With 2015 winding down, I'm waiting patiently for 2016 to arrive so I can transfer fresh capital to our TFSA's to maximize the contribution limit of $5,5500 per person. Not going to lie, my hands have been feeling a bit itchy as I haven't pulled any major buy triggers recently. The most recent buys were in early November but I considered them as small purchases. With some money lined up already, I'm ready to make a splash. But which stocks are on my early 2016 stock considerations?
Let's start off the list with Canadian dividend stocks that I am considering. 2015 has been a brutal year when it comes to Canadian stocks in general. Many of the stocks in the gas & oil sector saw a significant drop in share price. Because of this, we took on paper loss with some of our dividend holdings when reviewing our dividend portfolio. Adding some of these oil & gas Canadian dividend stocks will allow us to average down our cost basis.
RioCan REIT (REI.UN)
RioCan specializes in commercial real estates. The firm invests in grocery chain anchored shopping centres, mixed-use development and urban opportunities in both US and Canadian markets. RioCan is one of the largest REITs in Canada and RioCan properties usually will show "RioCan managed" on the property signs, making them easy to spot. Whenever we drive by one of RioCan's retail properties, I'd always proudly tell Mrs. T that we own part of the it. RioCan currently has a dividend yield of 5.84% and is very close to the 52 week low price. Considering the Canadian interest rates probably won't go up anytime soon, RioCan should be able to continue taking advantage of the low interest rates when refinancing properties. Furthermore, RioCan recently announced it will sell 49 retail properties in the US for $1.9 billion US or $2.7 billion Canadian. I think this is a very smart move since RioCan purchased these properties when the Canadian dollar was strong and now they're taking in some nice profits a results of the strong US economy and strong US dollar. Long term, I think RioCan will remain very attractive to hold in our dividend portfolio.
TransCanada Corp (TRP.TO)
TransCanada Corp is an energy infrastructure company. The company operates in natural gas pipelines, liquids pipelines, and energy. Due to the recent oil & gas price drop, TRP's share price has dropped from its 52 weeks high of $59.50 to around $44, which is quite close to its 52 week low of $40.58. TRP has a 14 year dividend increase streak and a 5 year annual dividend growth rate of 4.8%. The dividend growth rate is low because the starting yield is quite high already. I see TRP as a company with wide moats. It takes significant amount of time and investments to build up a pipeline system. And once these pipelines are built, they will be around for a long time. Furthermore, considering the on-going environmental concerns with pipelines, it will be extremely difficult for a new company to enter the playing field.
Similar to TransCanada Corp, Enbridge is also an energy transportation and distribution company, specializing in liquids pipelines, gas distribution, gas pipelines, processing, and energy services. Enbridge's price has dropped from a 52 week high of $66.14 to around $43. With a dividend yield of 4.76% and a 5 year annual dividend growth rate of 13.6%, I believe Enbridge is a great long term hold as well.
Canadian Natural Resources (CNQ.TO)
Continue with the oil & gas story, CNQ has seen a huge price drop in 2015. With the current price hovering around the 52 week low, it might be a good opportunity to average down our cost basis. CNQ currently has a dividend yield of 3.17% and a 5 year dividend annual growth rate of 33.8%. CNQ has also increased dividend payout for 14 straight years.
Saputo produces, markets, and distributes a variety of dairy products under different brand names. Saputo's products are sold in 40 different countries. The other day I discovered that Dairyland is one of the brands that Saputo owns. We've been using Saputo products without knowing it! One of my 2016 goals is to increase our exposure in the consumer staple & discretionary sectors, so purchasing more Saputo shares makes sense. Saputo currently has a dividend yield of 1.63% and a 5 year annual dividend growth rate of 17.6%.
Potash (POT.TO) and Agrium (AGU.TO)
Both Potash and Agrium specialize in nutrients for agricultural and industrial markets. As the world population continues to increase, farmers will need to grow more and more crops to either feed animals or people. Nutrients will surely in high demands. Both Potash and Agrium have seen their price reduced in 2015. This is especially true for Potash, as the stock price is close to the 52 week low. While Potash looks attractive from a pure dividend yield point of view, the key concerns with Potash are the high payout ratio of 81% and the very high dividend yield at over 8%. Potash has increases its dividend for 4 straight years and has a 5 year dividend growth rate of whopping 60%. Considering the already high payout ratio and dividend yield rate, it's highly unlikely for Potash to continue the impressive dividend growth rate. However, even if the dividend growth is in the low single digits the next few years, if the company does not cut its dividends, the dividend yield will remain very attractive. Having said that, I do not want to invest in Potash and encounter a dividend cut similar to what KMI just recently announce. So when it comes to Potash, definitely need to keep a close eye on the company results and any company related news. On the other hand, Agrium has a 4 year dividend increase streak and an extraordinary 5 year annual dividend growth rate of 94%. I don't expect Agrium to continue such crazy dividend growth rate moving forward. However, considering its payout ratio and initial dividend yield is much lower than of Potash, I think it should be safe to see Agrium's dividend growth rate in the teens range.
Above are my current Canadian dividend stock considerations for early 2016. Although we only hold Canadian stocks in our TFSA's, I'm also considering some US stocks to purchase in our RRSP's. We only hold US dividend stocks in our RRSP's to avoid paying the 15% withholding tax on US dividends. Here are some US dividend stocks I'm considering.
Chevron (CVX), BP (BP), ConocoPhillips (COP), Royal Dutch Shell (RDS.B)
Similar to their Canadian oil & gas counterparts, these four companies have seen their share price dropping lower and lower in 2015. Although low oil price may stick around for a while, I think all four companies are solid long term holds. Once we have more US cash in our RRSP's (either from new RRSP contributions or dividends received in US dollar), we may consider purchasing these companies to average down our cost basis.
Procter & Gamble (PG)
Procter & Gamble doesn't need much introduction. The company operates under many brand names and we use many of these consumer packages goods every day. At 3.3% yield rate and a 59 year dividend increase history, you simply can't go wrong with holding Procter & Gamble in your dividend portfolio. Since we almost receive sufficient dividend each quarter to purchase an additional PG share, I would like to purchase some more shares so we can enroll in DRIP and put PG on auto-pilot.
Unilever plc (UL)
Like Procter & Gamble, Unilever is another household name in consumer goods. UL has a good dividend growth history and a solid product portfolio. At around 3% dividend yield, we would like to purchase more UL shares to increase our exposure in consumer staple sector.
Like many stocks listed above, Qualcomm has seen its share price drop in 2015. The company is facing a lot of headwinds but continues to be a juggernaut in the cellular chip sector. Considering cellular technology isn't going anywhere anytime soon, I think Qualcomm will come back stronger than ever. At current price of $48, Qualcomm's share price is very close to its 52 week low. I would like the add more Qualcomm shares to average down our cost basis.
In addition to individual stocks, I am also considering adding some Vanguard index ETF's to increase our international exposures. Some of the index ETF's that we're considering are:
VXC - Vanguard All-World Ex Canada
VTI - Vanguard Total Stock Market ETF
VXUS - Vanguard Total International Stock ETF
VXC is in Canadian currency while VTI and VXUS are both in US currency. We'll hold VTI and VXUS in our RRSP's and VXC in other accounts like TFSA or taxable accounts.
So there you have it, our 2016 stock considerations. We might add or remove some companies moving forward but this watch list is a good start to narrow down potential purchases in 2016. If you have guessed, the overall plan is to add more shares to companies that we already own and enrol in DRIP whenever we can.
Dear readers, which stocks are you considering in 2016?