It is an understatement to say that we had an extremely weird year for the stock market in 2020. The stock indices were firing on all cylinders in mid-February. The global pandemic uncertainties then quickly caused the market to crash and hit the 2020 bottom in mid-March. Since then, although the market remained volatile, the broad market continued to climb and eventually exceeded the highs set in mid-February. If you had asked me in late March what the stock market would look like at the end of 2020, I certainly wouldn’t have predicted this behaviour.
One of the important things as an investor is to separate emotions from investing. Therefore, we keep reminding ourselves to ignore the short term noises and focus on the long term. The volatile market throughout 2020 allowed us to purchase some stocks at a discount. In the first half of 2020, we purchased over $70,000 worth of dividend paying stocks. But we didn’t stop there. We continued to purchase more stock in the second half of the year.
As a long term investor, I believe regularly reviewing our stock transactions will help us become a better investor. Not all stock transactions are winners, so it is important to learn lessons from these poor decisions. Similarly, while it’s excellent to purchase winners, it is just as important to analyze the purchase decisions and understand why these decisions were the right decisions.
So I have decided to review our 2020 dividend stock transactions.
Selling our dividend stocks
Before reviewing our 2020 dividend stock purchases, I wanted to review the sales of several dividend stocks in 2020. Most of these sales resulted in closing out of positions. I sold dividend paying stocks because of these key reasons:
- The stock price has stayed flat for the last few years
- No dividend increase or minimum payout increase
- Dividend cuts or suspensions
- Dividend cuts or suspensions are anticipated because of deteriorating revenues
We closed out the following positions in the first half of 2020:
- Evertz Technologies (ET.TO)
- Chevron (CVX)
- General Mills (GIS)
- Domtar Corp (UFS.TO)
- Ventas (VTS)
- Magellan Aerospace Corp (MAL.TO)
- Laurentian Bank (LB.TO)
- Exco Technologies (XTC.TO)
- PrairieSky Royalty Ltd (PSK.TO)
I think it was a good idea to close out Evertz Technologies, Domtar Corp, Magellan Aerospace, Laurentian Bank, and Exco Technologies due to dividend cuts or expected dividend cuts. I did not expect General Mills to go on a run, but hindsight is always 20-20.
Back in February, when REIT stocks were hot, I sold 110 shares of Dream Office REIT around its 52-week high. These 110 shares were shares that we dripped over the past several years.
As part of the tax loss harvest exercise, I closed out the Suncor position held in my taxable account. This is to offset the capital gains from closing out our kids’ ShareOwner dividend portfolio.
These sales resulted in roughly $28,000 in cash that we could deploy.
2020 Dividend Stock Purchases
Throughout 2020, we have regularly added new cash to our TFSA, RRSP, and taxable accounts so we can purchase more dividend paying stocks. Since we maximized our TFSA contribution room in early January and made the purchases in January and February, this meant we purchased some stocks at relatively high prices. When the stock market slid in March, we continued adding new cash to purchase more dividend paying stocks. Although we didn’t time it perfectly at the bottom of the drop, we purchased many stocks at a discount.
If I looked at our 2020 cash transfer history, December was the only month that we didn’t add new cash to our investment accounts.
Here are all of our stock purchases in 2020, the adjusted cost basis, and whether the stock is up or down at the time of the writing.
- 378 shares of AQN.TO at $19.16 per share (up)
- 100 shares of BEP at $45.85 per share (up)
- 57 shares of BMO.TO at $77.63 per share (up)
- 102 shares of BNS.TO at $53.26 per share (up)
- 393 shares of BPY at $16.59 per share (down)
- 116 shares of CM.TO at $75.62 per share (up)
- 12 shares of CNR.TO at $118.29 per share (up)
- 43 shares of CU.TO at $32.40 per share (down)
- 374 shares of ENB.TO at $38.72 per share (up)
- 450 shares of ERE.UN at $4.69 per share (down)
- 27 shares of GRT.UN at $67.11 per share (up)
- 453 shares of IPL.TO at $22.53 per share (down)
- 50 shares of NA.TO at $65.54 per share (up)
- 20 shares of PEP at $135.94 per share (up)
- 26 shares of RY.TO at $84.60 per share (up)
- 121 shares of SRU.TO at $31.83 per share (down)
- 118 shares pf SU.TO at $30.63 per share (down)
- 320 shares of TD.TO at $63.11 per share (up)
- 16 shares of VCN at $32.13 per share (up)
- 612 shares of XAW at $28.25 per share (up)
As you can see, many of these purchases reflect our beliefs in the top 10 Canadian dividend stocks that I selected. In case you’re curious, for our RESPs, we went from a multi-ETF approach to holding one of the all equity ETFs. We decided on this approach for simplicity reasons and allowing us to leave the RESPs on autopilot and not needing to re-balance.
Adding these 20 dividend paying stocks and ETFs throughout 2020 meant we added almost $115,000 to our dividend portfolio. These purchases increased our annual dividend income by over $6,000.
As mentioned, around $28,000 is from the sale of dividend stocks. Then around $20,000 was from closing out our kids’ dividend portfolio with ShareOwner. If we subtracted these two sales, it meant we added around $67,000 to our dividend portfolio in 2020.
Please don’t get the impression that I am getting paid a crazy amount of money at my full time job. That’s not the case. Because of the pandemic and staying at home mostly, we could save more money than in previous years. We also reinvest 100% of the dividends that we receive.
2020 Dividend Stock Purchase Analysis
Out of the 20 dividend stocks that we purchased throughout 2020, fourteen of them are showing paper gains and six of them are showing a paper loss at the time of writing. Overall, we are up about 9% on these 20 stock purchases. Let’s go through each of them.
Algonquin Power & Utilities Corp (AQN.TO) – Winner
I added AQN to increase our exposure in the utility sector. I liked AQN because of its global leadership in renewable energy. AQN has a portfolio of long-term contracted wind, solar and hydroelectric generating facilities representing over 2 GW of installed capacity and over 1.6 GW of incremental renewable energy capacity under construction. The purchase had resulted in a winner so far. We may purchase more AQN shares in 2021.
Brookfield Renewable Partners (BEP) – Winner
We started a position in BEP.UN in 2019. In 2020, with some US cash in hand, I purchased BEP, since Brookfield Renewable distributes dividends in the USD currency. I added more BEP for its exposure in the renewable energy sector. I really think renewable energy is the future. Lucky for me, BEP has done well. We may purchase more BEP/BEPC/BEP.UN in 2021.
Bank of Montreal (BMO.TO) – Winner
Since the Canadian Big Five have been paying dividends since the last 1800’s, they are solid picks for any dividend investors. During the market downturn, the Canadian banks took a big hit, resulting in some really juicy dividend yields. Although BMO may not be the best pick out of all the five banks, for weighting purposes, I added some more BMO shares. This turned out to be a good decision so far.
Bank of Nova Scotia (BNS.TO) – Winner
Similar to BMO, I added more Bank of Nova Scotia shares to take advantage of the depressed stock price. BNS’ stock price has since recovered a bit and we’re looking at more than a 25% gain from our purchase and a juicy 6.76% yield on cost.
Brookfield Property Partners (BPY) – Loser
I purchased BPY around the beginning of the year because I wanted to increase our retail REIT exposure. I liked BPY’s property holdings and the large retail exposure in the US. Then COVID-19 hit and BPY’s stock price went for a nosedive. I have since added a small amount of shares to bring down the cost, but we are still in the red. Although BPY hasn’t cut its dividends so far, BPY’s distribution is extremely high. It is highly possible for BPY to reduce its dividends if the pandemic rages on, causing many retailers not able to pay rent. Having said that, I think over the long term, the retail REITs will eventually recover, so hopefully BPY will turn into a winner in a few years.
Canadian Imperial Bank of Commerce (CM.TO) – Winner
CM has a higher exposure to the Canadian mortgage market than the other Big Five. Many investors were worried about the possibility of mortgage loans defaulting in March, which caused CM’s stock price to take a big tumble. I scooped up over 110 shares of CM below $76 per share with a yield of over 7%. It was an opportunity too hard to pass.
Canadian National Railway (CNR.TO) – Winner
I consider CNR as one of our long term holdings. Why? With seven Class I railways in North America and a vast rail network, CNR has a wide moat. I purchased CNR shares around the beginning of 2020. At the time, I thought the stock price was reasonably priced and wanted to add more CNR shares. Looking back, it would have been nice to add some more shares in late March or early April when CNR’s price was below $100, but I decided to buy other better bargain stocks.
Canadian Utilities (CU.TO) – Loser
Although Canadian Utilities has one of the longest dividend increase streaks in Canada, the stock price hasn’t done all that much in the last five years. Hindsight being 20-20, I probably should have purchased another utility stock for better stock price appreciation potentials. Since CU has a juicy yield and a consistent dividend increase streak, I am not too worried with the small paper loss that we’re seeing.
Enbridge (ENB.TO) – Winner
I had a hard time debating whether to add Enbridge at below $40. The dividend yield was super high and I was worried that Enbridge would cut its dividends. So far, Enbridge has kept its dividends and the stock price has recovered slightly. I will have to continue monitoring Enbridge closely. Mike, The Dividend Guy, did a great analysis on Enbridge’s dividends and stated that the dividends should be safe and expected Enbridge to raise its dividend payout in 2021.
European Residential REIT (ERE.UN) – Loser
I picked ERE.UN around the beginning of 2020 wanting to increase our exposure to residential REITs. The stock price has bounced around throughout 2020 but we are still down around 9.5% from our cost basis. Since ERE.UN is a tiny percentage of our portfolio, I am not too worried. I do like residential REITs and I may consider adding more ERE.UN in 2021 to average down our cost basis.
Granite REIT (GRT.UN) – Winner
Granite REIT was the only winning pick out of all of our REIT purchases in 2020. I liked Granite because it is an industrial REIT. As online retailers get even more popular, they need places to store their inventories. Enter Granite REIT!
For some reason, we’ve done well with industrial REITs (for example, Pure Industrial and Dream Industrial). I may consider adding more GRT.UN shares in 2021 to increase our industrial REIT exposure.
Inter Pipeline (IPL.TO) – Loser
Did someone yell LOSER? At the time of writing, we are down over 40% with IPL.TO. I’ll be the first one to admit that we added IPL.TO at the beginning of 2020 purely because of the around 8% high yield. I knew Inter Pipeline’s debt level was worrisome but I thought the dividend payout was sustainable. Then COVID-19 hit, IPL cut its dividend payout, and the rest is history. I plan to continue to hold IPL.TO shares and wait for the stock price to recover. I may slowly trim our shares, we’ll see.
Lesson learned here? Don’t get too attracted to high yield stocks and be OK with the potential downsides. If I had the chance to do it again, I would have avoided Inter Pipeline. Although the dividend yield was a lot lower, it would have been way better to purchase Canadian National Railway or Algonquin Power & Utilities Corp.
National Bank (NA.TO) – Winner
Well, nothing to see here, I simply continued my pattern of adding Canadian banks when the stock price was depressed. If anything, I should have purchased National Bank earlier to capture more capital gain.
Pepsi (PEP) – Winner
I picked up a few shares of Pepsi around the beginning of 2020 to increase our exposure in the consumer staples sector. We’ve done well with Coca-Cola, so hopefully Pepsi will repeat this trend.
Royal Bank (RY.TO) – Winner
It was simply too hard to pass on Royal Bank at below $85. I thought it was a great bargain to purchase Royal Bank at that price. Sure, it would have been great to get some shares at $72, the 52-week low, but I think I did alright getting 26 shares at $85.
Royal Bank will continue to make billions of dollars and pay out dividends. Who doesn’t like Canadian banks?
SmartCentre REIT (SRU.TO) – Loser
Well, another loser REIT pick. Who knew in January that COVID-19 is going to be the biggest news in 2020 and that the retail REIT would take a big hit because of that? As long as SRU.TO continues to pay its dividends and doesn’t cut its payout, I can afford to wait for the stock price to recover. I do like SmartCentre for its diversified tenant list.
Suncor (SU.TO) – Loser
I purchased Suncor shares in February thinking the dividends were safe. When the stock price tumbled in March, I took the risk and added a few more Suncor shares. To everyone’s surprise, Suncor’s board cut its dividends. While the stock price has recovered somewhat, it is still nowhere close to our average purchase price. Suncor is the only pure oil producer in our portfolio and I do plan to close out Suncor in the future. I am done with holding pure oil producer stocks. I want to focus more on renewable energy.
TD (TD.TO) – Winner
We were very aggressive and added a lot of TD shares throughout 2020. We added some TD at the beginning of the year at around $73, added some shares at around $52, then added some more at around $63. We ended up with an average purchase price of $63.11 and an average yield of 5%. Given TD’s dividend history and solid track record, I think the stock price should continue to recover as the Canadian and US economy recover from the pandemic.
Vanguard FTSE Canada All Cap Index ETF (VCN) – Winner
We took advantage of Questrade’s free ETF purchase and made some tiny purchases throughout 2020 whenever the market was down. So far these purchases have done OK. For some time, I have considered closing out the VCN position. But I kept holding on because of better diversification than individual dividend stocks.
I wanted to increase our international exposure significantly and I’m using XAW to do that. XAW is currently one of our top five holdings but I’d like to see it making it to either the first or second largest holding in our portfolio. The ETF price, like the rest of the market, has climbed since the various vaccine news. I plan to continue adding XAW shares regularly throughout 2021.
Summary – Our 2020 Dividend Stock Transactions
We were busier than usual in 2020 with dividend stock transactions. If I could predict the future, I would have sold a lot of stuff in mid-February when the market was high, added an enormous amount of cash, and bought back in late March.
But I can’t predict the future. So, the best thing to do is continue to add new cash and continue to buy more dividend paying stocks whenever they are on sale. Although I have been investing in stocks and ETFs for many years, 2020 has taught me many more investing lessons. One lesson I learned is that time in the market is way more vital than timing the market.
I’ll end the post from a great tweet from Dividend Growth Investor:
Dear readers, have you learned any lessons from your 2020 dividend stock transactions?