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Shoppers Drug Mart has risen more than 40 per cent since it was profiled in February, largely on Loblaw's blockbuster $12.4-billion takeover offer. (Fernando Morales/The Globe and Mail)
Shoppers Drug Mart has risen more than 40 per cent since it was profiled in February, largely on Loblaw's blockbuster $12.4-billion takeover offer. (Fernando Morales/The Globe and Mail)

YIELD HOG

My best and worst dividend picks of 2013 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.

We hold our elected officials accountable. Why should investment columnists be any different?

Last week, I looked at how my Strategy Lab model dividend portfolio performed in 2013. In today’s Part 2 of Yield Hog’s year in review, I’ll be examining the performance of specific stocks I wrote about.

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Measuring a stock’s return over such a short time span doesn’t really tell you a whole lot. Dividend growth investing is, after all, a long-term exercise; it’s about holding good companies for years and collecting the rising income stream.

What happens to the stock price over a few months is largely irrelevant.

But I don’t know if I’ll be here in five or 10 years to gloat about my great calls or to answer for the ones that blew up in my face.

So, with the above caveat in mind, let’s see how Yield Hog fared over the past 12 months or so.

This isn’t an exhaustive list, but a sample of the companies I wrote about, both favourably and (in one case) unfavourably.

Canadian Utilities Ltd. (CU-TSX), profiled Nov. 28, 2012

  • *Total return: +10.8 per cent
  • *S&P/TSX return: +11.8 per cent

I wrote that Canadian Utilities has delivered solid returns despite its modest dividend yield (currently 2.8 per cent) and called it a “conservative choice” for growth and income investors thanks to its regulated operations.

Although it trailed the S&P/TSX’s return – utilities are sensitive to rising interest rates – the company raised its dividend last January and will almost certainly do so again next month.

Shoppers Drug Mart Corp. (SC-TSX), profiled Feb. 6, 2013

  • Total return: +40.4 per cent
  • S&P/TSX return: +5.7 per cent

I referred to Shoppers Drug Mart as a “sickly stock that’s poised for recovery,” citing its attractive valuation and favourable demographics.

What I didn’t know at the time was that Loblaw was preparing a blockbuster $12.4-billion takeover offer for Canada’s largest drugstore chain, causing Shoppers’ shares to soar.

Johnson & Johnson (JNJ-NYSE), profiled March 20, 2013

  • Total return: +17.5 per cent
  • S&P 500 return +15.7 per cent

After struggling with quality control issues, product recalls and plant closings, U.S. health products giant Johnson & Johnson was getting back on track, I wrote, citing its strong balance sheet, diversified product lineup and good growth prospects. Shareholders are feeling healthy indeed.

Reitmans Ltd. (RET.A-TSX), profiled April 17, 2013

  • Total return: -26.3 per cent
  • S&P/TSX return: +10.6 per cent

I warned that Reitmans’ fat dividend yield – at the time 9.1 per cent – “should set off alarm bells.”

Further, I quoted an analyst who said the dividend was unsustainable without a turnaround in the clothing retailer’s sinking fortunes.

The shares continued to sink and this month Reitmans slashed its dividend by 75 per cent. Lesson: If a yield seems too good to be true, it probably is.

Colgate-Palmolive Co. (CL-NYSE), profiled April 24, 2013

  • Total return: +9.8 per cent
  • S&P 500 return: +14.1 per cent

Toothpaste maker Colgate-Palmolive has been “whitening and brightening portfolios for decades” and is an attractive choice for long-term investors, I wrote. But with a price-to-earnings multiple of 22.6, the stock wasn’t cheap – and that lofty valuation has evidently caught up with the shares, which have posted solid gains, but trailed the S&P 500’s advance.

Telus Corp. (T-TSX), profiled May 22, 2013

  • Total return: -1.2 per cent
  • S&P/TSX return: +4.9 per cent

The timing on this one wasn’t great. Weeks after I praised Telus, news that Verizon was eyeing Canada hammered the stock. Telus has bounced back now that Verizon has taken a pass, but with cellphone bills a perennial political target, there’s never a dull moment for Canadian wireless investors.

But here’s one thing you can count on: Telus’s dividend will keep growing.

Algonquin Power & Utilities (AQN-TSX), profiled May 15, 2013

  • Total return: -9.5 per cent
  • S&P/TSX return: +7.2 per cent

Algonquin is another stock that tumbled after I wrote a favourable article about it.

The culprit in this case: rising bond yields. But the stock is up 17 per cent from its lows, the business remains sound and the dividend will almost certainly grow. In other words, no need to panic.

Procter & Gamble Co. (PG-NYSE), profiled July 31, 2013

  • Total return: +3.2 per cent
  • S&P 500 return: +6.2 per cent

I called P&G a “dividend growth machine” and said the company’s entrenched brands, growth prospects in emerging markets and cost-cutting opportunities made it an attractive pick. The stock had surged 27.5 per cent in the 12 months before the column appeared, and though it has risen since then, it’s been outpaced by the S&P 500. But its dividend will go nowhere but up.

The writer personally owns shares of CU, JNJ, T, AQN and PG.

*Returns in all cases are in local currency, include dividends and are for the period from the article publication date through Dec. 13, 2013. Benchmark index returns also include dividends.

 

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