With the first half of 2023 in the books, I thought it’d be an interesting exercise to review our dividend portfolio. The key focus will be determining what to do with each position – should we continue to hold, should we add more shares, should we trim some shares, or should we close out the position altogether?
At the time of writing, we hold 48 individual dividend stocks and 1 index ETF. We went from a total of 50 individual dividend stocks down to 48 with the closing of Verizon and Omega Healthcare in May.
Our dividend portfolio generated $24,685.91 in the first half of 2023. Based on my current dividend income projection, we are on track to receive over $49,000 in dividend income. If companies continue to raise dividend payouts and we continue to reinvest dividends via DRIP, there is a very small chance we may even get close to $50,000 in dividend income for this year.
Our holdings in alphabetical order are:
- Apple (AAPL)
- AbbVie (ABBV)
- Algonquin Power & Utilities (AQN.TO)
- Brookfield Asset Management (BAM.TO)
- BCE (BCE.TO)
- Brookfield Renewable Corp (BEPC.TO)
- BlackRock (BLK)
- Bank of Montreal (BMO.TO)
- Brookfield Corporation (BN.TO)
- CIBC (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- Canadian National Railway (CNR.TO)
- Costco (COST)
- Capital Power Corp (CPX.TO)
- Canadian Tire (CTC.A)
- Dream Industrial REIT (DIR.UN)
- Emera (EMA.TO)
- Enbridge (ENB.TO)
- Fortis (FTS.TO)
- Granite REIT (GRT.UN)
- Hydro One (H.TO)
- Intact Financial (IFC.TO)
- Johnson & Johnson (JNJ)
- Coca-Cola (KO)
- McDonald’s (MCD)
- Manulife Financial (MFC.TO)
- Magna International (MG.TO)
- Metro (MRU.TO)
- National Bank (NA.TO)
- PepsiCo (PEP)
- Procter & Gamble (PG)
- Power Corp (POW.TO)
- Qualcomm (QCOM)
- RioCan REIT (REI.UN)
- Royal Bank (RY.TO)
- Starbucks (SBUX)
- SmartCentres REIT (SRU.UN)
- Suncor (SU.TO)
- Telus (T.TO)
- TD (TD.TO)
- Target (TGT)
- TC Energy (TRP.TO)
- Visa (V)
- VICI Properties (VICI)
- Waste Connections (WCN.TO)
- Waste Management (WM)
- Walmart (WMT)
- iShares international ex-Canada index ETF (XAW.TO)
As you can see, we hold some dividend stocks like Enbridge, TC Energy, and BCE with very high yields. Some of these higher-yield dividend stocks have low dividend growth. On the other hand, we also hold some dividend stocks like Apple, Waste Connections, Visa, and Costco that have very low dividend yields but have raised dividend payout at high rates over the years.
The idea is to have a mix of high yield low dividend growth and low yield high dividend growth stocks to generate sufficient dividend income for us to eventually live off dividends. We want our dividends to continue to grow organically when we slow down with new capital contribution.
With that in mind, here’s our 1H 2023 dividend portfolio review.
1H 2023 dividend portfolio review – Part 1
Because of the number of stocks and the length of the article, I decided to break up the review into 3 parts. This is the first part of the review.
For the dividend portfolio review, my plan is not to sugarcoat anything and provide readers with my thoughts and what I’m thinking about each holding.
1. Apple (AAPL)
It’s not a surprise that we like Apple a lot. Over the years, Apple has transformed itself from a hardware-centric company to a company that generates revenues from both hardware and software. Furthermore, Apple is slowly turning itself into a consumer discretionary company (some may argue it’s almost like a consumer staples company) rather than a high-tech company.
The Apple silicon is a game changer for Macs. iPhone continues to be dominant in the smartphone sector (a side note, Mrs. T and I recently watched BlackBerry and it reinforces my belief that Apple doesn’t enter a product segment early. Instead, they spend time researching and perfecting a new product that works better than other existing products. Essentially, they are changing the product environment. One only has to look at the iPod, the iPhone, and the Apple Watch to see the truth of “the Apple approach”).
Over the next while I believe many Apple users will be looking at upgrading their existing Intel-based Macs and moving to Apple silicon based Macs. This will drive Apple revenues. Given that the 15 inch laptop segment is the most popular segment for laptops, Apple coming out with a 15 inch MacBook Air will also help the company become a dominant force in this particular segment.
Furthermore, I have no doubt that Apple will continue to execute well in the existing product segments and come out with complementary accessories that would generate more revenues for the company.
The new Vision Pro looks like yet another revolutionary product from Apple that has the potential to disrupt and change the AR & VR space. Knowing Apple’s new product history, I would guess that the Vision Pro won’t get widely adopted until the third or fourth generation. But things can change pretty quickly…
Not to mention that Apple has been generating more and more revenues from subscription services like Apple Music, the Cloud, etc. These are recurring revenues with high margins, the type that investors love.
I’m convinced that Apple will continue to do well and that is why we bought more Apple shares recently.
2. AbbVie (ABBV)
AbbVie has had a tough year with the share price near a 52-week low. This was mostly caused by the impending decline in revenue from Humira, as there are at least 8 similar versions that will be launched by AbbVie competitors this year.
However, I’m not concerned. The company continues to invest in R&D for new drugs which should provide future revenue growth.
If the stock price stays low we may consider adding more ABBV shares.
3. Algonquin Power & Utilities (AQN.TO)
Ugh, AQN, what a freaking mess! Despite cutting its dividends and pulling out of the Kentucky Power acquisition deal, the share price continues to struggle to recover.
We’re down quite a bit on our AQN holding but don’t plan to sell shares at a loss. If we see some price recovery, we may consider selling some portions over time.
For now, we plan to DRIP and dollar cost average over time. AQN has definitely dragged our overall portfolio performance this year.
4. Brookfield Asset Management (BAM.TO)
Brookfield is a big name in North America and I have a lot of confidence and trust in its executive team.
I believe the company made the right move and split the company into BAM and BN to unlock potential values. The stock price has been relatively flat since the split but I believe over the long term, the stock price should increase, and probably, substantially..
We plan to add more BAM shares whenever we can.
5. BCE (BCE.TO)
BCE is a high dividend yield stock with a good history of dividend growth. The share price has trended down in the past year.
I believe this is caused by the higher interest rates and concerns over Starlink. The media segment business for BCE has not done all that well lately and BCE has been working to cut costs in that segment.
I’m not too concerned with these three things as I think BCE is experiencing some short term headwinds but long term it should be OK.
6. Brookfield Renewable Corp (BEPC.TO)
Recently BEPC announced that they’d buy the commercial renewable business from Duke Energy. This should solidify Brookfield Renewable’s position as one of the largest renewable energy businesses in North America. Furthermore, this purchase should generate strong cash flow for Brookfield.
We like the renewable sector. BEPC is a long term holding so we plan to add more shares.
7. BlackRock (BLK)
BlackRock has seen better days but the company is poised to do well long term. With the popularity of ETFs, it makes a lot of sense to invest in the parent company of iShares. Not to mention that BlackRock has been growing dividend payout consistently.
We plan to add more shares whenever we have some USD available.
8. Bank of Montreal (BMO.TO)
We have been BMO shareholders for a long time now. At the time of writing, I think BMO has an attractive entry point so we plan to add more shares whenever we can. BMO has been paying dividends since the late 1800s so I have no concerns with its dividend payment record.
BMO is definitely a long term holding for us.
9. Brookfield Corporation (BN.TO)
Brookfield Corporation is a newly formed company from Brookfield Asset Management. While the yield is quite low, it should provide some long term capital growth. Brookfield invests in high quality assets and businesses around the world that form the backbone of the global economy. At time of writing Brookfield Corporation owns $825+ billion assets across 30+ countries across segments like newable power & transition, infrastructure, private equity, real estate, insurance, and credit.
I’m quite confident with the Brookfield management & board so we’ll aim to add more BN shares over time.
10. Bank of Nova Scotia (BNS.TO)
BNS has performed quite poorly in comparison to other Canadian banks. This is mostly caused by the company’s presence in Latin America. Over the last few years, BNS has been slowly reducing its exposures in Latin America, but perhaps not fast enough.
While BNS has the highest yield out of the Big Five, I am slightly concerned that the total return performance has been poor over the past few years.
Given the poor historical performance, we may consider reducing our exposure to BNS and investing the money in other banks like TD, NA, or RY.
11. CIBC (CM.TO)
Like BNS, CIBC has a relatively high dividend yield and has performed poorly over the last five years. CM’s poor performance is mainly driven by its heavy exposure to the Canadian mortgage market.
For now, we plan to continue holding CM and dollar cost average via DRIP. We will have to monitor and see whether it makes sense to reduce our exposure to CM or not.
12. Canadian Natural Resources (CNQ.TO)
I’m glad we didn’t get rid of CNQ during the pandemic lows. As demands for oil rebounded, CNQ’s share price recovered and CNQ even paid out a special dividend.
However, due to the cyclical business nature, CNQ’s share price will bounce up and down, heavily dependent on oil prices. Since we are enrolled in DRIP, we can dollar cost average over time.
CNQ continues to be a solid stock for us, earning its inclusion as one of the best Canadian dividend stocks.
13. Canadian National Railway (CNR.TO)
Although Canadian National Railway’s share price has struggled year-to-date, I’m not too concerned. I believe CNR’s share price will continue to appreciate over the long term.
While most people travel across North America by car or plane, rail is still the key method for transporting goods across North America. CNR’s vast network of railways will help to drive and grow revenues.
Given that CNR has been raising dividends at over 10% annual growth rate, we plan to add more shares of CNR and take advantage of the depressed share price.
14. Costco (COST)
It shouldn’t be a surprise that I like Costco a lot. We shop regularly at Costco and I have done a number of price comparisons over the years to show that Costco is the cheapest grocery store in Canada compared to the likes of Superstore, Walmart, Safeway, and Save-On-Foods.
Costco makes most of its revenue from membership fees and the membership renewal rate is around 92% in the US and Canada and around 90% globally. While Costco has decided to delay its membership fee hike, a small increase of $5 or so will definitely generate Costco a great amount of revenue.
Why invest in Costco? Well, first of all, the business is stable and easy to understand. Like McDonald’s, Costco opens up its warehouses at strategic locations, attracting shoppers from different cities. Also, Costco has been a reliable income generator with a 10-year annualized dividend growth rate of 12.6%.
We plan to add more Costco shares over time. It would be nice to be able to DRIP Costco eventually but that will take A LOT of shares given the low yield.
15. Capital Power Corp (CPX.TO)
Like most utility companies, Capital Power Corp just continues to chug along and generate stable dividend income every quarter. With an initial yield of over 6%, a dividend growth streak of 9 years, and a 10-year dividend growth rate of 6%, there’s a lot to like about CPX.
The only concern I have is the dividend yield is a bit high compared to the rest of Canadian utility companies. It’s probably a good idea to keep an eye on its payout ratio and free cash flow to make sure the dividends are safe.
Having said that, CPX makes up less than 1% of our overall portfolio so if there’s a dividend cut or dividend freeze, we’re not too concerned.
Wrapping Up – 1H 2023 dividend portfolio review Part 1
This is Part 1 of my 1H 2023 dividend portfolio review. I think these portfolio reviews are very worthwhile because they force me to examine our portfolio and write down my thoughts about individual holdings.
Through this exercise, I have identified Bank of Nova Scotia, CIBC, and Algonquin Power & Utilities as ones that we may consider trimming or closing out completely.
On the other hand, I would love to add more shares of Apple, AbbVie, Brookfield Asset Management, Costco, BlackRock, BCE, and BMO as I think these stocks are either at a discounted price or will continue to perform well in the long run.
What do you think about the review so far? Please leave your thoughts in the comments, I’d love to hear them.
Stay tuned for Part 2 of the portfolio review next week.