11 Monthly Paying Canadian Dividend Growers for 2021

"Do you know the only thing that gives me pleasure? It's to see my dividends coming in."
- John D. Rockefeller

If like Mr. Rockefeller, you get pleasure from seeing your dividends coming in each month, and you'd like to see them grow over time, the below table might interest you. Using the Canadian Dividend All-Star list from December 31, 2020, I determined the monthly dividend growers for 2021.   To be included, companies had to pay a monthly dividend, increase their distribution at least once in the last 12 months, and have a minimum 5-year history of annually increasing their payouts. Much like in similar posts in 2020, 2019, 2018,  2017 and 2016, there was some additional filtering to come up with the below table. From the 100 companies appearing on the initial Canadian Dividend All-Star list, there were only 18 who paid dividends monthly. Sadly, I had to remove seven companies (ticker symbols: EIF, KEY, CAR.UN, PPL, SGR.UN, SRU.UN, MRG.UN) who had not raised their distributions in the past twelve months. The negative impacts of the covid-19 pandemic can be seen since the remaining 11 companies were much less than the 18 monthly dividend growers in 2020, and the 17 in 2019 and 2018, down from 20 in 2017, but only slightly lower than the 12 in 2016. The resulting 11 companies included six real estate investment trusts (REITs). As the payout ratios and valuations of REITs are usually calculated based on funds from operations (FFO) or adjusted funds from operations (AFFO), I decided to separate the resulting list in two so as not to confuse any casual readers. For your browsing pleasure, the resulting 11 monthly dividend payers are.

	Streak	CAD	Div.	Dividend Growth Rates				EPS Payout	P/E
Company	Years	Yield	Curr.	1-yr	3-yr	5-yr	10-yr	Ratio %	TTM
First National Financial Corp	9	5.06	CAD	7.7	2.7	5.5	2.8	75.34	14.78
Parkland Fuel Corporation	8	3.01	CAD	1.7	1.7	2.4	-0.4	93.8	31.2
Savaria Corporation	8	3.32	CAD	4.4	17.8	22.4	18.7	86.7	25.97
Global Water Resources Inc.	7	2.01	USD	1.0	1.8	3.1	N/A	599.02	311.73
Badger Daylighting Ltd.	5	1.58	CAD	5.3	12	10.6	3.5	53.33	33.57
Granite Real Estate Investment Trust	10	3.85	CAD	3.3	3.7	4.8	18.9	59.61	12.17
Allied Properties Real Estate Investment Trust	9	4.36	CAD	3.1	2.5	2.4	2.3	29.38	6.7
Firm Capital Property Trust	9	8.04	CAD	1.9	4.4	4.4	N/A	68.09	8.38
InterRent Real Estate Investment Trust	9	2.38	CAD	5.0	8.1	7.1	10	12.73	5.32
CT Real Estate Investment Trust	8	5.13	CAD	2.0	4.2	3.6	N/A	230.57	44.61
Chartwell Retirement Residences	6	5.47	CAD	2.00	2.10	2.10	1.20	N/A	N/A
Averages:	8.00	4.02		3.40	5.55	6.22	7.13	130.86	49.44

As with any other screen, the above list is simply a starting point for further research.  Clearly, a deeper dive is required based on the average EPS payout ratio of 130.86% and the pricey trailing average P/E of 49.44X. As indicated on my Investment Holdings tab, I currently own twor monthly paying Canadian Dividend All-Stars (Granite REIT and CT REIT). Of the remaining nine companies, First National and Allied Properties both look interesting to me based on the metrics above. The psychological boost I get from holding a couple monthly dividend payers in my portfolio helps me relate to the pleasure Mr. Rockefeller felt about receiving regular dividend payments.

Do you hold or are you interested in purchasing any of the 11 monthly payers?

Portfolio Results for 2020 & Goals for 2021

 "Whenever we are surprised by something, even if we admit that we made a mistake, we say, 'Oh I'll never make that mistake again.' But, in fact, what you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. That's the correct lesson to learn from surprises: that the world is surprising."
- Daniel Kahneman

Heading into 2020, I was on a high after achieving my 2019 goal of increasing my forward dividend by $3,300 while obtaining a dollar-weighted average organic dividend growth rate of 6.8%. Therefore, I set a stretch goal of adding an additional $3,600 to my forward dividend income in 2020, while targeting a dollar-weighted average organic dividend growth of 6.0%. My results from 2020 were surprising: my forward dividend income went up by $1,675 and my dollar-weighted average organic dividend growth was a mere 0.85%. 

Although I managed to sell early enough to avoid dividend cuts from Alaris Royalty and Tanger Factory Outlet Centers, the distribution cuts from Laurentian Bank and A&W Revenue Royalties Income Fund severely impacted my dollar-weighted average organic dividend growth rate, especially given A&W is one of my larger positions. Similarly, the Office of the Superintendent of Financial Institutions' ("OSFI") March 2020 decision to halt dividend increases for the Canadian banks that it regulates also negatively impacted the organic dividend growth of my portfolio given I hold seven Canadian banks, and only three (CIBC, Royal Bank & TD Bank) increased their payouts before OSFI's march decision. 

Falling almost $2,000 short of my forward dividend income goal isn't quite as surprising if you followed my transaction journal during the last couple months of 2020 and noticed I traded into and out of Brookfield Renewable Partners units twice in three months. Although holding onto my position in Brookfield Renewable Partners at year end wouldn't have allowed me to meet my goal, the deficit wouldn't have been at large. That said, the two trades I completed allowed me to book a profit in excess of the $2,000 shortfall. Other big contributors to the forward dividend income shortfall include selling Alaris Royalty and Tanger Factory Outlets in advance of their announcements to cut their dividends, the lower organic dividend growth noted in the above paragraph, and the fact I continue to count any US dollar dividend income on a 1:1 exchange rates with Canadian dollars (impacts 15 of my 37 holdings). 

After taking a couple weeks to digest my shortcomings in 2020, I decided to shoot for a more realistic forward dividend income increase of $3,000 in 2021, while targeting a dollar-weighted average organic dividend growth rate of 5%. Although I personally feel like the coronavirus will continue to impair regular economic activity in North America well into the summer, I'm optimistic that immunization shots will be effective and will become more plentiful in the second half of the year. Other lesser goals for 2021 include:
- At least one quality blog entry per month.
- At least one purchase of stock per month.

Since I had some down time over the holidays, I calculated some portfolio metrics for 2020 that I thought would be fun to share.

- My internal rate of return on my portfolio in 2020 was 1.0%. Although this sounds sadly low, it compares well to -3.9% benchmark return, I get from calculating 67% of the Canadian dividend aristrocat ETF 'CDZ' and 33% of the US S&P dividend ETF SPY (the actual weights of Canadian and U.S. holdings in my portfolio). 
- The value of my portfolio rose by 6.7% in 2020; much better than I expected after experiencing some large declines in March. Algonquin Power & Utilities and Microsoft were two of my best performers north and south of the border respectively.
- The dividend yield of my portfolio was 3.9% in 2020, in-line with the 3.9% achieved in 2019, lower than 4.2% in 2018 and 4.0% in 2017.
- Cash represented 4.2% of my portfolio at year end 2020, much higher than the 1.6% at year end 2019, and 2.7% at year end 2018. A big contributor was having traded out of Brookfield Renewable Partners at year end. 
- My holdings raised their dividends 35 times during 2020, with Realty Income doing so 5 times, and Power Corporation providing the largest percentage increase (10.5%).

- I conducted 32 trades in 2020, including six sales. Although this is high compared to the 24 conducted in 2019, it still only represents a couple basis points in terms of cost. 
- I ended the year with 37 positions, down from an all-time high of 40 positions at year end 2019. The plan is to slowly decrease this number again this year. 

Having made it through the very surprising 2020, I wish all of you the best of luck in 2021 and hope the surprises we experience collectively are less negative this year. 

9 Canadian Companies Providing Dividend Growth Guidance

In 2017 and last year, I shared a list of Canadian companies that provide dividend growth guidance. I've decided to update  this list as I find dividend growth guidance useful in helping me assess the capital allocation plans for companies, introducing a soft control by which to judge management's actions, and assisting me in projecting the organic dividend growth rate of my portfolio for 2021. 

Of the Canadian companies that provide dividend growth guidance, Enbridge Inc. (TSE: ENB, NYSE: ENB) is likely the best known. During their Investor Day presentation on December 8th, they raised their dividend by 3.0%, below their projected 5 - 7% guidance tied to their forecasted distributable cashflow growth rate through 2023. Although the magnitude of Enbridge's dividend increase might have disappointed some investors, it is worth noting that with the shares currently yielding around 8%, any more of a raise might have set off alarm bells for investors wary of sucker yields. 

The table below could be considered a starting point for further research. Please, let me know of any other Canadian companies that provide dividend growth guidance. I'll gladly update the table with your input. Like last year, I almost included BCE Inc. as management has been consistent in raising their dividend by about 5% since 2009. However, management has been reluctant to confirm this target during conference calls and in their presentations to investors. Therefore, I opted for the conservative approach of not including them below. Lastly, the percentage beside the company's ticker symbol in brackets is the amount of the most recent dividend increase.

TC Energy Corp (TRP - 8.0%)	Dividend growth of 8-10% through 2021, 5-7% after 2021
Enbridge Inc (ENB - 3.1%)	Dividend growth of 5-7% through 2023
Emera Inc (EMA - 4.1%)	Dividend growth of 4-5% per year through 2022
Telus Corp (T - 6.9%)	Dividend growth of 7-10% per year through 2022
Capital Power Corp (CPX 6.8%)	Dividend growth of 7% per year through 2021, 5% in 2022
Fortis Inc (FTS - 5.8%)	Dividend growth of 6% per year through 2025
Algonquin Power (AQN - 10.0%)	Dividend growth of 10% per year through 2021
Brookfield Infrastructure Partners (BIP.UN - 7.0%)	Annual distribution increases of 5-9%
Brookfield Renewable Partners (BEP.UN - 5.3%)	Annual distribution increases of 5-9%

For those of you with a sharp eye, you may notice that Brookfield Property Partners (BPY.UN) and their expected annual distribution growth of 5-8% is missing from this year's list. After delivering a paltry 0.8% distribution increase in January 2020, the company changed their distribution guidance to "annual distribution growth in-line with earnings growth". However, given BPY's current yield of 8.7%, and the absolute terror that the pandemic has had on their retail and office property portfolio, most unit holders would be happy if management simply maintains the current distribution. 

Does dividend growth guidance make you more likely to invest in a company? 

My Top 5 Canadian & U.S. Stock Positions

 “Don’t tell me what you think, tell me what you have in your portfolio.”
― Nassim Nicholas Taleb, Skin in the Game: Hidden Asymmetries in Daily Life

I remember hearing Taleb use this quote in an interview when promoting Skin in the Game. The quote is so simple, yet profound...I absolutely love it. Although I try to be transparent in showing my Investment Holdings, I admit I'm slow to update these holdings, and my Transaction Journal. Furthermore, I don't feel comfortable posting exactly how many shares I own in companies, which limits my transparency. 

After writing over the summer about the top five Canadian and U.S. companies I'd be comfortable holding for 10 years, I decided to post the below two lists to check if I'm "eating my own cooking". As a reminder, these were the five Canadian and U.S. companies I said that I'd be comfortable holding for 10 years:

My top five Canadian and U.S. holdings by value on November 20, 2020 were as follows: 

Top 5 Canadian Holdings

1. Brookfield Infrastructure Partners L.P. (BIP.UN)

2. Granite REIT (GRT.UN)

3. Telus Corp (T)

4. A&W Revenue Royalties Income Fund (AW.UN)

5. Fortis Inc. (FTS)

Top 5 U.S. Holdings:

1. McDonald's Corporation (MCD)

2. Microsoft Corporation (MSFT)

3. National Storage Affiliates Trust (NSA)

4. Johnson & Johnson (JNJ)

5. Digital Realty Trust, Inc. (DLR)

I'm pretty consistent on the Canadian side, with the only difference being my fourth largest holding, A&W Revenue Royalties Income Fund replacing Royal Bank. There's two big reasons for this discrepancy. First reason is that since I own seven Canadian banks, I've been reluctant to invest a large amount in any one. This is partly due to my job, but also speaks to my trying to avoid being overconfident in any given Canadian bank. Secondly, with the hindsight afforded to me with the current pandemic, I am definitely overweight in A&W, despite really liking the strategic decisions management had made for this restaurant chain. I'm in no rush to make any big changes currently to my A&W holding, but will likely look to decrease it after the pandemic is behind us. 

I'm less consistent in the U.S., having large positions in National Storage Affiliates and Digital Realty Trust in my portfolio, instead of Realty Income and Amazon. After first sampling National Storage late last year, I've added twice more in 2020 during which the company has produced some very solid results that have lead to a higher share price. Frankly, I'm fine with this position having grown steadily as the company boosted their dividend twice by ~6% combined over the past year. Digital Realty has also been a steady performer during the pandemic, the share price has risen, and I haven't actually added to my position since September 2018. Realty Income is my eighth largest U.S. position, but I will likely add to it before year end boosting it up to closer to total value of Digital Realty. Although I like the company's proven business model, I am a little fearful of their theatre, gym and retail exposure during the pandemic. Lastly, I haven't yet bitten the bullet and invested in Amazon. Reasons for this is my current quest to avoid making stupid mistakes during the pandemic by buying companies beyond my circle of competence that don't pay dividends, the recent European Union investigation into Amazon's use of third-party sellers' data, and Bezos' admission to congress that he couldn't guarantee Amazon employees didn't use proprietary data in order to compete with third-party sellers. 

Overall, I feel what I say and what I do are pretty consistent, with some obvious gaps, especially related to Amazon. There's always room for improvement and being consistent will definitely be an area of focus for this blog going forward. 

Avoiding Stupid Investment Mistakes During the Pandemic

Within the first month of moving into our house with my then-girlfriend, now wife, I shrunk one of her favourite sweaters. Over the next eight years, I have only managed to replicate this embarrassing feat once more. I attribute this improvement to my choosing a very risk-averse approach of air drying almost all of my wife’s shirts, sweaters and pants, rather than risk shrinking another item in the dryer. My wife finds my over-reaction of barely ever using the dryer on any potentially shrinkable items humorous. Now that we’re both working from home out of the office in our basement, after I’ve put the clothes on a drying rack and start the dryer with mainly my clothes and those of my kids, my wife often checks what is on the rack, and moves the majority of her clothes into the dryer. She then usually laughs at me and tells me not to worry about shrinking her t-shirt, pajama pants, pullover, etc.. Despite these repeated assurances from her, I continue to put the great majority of her clothes on the rack each time I perform this part of the laundry.

I share this anecdote with you as I'm worried about making preventable mistakes since my portfolio has been negatively impacted this year due to the coronavirus pandemic. Between Canadian banks being told by the national regulator not to increase their dividends, A&W suspending and then decreasing their distribution due to lower traffic in their restaurants, and the disruption to retailers caused by local restrictions that has meant landlords like Brookfield may have to rethink their distributions, I've been feeling the will to undertake more transactions than I normally would in order to avoid more dividend cuts. Instead of going crazy, and totaling revamping my dividend growth strategy in the middle of this pandemic, I am making a conscious choice to hold off on making any huge changes until after covid-19 is behinds us. A large part of my reasoning to ride this out is based on my desire to avoid making mistakes similar to those of shrinking my wife's clothes. 

To avoid making a bunch of mistakes in the middle of the covid-19 pandemic, I decided to focus on my process for choosing investments. By following the short checklist below, I hope to simplify my investment decisions and keep focused on my long-term goal of financial independence through dividend growth investing.

 

1.       Does the company pay a dividend/distribution of at least 2%/3%?

2.       Has the company increased their dividend/distribution by at least 5%/2% in the last 12-months?

3.       Is the dividend/distribution sustainable as evidenced by a TTM EPS/FFO payout rate of 80%/90% or less?

4.       Is the price of this company reasonable indicated by a P/E or P/FFO of 25X or less?

5.       If this is a new position, what exposure does this company provide that current companies in my portfolio do not?

6.       If this is a new position, what is the thesis of why this company is undervalued?

Here's hoping that after covid-19 is behind us, my investment portfolio looks more like an organized, well sorted drying rack, like that curated by my wife today.