lot simpler than carrying cash and coins. The convenience is here to stay and VISA is increasing its market share.
[CORE] – Same as VISA. There is room for 2 big players. It gives options to the consumer.
[CORE] – A giant asset management firm profiting from many ETFs and the indexing trends is making this company a toll booth operator for investors.
[OPPORTUNISTIC] Activision – A play on the Microsoft acquisition and waiting to see about the push back from different countries. There is a 15% upside on the price if it’s approved.