Early 2016 Stock Considerations

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.

Enbridge (ENB.TO)
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 (SAP.TO)
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.

Qualcomm (QCOM)
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?

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44 Comments

  • Reply
    our next life
    December 23, 2015 at 8:24 am

    Haha — We can definitely relate to that itchy feeling! We have received my bonus, but haven’t gotten Mr. ONL’s promised bonus through to our bank account yet, and we can’t wait to make the big Vanguard buy when we have it, so we can officially check all of our year-end goals off of our list. 🙂 Happy holidays!

    • Reply
      Tawcan
      December 23, 2015 at 9:26 pm

      Hi Our Next Life,

      I suppose it’s great that we have money lined up for investing. Can’t wait to hear what you end up doing with the money investing wise. 🙂

  • Reply
    Team CF
    December 23, 2015 at 8:26 am

    Some very solid considerations here Tawcan.
    Taking into account the holdings in our portfolio, we are considering cheating a bit and buying VDY to supplement our current dividend holdings. The ETF is down quite a bit since its peak in 2014 (Around $32) and the dividend yield is also appealing around 4% (paid monthly).
    Good luck making up your mind on the upcoming investments (and happy holidays)!

    • Reply
      Tawcan
      December 23, 2015 at 9:27 pm

      Hi Team CF,

      Nothing wrong with buying VDY. If I was staring today I’d probably pick up some VDY right now. I didn’t realize that VDY pays monthly dividend. That seems like a great dividend ETF to hold. Happy holidays to you too.

  • Reply
    Roadmap2Retire
    December 23, 2015 at 9:13 am

    All great names on the list, Tawcan. Some of those are on my list too. Thanks for sharing your list.

    R2R

    • Reply
      Tawcan
      December 23, 2015 at 9:28 pm

      Hi R2R,

      Would love to see your watchlist. 🙂

  • Reply
    jd
    December 23, 2015 at 10:01 am

    I was watching TRP when it was in the low $40s a couple of weeks ago. Regretting that I didn’t pull the trigger, as it’s really shot up since.

    • Reply
      Tawcan
      December 23, 2015 at 9:28 pm

      Hi jd,

      I think we’ll continue seeing more volatile in the oil & gas sector. You might get another buy opportunity.

  • Reply
    Investment Hunting
    December 23, 2015 at 11:28 am

    Thanks for putting this list together. Lots of energy names here. I am too heavy on energy, but I am interested in PG and UL.

    • Reply
      Tawcan
      December 23, 2015 at 9:29 pm

      We’re slightly heavy in energy than we like but with the current drop it’s hard not to buy more. Be greedy when others are scared. 🙂

      • Reply
        JT
        December 24, 2015 at 1:54 pm

        Agreed! Oil is so hard to resist right now. I am thinking about adding to BP or start a new position in XOM or TOT in the future. Thanks for the list.

        Merry Christmas!

  • Reply
    DivHut
    December 24, 2015 at 12:32 am

    That first paragraph hit home as I feel the exact same way. With December almost over I invested only $800 and am waiting for 2016 to roll around so I can add a fresh $5,500 to my ROTH and start adding to those beaten down Canadian banks I own. You mention many great names. I know POT has been making the rounds quite a bit among our fellow bloggers. No interest in TD, BNS or RY? Thanks for sharing.

    • Reply
      Tawcan
      December 24, 2015 at 4:08 pm

      The Canadian banks are looking good too but we’re already heavy in banks so we might avoid banks for now. 🙂

  • Reply
    Dividend Lord
    December 24, 2015 at 3:28 am

    “overall plan is to add more shares to companies that we already own”
    That’s my plan too. Probably some new names will find their way to my portfolio during 2016, but in the beginning it’s all about adding to existing positions. That being said, can’t wait to buy more Unilever, Procter&Gamble, Agrium, Enbridge.
    Looking forward what will be your first purchase in 2016!

    • Reply
      Tawcan
      December 24, 2015 at 4:08 pm

      Very cool that we share similar plans when it comes to investing in early 2016. 🙂

  • Reply
    MrRicket
    December 24, 2015 at 6:13 am

    Interesting article. Do you suggest any large cap ETFs covering international markets, in Euro?

    • Reply
      Tawcan
      December 29, 2015 at 9:32 am

      Hi MrRicket,

      I picked international ex-Canada ETF to increase our international exposure. Unfortunately I don’t know any ETF’s covering international markets in Euro.

  • Reply
    Income Surfer
    December 24, 2015 at 6:24 am

    I think most of us can relate to your itchy trigger finger Tawcan. That’s a list of good names, and I’m sure I will be buying several of them…..especially VTI……in the coming year. I will however be selling our position in Procter and Gamble in the new two or three weeks. I bought our position in the 2008 financial crisis, but the company has tremendously disappointed me over the last couple years. The current metrics worry me and I question where the future earnings growth will come from. Just my thoughts, and I could certainly be wrong.

    I hope you have a Merry Christmas buddy. Take care
    -Bryan

    • Reply
      Tawcan
      December 24, 2015 at 4:09 pm

      VTI is looking very intriguing right now that’s for sure. I see your point about PG, definitely something to keep in mind.

  • Reply
    A Frugal Family's Journey
    December 24, 2015 at 10:00 am

    Thanks for sharing your thoughts Tawcan….We hold ENB, POT, CVX, and RDS.B in our family’s dividend stocks portfolio and may add to these holding in the coming year. I’m also hoping to add a few new ETFs to the portfolio in the coming year as well!

    Cheers to a prosperous 2016! AFFJ

    • Reply
      Tawcan
      December 24, 2015 at 4:09 pm

      Hae a prosperous 2016 to you too AFFJ.

  • Reply
    ambertreeleaves
    December 24, 2015 at 11:05 pm

    As an index investor I have not really a stock watch list. That being said, I have a play portfolio where I experiment with dividend stocks an options. I am actively watching Unilever, engine and axa.
    I also look at dividend trackers to combine those with options.

  • Reply
    Jayson @ Monster Piggy Bank
    December 25, 2015 at 10:34 pm

    That is a solid list of stocks, Tawcan. Procter & Gamble and Unilever are really the best out of the list. Definitely, these are included in my list. Merry Christmas!

    • Reply
      Tawcan
      December 28, 2015 at 12:27 am

      Hi Jayson,

      I particularly like Unilever right now. 🙂

  • Reply
    Dividend Diplomats
    December 26, 2015 at 3:04 pm

    Ready to unload….LET”S DO THIS TAWCAN! I love the companies on your list. For me personally, I am fed up with oil/gas and resource stocks and I am staying away from them all together. I don’t want to get into the game of trying to predict this crazy oil and gas market, because every time I make an internal prediction it goes in the other direction. So I’ll be watching that industry from the sidelines and rolling with what I currently own.

    However, I love stocks like PG and UL. Keep us updated with which stocks you select. I don’t think you are going to make a bad choice here.

    Have a great weekend.

    Bert

    • Reply
      Tawcan
      December 28, 2015 at 12:28 am

      Hi Bert,

      Makes sense that you’re fed up with oil/gas and resource stocks, especially after the recent KMI dividend cut.

    • Reply
      Morg
      February 6, 2016 at 1:55 pm

      Why would you put VXC or XAW in your TFSA instead of your RRSP with all the exposure to USA$s should it not be in an RRSP account. Thanks

      • Reply
        Tawcan
        February 6, 2016 at 2:33 pm

        Hi Morg,

        We hold VXC in regular accounts so we can potentially get some tax refunds. You’re right, it’s better to hold VXC or XAW in your RRSP.

        • Reply
          sean
          April 12, 2016 at 12:05 pm

          I believe you would get taxed the same when VXC is held in both RRSP and TFSA as it’s a Canadian listed ETF. When you go for an ETF that is US listed – you won’t be taxed as much in the RRSP where you’ll get taxed in the TFSA.

          Is my understanding correct?

          • Tawcan
            April 12, 2016 at 12:13 pm

            I think you might be right about that!

  • Reply
    Ken
    December 27, 2015 at 9:18 am

    I to like your list but would be very cautious about Riocan as its exposure to the Target debacle here in Canada is going to take a toll on them.

    • Reply
      Tawcan
      December 28, 2015 at 12:28 am

      Hi Ken,

      Very good point about Riocan and their exposure to the Target debacle. Definitely need to take a closer look on this subject. Thanks for mentioning.

  • Reply
    talesfromthetape
    December 27, 2015 at 2:34 pm

    Awesome job Tawcan, i wish i was in your position at your age. I arrived in Vancouver when i was 32, messed about for a bit then realized i needed to get my ##@@ together :). Looking forward to an exciting 2016, cheers T

    • Reply
      Tawcan
      December 28, 2015 at 12:30 am

      We all wish to have started earlier but the good thing is that we’ve started and are building a better future. 🙂

  • Reply
    BeSmartRich
    December 30, 2015 at 12:58 pm

    Great list there Tawcan. I have TRP, CNQ, POT and CVX and thinking of adding Riocan and Enbridge soon when TFSA room gets replenished. Although the contribution limit was unnecessarily and politically reduced $5500 is still better than nothing. Can’t wait to buy more REITs and mining stocks especially precious metals.

    • Reply
      Tawcan
      December 31, 2015 at 9:30 pm

      All these stocks are great buys IMO. 🙂

  • Reply
    Financial Underdog
    December 30, 2015 at 1:50 pm

    I’m looking at American Express since it’s still quite beat down from previous high. Enbridge as well.

    • Reply
      Tawcan
      December 31, 2015 at 9:30 pm

      Personally I’d rather buy Visa or Master Card at the moment as I don’t have good experience with American Express.

  • Reply
    Adam @ AdamChudy.com
    December 31, 2015 at 10:47 am

    If you’re on a 20+ year timeline, I think most people should be considering the major oil companies (BP, Shell, Exxon, Chevron, BHP). These guys typically return by far the best when you buy at the worst of the commodity cycle. If you reinvest the dividends at 3-6% yields at these levels, you’ll be pretty happy in the future.

    Chipotle is also interesting after getting cut by 40%. 28x earnings with a company that is growing in the teens every year without a bit of financial engineering could a great growth buy. Taking advantage of this E.coli breakout reminds me of Target after the credit card scandal.

    • Reply
      Dan
      December 31, 2015 at 3:24 pm

      re: “Taking advantage of this E.coli breakout reminds me of Target after the credit card scandal.”

      main difference being, one company inadvertently compromised customer data, the other advertently poisoned customers by virtue of lax food prep quality control (possibly in an effort to minimize restaurant operation costs so as to create the illusion of growth to Wall Street muppets). No point distinguishing between the two scandals though. Situation normal.

      • Reply
        Tawcan
        December 31, 2015 at 9:32 pm

        If both companies can recover from their respective operational disasters, then it makes sense to invest in these stocks in the long run. 🙂

    • Reply
      Tawcan
      December 31, 2015 at 9:31 pm

      Good point Adam on the 20+ year timeline. Haven’t looked into Chipotle but have heard about the E.coli outbreak. Will have to take a closer look I think. Thanks for pointing out.

  • Reply
    Our Big Fat Wallet
    January 8, 2016 at 9:13 pm

    With the recent downturn there are lots of good deals out there. I am looking at Royal Bank, Telus, Suncor, and a few others. Not sure about oil and gas right now as I think the downturn is going to last well into 2016 but I think Suncor will be able to weather the storm

    • Reply
      Tawcan
      January 11, 2016 at 4:52 pm

      Telus is another good pick, I’m actually altering the consideration list slightly. 🙂

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