Recent Sell & Buy - Enerplus, National Bank, Telus

buy & sell

As hinted in our Feb 2016 dividend update, we have been evaluating our dividend portfolio and looking to sell some stocks that have cut their dividends. One of the stocks that we've been liquidating over the last few years is Enerplus Corp (ERF.TO).

From Google Finance:

Enerplus Corporation is a Canada-based energy producer. The Company’s capital program is focused on the development of its crude oil and natural gas core areas of operation, which includes its North Dakota and Montana crude oil assets in the Williston Basin, and its natural gas interests in northeast Pennsylvania. The Company’s oil and natural gas property interests are located in western Canada in the provinces of Alberta, British Columbia and Saskatchewan, and in the United States, primarily in the states of Montana, North Dakota, Pennsylvania and West Virginia. The Company’s properties consist of approximately 42% crude oil and natural gas liquids (NGLs) and 58% natural gas properties. The Company drilled around 14 wells at Brooks; seven injection wells and seven production wells at Medicine Hat and 27.2 net horizontal wells in the Fort Berthold region. It has around 71 net producing wells in the Marcellus. Enerplus USA is a subsidiary of the Company.

Enerplus was one of the stocks that we purchased when we first started our dividend growth investing journey. Back then we didn't know much about dividend growth investing. Rather than focusing on solid, high growth stocks, we were buying high yield stocks like Enerplus. Unfortunately, Enerplus' dividend distribution structure was not very sound and the company has made multiple dividend cuts in the last few years, going from 18 cents per share per month to 9 cents, then reduced to 5 cents, reduced again to 3 cents, then finally reduced to 1 cent recently (Ouch!). Lucky for us, we have liquidated a large portion of our Enerplus stocks before oil price tanked. We are happy that we've finally closed out all of our Enerplus stocks recently. Overall we came out with a small amount of capital gain.

With the cash from the sell and some newly added capital we purchased the following stocks:

57 shares of National Bank (NA.TO)

40 Shares of Telus (T.TO)

Since we already own National Bank and Telus in our dividend portfolio, we simply added shares to our existing positions and averaged down our cost basis slightly. National Bank is currently trading at a PE ratio of below 10, a dividend yield rate of 5%, and a payout ratio of 53.7%. With a 5 year annualized dividend growth rate of 10.5% and a PEG ratio of 1.17, I think the stock is very cheap. Adding 57 more shares means we'll get to DRIP two shares of National Bank every quarter, allowing us to take advantage the power of compound interest.

Telus is one of the three major telecommunication companies in Canada. The price of the stock has come down slightly due to Shaw's bid to purchase Wind Mobile. It appears that Shaw is getting ready to enter the cellular provider space. However, given that Wind Mobile only has about 940,000 customers, mainly in big cities in Alberta, BC, and Ontario, that's a small drop compared to the amount of customers Telus has. For Shaw to compete against the likes of Telus, Roger, and Bell, a significant of money will needed on network infrastructure upgrades (Mrs. T is on Wind Mobile and the she's often on "away" zone in downtown Vancouver, not a great customer experience). Telus is trading at a PE ratio of 17, a dividend yield rate of 4.4%, and a 5 year annualized dividend growth rate of 10.9%. Given that cellphones and data plans are a given for most of the younger generations, I continue to like Telus' growth potentials.

The sell and purchases will add approximately $179.6 in our annual dividend income.

Dear readers, what do you think about our decision to sell Enerplus and purchase National Bank and Telus?

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30 Comments

  • Reply
    Special Agent Dividend
    March 10, 2016 at 6:12 am

    I love this move, as you dumped an under performer that you gave several chances for two solid companies. Dividend cuts are never easy, but add up all the ones you mention and I can see why it's time to cut ties and move on. It's great you mention that you initially chased yield but your investing in DGI has evolved to more solid growth companies, as it's easy to get sucked into the high yield at the start. Best of luck!

    • Reply
      Tawcan
      March 10, 2016 at 10:41 am

      Hi Special Agent Dividend,

      It's always crappy to see dividend cuts but sometimes you just need to move on right?

  • Reply
    Roadmap2Retire
    March 10, 2016 at 6:24 am

    Looks like you made the right decision to sell ERF and good to hear that you've been selling before the oil prices tanked.
    That cash has found a nice home and will be working hard for you.

    Thanks for sharing
    R2R

    • Reply
      Tawcan
      March 10, 2016 at 10:41 am

      It's kinda too bad that we didn't sell all of the ERF shares and take a nice profit before oil tanked. Oh well, live and learn.

  • Reply
    ambertreeleaves
    March 10, 2016 at 6:38 am

    If a DGI stock is no longer growing its dividend but decides to do the opposite, then it should be clearly analyzed.
    From your story, it looks like a no reliable dividend payer, so selling sounds logical.

    A good thing you got still some small capital gains.

    Adding an extra 180/year is nice increase.

    Roll that snowball.

    • Reply
      Tawcan
      March 10, 2016 at 10:42 am

      Hi ambertreeleaves,

      Very true. No longer a DGI stock if dividends keep getting cut.

  • Reply
    Dividend Growth Investor
    March 10, 2016 at 7:48 am

    I once owned a High Yield Closed End Fund that always yielded 10% -12% - the problem was that distributions were always declining and the price was declining as well.

    This is why I am always careful about high current yields. If an investment has a spotty track record of maintaining and growing dividends, I avoid it.

    There were a lot of investors who owned the Canadian Royalty Trusts almost a decade ago - most of them have lost a lot of money in the process.

    • Reply
      Tawcan
      March 10, 2016 at 10:43 am

      Never heard of Canadian Royalty Trusts but I bet many people lost their money in the process. Just learned that Liquor Store cut their dividends too. Boo. May need to look into whether to cut ties for that stock as well....

  • Reply
    German
    March 10, 2016 at 8:58 am

    Great move! I totally support your decision. I recently sold PSK and FRU because they reduced their dividend and bought Magna. NA and T are great stocks for dividend growth. I'm planning to put money into telcos this year. Good lukc!

    • Reply
      Tawcan
      March 10, 2016 at 10:43 am

      Magna is a great long term pick. We recently picked up Magna too.

  • Reply
    DivGuy
    March 10, 2016 at 9:00 am

    Very good move!
    I like NA and Telus (own both in my portfolio). They will certainly pay better dividend over time than enerplus 🙂

    Cheers,

    Mike.

    • Reply
      Tawcan
      March 10, 2016 at 10:43 am

      Hi Mike,

      That's exactly my way of thinking. 🙂

  • Reply
    Dividend Gremlin
    March 10, 2016 at 9:25 am

    Tawcan,

    I learned a similar lesson from PGH (PGF up North). Since then I have done what you are doing right now, finding good reliable payers, with a track history of raises, room to grow, and well valued (at the time of purchase).

    Congrats on the two buys. I am long T - (AT&T) and 2 Canadian Banks (BNS and CM), and so far nothing but nice things to say about being an owner. Good luck with Telus and NA up there.

    - Gremlin

    • Reply
      Tawcan
      March 10, 2016 at 10:44 am

      Since we're investing for the long term, finding reliable dividend payers is probably more important. 🙂

  • Reply
    Ashley
    March 10, 2016 at 11:08 am

    I am starting my Dividend Stock portfolio and have 5 banks now, strike while they're on sale. Purchased NA a few months ago, and more RY right now. I expect that in the not too distant future they'll become overpriced but I've likely stopped buying Cdn. banks. Enjoying the 4-5% yields.

    I own RCI.B so not interested in adding T, but I do see it being a decent core telecommunications buy.

    Good choices, looking forward to the day when I have enough to DRIP a stock. Still, I love seeing the CASH line of my portfolio jump every week or two.

    • Reply
      Tawcan
      March 10, 2016 at 3:49 pm

      We own all 5 Canadian banks + NA, DRIPing all of them right now. All of these are long term holds. I think Telus has more growth potentials than the other two Canadian telecoms but that is just my opinion. 🙂

  • Reply
    Tristan @ Dividendsdownunder
    March 10, 2016 at 2:36 pm

    Hey Tawcan,

    Looks like a good move to do. Very impressive to have made a gain even with all this carnage in the energy sector. Definitely a safer place to have your money in stable businesses. Nice move.

    Tristan

    • Reply
      Tawcan
      March 10, 2016 at 3:48 pm

      Hi Tristan,

      Thanks. Need to focus more on high growth stocks rather than high yield stocks.

  • Reply
    Anonymous
    March 10, 2016 at 6:34 pm

    Tawcan,

    Good move on Enerplus. I wish I would of sold at $24 something. I would lose about 10 grand if I sold right now. So I just drip right now.

    • Reply
      Tawcan
      March 11, 2016 at 10:31 am

      Ouch hopefully the stock price goes up a bit so you can recover that loss.

  • Reply
    Weekend Reading – Spring, blog income, simple money, dividends and more - My Own Advisor
    March 10, 2016 at 8:25 pm

    […] Tawcan loaded up on Telus and National Bank. […]

  • Reply
    Vivianne
    March 11, 2016 at 8:26 am

    Putting the money at work is the way to go. Love both of the buys, banks and utilities (telecom) are expected to do great.

    Even people in my company who's making <$50K/year are taking oversea vacation, and vacations. Millennials in my company are buying new houses ... it's like 2004 again or something. 😛

    • Reply
      Tawcan
      March 11, 2016 at 10:32 am

      Hi Vivianne,

      That's my thought exactly with purchasing of banks and telecoms. We all need to be careful and not extend ourselves too much financially. Live below your means is the way to go.

  • Reply
    cannew
    March 11, 2016 at 12:45 pm

    Much better off without Cyclical, Energy, Tech, Auto\Airline and sticking with the solid DG stocks, especially when bought at a lower price.

    Good move!

    • Reply
      Tawcan
      March 11, 2016 at 2:17 pm

      Thanks cannew. 🙂

  • Reply
    DivHut
    March 12, 2016 at 2:25 am

    I don't sell a stock just because of a dividend cut. I know most DGI bloggers prefer to sell after a cut. I experienced three cuts over the years, GE, WFC and IR. I held on to each and even added to my positions. I guess it comes down to if I still believe in the company/industry going forward or not. Of course, it's not a rule set in stone and I have no problem selling a stock but the reason will not be because of a dividend cut. IN any case, congrats on adding some great forward income. Nice to see another Canadian bank in the mix.

  • Reply
    Jayson @ Monster Piggy Bank
    March 12, 2016 at 5:29 pm

    Hi Taw, approximately, how many buy/sell do you do each month? Good move.

    • Reply
      Tawcan
      March 14, 2016 at 1:43 pm

      Hi Jayson,

      That really depends. Typically 1 buy per month I'd say but sometimes none.

  • Reply
    Kat Y
    March 15, 2016 at 9:11 pm

    I loved the telecommunication sector especially Telus. They spent quite a bit of money upgrading it's fiber optic network lately, and I see more potential growth compared to BEC and Rogers.

    • Reply
      Tawcan
      March 16, 2016 at 1:28 pm

      Very good point about Telus upgrading their fiber optic network. Long Telus for sure.

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