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?