Financial Goals for 2014

Although I’m not much for resolutions, I enjoy setting goals for myself each year. Putting objectives on paper, or “on the cloud” helps me focus.  Since I spend a fair amount of my free time researching companies and investments, I decided to share what I’m looking to do with my investment holdings in 2014.

Increase my portfolio value by 17% :

Since I’m not comfortable disclosing how much my investment portfolio is worth, I have to state the first two goals in percentages. The 17% increase in value corresponds to a number I’d like to hit by year end. Although I had very strong returns in 2013, I don’t expect the same this year. However, I do expect my portfolio to appreciate, I’ll reinvest the dividends I receive in 2014, and I should be able to deploy some new capital, all of which should help me meet this goal.

Total Dividends Received Up 18%:

As indicated above, the 18% also corresponds to the amount of dividends I expect to receive in 2014. None of the companies in which I'm currently invested should cut their dividends in 2014. Alternatively, I expect most, if not all of the company’s I own will increase their payouts during 2014. Add to this some new capital I plan to inject in my portfolio, and this is a realistic goal.

Maintain US Holdings at About 30%:

I ended 2013 with holdings of US stocks accounting for 28% of my investment portfolio. With the USD appreciating against the CAD, this number is now closer to 30%. I feel that by investing in large multinational companies with sales across the world, my portfolio gains geographic diversification. Even though the US market was hot in 2013, I’m comfortable with all my US holdings.

Doubling Down on Comfortable Holdings:

As my investment portfolio grows, I’ve learned that in order for a strong performer to make a difference to my portfolio return, there has to be a material investment in the company. A good example is Microsoft, a great dividend grower, who was up about 40% in 2013. However, since I only bought 100 shares, the impact on my portfolio was minimal. My plan is to invest in fewer companies, but increase the amount of money I invest in my core holdings.

Get rid of all companies who haven’t raised their dividend in the past 18 months:

During 2013, I was very happy to get rid of all the laggards in my portfolio, who hadn’t recently raised their dividends. I think it shows good financial management on the part of companies who are able to increase their payouts without raising their payouts ratio to unsustainable levels. I plan to get rid of any companies that haven’t raised their payouts in the last 18 months. So far, I think only Intel and Western Union are on my watch list in this area.

Figure out what to do with cash in excess of $500 (especially in TFSA and RRSP):

Given the amount of distributions I receive each month, I find myself with excess cash in my various investment accounts that isn’t doing anything. Since iTrade allows me to buy and sell a number of ETF without commissions, I plan to pick one or two high yielding ETFs to deploy my excess cash in when I don’t have any investment ideas I’m looking to test. I’ll pay particular attention to my TFSA and RRSP since I can buy and sell ETFs without worrying about tax implications.

2013 Investment Goals Updated at Year End

As 2013 comes to an end, it's time to look back and see how I fared against the goals I set out for my portfolio at the start of the year.

1. Get Rid of Non-Dividend Growers
I'm very happy with the progress I made on this goal. Gone are non-dividend growers such as Power Financial and Transalta. That said, as we start a new year, there's a couple companies I have to keep an eye on (i.e. Western Union and Intel) to ensure they re-start policies to raise dividends. After all, being a dividend growth investor requires companies in my portfolio to actually raise their distributions.

2. Increase my Dividend Income and Total Portfolio Value by 25%
In 2012, I managed to increase dividend income by 45% while increasing my total portfolio value by 34%.  With less proceeds to invest in my portfolio in 2013, I still managed to achieve both goals, increasing dividend income by 37% while increasing my portfolio value by 38%. It helped that the North American markets were up nicely YoY, and the raise in the USD compared to CAD also benefited my portfolio value.

3. Increase my Non-Canadian Investment Holdings from 20% to 25%
In 2013, my non-Canadian (all US stocks at this point) holdings increased from 20% to 28%. I had some very nice gains in US stocks, the rise of the USD vs the CAD helped, and I also sold some Canadian stocks and invested in US companies. With the exception of one USD company I own (Realty Income Corporation), I aim to buy US companies who sell internationally in order to get worldwide diversification in my portfolio.

I had another soft goal of posting once a week in 2013. Sadly, with 44 posts, I didn't meet this goal. Life, work, and relationships got in the way....and I don't regret that at all.

Here's wishing everyone a healthy and prosperous 2014!

Selling Walgreens and Buying Realty Income Corp?

 I held on to half of my investment in Walgreens (“WAG”) after selling shares in the fall. As the share price keeps climbing, and is now near a 52-week high, the dividend yield is only 2.1%. The yield seems ridiculously low, especially given they just boosted their dividend by 15% in August.

On the other hand, Realty Income Corporation (“O”) is trading near its 52-week low, yielding a tantalizing 5.6%. They have grown their dividend at about 5% per year over the past 5 years. I’m impressed with their management, tenant list, and the potential upside of rent increases in the US as the economic recovery continues.

I haven’t decided if I’ll pull the trigger and sell my shares of WAG to up my investment in Realty Income Corp, but it’s very tempting. 

Christmas in November?

After patiently sitting on a chunk of cash in my RRSP portfolio, eagerly waiting for a market over-reaction to a negative earnings report, and hoping it would happen to a US dividend grower, I was very happy to read about Cisco Systems (“CSCO”) reporting Q3 results that fell (barely) short of analyst expectations. The fact management also revised their full year estimates downwards (ever so slightly), made my morning even brighter. Cisco has been on my watch-list for over a year, and I have been waiting for a good entry point into this market leader that gushes cash. I gladly placed a buy order this morning, bought shares at a bargain basement price, and welcomed a new additional to my RRSP.

Why do I like Cisco so much?

-          Entry point provided me yield of 3.3%

-          The company’s relatively low payout ratio 30-35%

-          Recently announced plans to increase their share buyback program

-          A history of revenue, earnings, and dividend growth (from $0.12/share to $0.68 in the last 4 years)

-          A strong balance sheet (more cash than debt), great free cashflow generation, and strong margins (gross margin =~ 60%)

-          A world leader in their segments which helps me diversify globally

-          Issuer ratings of A+/Stable, A1/Stable

I could go on and on. I’m so happy to have this great company as part of my investment portfolio. I feel like Christmas came early this year. 

Bought: Enbridge Income Fund ("ENF")

It's a good day to be a dividend growth investor. Despite a recent announcement that they were increasing their distribution by 3%, Enbridge Income Fund ("ENF") was down this morning, allowing me to double my position. I used to the proceeds of my sale of SNC to invest in a company paying a 6% dividend yield, and a history of growing that yield. Now I won't feel so bad about paying my monthly gas bill, knowing my shares in Enbridge Inc. (which usually raises their dividend in December), ENF, and Inter Pipeline Ltd (recently boosted its dividend by 13%) all pay me an increasing distribution each year just for holding their stock.