Welcome to Yield Hog, the year in review.
This is our chance to gloat about stock picks that worked out, and your chance to mock us for the ones that didn’t.
Before we get into the good, bad and ugly of 2012, it’s worth remembering that dividend growth investing isn’t about trying to make a quick buck. It’s about holding great companies for years and collecting a rising income stream. What the stock price does over a few weeks or months is largely irrelevant, assuming the company remains sound and the outlook hasn’t changed materially.
In fact, if you’re looking to add to a position, it’s preferable for the stock to fall, not rise. On the other hand, a sinking share price can also indicate that a business is in trouble, as was the case with a couple of high-yielding stocks we warned you about in the past year – namely TransAlta and AGF Management.
With that disclaimer out of the way, let’s see how Yield Hog made out. This is not meant to be an exhaustive list; rather it’s a representative sample of the stocks we wrote about in the past year and a bit. Note: The total return is from the article publication date through Dec. 11, and assumes dividends were reinvested.
Disclosure: The writer personally owns shares of Inter Pipeline, Enbridge, Coca-Cola and Canadian Utilities.
Inter Pipeline Fund
Profiled Nov. 8, 2011
Now: $23.35 (Dec. 11, 2012)
Total return: +38.8 per cent
S&P/TSX return: +1.6 per cent
We called Inter Pipeline a low-risk way to play the oil patch, and so far that’s been true. In addition to providing a nice capital gain, in November the company hiked its distribution 5.7 per cent – the fourth consecutive annual increase.
Profiled Dec. 6, 2011
Now: $40.70 (Dec. 11, 2012)
Total Return: -17.4 per cent
S&P/TSX return: +4.8 per cent
This is the sort of stock that investors’ nightmares are made of. A few months after we referred to the engineering and construction firm as an attractive play on the global economy, SNC was engulfed in a still-unfolding bribery scandal.
Profiled Dec. 13, 2011
Now: $41.88 (Dec. 11, 2012)
Total return: +18.6 per cent
S&P/TSX return: +7.5 per cent
We called Enbridge a “pipeline to profits” and the company didn’t disappoint, delivering a solid stock price gain and an 11.5-per-cent dividend increase that came right on schedule this month.
Profiled March 27, 2012
Now: $14.90 (Dec. 11, 2012)
Total return: -17.6 per cent
S&P/TSX return: +0.3 per cent
We warned that TransAlta was a “stock that’s run out of juice,” citing shutdowns at a coal-fired plant in Alberta and the looming expiration of favourable power sales contracts in Washington state. The stock has since tumbled, and the yield – which was already uncomfortably high – has risen to 7.8 per cent.
Profiled April 17, 2012
Now: $9.39 (Dec. 11, 2012)
Total return: -30.6 per cent
S&P/TSX return: +3.2 per cent
We said AGF’s 7.6-per-cent yield “should come with a caution sign,” and we were right. Plagued by underperforming funds, net redemptions and the loss of star portfolio manager Patricia Perez-Coutts, the stock has tumbled and the yield has zoomed up to 11.5 per cent. Buyer beware.
Profiled May 8, 2012
Then: $67.74 (U.S.)
Now: $73.31 (Dec. 11, 2012)
Total return: +10 per cent
S&P 500 return: +6.2 per cent
Being lactose intolerant, we don’t indulge in chocolate much. But we thought Hershey was a sweet investment, citing its dividend growth track record, strong pricing power and well-known stable of brands. Investors are enjoying the chocolatey goodness.
High Liner Foods
Profiled May 22, 2012
Now: $29.52 (Dec. 11, 2012)
Total return: +45.5 per cent
S&P/TSX return: +9.1 per cent
We said the seafood supplier’s stock was a “good catch,” citing its attractive valuation, expanding product line and cost savings from the $233-million acquisition of Icelandic USA. Investors have hauled in some hefty gains – with a 10-per-cent dividend increase in August as a nice garnish.
Profiled July 31, 2012
Then: $40.40 (U.S.)
Now: $37.86 (Dec. 11, 2012)
Total return: -5 per cent
S&P 500 return: +4.5 per cent
We said Coca-Cola’s impending stock split was a positive signal – along with its long track record of dividend and cash flow growth, international expansion, sprawling distribution system and world-leading brands. The stock’s lost its fizz, but we still think it’s a core long-term holding.
Profiled Oct. 16, 2012
Then: $70.95 (U.S.)
Now: $67.52 (Dec. 11, 2012)
Total return: -4.8 per cent
S&P 500 return: -1.5 per cent
We highlighted Yum’s “finger-lickin’ good dividend growth,” but warned that the KFC, Pizza Hut and Taco Bell operator’s high price-earnings multiple and heavy exposure to China could hurt if growth disappoints. That happened when it warned that China fourth-quarter same-store sales will tumble 4 per cent.
Profiled Nov. 27, 2012
Now: $69.15 (Dec. 11, 2012)
Total return: +4.8 per cent
S&P/TSX return: +1.5 per cent
We called Canadian Utilities a cheap, relatively low-risk stock with plenty of growth potential. So far, the market appears to agree. Look for a dividend increase in January.
Profiled Dec. 4, 2012
Now: $541.39 (Dec. 11, 2012)
Total return: -6 per cent
S&P 500 return: +1.5 per cent
We warned that Apple is a “volatile stock that may not be suitable for risk-averse investors,” but said a good holiday quarter could lift the stock. The day the column appeared the shares suffered their biggest drop in four years. It’s safer to play with Apple’s gadgets than to invest in its shares.
- Snc-Lavalin Group Inc$57.280.00(0.00%)
- Enbridge Inc$55.620.00(0.00%)
- TransAlta Corp$7.320.00(0.00%)
- AGF Management Ltd$5.380.00(0.00%)
- Hershey Co$97.890.00(0.00%)
- High Liner Foods Inc$19.490.00(0.00%)
- Coca-Cola Co$40.620.00(0.00%)
- Yum! Brands Inc$63.060.00(0.00%)
- Canadian Utilities Ltd$35.070.00(0.00%)
- Apple Inc$109.110.00(0.00%)
- Updated December 5 4:00 PM EST. Delayed by at least 15 minutes.