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A Dollarama in downtown Toronto. (Kevin Van Paassen/The Globe and Mail)
A Dollarama in downtown Toronto. (Kevin Van Paassen/The Globe and Mail)

Yield Hog

A fine year for dividend lovers Add to ...

Here at Yield Hog, we’re not big on short-term trading. We prefer to buy and hold great dividend stocks for years, so we can collect the rising income.

So it may seem strange that we’re already reviewing our 2011 stock picks, some of which we wrote about only a month or two ago.

What can a few months possibly tell you?

More related to this story

Not much, actually. But there’s a good chance Yield Hog may not be here in five, 10 or 20 years to perform this exercise. Depending on how our own investments pan out, we could be sailing around the world. Or greeting shoppers at Wal-Mart.

Which leaves us no choice but to review these stocks now, keeping in mind that doing so has very little value beyond allowing Yield Hog to gloat about the ones that have worked out so far, and allowing you to laugh at us for the ones that haven’t.

The return of each stock, and the relevant benchmark, is from the article publication date through Dec. 19 and assumes all dividends were reinvested.

*****

Dollarama

Profiled: May 4, 2011

Then: $29.97 Now: $42.76

Return: +43.4 per cent

S&P/TSX return: -13.8 per cent

We cited Dollarama’s strong balance sheet and growing free cash flow as reasons to expect it to initiate a modest dividend, and the retailer did just that in June. The 9-cent quarterly payment works out to a yield of just 0.84 per cent, but the dividend will almost certainly grow as Canada’s biggest dollar store continues to expand. The stock has had a big run since we wrote about it, however, and may no longer be a screaming buy.

*****

Reitmans

Profiled: June 9, 2011

Then: $15.11 Now: $14.26

Return: -3.4 per cent

S&P/TSX return: -11.7 per cent

We said Reitmans’ stock was a “compelling bargain” after plunging on lousy first-quarter results. But the market apparently didn’t agree, judging by the ongoing weakness in the shares. Although the clothing chain sports a juicy 5.5-per-cent yield and has a bulletproof balance sheet with lots of cash and virtually no debt, Reitmans’ same-store sales slumped 5.2 per cent through the nine months to Oct. 29 as debt-burdened shoppers hunkered down.

*****

High Liner Foods

Profiled: June 23, 2011

Then: $15.10 Now: $15.49

Return: +3.9 per cent

S&P/TSX return: -9.9 per cent

We called growth-minded High Liner a “good catch,” noting that the frozen seafood processor and marketer was poised for further dividend hikes after increasing its quarterly payment seven times in three years. Since the article appeared, High Liner has reeled in the U.S. and Asian operations of Icelandic Group, making it the biggest seafood supplier to North American restaurants, schools and hospitals. Even in a down market, the stock has stayed afloat.

*****

McDonald’s

Profiled: Oct. 11, 2011

Then: $89.34 (U.S.) Now: $97.24

Return: +9.7 per cent

S&P 500 return: 1.3 per cent

We’ve been known to sneak a double hamburger now and then, but it was McDonald’s 35-year history of dividend increases that really got us salivating. With plenty of room for growth in Asia, an ever-evolving menu, refurbished stores and the successful launch of McCafés, the Golden Arches will keep the annual dividend increases coming for many more years, we wrote. As the shares approach $100, we’re licking our lips for a possible stock split.

****

Inter Pipeline Fund

Profiled: Nov. 8, 2011

Then: $17.80 Now: $18.75

Return: +5.8 per cent

S&P/TSX return: -7.3 per cent

A pipeline stock with a five-year average annual return of 25 per cent? Yup. As hard as it will be for Inter Pipeline to repeat that sizzling performance, the future still looks bright, we wrote. With a dividend payout ratio of less than 60 per cent, numerous expansion projects on the go and favourable fractionation margins on natural gas, more dividend increases could be coming down the, um, pipe.

****

Leon’s Furniture

Profiled: Nov. 22, 2011

Then: $11.50 Now: $12.26

Return: +8.7 per cent

S&P/TSX return: -1.9 per cent

Behind Leon’s silly commercials is a serious family-controlled company that shuns debt, squeezes costs and keeps its dividend growing, we wrote. Sure, a slowdown in the housing market is a concern, but Leon’s payout ratio is less than 50 per cent and CEO Terrence Leon said the dividend is sustainable “barring a complete collapse of the economy.” Leon family members – who control more than 70 per cent of the stock – want to keep the dividend cheques coming, after all.

Disclosure: I own shares of Inter Pipeline and McDonald’s.

Follow on Twitter: @johnheinzl

 
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