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?