It’s Going to Hurt, Stay Invested [Podcast]

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The market has gone sideways for a while: Russian sanctions, outbreaks, inflation, and interest rates don’t help. There are also concrete signals that the worst is ahead. We could live in denial, but we chose to discuss why a recession may be upcoming and help you be prepared for the storm.

Get your portfolio ready! Download the Recession-Proof Portfolio Workbook here.

You’ll Learn

  • The last “real” recession happened in 2008. What did it look like back then and which lessons could we learn from it?
  • After a few months of War and Russian sanctions, there are impacts on the market, like additional pressure on inflation and supply chain disruption.
  • There are still some outbreaks in China that won’t help with the supply chain. What does that mean for investors?
  • Should inflation continue to rise, how could it impact the market? What should investors expect?
  • Inflation and higher interest rates reduce consumer buying power. This could likely slow down the economy.
  • There are 5 markers of a recession: loss of jobs, declining real income, production and manufacturing slowdown and finally, lower consumer spending. While some are not doing so great, others can give us some hope.
  • Recently, we have also seen an inverted yield curve. What is it and what does it mean?
  • Stagflation is probably the worst thing that could happen. Is it a possibility in the current context?
  • Investors can diminish the hurt by knowing what they own and why they own it… Mike gives concrete examples of what that means.

Related Content

Inflation has been rising for many months now. What should investors expect from the FED or the Central Bank of Canada? How will it continue to impact you and your portfolio? From a look back in history to which sectors or stocks can benefit from the situation, here’s everything you need to know about inflation!.

Inflation is Rising, What Does It Mean for You? [Podcast]

We can’t predict everything, but there are indicators that can help us get prepared and have an idea of what’s ahead. Here are 5 macroeconomic metrics to improve your understanding of the economy, avoid panicking and help find some opportunities.

5 Metrics to Predict the Market [Podcast]

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The post It’s Going to Hurt, Stay Invested [Podcast] appeared first on The Dividend Guy Blog.

Mr. Market is Moody – April Dividend Income Report

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In September of 2017, I received slightly over $100K from my former employer which represented the commuted value of my pension plan. I decided to invest 100% of this money in dividend growth stocks.

Each month, I publish my results on those investments. I don’t do this to brag. I do this to show my readers that it is possible to build a lasting portfolio during all sorts of market conditions. Some months we might appear to underperform, but you must trust the process over the long term to evaluate our performance more accurately.

Performance in Review

Let’s start with the numbers as of May 5th, 2022 (before the bell):

Original amount invested in September 2017 (no additional capital added): $108,760.02.

  • Portfolio value: $210,467.87
  • Dividends paid: $4,070.50 (TTM)
  • Average yield: 1.93%
  • 2021 performance: +16.78%
  • SPY= 28.75%, XIU.TO = 28.05%
  • Dividend growth: +3.14%

Total return since inception (Sep 2017- May 2022): 93.52%

Annualized return (since September 2017 – 55 months): 15.49%

SPDR® S&P 500 ETF Trust (SPY) annualized return (since Sept 2017): 14.78% (total return 88.10%)

iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 11.62% (total return 65.50%)

Mr. Market is Moody – It Hurst Your Recent Purchase

Since the beginning of the year, it seems that for every good day on the market, you get 3 bad ones. Sometimes, it even starts in the green and ends up in the red (or vice-versa). Why is that? Probably because we have been crushing all-time high records month after month, quarter after quarter, year after year for a very long time.

In Canada, the energy sector saved the day for a while, but there is a limit to what a single sector (even important) can do to lift an entire market. If you haven’t made many transactions in your portfolio like me in the past few years, you probably don’t mind much. After a while, short-term fluctuations aren’t that bad because you “run on profit”. In other words, when a stock goes down by 20%, but your total return on this investment is still +56%, it doesn’t hurt as much as you are still in positive territory.

However, I can appreciate how you might feel if you bought TFII International (-25% ytd), Goeasy (-33%), Innovate Industrial Properties (-42%) or Air Product & Chemicals (-21%) in January 2022. Strangely enough, your perspective would be completely different if you had bought them 3 years ago as you would still be showing profits on these investments.

I noticed in the latest webinars that many questions were formulated like this:

Why company ABC is down 20%?

You can certainly do a lot of digging and find an explanation (there is always a good reason to explain stock movements). This could satisfy your curiosity and make you feel better about the paper loss in your account. But, respectfully, I think you are asking the wrong question. The question you should be asking is:

“Is company ABC still in line with my original investment thesis?”

The market is filled with short-term investors that don’t have the same investment goals as you. They focus on performance for the next week, next month or the next quarter. As a dividend investor, you are smarter than this. You focus on the next decade, 25 years, half a century. If you don’t believe me, here’s an example for you to consider. Consider this stock price graph of TFI International (TFII.TO) for a nine-month period (please note that I’ve taken the year off the chart on purpose):

This graph shows how TFI stock (known as Transforce back then) went down from April 2015 to January 2016. Nine months and investors were down almost 30%! In 2015, the economy wasn’t that great, and we were in the middle of another oil turmoil and investors were nervous.

Interestingly, we featured TFI in a DSR newsletter in July 2016 as one of the best plays in the industrial sector at that time. Here’s what I wrote:

“With lots of cash in its hand and a weaker economy outlook, many analysts anticipate a merger or acquisitions from TFI to make it even stronger when the economy bounces back. The stock is down 9% for the past 12 months and keeps dragging behind the TSX since the beginning of the year, this could represent a great buying opportunity.”

You already know the rest of the story (TFI was also added to some of our DSR portfolios back then), but imagine what investing with conviction (e.g., with strong belief in your investment thesis) would have done after seeing the stock going down 30%…

When I look at this graph, there are two things that stand out for me:

#1 TFI went through an amazing growth phase mostly related to the DSR investment thesis announced in 2016.

#2 Even after the current correction of the stock, we are just trading at last year’s levels.

Again, I get it, it sucks when you buy shares of a stock, and it drops 20%+ a few months later. I’ve experienced that many times too. In an ideal world, we would have waited for that perfect moment to buy. Unfortunately, crystal balls are also victims of supply chain disruptions, and we can’t find them anywhere. The good thing to do is to take more time to write down your investment thesis to invest with more conviction.

It doesn’t look like this, but great companies always come back full strength and become winners on the stock market.

Keep that in mind for the coming months.

Smith Manoeuvre Update

Last month, I told you I had started a Smith Manoeuvre (a leveraged operation) where I will borrow $500 per month to invest in the stock market. I’ve already shared my first purchase (Canadian Net REIT NET.UN. V) and I was ready to make my second $500 purchase in April.

I’m not going to surprise anyone with my second pick: National Bank (NA.TO). Do I need to explain myself here?  More seriously, when I look at my “SM list” and saw that NA.TO went from $100 to $90, I couldn’t help but add more of this amazing dividend grower.

As you can know, I’m starting this portfolio by focusing on the growth segment. A few members have asked me why I picked NET.UN as my first holding. There isn’t exactly a clear answer to that question as many of the 22 stocks from that list would have been a good pick. I have a preference at this point to buy companies with a variety of growth vectors. This is the case for both NET.UN and NA.

I told you I opened a margin account and that it wasn’t the plan to go on margin at this point. However, having a margin account offers flexibility when you trade with small amounts. With a deposit of $500, I was a bit short to buy six shares of National Bank at $90.48 ($542.88). I had, therefore, two options:

#1 buy five shares and leave about $50 in the cash account (which is 10% of the amount to be invested)

#2 use the margin for the difference (which happened to be $38 since I had received a dividend from NET already).

I decided to use the margin for this small amount. I don’t expect to use it all the time, but it will help me in getting invested more efficiently. Here’s my portfolio as of May 5th:

Company Name Ticker Sector Market Value
Canadian Net REIT NET.UN. V Real Estate $486.70
National Bank NA.TO Financials $557.64
Cash (Margin) -$36.51
Total $1,007.83

Let’s look at my CDN portfolio. Numbers are as of May 5th, 2022 (before the bell):

Canadian Portfolio (CAD)

Company Name Ticker Sector Market Value
Algonquin Power & Utilities AQN.TO Utilities $6,061.32
Alimentation Couche-Tard ATD.B.TO Cons. Staples $20,638.91
National Bank NA.TO Financials $11,245.74
Royal Bank RY.TO Financial $7,956.00
Brookfield Renewable BEPC.TO Utilities $6,746.85
CAE CAE.TO Industrials $6,280.0
Enbridge ENB.TO Energy $9,262.33
Fortis FTS.TO Utilities $6,039.99
Magna International MG.TO Cons. Discre. $5,599.30
Sylogist SYZ.TO Inf. Technology $3,356.85
Granite REIT GRT.UN.TO Real Estate $11,667.20
Cash 389.33
Total   $95,243.82

 My account shows a variation of -$3,311.64 (-3.36%) since the last income report on April 4th. Since most of my US companies declared their earnings, we’ll have a look at them for this update and I’ll reserve the Canadian companies’ update for June.

Here’s my US portfolio now. Numbers are as May 5th, 2022 (before the bell):

U.S. Portfolio (USD)

Company Name Ticker Sector Market Value
Activision Blizzard ATVI Communications $9,191.84
Apple AAPL Inf. Technology $12,451.50
BlackRock BLK Financials $9,313.22
Disney DIS Communications $5,228.55
Gentex GNTX Cons. Discret. $7,139.30
Microsoft MSFT Inf. Technology $15,948.90
Starbucks SBUX Cons. Discret. $6,939.40
Texas Instruments TXN Inf. Technology $8,811.50
VF Corporation VFC Cons. Discret. $4,216.05
Visa V Inf. Technology $10,726.00
Cash $334.70
Total   $90,300.96

The US total value account shows a variation of -$6,707.42 (-6.9%) since the last income report on April 4th. I took a serious beating on my tech stocks, Disney, and Starbucks (all right, that’s pretty much all of this portfolio!). The market’s move away from growth toward value hurt this portfolio. There were many results that came in over the past few weeks. Let’s look at them!

Activision is slowing down (still no news on the merger)

Activision reported declining sales as compared to the incredible results from the pandemic period. Activision Blizzard’s net bookings were $1.48 billion, as compared with $2.07 billion for the first quarter of 2021. The company should see a revenue boost coming from the launch of its new Diablo franchise Immortal coming in June. While we have no definitive news from the regulators, more than 98% of ATVI shareholders voted in favor of the merger.

Apple is on a roll (did it ever stop?)

Apple did it again! It beat both EPS (+8.6%) and revenue (+8.6%) growth expectations. In detail: iPhone revenue of $50.57B (+5.5%), Mac revenue of $10.44B (+14.6%), iPad revenue of $7.64B (-2%), Wearables, home and accessories of $8.81B (+12.4%) and Service revenue of $19.82B (+17.3%). Revenue increased in all geographic regions besides the rest of Asia (-6.7%) while China’s revenue was up 3.7%. Apple also said it would increase its buyback program by $90 billion and boost its quarterly dividend by 5% to 23 cents per share. Congrats to all Apple shareholders!

BlackRock stock is down, but the business is doing great!

On April 13th, BlackRock reported another killer quarter with EPS up 23% and a dividend increase of 18%. The market was disappointed by only high-single-digit revenue growth (+7%). Results were driven by strong organic growth and 11% growth in technology services revenue, partially offset by lower performance fees. Technology services, including Aladdin, produced $341M in revenue in Q1, vs. $339M in Q4 and $306M in Q1 2021. Aladdin continues to be a strong growth vector and there is much room for expansion as many institutional investors are not using it yet. Although the market wasn’t that great, BLK was able to bring in $114B in net inflows.

Gentex is still struggling

Gentex did better than expected despite reporting declining EPS (-19.5%) and revenues (-3%). Results were affected as global light vehicle production decreased by approximately 5%. Additionally, light vehicle production in the Company’s primary markets of North America, Europe, and Japan/Korea, declined by 11% on a quarter-over-quarter basis. These declines were primarily a result of the ongoing industry-wide component shortages and global supply chain constraints. With a payout ratio of only 33%, we were surprised to not find any indications of a dividend increase.

Microsoft is a beast!

Microsoft continues to impress with another quarter showing double-digit EPS (+14%) and revenue (+18%) growth. The company reported double-digit growth across all business segments. Revenue in Productivity and Business Processes increased 17% thanks to LinkedIn (+34%) and Dynamic products (+22%). Revenue in the Intelligent Cloud increased 26% (Azure was up 46%) and Revenue in More Personal Computing increased by 11% driven by Windows sales (+11% for OEM and +14% for commercial). While the tech sector is going down, MSFT continues to show strong results. We can’t wait to see when the acquisition of ATVI will be approved by regulators!

I just did a video about this marvel!

Starbucks is brewing a great buy opportunity

While the stock is down like SBUX is heading right toward bankruptcy (-30% since the beginning of the year), the iconic coffee brand reported double-digit revenue growth (+14.5%). Strong demand from their U.S. stores compensated for the ongoing lockdown in China which is bad for business. U.S. Comparable transactions were up 5% in the region and a 7% increase in the average ticket was seen. Most importantly, active membership in Starbucks Rewards in the U.S. rose 17% to 26.7M during the quarter. This is the type of business that will eventually turn around and get more love from the market. You have been warned.

Texas Instruments’ future is bright

Texas Instruments reported another strong quarter with double-digit growth (EPS up 26% and revenue up 14%), beating analysts’ expectations. Results were driven mostly by strong demand in the industrial and automotive industries. You can expect this trend to continue for a while. The company continues to fuel growth through R&D investments. In the past 12 months, TXN invested $3.2 billion in R&D and SG&A, invested an additional $2.6 billion in capital expenditures, and returned $5.0 billion to owners.

Visa surfs on traveling activities.

Visa reported strong results (EPS up 30%, revenue up 26%) as consumers kept spending and started traveling again. Net revenues in the fiscal second quarter were $7.2 billion, an increase of 25% driven by the year-over-year growth in payments volume, cross-border volume and processed transactions. Net revenues increased approximately 27% on a constant-dollar basis. Payment volume rose 17% Y/Y in constant dollars with cross-border volume up 38% and process transactions up 19%. Cross-border volumes excluding transactions within Europe, which drive international transaction revenues, increased 47% on a constant-dollar basis.

My Entire Portfolio Updated for Q1 2022

Each quarter, we run an exclusive report for Dividend Stocks Rock (DSR) members who subscribe to our very special additional service called DSR PRO. The PRO report includes a summary of each company’s earnings report for the period. We have been doing this for an entire year now and I wanted to share my own DSR PRO report for this portfolio. You can download the full PDF showing all the information about all my holdings. Results have been updated as of March 31st, 2022.

Download my portfolio Q2 2022 report.

Dividend Income: $180.59 CAD (+9.5% vs April 2021)

This was a good month compared to last year. I enjoyed dividend increases from Algonquin, Couche-Tard and Granite started paying dividends in my portfolio (this compensates for Andrew Peller that I sold not too long ago).

I’ve mentioned this before, but I’m still annoyed by Gentex’s no dividend growth policy. At one point, I’ll have to reconsider this investment if the company doesn’t get back on track. While the other metrics are okay considering the situation and the balance sheet remains strong with virtually no debt, I can’t get outside of my investing strategy and start making several exceptions. This will be on the top of my mind throughout the rest of the year.

Here are the detail of my dividend payments.

Dividend growth (over the past 12 months):

  • Algonquin: +9.7%
  • Granite: New
  • Alimentation Couche-Tard: +25.72%
  • Gentex: 0% (annoying)
  • Currency factor: +4.4%

Canadian Holding payouts: $144.61 CAD

  • Algonquin: $72.06
  • Granite: $33.06
  • Alimentation Couche-Tard: $39.49

U.S. Holding payouts: $28.20 USD

  • Gentex: $28.20

Total payouts: $180.59 CAD

*I used a USD/CAD conversion rate of 1.267

Since I started this portfolio in September 2017, I have received a total of $16,124.60 CAD in dividends.  Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added to this account other than retained and/or reinvested dividends. Therefore, all dividend growth is coming from the stocks and not from any additional capital being added to the account.

Final Thoughts

While this was a tough month on the market, I’m happy to see my dividends increase. When the market goes sideways or down and I start “losing paper money”, it’s important to remember three things:

#1 My portfolio’s long-term return (I’m still outperforming the market)

#2 My dividend growth (going up… always going up!)

#3 My investment strategy (I’m in for the next 40-50 years, not 4-5 months!).

Cheers,

Mike.

The post Mr. Market is Moody – April Dividend Income Report appeared first on The Dividend Guy Blog.

Stock Buy: The 5 Most Important Points [Podcast]

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What does “Doing your due diligence” really means? What should you do to avoid buying a stock that does not suit your investment plan?

Today, we guide you through the due diligence process with the 5 Most Important Points before buying.

We have 6 Top Stock ideas for you! Download your Top Stocks for 2022 book excerpt here.

You’ll Learn

  • Understanding a business model goes beyond knowing what they do. It’s also about understanding when a company will thrive and when it could take a hit.
  • Why focusing on the worst-case scenarios rather than the optimist ones will prevent you from impulsive moves. Never forget about the downsides of a company!
  • How can the investors’ relation website help and which information to look for? Then, how to link what you’ve found with the dividend triangle.
  • Why the 10-year data can be misleading and how the 5-year one is a better choice.
  • Before buying, you need to understand the different financial metrics and know when they are useful. Which metrics should always be part of your due diligence?
  • The importance of consistency and a clear investment process.
  • How to prevent yourself from getting too excited by a stock.
  • How do we know we have completed our due diligence?

Related Content

Payout ratios can be a good start in your investigation of a company’s dividend safety. But which one should you use? What’s a good payout ratio and what does it tell you exactly? This is what you’ll find in this episode.

Protect Your Dividends: Master All Payout Ratios [Podcast]

Having a buy list is crucial. Here is how to create the best one using must-have metrics and the tools to assess the future of a company.

Create the Best Buy List [Podcast]

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Download our Top Stocks for 2022 booklet now and do not miss out on the good stuff! Receive our Portfolio Workbook and weekly emails including our latest podcast episode!

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This podcast episode has been provided by Dividend Stocks Rock.

The post Stock Buy: The 5 Most Important Points [Podcast] appeared first on The Dividend Guy Blog.

How Did Mike Build His Smith Manoeuvre [Podcast]

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You’ve made up your mind and would like to use your home loan to create wealth? Canadian investors can transform their mortgage into a tax-deductible loan with the Smith Manoeuvre. But then, what? How to proceed? Which rules should you set yourself? Mike shares his best tips based on his own leverage portfolio!

This episode includes many references to Dividend Stocks Rock Stock Screener. You can visit the DSR website right here or have a glance and what Mike’s filters looked like below.

Screenshot is not updated. Example purposes only.

You’ll Learn

  • How does the Smith Manoeuvre work and what kind of expectations should investors have.
  • What is Mike’s goal with his leverage portfolio and the role played by compounding interest?
  • Is it good timing to start such a strategy and why is it best suited for investors with a high-risk tolerance?
  • Why investors should use a non-registered account to create a Smith Manoeuvre and the flexibility a margin account can bring.
  • What type of budget should you aim at without taking too much risk?
  • The 4 Rules Mike set himself for his leverage strategy and why it is important to have some.
  • Which set of filters to use in order to pick among the best companies possible.
  • The importance of looking at your sector allocation before adding any stock to your buy list.
  • How do you determine the order in which to buy your stocks for a brand new leverage portfolio?
  • Is borrowing to invest a good idea at any age?

Related Content

To follow the updates on Mike’s Smith Manoeuvre portfolio and to access all his previous Dividend Income Reports, simply follow this link.

Latest Dividend Income Reports

You can dive deeper into the concept of the Smith Manoeuvre in the episode below.

Smith Manoeuvre: Borrow, Invest, Create Wealth [Podcast]

Small caps are in for a rollercoaster ride, but can bring a lot of growth to your portfolio! Often overlooked, these companies still tend to outperform large caps. Here are their pros and cons as well as our best picks in the small caps category!

High Growth Potential Small-Cap Dividend Stock Ideas [Podcast]

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The Best Dividends to Your Inbox!

Download our Top Stocks for 2022 booklet now and do not miss out on the good stuff! Receive our Portfolio Workbook and weekly emails including our latest podcast episode!

_________________________________________________________________________

Follow Mike, The Dividend Guy, on:

  • Twitter
  • YouTube
  • Facebook

_________________________________________________________________________

Have Ideas? 

If you have ideas for guests, topics for The Dividend Guy Blog podcast, or simply to say hello, then shoot me an email.

_________________________________________________________________________

This podcast episode has been provided by Dividend Stocks Rock.

 

The post How Did Mike Build His Smith Manoeuvre [Podcast] appeared first on The Dividend Guy Blog.

ESG Investing: Possibilities and Limits [Podcast]

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Are your values and investment aligned? Can you make a difference by investing in socially responsible companies? Are such businesses easy to find, and can you make money with them? Today, we talk about the possibilities and also the limitations of ESG investing.

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You’ll Learn

  • ESG stands for Environment, Social, and Governance, but what does it imply? What can you expect from businesses that follow such guidance?
  • Mike shares examples of “good” ESG stocks. Banks, railroads, and some consumer staples companies tend to score high in the ESG score. Does that mean they are in line with your values?
  • To understand such scores better, we dive into the StarMine ESG Score provided by Refinitiv and available at Dividend Stocks Rock. We explain why some companies – SBUX, AAPL, CNQ, etc. – could be great investments while being among the worst ESG performers.
  •  What other indexes or scores are available to investors?
  • Do ESG stocks tend to outperform or underperform the market? What kind of results can you expect?
  • In the end, the limits of ESG investments are very personal. Mike shares his thoughts on why the ESG score is a good “cross-reference” but is not at the center of his research. Still, investing in companies that you will feel comfortable with surely helps sleeping well at night!

Related Content

To pursue thoughts on limitations in your research, here’s an episode on why ignoring companies with a yield below 1% is a big mistake. 

Ignoring Yield Below 1% Is Your Biggest Mistake [Podcast]

About a decade ago, Mike did a mini-series on Socially Responsible Investing. It’s interesting to see that so many years later, the conclusion remains similar!

SRI – Socially Responsible Investing or Investing to Make Money: Are Both Possible?

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The Best Dividends to Your Inbox!

Download our Top Stocks for 2022 booklet now and do not miss out on the good stuff! Receive our Portfolio Workbook and weekly emails including our latest podcast episode!

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Follow Mike, The Dividend Guy, on:

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_________________________________________________________________________

Have Ideas? 

If you have ideas for guests, topics for The Dividend Guy Blog podcast, or simply to say hello, then shoot me an email.

_________________________________________________________________________

This podcast episode has been provided by Dividend Stocks Rock.

The post ESG Investing: Possibilities and Limits [Podcast] appeared first on The Dividend Guy Blog.