The goal of this portfolio is to build wealth through stock appreciation while earning a steady dividend income. In other words, a passive income machine. During the accumulation years, the dividend income is fully re-invested through synthetic DRIP. When retirement comes, the portfolio may switch to focus on higher dividend earnings but time will tell if I need to make this change. My hope is to become financially independent from the dividend income my portfolio can generate.
The dividend growth stocks are selected using a simple but yet effective stock selection process which leverages the Chowder Rule as growth marker.
One of my rules is to hold 40 or fewer stocks in my portfolio to ensure I can stay on top of my holdings. To better understand my strategy, you need to read my 7 investing rules and leverage my dividend growth stock selection process. All in all, it has provided me with a portfolio that can beat the index and in retirement, my knowledge of dividend investing will allow me to draw dividend income rather than burn through my hard earned capital.
Portfolio Breakdown by Accounts
During the accumulation phase. Dividend growth and total return is what drives my stock selection process and as such you will see very low yield stocks that I would normally not hold in my retirement years. The below table is a snapshot from when I decided to start switching to my retirement portfolio. The percentage represents the size of my portfolio represented by the holding classification. Under 2% it’s a low yield, and over 4% it’s a high yield (yup that’s high – and over 6% that’s danger zone just so you know).
| Dividend | wdt_ID | Low Growth | Medium Growth | High Growth |
|---|---|---|---|---|
| Low Yield | 2 | 3.38 | 4.57 | 45.83 |
| Medium Yield | 3 | 0.00 | 11.10 | 12.39 |
| High Yield | 4 | 3.58 | 27.11 | 0.00 |
My retirement portfolio is looking like this now.
| Dividend | wdt_ID | Low Growth | Medium Growth | High Growth |
|---|---|---|---|---|
| Low Yield | 2 | 3.29 | 4.53 | 30.28 |
| Medium Yield | 3 | 0.00 | 20.73 | 12.20 |
| High Yield | 4 | 8.70 | 20.26 | 0.00 |
The low yield / low growth is the ETF I hold. Without it, I would have 0% exposure in that corner and 0% exposure in the high yield / high growth since such stock doesn’t exist.
The accounts below represent holdings across my accounts and our spousal equivalent. My accounts are with RBC Direct Investing and Questrade.
Canadian Stock Portfolio
When it comes to choosing a Canadian stock, the list of companies matching my investing criteria will mostly be Canadian Dividend Achievers with a 10% CARG dividend growth. However, with some sectors, it can be difficult to find a match and I have to vary my approach and selection.
You can see my rational on why I hold each stock in my portfolio and that’s what I use to run a portfolio stress-test. I love companies that operate like a toll booth where there is regular payments made by the customers.
- Telus TSE:T – I hold Telus as it offers strong mobile revenue followed by internet/television revenue but moreover, it chose to diversify into the health sector as opposed to buy content or sports team like the others. It is also well position to grow customers across Canada and is obviously part of a controlled oligopoly.
- Canadian National Railway TSE:CNR – The railway continues to be the primary method of transporting goods across North America and there will not be any new added competition. It’s an oligopoly with competition only coming from the trucking or airline industry. The dividend growth is impressive and it makes up for the low yield. I chose CNR over CP simply because CP was going through management changes when I was ready to buy into the railway.
- Enbridge TSE:ENB – Pipelines, while not popular for the environment, have been setup to move oil throughout North America and it operates like a toll booth. Enbridge has one of the best coverage and reach to partner with multiple businesses. It also sports a healthy dividend yield and dividend growth.
- TD Bank TSE:TD – A strong Canadian bank across Canada with good product offering and technologically on par with other Canadian banks. TD stands above other Canadian banks with its expansion in the US market through TD Ameritrade and other ventures. Regular fees are paid and dividend increases can always be covered by some increase in fees. Good and safe dividend yield and growth. Best Chowder Score within the big banks.
- Royal Bank of Canada TSE:RY Same reason as TD. Royal Bank happens to also have some international exposure and a strong wealth management segment. Next best Chowder Score within the big banks.
- Brookfield Infrastructure Partners L.P. TSE:BIP.UN Infrastructure ownership in other developed countries with a strong yield is what attracted me to BIP along with the management strength.
- National Bank TSE:NA An opportunistic purchase as it was undervalued against the other big banks. Well run and focused on small businesses in Quebec. It pays more than the top 2 banks and still has a good Chowder Score.
- Intact Financial TSE:IFC The leader in property and casualty insurance growing through acquisition and organic growth. Normal dividend yield but great dividend growth. It passed the 10-10 test and is a Dividend Ambassador. The insurance business is a cash flow business. Even in a bad year, you know they will recover with higher cost the next. It’s like gambling, the house never loser.
- Emera TSE:EMA The business is regulated and a necessity with little competition making this utility a toll booth. It’s a leader on the east coast of Canada with growth in the US and Caribbean. Good Chowder Score with consistency over the past 10 years.
- CAE Inc TSE:CAE The company operates like a toll booth with respect to training on multiple fronts (advancement in technology, upgrades and replacement of aircraft, software or tools). Regulations and compliance laws also enforce training by government in the medical sector which helps with the business diversification. Not quite a Dividend Ambassador but not far off. The Chowder Score is above 10% but it has a lower dividend yield and is therefore expected to grow the dividend above 8%.
- Alimentation Couche-Tard Inc. TSE:ATD.B This convenience store chain is setup to profit from many gas station stops around the world. I am late to the party for this company but it has done well. It is a true Dividend Ambassador with strong dividend growth offsetting the low yield and supported by the stock growth.
- TC Energy TSE:TRP A strong pipeline operating between Canada, the US and Mexico. It pays a good dividend yield with consistent dividend growth. The Chowder Score is above 10% and the dividend growth is consistent. I have a tiny position and I am adding to it quarterly through Computershare.
US Stock Portfolio
The list of stocks matching my investing criteria will mostly be US Dividend Aristocrats with the exception of the technology sector. That sector is relatively recent to fulfill the requirements for a US Dividend Aristocrat.
- Johnson & Johnson NYSE:JNJ
- AbbVie Inc NYSE:ABBV
- Microsoft NASDAQ:MSFT
- Kimberly Clark Corp NYSE:KMB
- Disney NYSE:DIS
- VISA Inc NYSE:V
- Mastercard NYSE:MA
- Blackrock NYSE:BLK
- Apple Inc NASDAQ:AAPL
- Costco NASDAQ:COST
- 3M NYSE:MMM
- Becton Dickinson NYSE:BDX
- Texas Instrument NASDAQ:TXN