Dividend Bull List History - Stocktrades Canada

Hi Ken, Matt. I have noticed that for the Bull list history performance totals, you use the recommendation date price and current price of each stock and then average the return of the results. This is just one of many ways to reflect performance and I get the challenge of picking just one. I know that even when you move a stock to neutral status that this is not necessarily a recommendation to sell and that one or both of you may continue to hold the stock in question. And thus simply using an annualized average of the add date for buy and neutral date for sell price may not do justice to the intent of the recommendation. For example Shopify was not a buy on the growth list for long but I have not seen a recommendation to sell it. And even if one eliminates it completely, the performance of the growth list far outstrips that of the TSX. But I think there may be an error in the dividend bull list performance history that is understating the relative performance of the selections. On the surface it looks like the Dividend Bull List selections have returned some 15% on average as opposed to the TSX’s 21.74%. But the Dividend bull list was started a full year later than the Growth list according to the initial dates specified. So the TSX starting price should not be 14,322 as it was at end of December 2018 but over 17000 as it was at end of December 2019. The annualized return of the TSX since that point is about 11.9% according to my abacus. This is meant simply as a clarification to hopefully help. I’ve been in the investment arena for over 3 decades and the insight you guys provide into Canadian companies is unmatched (period).
I marked this as anonymous because of the nature of the performance content but please feel free to comment on it in the forum if you please.

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Asked on August 8, 2021 7:48 pm

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Hey there - the average as it is listed is actually correct on the dividend bull list. Its just misleading because of that one item under date added - which we will remove. There are so many ways to look at performance via TSX. Here are some of the ways we've looked at:

- You can take the average returns of the stocks and compare it to the total return of the Index
- You can take the average returns of the stocks and compare it to the average annual return of the Index (which is kind of like you are referring to)
- You can use a weighted average which is calculated much like a portfolio would which takes weighted time into account.
- You can take the average returns of the stocks and compare it to the average return of the Index over the same period.

Our preference is the latter as it compares apples to apples and is the easiest to defend. The weighted average is also pretty good, but would take quite a bit of explaining but in short it gives more weight to some of our earlier picks vs the later picks.

To illustrate how we do it, let's use just two companies - MFC and BMO. Since added, they have returned -4.5% and 20% respectively for an average of 7.75%. Since both were added on the same day, the TSX Index has returned 20% over that same period of time. So the TSX average is (20+20/2) = 20%. This is how we calculate it - so as much as we'd like to say its outperforming - its not. Now, if you add dividend in we might actually be, but haven't taken the time to put all that in and it is just reflective of share price returns.

The reason why our Dividend Bull List is underperforming is mainly because of three stocks - MFC, EIF and CNQ - the latter of which were significantly impacted by the pandemic. We are however starting to slowly catch up. Also of note, our weighted average is actually 18.57% vs 21.35% and the gap here used to be in the double-digits. This is a sign that our earlier picks are actually starting to perform better.

I appreciate you bringing this forward and for the kind words, but the averages are correct. We will however, remove the TSX price from "date added column" as it doesn't make sense in the context of the returns.

Mat

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Posted by Mathieu Litalien

Answered on August 9, 2021 5:02 am

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Matt clarified it below!

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Posted by Dan Kent

Answered on August 8, 2021 8:40 pm

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