WHAT WE'RE LOOKING AT
Bob Gorman, chief portfolio strategist at TD Waterhouse, has supplied us with four model portfolios for this week's Cruncher series. Today, we look at the Canadian Dividend Portfolio. In each case, the top 10 holdings will be presented.
TD says the priority with this portfolio is preservation of capital, with the opportunity for capital appreciation. In other words, safety comes ahead of share-price increases. Other goals are low volatility - few jagged ups and downs, in other words - and minimal requirements to make adjustments to the portfolio. In the investing world, they call that low turnover.
The holdings in this portfolio produced an aggregate dividend yield of 3.5 per cent as of the most recent quarterly update, compared with 2.6 per cent for the S&P/TSX 60 index. TD notes that investors get a higher level of income with this portfolio than with the broader market, and they also get the potential for dividend growth through stocks such as Enbridge Inc., TransCanada Corp. and Shaw Communications Inc., all of which have increased their quarterly dividend payouts in recent months.
A degree of safety has been built into this portfolio by having dramatically less exposure to the volatile materials sector than the broader market, and by adding exposure to safer sectors, such as utilities and telecom services. Still, the long-term returns of this portfolio beat the market by a wide margin. The Canadian Dividend Portfolio made 14.7 per cent annually from May 31, 1995, through Dec. 31, 2009, while the S&P/TSX 60 index made 11.2 per cent. The portfolio's Sharpe ratio, a measure of risk-adjusted returns, was 0.97 at Jan. 6, compared with 0.46 for the index. (Higher is better.)
Bargain hunters note: Imperial Oil Ltd. is the laggard of the group with a share-price decline of 0.8 per cent for the past 12 months. Shaw and TransCanada have gained 6.4 and 13.1 per cent, respectively.
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