If you look at our dividend portfolio, you will notice that we currently hold 72 dividend stocks and 2 index ETFs. To be honest, I would like to trim down our holding somewhere around 55 individual stocks. But there are so many great blue chip dividend stocks out there that I would love to own. For examples, Diageo plc (DEO), Novo Nordisk (NVO), and 3M (MMM). Unfortunately, given the number of blue chip dividend paying stocks that are available on the market, it is simply not possible to own them all.
Over the years, we have received some stocks in small quantities from company splits (i.e. Care Capital REIT, Verizon, and PrairieSky Royalty Ltd). It makes very little sense to sell these stocks as the selling commission would account anywhere from 5 – 30% of the entire transaction amount. Therefore, we plan to continue to hold these stocks and collect dividend income.
We hold 2 index ETFs, VCN and VXC, mainly for diversification purposes.
VCN, a Canadian All Cap ETF, seeks to track the performance of the broad Canadian equity index that measure the investment return of large-mid- and small capitalization, publicly traded security in the Canadian market. The ETF currently has 218 holdings with Royal Bank, TD, Bank of Nova Scotia, Enbridge, Canadian National Railway, Suncor, Bank of Montreal, TransCanada Corp, Manualife Financial, and CIBC as the top 10 holdings, making about 40.4% of net assets.
VXC, a Global All Cap ex Canada ETF, seeks to track the performance of a broad global equity index with focus on developed and emerging markets, excluding Canada. The ETF currently has 10,167 holdings with Apple, Microsoft, Alphabet, Facebook, Amazon, Johnson & Johnson, Berkshire Hathaway, Exxon Mobil, JPMorgan Chase, and Nestle as the top 10 holdings, making about 9.2% of net assets.
VCN gives us a good broad exposure to the Canadian market while VXC gives us a good broad exposure in international markets.
Combined with the 72 dividend paying stocks that we hold, I believe holding both dividend growth stocks and index ETFs offer the best of two worlds.
You may wonder, out of all the stocks and ETFs that we hold, which of them are considered our top 5 long-term holdings?
Our Top 5 Long Term Holdings
For the most part, we are deploying a buy and hold strategy. We do sell stocks once in a blue moon if a particular company undergoes dramatically changes. We also sell stocks when we believe that our money is better invested elsewhere.
Here are the 5 stocks I believe we can hold for a very long time… like forever!
Royal Bank (RY.TO)
Royal Bank is one of the biggest banks in Canada and derives 62% of its revenue from Canada, 22% from US, and 16% from other international regions. The company has paid its shareholder dividends since 1870. During the financial crisis, unlike many of its US counter parts, Royal Bank did not freeze or cut dividend payments.
Why do I like Royal Bank as a long-term holding?
Two words – Wide Moat.
People need financial services every single day. People need to keep their money somewhere, people need a financial institution for investing services, people needs someone to loan them money for home purchase, and people need to apply credit cards somewhere. Royal Bank’s ability to offer a large amount of financial services and having a large branch network will help Royal Bank to retain and grow its customers both within Canada, US, Europe, and other countries.
The way I see it, Royal Bank will continue making billions and billions of dollars each quarter. Therefore, it makes sense to consider Royal Bank as one of our long-term holdings and continue collecting dividend every quarter.
Toronto-Dominion Bank (TD.TO)
I love Canadian banks, so it should not come as a surprise that TD is one of our five long-term holdings.
Similar to Royal Bank, TD has paid dividends for over 160 years and continued the dividend payments during the financial crisis. As a dividend investor, I treat TD dividend payments as stable bond-like income.
Unlike Royal Bank, TD has been focusing in US and Canadian markets. TD has been aggressively expanding in both countries the last 10 years or so.
I plan to hold TD for the long-term for the same reasons I listed above for Royal Bank. TD has a very wide moat and will continue generating billions of revenue each year while continue rewarding its shareholders with regular dividend payments.
Vanguard Global All-Cap Ex Canada ETF (VXC)
Why do we consider Vanguard Global All-Cap Ex Canada ETF as one of our five long-term holdings?
This should not come as a surprise. While it is great to hold Canadian dividend paying stocks, the Canadian market tends to be heavy on financial and energy sectors. Holding VXC allows us to expand our exposure outside of Canada.
If we look at VXC’s country diversification, its holds equities from 41 countries. The top 10 countries are – 53.6% United States, 8.3% Japan, 6.2% UK, 3.2% France, 3.1% Germany, 3% China, 2.8% Switzerland, 2.4% Australia, 1.7% Korea, and 1.6% Taiwan.
If we look at the sector weighting, VXC has the currently sector weighting – Financial 22.5%, Industrials 14.2%, Consumer Goods 12.9%, Technology 12.8%, Health Care 10.7%, Consumer Services 10.5%, Oil & Gas 5.2%, Basic Materials 5.0%, Utilities 3.3%, and Telecommunications 2.9%.
As someone who seeks for portfolio diversification, I believe VXC is an excellent ETF to hold for this sole purpose. At 0.27% MER, this is an extremely small fee to allow us to hold 10,167 non-Canadian stocks.
How many of you have a credit card in your wallet?
Most likely, the credit card you have is either from Visa, Master Card, or American Express.
Visa is well-known international brand. While many North Americans are relying more and more on credit and electronic payment for everyday purchases, bulk of the world population still use cash. If you ever been to Japan or other Asian countries, you will notice that many transactions are still involve cash. You often have to ask if paying using credit card is accepted.
As the world’s population transition toward electronic payment, Visa will continue to grow and generate more revenues. I don’t believe credit card companies like Visa is going away anytime soon. Therefore, Visa is one of our top 5 long-term holdings.
Johnson & Johnson (JNJ)
Johnson & Johnson is yet another very well-known international brand. JNJ operates through 3 segments – consumer, pharmaceutical, and medical devices. While its consumer products like Johnson’s Baby, Aveeno, Neutrogena, BAND-AID, Tylenol and Listerine are well-known products used by people every single day, the consumer products only brought in 18% of the 2016 total revenue. 47% of the 2016 total revenue came from its pharmaceutical business and 35% from medical devices. So rather than seeing Johnson & Johnson as a consumer health care product company, we should treat Johnson & Johnson as a pharmaceutical company.
The key reason behind holding Johnson & Johnson as a long-term holding is its long consecutive years of dividend increases. At 55 years and counting, JNJ’s dividend increase streak is the longest compared to other pharmaceutical counter parts like Pfizer, Merck & Co, AbbVie, and Bristol-Myers Squibb.
Just like the other 4 dividend stocks mentioned above, I believe Johnson & Johnson has a wide moat that will continue to widen it via organic growth and acquisitions. As an investor, this can only mean consistent dividend payments.
There you have it, the top 5 long-term holdings of our dividend portfolio. We only own a small amount of Visa shares right now, so I would love to add more shares in the future. We plan to continue adding more VXC shares regularly through Questrade’s commission free ETF trading.
Dear readers, what do you think about our 5 long-term holdings? What are your top 5 long-term holdings?