YUMC - Q1 2023 Dividend Report

2023-04-10 07:07:23 ET

Summary

• I topped $1,800 in passive dividend income.
• Over 19 companies bumped their dividends.
• I added to two positions.

My Background

Each investor faces a different set of circumstances. Now 36, I have been investing since I was 22 years old. My first investment in individual stocks was made in the heart of the financial crisis back in May of 2009. I purchased 40 shares (80, split-adjusted) of Toronto-Dominion Bank (TD:CA). However, for years before making that purchase I had been researching the best methods available for both wealth creation and preservation.

I don't believe in taking unnecessary risks and feel the whims of the stock market are too fickle as far as capital gains are concerned to base my aspirations of financial freedom on. Dividend growth investing stands out as it is far more predictable that a healthy company might increase its dividend by 6% than to make any sort of prediction about stock price volatility in the near term.

On this basis and from my initial foray into the markets with TD, I've built a portfolio of over 30 cash flowing equities. My goal is ultimately to have a stock market portfolio which provides enough income to cover all of my expenses.

While some feel that it only requires ten companies to achieve ultimate diversification, I believe there is room for a healthy level of redundancy to avoid the hiccups involved with company-specific performance. Regardless, I endeavor to always own the best of breed companies in their respective industries. I can live with slower growth if it means greater security for my invested dollars.

This is a strategy I have researched over time and came to trust because it can work for me both as a young investor and likewise carry me through the decades to come. While it may not turn heads at a dinner party, it has proven its value over the past few hundred years and remains as relevant as ever today in our digital age.

Having noted the above, it is truly a great time to be a dividend growth investor. The companies I own are committed to rewarding shareholders and I love nothing more than to reinvest back into them to further increase the compounding power in my portfolio

Dividend Summary

As a Canadian investor, I prioritize income in CAD. I earned CAD income from 26 sources, with another 11 coming through in USD.

Please note that all Canadian companies are owned in CAD on Canadian exchanges. KO and JNJ are owned in CAD within my portfolio, though they reside on the NYSE; their dividend payments are provided in CAD.

CAD Dividends

USD Dividends

Dividend Totals

I brought in C$1,534.05 and U$193.07, combining for a currency-neutral $1,838.98 in Q1. In comparison with Q1 2022 , my passive income has increased by 22.78% YOY. However, the companies marked with an asterisk paid dividend twice in Q1 2023, skewing the results to the upside. This will show back up in subsequent quarters where the growth rates will trend lower.

All the same, these are incredibly solid totals. Over half-19 of the 37 companies-posted dividend raises. Both MRU:CA and MA were able to do so at a double-digit rate.

The benefits of organic dividend increases represent one of the most poorly understood aspects of the dividend growth investing methodology. They can often seem small in nature, but the progress is what is most important. Having a business that is able to routinely send more capital to shareholders simplifies portfolio management.

One of my favorite things to do is to open my brokerage account and notice that I have another $1,000 to invest from the last time I checked. The account just keeps filling up. It's like a never-ending fountain of wealth that fills faster the more I spend (reinvest) it.

Dividend Cuts: A Rarity

CSW.B:CA has been choppy ever since the beginning of the pandemic. They've boosted and cut the dividend a number of times. At this stage, it's a company I plan to hold for the foreseeable future, but I will not be adding fresh capital.

Taking a step back and considering this in the context of my overall portfolio, the way this stands out is reflective of the strength of my holdings. Dividend cuts stand out like a sore thumb amid so many raises.

In fact, there have been many years where I've not had any cuts at all, with raises coming from the vast majority of companies. Still, in the name of building a robust portfolio, I always keep a close eye on this sort of activity and ensure I have my investments spread out enough that one small cut will get swallowed by the increases.

The dividend train must always be kept trending down the track in the proper direction.

Market Activity

My high-level approach to investing at this stage is to continue investing in companies I already own. I've spent over a decade amassing what I believe to be mostly best-of-breed companies in their respective industries. Now is the time to continue doubling down rather than diversifying too thinly.

On that note, I typically aim for at least two purchases per quarter. I did manage to hit that in Q1 with additions to both T:CA and BIP.UN:CA.

Since BIP.UN:CA posts its dividend rate in USD, I've added a conservative 30% boost for the conversion to CAD.

Taken together, these purchases should add C$98.90 in forward annual dividend income. As usual, all dividends will continue to be reinvested for compounding.

As I recently put BIP.UN:CA in the spotlight in Q3 2022 , this time I'll give a glimpse into what I love about T:CA.

TELUS Corporation ( T:CA )

T:CA is one of the leading telecommunications and digital-products company in Canada. It operates within an oligopoly in its home market and routinely performs as best-in-class within the wireless space.

With its Q4 earnings posted in February , the company delivered an industry-leading +300k net telecom additions, with full-year net additions in excess of 1M. These numbers are the best it has ever posted and represent the company's strength in its key lines of operation.

The thing I appreciate most about T:CA and its corporate culture is the level of transparency provided to shareholders. Namely, they openly promote their dividend policy and growth program, wherein they have announced their intention to aim for semi-annual dividend increases totaling 7-10% annually. This target is set through the end of 2025.

Likewise, they provide very clear targets and hold themselves accountable with their annual scorecard. From the 2022 Annual Report , they demonstrated how they were able to hit their ambitious targets:

I first covered the commonalities and differences of the Big 3 Canadian Telecoms back in 2016. Since that time, TELUS has continued to branch out into lines of business beyond traditional telecommunications. For example, they have been building out their TELUS Health and TELUS Agriculture & Consumer Goods businesses.

In fact, it is the TELUS Health unit that has me most bullish about their prospects.

The pandemic provided a boon to their "Health MyCare" and "Health Virtual Care" platforms in terms of adoption for patients staying safe at home. This trend toward digital solutions for healthcare was already on the rise and accelerated through necessity.

Shares of T:CA have come down nearly 19% over the past year:

This pullback afforded me the opportunity to deepen my relationship with the company. Further, the +5% starting yield on a company targeting high single digits in annual dividend growth has the potential to pack a powerful long-term punch.

Conclusion

I hit a new quarterly record for dividend income in my portfolio. As always, the secret is to pump that cash flow back into more equities and continue rolling the passive income snowball.

Seeing more than half of the companies listed boosting their payouts provides exactly the sort of inflation-protection that's necessary in times like we're presently in.

I'll be looking to opportunistically put more capital to work in Q2. As per my recent strategy, this money will ideally be deployed within companies I already own.

Thank you for reading.

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