Mar 302020
 

This financial crisis appears to be getting worse by the day. The economy is stalled and millions of workers have lost their jobs. 🙁 Did you hear about the man who was fired at a coffee factory? They say he had no filter. ğŸ˜Ž But there is a silver lining here. As the stock market sinks the dividend yields rise. 🙂

Value investing with dividend stocks

Warren Buffett bought 4.3 million shares of Suncor (TSE:SU) last quarter when the stock was trading at roughly $40/share. Today TSE:SU is trading at just $16/share. Buffett is a value investor who only buys profitable companies that have promising growth prospects. Anyone buying SU today would be getting in at a 60% discount compared to what Buffett paid in late 2019. I don’t give stock tips, but I’m just sayin’. 😉

Similar to Buffett I’ve been on the lookout for bargains lately. I purchased many dividend growth stocks throughout this month. In today’s post I will disclose which stocks I bought, why I bought them, and how I have grown my forward dividend income by $7,200 per year. Wowzers! 😀

dividend investing pays off

 

Narrowing down my options

There are thousands of stocks and ETFs out there. So how did I choose? Well first, I determined which type of investment account to use. This will ensure maximum tax savings. I don’t have much contribution room remaining in my TFSA and RRSP. So most of my new purchases will be in a fully taxable account. This means looking at securities that pay eligible dividends which can benefit from the Canadian dividend tax credit.

I personally like to buy and hold companies that consistently increase their dividends over time. These are known as dividend growth stocks.

 

The best dividend growers

Earlier this year Million Dollar Journey posted an article about the 25 best dividend growth stocks of 2020. There are other dividend achiever lists on the internet as well if you look for them. I have shortlisted the following dividend stocks based on their finances and competitive advantages:

  • Fortis Inc (FTS) – Utilities company. Wide economic moat. Recession resistant.
  • Telus (T) – Telecom company. Part of an oligopoly along with 2 other big names.
  • BCE inc (BCE) – Telecom company. Another name in the oligopoly.
  • Finning International (FTT) – Selling and servicing heavy equipment worldwide.
  • Suncor (SU) – Oil and gas company. Integrated. Well managed.
  • Canadian Natural Resources (CNQ) – Oil and gas company. Low cost producer.
  • Pembina Pipeline Corp (PPL) – Pipeline company. Insiders have been buying like crazy.
  • Canadian National Railway (CNR) – Railway company. Bill Gates likes it.
  • TD Bank (TD) – Second largest bank in Canada. Has lots of U.S. exposure.
  • Maple Leaf Foods (MFI) – Makers of meat and plant protein food. Everyone has to eat.
  • Canadian Apartment Property REIT (CAR-UN) – Acquires and operates apartment buildings.

All these companies have strong balance sheets (not heavily leveraged) and a long history of growing dividends. Most of these names are listed on both Canadian and U.S. exchanges so American investors can buy them as well.

Another criteria I look for is insider buying and selling by officers and directors. Often top executives have skin in the game and are compensated according to company performance. So if they are buying shares during this bear market then it probably means they truly believe in the long term profitability and staying power of their business.

For example, it appears company executives at Pembina Pipeline have been busy lately. I will let the chart speak for itself. 🙂

 

My $100,000+ shopping spree

A couple of weeks ago I shared the transactions of my TD and Telus purchases. 🙂

  • TD – 450 shares @ $52.30/share. Total cost $23,500. Dividend = 6.0% yield on cost
  • T – 500 shares @ $49.32/share. Total cost $24,700. Dividend = 4.7% y.o.c

It’s very rare to find TD bank yielding 6% ever. This might be a once in a decade opportunity. Telus is recession resistant since everyone needs internet and phone service.

Other stocks I bought in March. (Transaction statements for transparency.)

  • Suncor (SU) – 1300 shares @ $18.38/share. Total cost $23,900. Dividend = 10.1% y.o.c
  • Finning (FTT) – 300 shares @ $15.41/share. Total cost $4,633. Dividend = 5.3%
  • Maple Leaf (MFI) – 200 shares @ $22.89/share. Total cost $4,588. Dividend = 2.8%
  • Pembina (PPL) – 200 shares @ $24.63/share. Total cost $4,936. Dividend = 10.2%
  • Fortis (FTS) – 120 shares @ $47.59/share. Total cost $5,721. Dividend = 4.0%
  • Cdn Natural (CNQ) – 500 shares @ $15.36/share. Total cost $7,690. Dividend = 11.1%
  • Cdn National (CNR) – 100 shares @ $98.94/share. Total cost $9,895. Dividend = 2.3%

In short I purchased $109,600 of stocks this month boosting my monthly passive income by $600. 😀 On average I locked in a juicy 6.6% dividend yield with these new stocks. This is incredible! Much better than the 3.5% yield from a total market index fund.

Strong dividend growers have been distributing cash to shareholders for decades. For instance Suncor has been paying a dividend since 1992. It’s impressive how the distributions have never been cut over all these years – including in 2009, the depth of the great recession, and in 1998 when oil was cheaper than today. That doesn’t mean there’s no chance of a dividend cut this time. But I think if that happens it will be a temporary setback.

 

What I’m doing now

I still have $40,000 in cash. I will wait a couple of weeks and re-access my position.

If the market stays flat next month I will not take any actions. If the market drops lower, I will buy more stocks at even cheaper prices. 🙂 And if it climbs higher that will signal the correction might be over so I will probably also buy more stocks.

It’s been a wild year so far. Let’s see what happens in April. At this point I do not plan to use margin debt to buy stocks since I still have cash savings. Next week I will give a net worth update and it will not be pretty, haha. Stay safe, everyone. 🙂

 

____________________
Random Useless Fact:

You don’t have to wear pants if you work from home.

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Earlierretirement
Earlierretirement
03/30/2020 3:34 pm

Great progress! How much % does the TSX need to increase from 13,038 (today) in order for you to take it as the correction is over?

John
John
03/30/2020 4:35 pm

Some nice purchases, did you buy all in registered (TFSA, RRSP) or non reg accounts for low dividend taxation?

Reggie
Reggie
04/01/2020 8:23 am

You’re counting on a bunch of yields that you probably shouldn’t. If you think you can count on the dividend remaining the same for CNQ definitely, but PPL, and SU possibly, you have another thing coming. I wouldn’t go around talking about how much you’ll get in dividends like it’s a sure thing.

AlW
AlW
04/01/2020 8:37 am

I think you’ll see a ton of dividend cuts. Many companies have less and less money coming in to pay dividends. Once the economy bounces back the dividends will rise but your best play here is to simply acquire more shares.

soze
soze
04/01/2020 11:14 am

isn’t cnr still a little expensive given the pe?

Earlierretirement
04/01/2020 10:32 pm

So true. It’s quite worrying how prices will go up with all of this money printing. The money printed will never be unprinted. Especially since currencies are no longer backed by gold.

soze
soze
04/02/2020 10:41 am

I appreciate your explanation. I guess its more about stability than roi.

GYM
04/02/2020 12:42 pm

Thanks for sharing. I also picked up some Suncor averaging down, for $18/share. I haven’t bought anything this week yet. Still waiting for prices to be back at around $50 for TD haha. I think it will happen. I also think dividends will probably be cut, but so far nothing has been announced for me yet.

Earlierretirement
04/02/2020 5:23 pm

BTW from which website are you getting that nice graph of insiders selling and buying?
Thanks!

Will
Will
04/04/2020 11:35 am

Hello, i found your blog because of reddit and i find your journey intresting!
I was wondering if you could give me your opinion on my plan.
Im in university and I have 1.5 – 2 years left in university. I live with my parents so I dont pay rents.
I have 3 paying coop to do in my degree (will start my first one this summer, if its not cancelled). Right now I have 50 shares of $TD bought at $55.32 yesterday. And I have around 32k CAD sitting in my bank (mostly in HISA – 2.1%).
10K CAD is from my gouvrnement student loans. Do you think its a bad idea to invest right now like
20k-25k of my money to buy some stock during this crash? I was planning on buying more $TD and $BMO. I will definitely be able to pay my student loans when im out of university (1 coop should pay me around 13-16k cad). Thank you.

Will
Will
04/04/2020 1:07 pm

Thank you for your quick response and the info! Ill look into it!

myprudentlife
04/04/2020 8:04 pm

Great site and so much information to learn from. Those buys – are excellent additions to every portfolio. I have to agree that the only certainty during these days is Nothing. When Inter Pipeline Ltd.(IPL) one of Canadian aristocrats announced they are reducing their dividends, I am not surprise if others will follow suit. But as a dividend investor I am not just going to sit on the sidelines waiting what the companies are going to do. If one has the resources investing regularly whatever the market conditions is the key in my humble opinion.

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[…] been loading up on high quality stocks at discounted prices, increasing my forward dividend income by over $7,000 a year.  And I’m not the only one shopping around these days. Other personal finance bloggers such […]

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[…] earlier stock purchases from February and March are starting to pay off. For example, Telus Corp (TSE:T) paid me nearly […]

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[…] a very rare phenomenon. I blogged about investing while the price of oil was unsustainably low. And in March I disclosed buying 1300 shares of Suncor (SU), and 500 shares of Canadian Natural Rss (CNQ) – two of the largest […]

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[…] a big sell-off, which gave me a major case of FOMO.😖 Not wanting to miss out on bargain prices I purchase over $100,000 worth of dividend stocks in March. My dividend yield on cost was over 6% on these new purchases. I […]

Jeroen
Jeroen
08/10/2020 1:48 pm

How did you have 100k available for investing? Did you sell real estate or borrow?

Jeroen
Jeroen
08/11/2020 9:10 am

Good stuff. Congrats on reaching FI!