Recent Buy - Domtar Corp


Since we started our dividend growth investment journey, we have not consistently purchased dividend paying stocks every single month. Funny enough, so far in 2015, we managed to buy dividend stocks every single month. Both Mrs. T and I feel very fortunate to be able to do this so far this year and are extremely happy with our progress. It feels good knowing that we have added $1,251.89 toward our annual dividend income already this year.


As mentioned in our April 2015 dividend update, we have been looking at TD.TO and UFS.TO. We recently purchased some shares of TD.TO, so it shouldn't surprise anyone that we decided to add UFS.TO in our portfolio a well.


We recently added 32 shares of Domtar Corp (UFS.TO) into our dividend portfolio.


I came across Domtar Corp by running through some analysis on the Canadian-Dividend-All-Star-List maintained by Michael Weber at Dividend Growth Investing & Retirement. The Canadian-Dividend-All-Star-List is one of my go-to resources for finding attractive dividend stocks to further monitor. Domtar Corp was one of the stocks that I discovered that fits our selection criteria.


(From Google Finance)
Domtar Corp designs, manufactures, markets, and distributes a wide range of fiber-based products. Some of its products including communication papers, specialty and packaging papers, and adult incontinence products. The company operates in two business segments: Pulp and Paper and Personal Care. The Company’s Pulp and Paper segment consists of the manufacturing, sale and distribution of communication, specialty and packaging papers, as well as softwood, fluff and hardwood market pulp. The Company’s Personal Care segment consists of the manufacturing, sale and distribution of adult incontinence products. The Company is an integrated marketer and manufacturer of uncoated freesheet paper in North America for a variety of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end-users. The Company produces incontinence care products marketed primarily under the Attends brand.


UFS.TO currently trades at a PE ratio of 6.82, and a book/price ratio of 1.1. The stock has a dividend yield of 3.51% with a payout ratio of 23.82%. There are a couple of things that caught my eyes when running through UFS.TO's numbers. First, although UFS.TO only started paying dividends in 2010, its dividend growth history has been nothing but impressive. Since 2010, the company has raised dividend every year at over 20% dividend growth rate each year. In fact, the 3 year annualized dividend growth rate is 29.1%, and the 1 year annualized dividend growth rate is 33%. You typically only see this kind of impressive dividend growth rate in lower yield dividend stocks (i.e. less than 1.5%). It's impressive to see this kind of dividend growth with the stock yielding at 3.5%. Combined with the  low payout ratio, UFS.TO should continue its impressive dividend growth rate in the future. The second thing that caught my eyes is that UFS.TO is roughly 25% below Graham's number. That's a sign that the stock is under-priced so there may be a strong upward trend in the stock price.


From an asset allocation point of view, I quite liked UFS.TO as it allows us to diversify in the consumer goods sector. Since we are a bit heavy in the financial sector, we would like to increase our exposure in other sectors. The consumer goods sector is always a good sector to add. Looking at our portfolio, we do not own any companies that produces paper related products, so I believe purchasing UFS.TO is a good move for our portfolio overall.


One particular interesting note about Domtar Corp... when I started looking at Domtar Corp, I checked out my work's printing stations to see what brand of printing paper we use. I was pleasantly surprised to see Domtar Corp's name on the paper box. 🙂


This purchase adds $61.44 in our annual dividend income.

What do you think about our purchase of Domtar Corp?

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  • Reply
    May 24, 2015 at 7:50 pm

    How is it possible that you can invest in a stock with a P/E of 6.82, payout ratio of 23.82% with annualized growth of 29.1% and an entry yield of 3.51%? It seems you have a winner Tawcan, congrats on the purchase!

    Thank you for sharing your recent buy, I will add to my watchlist and research further.

    • Reply
      May 25, 2015 at 11:42 am

      Hi FrugalityToFinancialFreedom,

      I was surprised to see that the numbers look so great. Should be interesting to see how the stock and dividend perform moving forward.

  • Reply
    Dividend Hustler
    May 24, 2015 at 8:57 pm

    Hey Tawcan. Wow, thats a great a buy Tawcan. Nice way to diversify. Keep up the good work bud. Congrats on the purchase and keep hustling hard my friend.
    Take care.

    • Reply
      May 25, 2015 at 11:43 am

      Hi Dividend Hustler,

      Thank you for the kind words. Looking forward to your updates on Emily's Holdings.

  • Reply
    May 25, 2015 at 4:40 am

    Those numbers are eyepopping. Thats a very low PE, payout ratio and for a dividend payer since 2010?! Hmm I might have to add this to my list of companies to research and dig in more.

    Congrats on adding $61 to your dividend income and thanks for sharing your recent purchase.


    • Reply
      May 25, 2015 at 11:43 am

      Hi R2R,

      I was surprised that I didn't find Domtar earlier. 🙂

  • Reply
    May 25, 2015 at 5:00 am

    I have been looking at Domtar for a long time but haven't made my decision yet. Great company at an attractive price. It is really tempting. Haha

    • Reply
      May 25, 2015 at 11:44 am

      Hi BeSmartRich,

      The price definitely is attractive. I figure instead of second guessing I should just go with my gut instinct.

  • Reply
    Dividend Diplomats
    May 25, 2015 at 7:40 am


    Man, monster addition to that forward income, what a great way to go into the memorial weekend. I haven't really hear of Domtar, so bringing this up is insightful and helpful. It's nice seeing these purchases, bring new waves to us investors. nice job and congrats!


    • Reply
      May 25, 2015 at 11:45 am

      Hi Lanny,

      Domtar wasn't on my radar until recently. It jumped out when I ran the analysis.

  • Reply
    May 25, 2015 at 8:38 am

    Wow close to $1500 in added dividend and it's only May. Domtar is a good find.
    Goodluck with your journey.

    • Reply
      May 25, 2015 at 11:45 am

      Hi Vivianne,

      We hope to continue adding to that $1,500 amount this year. 🙂

  • Reply
    May 25, 2015 at 12:33 pm

    Hello: I checked out this stock via my BMO Investorline account. The screens say; 3% median growth rate for the next 5 years. Is that not a rather low growth rate for a company one may want to invest in? Otherwise the data you presented looks very appealing. Funny, I've never heard of anyone recommending Domtar as a DGI stock. Regards,

    • Reply
      May 25, 2015 at 1:27 pm

      Hi Helen,

      I didn't find such number during my research. You're right the growth rate is a bit low at 3% if that's the case. However, the thing with growth rate is it's analysists' estimates.

      If you look at Domtar's dividend growth history, it makes a good DGI stock.

  • Reply
    June 3, 2015 at 8:01 pm

    Included in 2014 is a $200m income tax benefit which should be excluded in order to normalize eps. Excluding the above, the PE is about 18x, not 6x as stated.

    • Reply
      June 4, 2015 at 11:58 am

      Good catch. Thanks for this information Dan.

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