(This was originally published in the August 2017 version of The Dividend Growth Newsletter. It is available here.)
NAFTA talks aren’t going anywhere. North Korea continues to be a thorn in everyone’s side. Hurricane Harvey is the worst natural disaster on American soil since Katrina. The Bank of Canada is seriously contemplating an interest rate hike. Stock market valuations remain high. Housing prices continue to climb. We’re nearly three-quarters through the year, but we’re still no closer to figuring out the head scratchers of 2017. The TSX is down more than 1 percent this past month, and the S&P 500 a little less than that.
It could be a lot worse… but that’s not the proper mindset for investing. Investors don’t want to just lose less money than the next guy, they want to see their portfolios grow. Losing money doesn’t feel good, even when you lose less than the market. And when the markets fall, selling positions to generate cash isn’t a sustainable strategy.
Investing isn’t always about total return. Achieving financial objectives can be planned using specific income goals, and that’s where dividend aristocrats come in with their fixed payments and attractive yields. The key is to hold steady through rough waters, and that’s what these portfolios are designed to do – no new portfolio positions have been initiated this past month.
(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.