Dividend Investing Dividend Stock Transactions

Recent buys – H.TO & CTC.A

Since beginning of 2017 we have deployed roughly $13,700 to purchase more dividend stocks. But we are far from being done for 2017.

The recent market volatility provided an opportunity to deploy some more cash. So we purchased the following stocks:

  • 120 shares of Hydro One (H.TO)
  • 10 shares of Canadian Tire (CTC.A)

Around $4,400 was deployed. That brought up the total cash deployed in 2017 to about $18,100.

Both of these purchases are new positions.

Reasons for Purchasing

Below are my reasons for purchasing these dividend paying stocks.

Hydro One (H.TO)

If you noticed, I have been adding more and more utility companies in our dividend portfolio. For the longest time, Fortis (FTS.TO) was the only utility stock that we own. Since then we have added Brookfield Renewable Energy (BEP.UN) and Emera (EMA.TO). Adding Hydro One is yet another step to diversify our geographical exposure within the utility sector.

Hydro One has a monopoly in electricity transmission and distribution in Ontario, the largest province in Canada. Being the monopoly in electricity transmission and distribution in Ontario makes Hydro One quite attractive. Ontario, after all, is the one Canadian province with the largest population. The 1.3 million Hydro One customers represents a stable source of strong and growing cash flow.

As a utility company, the growth is predictable. Hydro One can easily increase its revenue by increasing the electricity rate. Its board plans a 70-80% dividend payout ratio moving forward. Currently yielding around 3.6% and a payout ratio of 73%, so there are some rooms for future dividend growth.

Canadian Tire (CTC.A)

Canadian Tire has a very low dividend yield, so most dividend growth investors probably don’t pay too much attention to this stock. But when you look at its has excellent dividend growth history, it is pretty impressive. Canadian Tire has grown its dividend payout by 20.1% annualized over the last 5 years. At payout ratio of 28%, there are lots of room for further dividend growth. Therefore, Canadian Tire is one of those stocks I am betting on for long term dividend growth.

Canadian Tire no longer is a brand that sells automotive related items only. Rather, it has been providing customers with everything they need for life in Canada throughout different categories like sporting goods, apparels, and financial services. The company also operates under different names like Mark’s, Sport Check, and Atmosphere. All these brands are well received in Canada. Furthermore, the Canadian Tire family stores usually are located in key locations in major cities.

Just like any traditional brick-and-mortar retail stores, Canadian Tire faces challenges when it comes to online retails. The company has realized this challenge and has plans to shift a bigger portion of its business over to digital sales.

In the past 5 years, Canadian Tire has grown its earnings by 10.3% with a 12.85% return on equity. I believe Canadian Tire will continue to excel in the Canadian retail space and reward its investors through dividend payout increase and stock price appreciation moving forward.

Conclusion

These two purchases added $126 to our annual dividend income.

Dear readers, what do you think about our purchases?

 

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16 Comments

  • Reply
    CanadianPassiveIncome
    March 23, 2017 at 8:23 pm

    Hey Bob, Canadian tire is a nice buy
    I recently sold my hydro one position. The hydro rates in Ontario have been insanely high for a couple years. Now the Liberals are finally paying attention by cutting hydro rates for the average consumer they say 25%. (election next year) That is going to be a big difference in profit. Now we know the liberals, they like to screw future generations. So long term this might be a great holding. Personally I feel hydro is a huge political issue going into the next provincial election and there will most likely be more cuts to the hydro rate. A positive could be a different party winning the next election and buying back hydro one at a higher stock price.

    • Reply
      Tawcan
      March 24, 2017 at 11:03 am

      Interesting insight about hydro rate in Ontario. I will have to keep an eye on how the future holds for Hydro One.

  • Reply
    RN
    March 25, 2017 at 7:01 am

    Canadian tire is definitely among my list of stocks to buy. However, at current price of $152, I find it too expensive. Hopefully, there will be a better entry point.

    RN

    • Reply
      Tawcan
      March 25, 2017 at 8:28 am

      PE is around 16.5 and PEG is around 1.38. I think the current price is reasonable based on these two parameters. Having said that, it’d certainly be nice to get in at a lower price, say $120 or lower. But it might mean you’d have to wait on the sideline for a while. I was looking at Costco at around $100. Thought it was too expensive… now it’s at $166 and looks like I missed the opportunity to add Costco in our portfolio.

  • Reply
    misterslm
    March 26, 2017 at 6:41 pm

    I always forget Canadian Tire isn’t just a chain of terrible stores, that they operate a bunch of other brands.

    • Reply
      Tawcan
      March 26, 2017 at 7:40 pm

      Haha Crappy Tire lol. They do operate a bunch of other brands that are quite reputable.

      Either way, the company seems to be making money and growing dividends. 🙂

  • Reply
    RN
    March 26, 2017 at 8:30 pm

    Big Yikes about missing the Costco boat. I was thinking $140 may be a good price to buy Canadian tire. $120 likely a long wait.

    RN

  • Reply
    Durga
    March 26, 2017 at 11:16 pm

    Which one of both H.TO and CTC .A give the higher income annually ?

    • Reply
      Tawcan
      March 27, 2017 at 10:11 am

      H.TO has a higher yield.

  • Reply
    Troy @ Market History
    March 27, 2017 at 2:39 am

    I like Hydro One. I have relatives who work for Toronto Hydro, and from what I hear those utility companies are very stable (b/c they have a monopoly?)
    In terms of Canadian Tire, I’m not too sure. I don’t like how Amazon is destroying retailers in the States, and with Amazon.ca becoming better and better, I think Canadian Tire is going to face increased competition.

    • Reply
      Tawcan
      March 27, 2017 at 10:12 am

      Yes Amazon is creating havoc with brick-and-mortar retailer. Amazon.ca still has a long way to go though, many of the items are actually more expensive than what you can find in local stores. Will have to continue monitor the impact of Amazon.ca to Canadian Tire. 🙂

  • Reply
    Dividend Growth Investor
    March 27, 2017 at 2:36 pm

    Canadian Tire looks like an interesting company. At a first glance, it seems to have a bunch of different business activities such as the REIT ( whose main tenant seems to be CT), and offering financial services as well. It also looks like CT regularly buys back shares as well. It also looks like they are targeting a pretty decent earnings growth as well..

    • Reply
      Tawcan
      March 28, 2017 at 11:28 am

      It’s an interesting company with pretty decent earnings growth. Online retailers like Amazon will be a concern moving forward. Gotta continue monitor this.

  • Reply
    TheInvestingEngineer
    April 4, 2017 at 6:05 pm

    Hey Tawcan,

    Love the addition of CTC but I have to admit i’m not a fan of Hydro One I don’t want to be a shareholder with the government! I much prefer Emera or Fortis (where I work) or even Algonquin Power.

    Cheers tho and keep that snowball rolling!

    • Reply
      Tawcan
      April 4, 2017 at 6:22 pm

      Hi TheInvestingEngineer,

      Sounds like Hydro One has a lot of haters. 🙂
      I have looking at Algonquin Power… might purchase some shares later.

  • Reply
    Seanc0x0
    April 11, 2017 at 2:50 pm

    I have FTS, EMA, and AQN for utilities, and have been looking at H. I’m still on the fence, since they don’t have a proven record like the others. I’d be more inclined to add BEP.UN for more diversification. I’ll revisit H in a few years when they’ve got some sort of track record.

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