A new addition to the American Dividend Aristocrat Portfolio is Carnival Corp. (NYSE:CCL), which operates the Carnival Cruise, Holland America and Princess Cruise Lines. The stock currently has a dividend yield of 2.48% and prior to the string of hurricanes, posted a record profits in their most recent quarter.
(This was originally published in the July 2017 version of The Dividend Growth Newsletter. It is available here.)
When it comes to investing, the old adage is that past performance does not indicate future performance. While that is certainly true, past history isn’t completely worthless. Both the stock market and the events of world history move in cycles, so what happens in the past can happen again. Forward looking statements are educated guesses at best, but, as they say, hindsight is 20/20.
Consider this article by investor Nick McCullum, who showcases a chart (left) by Ned Davis Research that shows the historical return of dividend-growing stocks (9.6%) outpacing both non-dividend stocks (1.7%) and the S&P 500 (7.3%).
Dividend aristocrats also experienced lower volatility compared to the index, and because only established companies with enough cash flow can consistently pay (or raise) dividends, they’re also considered to be safer investments as well. Considering that stocks are at record highs, dividend stocks remain a prudent investment.
(This was originally published in the June 2017 version of The Dividend Growth Newsletter. It is available here.)
Here’s a fun stat: The S&P TSX had the fourth-worst performance in the first half of 2017, returning just 0.69% (see left), finishing only ahead of Israel, China, and Russia. South Korea leads the pack with an 18.03% return, and only two countries (the U.S. and Spain) outside of the Middle East and Asia finished returned more than 10%. According to BNN, Canada ranked 91st among the 103 indices that are tracked, thanks to huge declines in the energy sector with low oil prices.
That hasn’t stopped prognosticators from predicting a huge rebound in the second half, citing more appetizing equity valuations. A rising loonie will help certain sectors, including grocery chains (such as Metro, Inc., which is featured in the Canadian Dividend Aristocrat Portfolio), and a Reuters poll showed that many believe the TSX will reach new highs by mid-2018… but we all know how wrong polls can be.
In times of poor overall returns and further geopolitical risk with North Korea’s constant missile experiments, dividends are once again attractive investments for their steady dividends and high yields.
(This was originally published in the May 2017 version of The Dividend Growth Newsletter. It is available here.)
Despite reports earlier in the year that Canada’s economic growth would outpace the U.S., the TSX has returned just 0.41% year-to-date. After an outstanding year in 2016, Canadian markets have remained relatively stagnant while the U.S. markets have rocketed; Donald Trump’s first 100 days in office had the fifth-highest percentage gain in the S&P 500 in history. Stats Canada says the country’s real GDP growth was 3.7% in Q1, but the Canadian dollar could go even lower with lower oil prices, Stats Canada’s numbers are often subject to revision and not always reliable, and the federal government has yet to inject the economy with any infrastructure spending.
The rest of the summer is expected to be quiet at best. At worst, there are many signals pointing towards a correction or a market downturn. Reports on overvalued stocks, low bond yields and an imminent bursting of the Canadian housing bubble have been ubiquitous, and the global political climate remains sensitive. Whether or not those calls come to fruition this year remains to be seen, but Canadians were sitting on big cash piles in 2016, which indicates investors have been cautious for quite some time.
The flip side, however, is that staying invested tends to pay off in the long run. Stocks in the Dividend Aristocrat portfolios are meant to be held long-term, even through market downturns. To better adapt to a constantly changing environment, 10 new names have been added to the three model portfolios, which are outlined in the newsletter.
(This was originally published in the April 2017 version of The Dividend Growth Newsletter. It is available here.)
Despite a record-breaking 24 executive orders – the most since World War II – in Donald Trump’s first 100 days in office, it seems very little has changed. Twitter continues to showcase the best and worst of Trump, the U.S. is still very much part of NAFTA, tax reform has yet to come, and a single brick has to be laid for the wall. Interest rates remain low, the housing crisis in Vancouver and Toronto have hit a fever pitch, and the Canadian dollar continues to be weak along with weak oil prices.
Combined with the French presidential election, which has eerily mirrored the most recent U.S. election so far with a right-wing populist going up against a center-left opponent who’s leading the polls, and North Korea, where Kim Jong-un’s fascination with flexing his military muscle can no longer be considered as just a sideshow, it’s understandable why some investors remain cautious, especially with a stock market that continues to try and push to new highs.
However, earnings for 1Q 2017 have looked mostly positive so far, and that may be the single biggest driving factor of the rise in the Dow and S&P 500. Dividend aristocrats such as Metro and McDonald’s have all reported impressive earnings, and continue to provide value through capital gains and consistently growing dividends. They have proven to provide downside protection relative to other equities, which makes them ideal in uncertain times.