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Dividend Growth Index 2012 Q2 Update

 

The Dividend Growth Index is a fun project created by Mike over at The Dividend Guy. The Index is comprised of 8 dividend growth bloggers selecting 3 stocks each, for a total of 24 dividend paying companies in the Index.  The Index was established in September 2011 and continues to be a fun initiative to be part of.   Like Mike wrote on his blog, the goal is not to do a stock picking competition but to build a real dividend portfolio in order to give you ideas of what it could return over time.  The purpose is to benefit from dividend increases throughout the years and steady dividend payments.

Before I update you with my picks, welcome goes out to Susan Brunner as a new participant in the Dividend Growth Index. Unfortunately, my buddy The Wealthy Canadian, an original member of the Index stopped his blogging activities, so Susan is now on board.   Let’s hope The Wealthy Canadian returns to blogging at some point…it was one of my favourite blogs.  

My three selections for the Index are:

Abbott (ABT:US).

Bank of Nova Scotia (BNS).

CML Healthcare (CLC).

Like I’ve mentioned in previous updates, these selections are not recommendations for purchase although I must disclose I own these companies.  While I don’t expect these companies to clobber the market in the short-term I do expect these companies to perform well over in the years to come and provide me with some passive dividend income and in some cases, tax-free income.

Let’s recap what these companies do, where their performance has been and what I forecast going forward.  The screenshots below are courtesy of TMX.

Abbott Laboratories (ABT:US)

Key metrics as of July 8:

In the healthcare sector Abbott is a major player.  Abbott is one of the largest organizations in the world engaged in the discovery, development, manufacture, and sale of diversified health care products. To this point, over the last couple of months, Abbott Nutrition introduced a new line of nutrition bars called Perfectly Simple. This product line limits the ingredients of these bars to 10 ingredients or less, something I think celebrated author Michael Pollan might approve of.  Last month, the Board of Directors declared a quarterly common dividend of $0.51 per share.  This marked the 354th consecutive quarterly dividend to be paid by Abbott since 1924.  Abbott has increased its dividend payout for 40 consecutive years – the last few of which I disclose, I’ve been a shareholder.  Last fall, Abbott announced plans to peel off its pharmaceutical business into a separate publicly traded company, called AbbVie [pronounced Abb-vee]; which is expected to be operational in a few more months.  AbbVie will take over Abbott’s current portfolio of pharmaceuticals and biologics.  I expect Abbott’s share price to continue to rise, even after the split, regardless how the U.S. economy performs.  This isn’t necessarily a good thing, since I prefer to buy my stocks at lower prices.  Oh well, can’t win them all.

Bank of Nova Scotia (BNS)

Key metrics as of July 8:

If you can’t beat ‘em you might as well own ‘em.  I say this often because it’s true, especially when it comes to Canadian banks.  Because a banks’ prime objective is to make money, by owning a bank that pays a steady dividend that means you’ll make money too.  Bank of Nova Scotia has paid a dividend, since, get this, 1832.  Scotiabank is one of North America’s premier financial institutions and arguably Canada’s most international bank, with operations in more than 45 countries outside the Great White North.  Bank stocks in Canada, including BNS has been on a wild ride since the beginning of the year, but when you think about it, volatility has always been part of the stock market.  Volatility and financial noise comes in the package of owning equities.  BNS now pays a quarterly dividend of $0.55 per share.  I suspect the share price for this stock will continue to hover between $52-$54 for the rest of the year.

CML HealthCare (CLC)

Key metrics as of July 8:

Although small in terms of market capitalization, this is a mighty company in our Canadian healthcare space.  Each year, CML HealthCare performs over 2 million medical imaging scans in Canada and close to 40 million laboratory tests.  Their medical imaging services include MRI, CT scans, ultrasound, mammography, x-ray and nuclear medicine to name a few.  They also provide medical lab services such as hematology, biochemistry, cytology, microbiology and histology.  As stable and predictable as the CLC medical tests are, the CLC stock price is on the other end of continuum.  Just like our equity markets of late, CLC is not immune to volatility as you can see from the TMX chart.  On the upside, CML HealthCare reported solid results in the first quarter of 2012.  Their revenue increased by over 5%, thanks to additional funding received from the Ontario Ministry of Health and Long Term Care (MOH) for laboratory services.  I expect continued good results from CML HealthCare going forward even if their cash reserves may suffer a bit, due to capital expenditures for new equipment and assets.  On a personal note, I’ve been earning about 7% return on CLC since I’ve owned it.  Not too bad in this market climate.

How has the entire Dividend Growth Index performed?   Check it out:

Blogger Stock  Sept. 30 Value   Jun. 29 Value   Inception Return 
My Own Advisor ABT US Equity  $       999.79  $    1,293.93 29.42%
  BNS CN Equity  $    1,000.10  $    1,031.54 3.14%
  CLC CN Equity  $       999.97  $    1,079.81 7.98%
The Dividend Guy Blog INTC US Equity  $       999.97  $    1,279.15 27.92%
  KO US Equity  $       999.89  $    1,181.90 18.20%
  NA CN Equity  $    1,000.13  $    1,073.67 7.35%
The Dividend Monk ETE US Equity  $       999.93  $    1,235.59 23.57%
  NVS US Equity  $       999.96  $    1,076.57 7.66%
  WMT US Equity  $    1,000.11  $    1,370.04 36.99%
Dividend Ninja HSE CN Equity  $       999.95  $    1,163.86 16.39%
  PEP US Equity  $    1,000.30  $    1,169.62 16.93%
  SPLS US Equity  $    1,000.03  $    1,003.14 0.31%
Passive Income Earner CNR CN Equity  $    1,000.03  $    1,246.34 24.63%
  CNQ CN Equity  $    1,000.03  $       896.04 -10.40%
  AFL US Equity  $       999.92  $    1,245.40 24.55%
Wealthy Canadian RY CN Equity  $    1,000.13  $    1,119.84 11.97%
  FTS CN Equity  $    1,000.00  $    1,831.85 83.19%
  BIN CN Equity  $       999.99  $       912.35 -8.76%
Dividend Mantra COP US Equity  $       999.82  $    1,174.68 17.49%
  PM US Equity  $       999.95  $    1,438.32 43.84%
  PG US Equity  $    1,000.14  $       993.47 -0.67%
DividendGrowth Investor CVX US Equity  $       999.97  $    1,167.80 16.78%
  MCD US Equity  $    1,000.27  $    1,031.06 3.08%
  EPD US Equity  $    1,000.14  $    1,326.47 32.63%
     $  24,000.52  $  28,342.44 18.09%

The overall Index is up just over 18% since September 2011.  Year-To-Date (YTD), the performance is not as good – the Index is up just over 2%.  For comparison purposes, here are some YTD returns for some prominent ETFs:

  • XIU = -1.28%
  • XDV = 0.46%
  • VIG = 4.80%
  • SPY = 9.47%

You can find more details about the Index by clicking here.  You can read about the other selections in the Index by clicking on the bloggers below:

The Dividend Guy

The Passive Income Earner

Dividend Ninja

Dividend Growth Investor

Susan Brunner

Dividend Monk

Dividend Mantra (taking a break)

What do you make of this Index?   What do you make of my picks?

For more reading about the Dividend Growth Index, check out these articles:

Introducing the Dividend Growth Index

My Own Advisor’s Three Picks for the Dividend Growth Index

Dividend Growth Index Q1 Results

Dividend Growth Index Q1 2012 Update

Filed in: Dividend Growth Index

11 Responses to "Dividend Growth Index 2012 Q2 Update"

  1. mark dansart says:

    Please put me on your mailing list

  2. Scott Messick says:

    Please add me to your mailing list.

  3. @Scott Messick

    Hey Scott,

    Simply subscribe at the top right of my blog…and follow along!

  4. @mark dansart

    Hey Mark,

    Simply subscribe at the top right of my blog…and follow along!

  5. Peter says:

    I know Wealthy Canadian doesn’t write blogs any more, but how come his selection of FTS (Fortis) has gained more than 80% when the price has not moved much
    I think he picked Daylight Energy instead or something, rightÉ That`s why such a huge gain.

    • Peter,
      You have a great memory, that was it. He made some big gains with DAY, and took the proceeds and invested it in FTS.

      I think Susan is going to invest in FTS, but I don’t suspect much capital appreciation. Maybe 2% per year.

  6. This is a neat project. I still think that long term you simply can’t go wrong betting on healthcare companies and Canadian banks. There was an interesting article in one of the papers I read this morning about how Canadian banks will soon own the whole sector in Canada including the exchanges! As always I’m interested to see how a group of investors that I think are pretty darn bright fair against their indexes. Your up on some, down on others. Any predictions for the mid-term say 5 years out? Do you think you can beat the TSX 60 by 2%?

    • Thanks, it’s fun (the project). As for beating the index, I think over 5 years, it will be close. I suspect the TSX will return about 5% in capital appreciation, and these stocks will return about 3-4% yield and 2% capital, as a portfolio. Just guessing of course.

  7. Modest Money says:

    As someone who’s just starting to get into non-mutual fund, thanks for putting together this index and post series! This is going to be so useful to start doing some research into some quality stock choices. Now time to head to the other bloggers’ posts for an overview of the stocks they picked.

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