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(CHRIS WATTIE/REUTERS)
(CHRIS WATTIE/REUTERS)

YIELD HOG

My dividend portfolio’s difficult season Add to ...

John Heinzl is the dividend investor for Globe Investor’s Strategy Lab. Follow his contributions here. You can see his model portfolio here.

My kids came home with their report cards last week. Now it’s daddy’s turn.

When I last turned the spotlight on my dividend stock picks, there were no signs of the difficult times that lay ahead for the markets.

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Most of the stocks I wrote about – many of which I also own both personally and in my Strategy Lab model portfolio – were up nicely in price, and the dividend hikes were rolling in.

But, being a naturally cautious fellow – and wanting to cover my posterior – I included the following disclaimer: “I’m … keenly aware that the investing gods can turn angry without notice, so I’m prepared for some tough times.”

Well, turn angry they did. With long-term bond yields rising, dividend stocks were knocked for a loop. The good news is that some have held up relatively well.

Here’s a sample of the stocks I wrote about in the past six months (or a bit longer in some cases).

The total return is from the article publication date through the end of June and assumes dividends were reinvested.

All prices have been adjusted for stock splits, where applicable.

 

Canadian Utilities (CU-TSX)

  • Profiled: Nov. 27, 2012
  • Then: $33 Now: $36.91
  • Total return: 13.3 per cent
  • S&P/TSX total return: 2.2 per cent

Don’t let Canadian Utilities’ modest yield fool you, I wrote. The stock has delivered steady gains in both dividends and its share price, and the future looks promising with $6-billion in capital spending projects on the way. The company announced a 9.6-per-cent dividend hike in January, as expected, but the shares – which are sensitive to interest rates – have tumbled since hitting a high of $41.68 in May

 

Algonquin Power & Utilities (AQN-TSX)

  • Profiled: Dec. 18, 2012
  • Then: $6.66 Now: $7.25
  • Total return: 12.5 per cent
  • S&P/TSX return: 0.1 per cent

I wrote that Algonquin offers a nice combination of growth and safety and said the dividend would continue to increase. The good news is that the company hiked its dividend 9.7 per cent in May – its second increase in nine months. The bad news is that the shares are down sharply from their May high of $8.33, again with rising interest rates being the primary culprit.

 

Shoppers Drug Mart (SC-TSX)

  • Profiled: Feb. 5
  • Then: $41.12 Now: $48.52
  • Total return: 19.5 per cent
  • S&P/TSX return: minus 3.5 per cent

I wrote that Shoppers’ shares were attractively valued after getting beaten down by government regulations designed to rein in drug costs. That, plus the company’s growing dividend and favourable demographics, made it a tempting pick. The market seemed to agree as the shares have surged.

 

Johnson & Johnson (JNJ-NYSE)

  • Profiled: March 19
  • Then: $78.86 (U.S.) Now: $85.86
  • Total return: 9.7 per cent
  • S&P 500 return: 4.3 per cent

I called Johnson & Johnson a “stock on the mend” after it was hit by quality control problems in recent years, citing its strong balance sheet, triple-A credit rating and growing pharmaceutical, medical device and consumer products divisions. In addition to delivering a solid price gain, the company hiked its dividend 8.2 per cent in April.

 

Telus (T-TSX)

  • Profiled: May 21
  • Then: $37.62 Now: $30.71
  • Total return: minus 17.6 per cent
  • S&P/TSX return: minus 4.3 per cent

One reason I like Telus is that it delivers predictable dividends, I wrote. What wasn’t so predictable, however, were the announcements that rocked wireless stocks in recent weeks, including an end to three-year contracts and news that U.S. giant Verizon is considering an expansion into Canada. Telus’s stock has since recovered some ground, however, indicating that the world may not be about to end for Canadian wireless companies after all.

 

Colgate-Palmolive (CL-N)

  • Profiled: April 23
  • Then: $60.71 (U.S.) Now: $57.29
  • Total return: minus 5.6 per cent
  • S&P 500 total return: 2.2 per cent

I cited Colgate-Palmolive’s strong balance sheet, well-known brands, solid emerging markets growth and rising dividends as reasons to like the maker of oral care products. Unfortunately, the stock has since lost some of its sparkle as the company’s premium valuation caught up with it. But the long-term outlook remains bright.

 
  • JNJ-N
  • CL-N
  • T-T
  • TU-N
  • CU-T
  • UTE.UN-T
  • AQN-T
  • SC-T
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