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Dividend Growth Index Q1 2012 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. I think this is a great initiative. Unfortunately, one of our participants, The Wealthy Canadian, had to quit blogging for some personal reasons.  I wish The Wealthy Canadian all the very best and hope he returns to blogging at some point.

We’re now into our 2nd quarter and the results are starting to show.  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, before I go any further, I must say these selections are not recommendations for purchase. That said, this Index is rather real for me.  I own all three of these companies.  So, while the Index is for fun for you and hundreds of other readers owning these companies is the real-deal for me.  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.   Otherwise, I wouldn’t own them :)

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

1. Abbott Laboratories (ABT:US)

Key Metrics as of April 3:

 

In the healthcare sector, Abbott is a major player.  It is one of the biggest companies in the world engaged in the discovery, development, manufacture, and sale of a diversified line of health care products.

Last fall, Abbott announced plans to split off its pharmaceutical business into a separate publicly traded company.  Recently, Abbott announced the name of this new company:  AbbVie [pronounced Abb-vee] which is expected to launch by the end of 2012.  The name is derived from a combination of Abbott and “vie,” which references the Latin root “vi” meaning life.

From its website:  the naming of this company is “the latest milestone in the process that began in October 2011, when Abbott announced it would separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. AbbVie, the research-based pharmaceutical company, will include Abbott’s current portfolio of leading proprietary pharmaceuticals and biologics. The diversified medical products company, which will retain the Abbott name, will consist of Abbott’s existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostics and nutritional businesses.”

Since my introduction of the Dividend Growth Index, Abbott has paid two dividends. Actually, Abbott has paid quarterly dividends since 1924.  A number of weeks ago, Abbott increased the company’s quarterly common dividend from $0.48 to $0.51 per share.  That dividend hike marked the 40th consecutive year that Abbott has increased its dividend payout and the 353rd consecutive quarterly dividend paid.  Most of my shares were purchased under $50 USD.  The yield very healthy and sustainable at just over 3%.  I won’t be selling this company.

2. Bank of Nova Scotia (BNS)

Key Metrics as of April 3:

If you can’t beat ‘em you might as well own ‘em.  Because a banks’ prime objective is to make money, by owning an established bank like Bank of Nova Scotia that pays a dividend that means you’ll make money too.   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.  In fact, if you visited the Caribbean, Central America or Mexico for your sunny destination this winter (lucky you), you might have used a Scotiabank ABM to get some money out while on vacation.

Last time I wrote about BNS, I said it was trading closer to its 52-week low than high and that was good for me because I was a buyer via my dividend reinvestment plan.  I try to buy my stocks near 52-week lows, if not lower, and never sell them. If you look at the chart above you’ll see BNS is approaching it’s 52-week high.  Earlier this year, Scotiabank reported a 15% increase in their 1st quarter earnings and decided to increase their dividend by 6%.   The quarterly dividend rose from $0.52 to $0.55 per share for a total yearly dividend of $2.20 per share.  BNS is currently sporting a healthy and sustainable 3.5%+ yield.  I don’t intend to sell this guy either.

3. CML HealthCare (CLC)

Key Metrics as of April 3:

This company may be unfamiliar to some but it’s a player in Canadian healthcare space.  CML Healthcare operates 105 medical imaging centres in three provinces across Canada, including 75 locations in Ontario, 21 in British Columbia, and nine in Alberta.  Staff at CLC are responsible for performing more than 2 million medical imaging scans in Canada and 37.7 million laboratory tests, imaging that includes MRIs, CT scans and X-rays to name a few.

As you can see from the chart above, 2011 was a year of volatility for CLC.   Thankfully for them and investors, things look better in 2012.  For the 12 month period that ended in December 2011, revenue increased 2.1% to $376.1 million; cash flow provided by operating activities from continuing operations increased 15.2% to $119.7 million and adjusted funds from continuing operations increased 25.4% to $101.3 million.  So far, so good.  I will continue to hold this company.  CLC pays a monthly dividend and a very high one at that, yielding over 7%.

In closing, I’ve selected each company for a variety of reasons:

  • I think this small collection of companies balances risk and reward.
  • All these companies have a good, and in some cases, a very long history of paying dividends.
  • I obtain a moderate average dividend yield by owning these companies.

How have the holdings in the Dividend Growth Index performed?

Pretty darn good.  After 2 quarters, our portfolio shows a return of 20.74% or $28,977 (assuming we invested $1,000 in each 24 stocks as at September 30th 2010).   You can find out more details about the Index performance on The Dividend Guy’s site.

Check out this table for detailed results:

You can read about the other participants in the Index by clicking on their name below:

Dividend Guy

Dividend Monk

Dividend Ninja

Passive Income Earner

Dividend Mantra

Dividend Growth Investor

Wealthy Canadian

What do you make of this Index?

What do you make of my picks for the Index:  ABT:US, BNS and CLC?

Filed in: Dividend Growth Index

8 Responses to "Dividend Growth Index Q1 2012 Update"

  1. stock newbie says:

    Thanks for the good article MOA. I wonder which brokerage will allow bi-weekly or monthly stock purchase (something like pre-authorize deposit or something like that)? right now I’m with TDW, if i want to buy ETF or stock, i need to make sure the total is over 1000 or something the make that 9.99 commission less than 1% of the trade.

    Thanks
    SN

  2. I am really enjoying watching what is happening with this. There are some interesting picks out there. I think you are doing alright so far but like anything, time will tell.

  3. Peter says:

    Hmm.. CML looks interesting. I have to look further into that one. But what’s up with a ridiculous P/B ratio?

  4. Thanks for the mention, Mark. This is very good advice – speaking with an accountant and getting a corporation set-up for my online business is definitely worth the cost.

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