We are currently in our 3rd quarter of the Dividend Growth Index (DGI)which started back in September 2011 as a project to see how our picks (a group of dividend focused bloggers) would perform over time compared with an index.
Here is a background on the Dividend Growth Index (DGI).
- Introducing the Dividend Growth Index
- Dividend Growth Index – 2011 Q4 Results
- Dividend Growth Index – 2012 Q1 Results
One of my picks (CNQ) is dragging down the index right now from a price perspective and it’s not a high dividend payer either. It’s worth pointing out that it is a Canadian Dividend Aristocrats (5 years of dividend increase) with a very low payout ratio. I did not choose this pick to see massive capital appreciation although it had a 2-for-1 stock split back in 2010, but rather for its dividend growth and relative capital growth. I have noticed that dividend investor can have a temptation to stay away from a stock in the short term because of the yield and I wanted to see what a growth stock would do with a growing yield. Other companies like that are Canadian National Railway, Saputo and Metro. In many of my technical screenings (Top 20 Stocks) , CNQ shows up high, so it might be time to have a look and take a position if it fits in your portfolio.
It’s worth noting that we could only have three picks and from a performance perspective, financials would provide a high dividend return in the short term (i.e. 5 years) but growth would be limited compared with other stocks. In fact, I have taken a profit in Bank of Nova Scotia (BNS) to purchase shares in McDonalds (MCD) last month (I share my stock trades in my newsletter – sign up it’s free!).
2012 Q2 Growth
- Canadian National Railway (CNR) is up 10.36%
- Canadian National Resources (CNQ) is down -17.05%
- Aflac (AFL) is up 3.05%
2012 Q1 Growth
- Canadian National Railway (CNR) is down -0.03%
- Canadian National Resources (CNQ) is down -21.82%
- Aflac (AFL) is up 4.09%
2011 Q4 Growth
- Canadian National Railway (CNR) is up 14.29%
- Canadian National Resources (CNQ) is up 29.87%
- Aflac (AFL) is up 29.37%
Dividend Growth Index – 2012 Q1 Results
Since inception, the index is up 18.09%. Year-to-date (YTD), it is now slightly up at 2.15%. What’s important is how it compares with the indexes out there:
- XIU @ -1.28% (YTD)
- XDV @ 0.46% (YTD)
- SPY @ 9.47% (YTD)
- VIG @ 4.80% (YTD)
No major breakthrough here in performance. I find it to be very good since a dividend growth index is built for the marathon and not a sprint. For example, I believe my pick will shine by providing dividend growth with the 10/10 rule over a long period of time. CNR has broken out of its slump and it’s just a matter for CNQ to do the same once oil prices go back up.
For those interested in the visualization of our asset allocations, see the graph below. It’s not bad, but we did load up on oil.
I feel the index is moving along quite nicely and we should see the benefits of compounding in a few years. Yes, it does take that long. See how I grew my Computershare portfolio in the past 3 years. All the picks in the table below started with $1,000 each. You can see the performance if you sort by market value.
|Company Name||Ticker||Starting Shares||Starting Price||2012 Q2 Shares||Market Price||Market Value||Sector||Market|
|Fortis||FTS.TO||188.68||$5.30||56.73||$32.55||$1,846.56||Oil & Gas||CDN|
|Energy Transfer Equity||ETE||28.75||$36.09||30.12||$40.40||$1,216.85||Oil & Gas||US|
|Enter. Products Partner||EPD||24.91||$40.90||25.89||$51.59||$1,335.67||Oil & Gas||US|
|Husky Energy||HSE.TO||44.07||$22.26||45.73||$25.40||$1,161.54||Oil & Gas||CDN|
|Royal Bank||RY.TO||20.81||$46.09||21.47||$52.35||$1,123.95||Financial Services||CDN|
|Philip Moris International||PM||16.03||$63.81||16.48||$90.17||$1,486.00||Consumer Products||US|
|National Bank||NA.TO||14.31||$66.98||14.75||$73.47||$1,083.68||Financial Services||CDN|
|ConocoPhillips||COP||15.79||$62.51||21.02||$54.50||$1,145.59||Oil & Gas||US|
|Chevron Corporation||CVX||10.8||$91.49||11.07||$104.26||$1,154.16||Oil & Gas||US|
|Procter & Gamble||PG||15.83||$61.25||16.22||$61.59||$998.99||Consumer Products||US|
|McDonald’s Corporation||MCD||11.39||$87.56||11.65||$89.60||$1,043.84||Consumer Products||US|
|Progressive Waste Solutions||BIN.TO||46.36||$21.68||47.30||$19.57||$925.66||Waste Management||CDN|
|Canadian National Railway||CNR.TO||14.28||$67.34||14.48||$85.60||$1,239.49||Transportation||CDN|
|Canadian National Resources||CNQ.TO||32.5||$30.23||32.81||$26.31||$863.23||Oil & Gas||CDN|
Dividend Growth Index Participants
This quarter, we have a new index contributor with SP Brunner. She will be introducing her picks and it will replace the picks from Wealthy Canadians. We should be able to see the results of those picks at our next quarter update.
- Dividend Growth Investor
- Dividend Mantra
- Dividend Monk
- Dividend Ninja
- My Own Advisor
- SP Brunner
- The Dividend Guy Blog
Readers: What stocks would you drop or add?
Disclamer: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your decision at your own risk - see my full disclaimer for more details.