Dividend Income Portfolio Update (15-Sept-14)



We’re back after another 2 months to check up on the dividend income portfolio.  So without further delay, here’s the latest values in our portfolio:

Dividend Income Portfolio: Performance as of September 15, 2014

Dividend Income Portfolio: Performance as of September 15, 2014


TransAlta continues to struggle, Dividend Hikes, and Extendicare news imminent?

TransAlta Corp (TA) continues to weigh down the portfolio (now down 20%) – the dividend continues to look safe (for now) but the company continues to disappoint investors at each earning release.  It’s still producing a 4.9% dividend for the portfolio, but with the loss in capital, we’ve luckily been balanced out by some great gains in TransCanada  (TRP) and Extendicare (EXE).  Nice to note though, that if the company can turn things around and/or keep its current dividend, the yield is sitting at 6.2% right now.   One thing I’m trying to look at is whether to mimic this portfolio to actions I take day-to-day.  For example, if I add more positions personally, should I reflect that in the portfolio and what’s the best way to track that extra investment.  One of the issues is that the portfolio was just meant to be representative – and just investing amounts equally.  Any new money invested in existing companies, not sure how to handle that yet.

Altria (MO) upped their dividend 8.3% and now sits at $0.52 a quarter.  It’s actually quite easy to figure out if and when Altria will up their dividend.  Their dividend payout has always been aligned to 80% of adjusted earnings per share which means if you listen in each quarter’s results and guidance,   just add up the EPS numbers and multiply by .8!

Extendicare (EXE) announced Q2 earnings – surprisingly reporting better numbers than last quarter and last year.  Just off the press was a settlement agreement with the OIG to address their deficiencies which would cause a $1.5-$3.5M hit each year.  However, as mentioned in the Q1 earnings release, the OIG Investigation was one roadblock to the potential sale of their US operations; and it was great to hear that they have tentatively come to a settlement and are still actively in negotiations with a particular suitor.    Does this mean an announcement is imminent?  I hope so – but unsure how long these negotiations take.  Personally, I suspect something will be announced (good or bad) sooner than later as it sounds like this same suitor has been engaged in negotiations for over 6 months.  Interesting transaction also announced  – the company announced that it was leasing its buildings in Pennsylvania, Delaware, and West Virginia to a third-party operator which would increase their earnings from those locations by $10M a year.  Most of this is due to savings in potential liability costs which would seem to indicate that the company is better suited as a facility owner than its current owner-operator model.  However, this transaction might provide some insight to how the company is illustrating how much value their existing properties have.


Dividend Income Portfolio Comparison

Metric Income Portfolio TDB622 TDB159 RBF448
Starting Book Value: $110,000
Current Market Value: $118,270 $120,566 $121,967 $116,104
Annualized RoR (less dividends): 9.65% 12.37% 14.03% 7.11%
Received Dividends (Lifetime): $4,427 $1,607 $1,308 $3,535
Total Market Value + Dividends $122,696 $122,173 $123,274 $119,640
Annualized RoR (with dividends): 14.90% 14.27% 15.59% 11.27%

Now for the fun part for me – comparing against the 3 dividend income products available.  The bad news is I’m still lagging the TDB159.  Good news is that gap is slowly closing – difference in Annualized RoR with dividends has dropped from 2.29% to 0.69%.  Of course, that could also be due to timing of dividends too.

One of these updates, I’ll take an in-depth look at what holdings each of these funds have.  I suspect the TD products are more geared towards potential capital growth vs. income distribution while my portfolio and RBC fund put more priority on income distribution over capital growth.  Which approach is better probably depends on your financial goals and needs (ie. whether you need the income distribution immediately).  I’m pretty sure in the long run, a focus on capital growth would ultimately provide a higher return as those companies are investing earnings back into themselves vs. rewarding investors via dividends/distributions.  Those re-invested earnings have the ability to then compound instead of the investor using that money to pay their hydro bill for the month.  The more likely comparison should be the TD funds vs. our portfolio with DRIP enabled (or investment in a simple index fund) to account for re-investing the dividend instead of sitting in a chequing account or paying a bill.  Will add that to the list of things to think about for future updates!







One thought on “Dividend Income Portfolio Update (15-Sept-14)

  1. Pingback: Dividend Portfolio Update (2-Feb-15) | Fearless Cal's Investment Journal

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