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 portfolio may switch to focus on higher dividend income but time will tell if I need to make this change. My hope is to become financially independent from the dividend income my portfolio can generate.
One of my rules is to hold 40 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 7 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.
|wdt_ID||Dividend||None||Low Growth (< 6%)||Medium Growth (> 6%)||High Growth (> 10%)||Total|
|3||Low Yield (< 2%)||0.00||6.90||0.00||53.47||60.37|
|4||Medium Yield (> 2%)||0.00||0.00||20.45||0.00||20.45|
|5||High Yield (> 4%)||0.00||0.00||11.93||0.00||11.93|
I put the above 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 the performance works for you.
|2||RRSP||17.33||2009||RBC Direct Investing|
|3||RRSP-S||16.09||2017||RBC Direct Investing|
|4||TFSA||13.02||2009||RBC Direct Investing|
|5||TFSA-S||16.66||2017||RBC Direct Investing|
|7||RBC||12.27||2009||RBC Direct Investing|
|9||RBC-S||7.68||2019||RBC Direct Investing|
|Accounts||Ticker||Sector||Currency||ROR||Years Held||MarketYield||Ratio||ROR %||Yield||Portfolio Ratio|
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 sectors, 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.
Telus TSE:T – I hold Telus as it offers strong mobile revenue followed by internet/television revenue but moreover, it chose to diversify into the health 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.
Canadian National Railway TSE:CNR – 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.
TD Bank TSE:TD – 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.
Royal Bank TSE:RY Same reason as TD. Royal Bank happens to also have some international exposure and a strong wealth management segment.
National Bank TSE:NA An opportunistic purchase as it was undervalued against the other big banks. 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 :)
Intact Financial TSE:IFC 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.
Fortis TSE:FTS Undeniably one of the strongest and most stable utility company in Canada, Fortis has been stable, consistent and has done some excellent acquisition in the U.S. to keep on growing.
Algonquin Power & Utilities Corp TSE:AQN One of the leader in renewable energy in Canada and poised to grow through acquistions
Emera TSE:EMA 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.
Alimentation Couche-Tard TSE:ATD.B This convenience store chain is setup to profit from many gas 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.
TC Energy TSE:TRP 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. I have a tiny position and I am adding to it quarterly through Computershare.
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.
Johnson & Johnson NYSE:JNJ A household name – simple. Look around your house and you find items from Johnson & Johnson that you cannot leave without. Moreover, the pharma division can always add new products in the pipeline. The dividend is safe and J&J can either re-invest internally or use their cash to acquire a business.
NASDAQ:MSFT 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.
NASDAQ:AAPL 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.
NASDAQ:COST The undisputed subscription leader. Costco gets people to pay to go shop there and the price value offering keeps the subscribers coming.
NASDAQ:TXN 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.
Visa NYSE:V 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.
Mastercard NYSE:MA Same as VISA. There is room for 2 big players. It gives options to the consumer.
Blackrock NYSE:BLK A giant asset management firm profiting from many ETFs and the indexing trends is making this company a toll booth operator for investors.
The Walt Disney Company NYSE:DIS My position in Disney is based on the following two concepts: amazing intellectual properties (Marvel, Star Wars, Disney, Pixar to name a few) and the streaming capabilities. While the IPs can be leveraged with the parks and keep them fresh, the growth will be the streaming subscription.
Twilio – A millionaire maker stocks. It’s a small position to be exposed to a super growth stock disrupting communication to customers through text. Behaviourally speaking, in the developed world, we all have a phone and would prefer to receive communication by text for notification of various company communications.