As earnings slow, I figured now would be the perfect time to review our Dividend Growth Model Portfolio here at Premium.
Our model portfolios are not a popular enough feature here at Premium for me to allocate several newsletters to discuss their transactions. However, I do update them frequently on the website. So again, make sure you log in to see any recent changes.
Our Dividend Growth Model, however, is of particular interest to a lot of members, so I have no problem doing a deep dive and going over its recent performance and transactions.
Let’s jump right into it. But first, my portfolio moves and some updates on our screener.
My moves this week
Outside of some routine dividend reinvestments I made this week, I made the same moves in my portfolio as last week.
I added to my Telus (TSE:T) and Alphabet (GOOG) positions.
As mentioned, I’m getting fairly aggressive on my additions to Telus as of late as I feel there will be multiple expansion moving forward, combined with an increase in free cash flow generation from the company. Over the short term, I will over-allocate myself to the company and plan to exit once (if) my thesis comes true. I feel it is a solid opportunity, not without risk due to CRTC regulations and stiff competition, but it is a risk that I’m willing to accept.
In terms of Alphabet, I’m adding to the company due to what I feel are discounted valuations at this point. This isn’t a short or mid-term play for me but simply a long-term addition to a core holding inside my portfolio.
Our stock screener beta is set to launch next week
Our stock screener is set to be completed this weekend and going live for beta testing next week!
Of note, if you’d like to be part of the beta testing, please reply to this email and let me know.
The beta testing portion of the screener will be primarily from a user-experience standpoint. I will take member feedback as I continue to fine-tune gradings/rankings for each particular stock.
I cannot accept all requests for the beta and will only be taking a handful of members. The best way to get into the testing is to reply and let me know.
Ultimately, if you don’t get in, this won’t be a huge issue, as the testing should be done relatively quickly, and our screener will be live in no time.
The screener will grade over 5000+ individual stocks across 90 different ratios, coming up with individualized grades based on particular elements (profitability, debt, etc) and overall grades for each stock as well.
I firmly believe it will be the best screener on the market, and it will be provided for all Premium members.
Stay tuned!
Our Dividend Growth Model Portfolio
Our dividend growth model portfolio is performing exceptionally well since its 2023 inception. Its benchmark is an index that is 65% Toronto Stock Exchange and 35% S&P 500, of which it is outperforming by around 7%.
This benchmark is constructed this way because for the most part, that is the overall geographical allocation in the portfolio.
The good
Brookfield Corporation (TSE:BN)
Bull List Stock Brookfield Corporation (TSE:BN) is one of the main drivers inside the portfolio at this point in time, and the company is one of the best-performing financial companies in North America in 2024.
It continues to grow distributable earnings and fee-bearing capital, which ultimately compounds into the company having more capital to deploy, which in turn allows it to invest that capital and grow distributable earnings. This is a continued snowball, and one that is relatively hard to stop once it gets rolling.
For the better part of a year, inside our Bull List report, we stated that Brookfield was trading at a large discount to its net asset value and being unfairly valued based on the pressures asset managers faced in the high-rate environment.
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Over the last year, Brookfield has returned 51%, far outpacing the TSX Index and the S&P 500.
The run-up in price has left the company with one of the larger allocations inside this portfolio. However, we’re more than happy to keep it this way.
TMX Group (TSE:X)
TMX Group (TSE:X) remains one of the most underrated Bull List stocks here at Premium.
I can make some general assumptions about a stock’s popularity here at Premium based on the level of questions I get and the commentary on the Discord and inside of the Q&A. And in this case, I believe TMX is one that many members have overlooked.
The business model is ridiculously simple. It operates major Canadian exchanges along with some European energy trading platforms. The bulk of its revenue is derived from trading activities on those indexes, along with revenues from listing IPOs.
As mentioned, the simpler the business model, the more I’m a fan of it.
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Since our highlight in 2021, the company has gone on to return 85%. This works out to be about 4-5% more annually than the TSX and S&P 500.
My main regret inside of this portfolio is the fact I didn’t allocate a bigger portion toward TMX Group. This is due to the mid-cap nature of the company. Although it would be easy to simply increase the weighting in this company due to the emotions of past outperformance, I’m going to stick to my guns in terms of allocation strategies and continue holding it in the 2-2.5% range as a mid-cap dividend growth company.
Loblaw (TSE:L)
It seems crazy to be speaking on a blue-chip Canadian grocery company as one of the best-performing stocks inside of a portfolio generally designed for growth, but the fact of the matter is Loblaw has crushed it.
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Up 53% over the last year, it’s outperformed the S&P 500 by 20% and the TSX Index by more than 30%.
The company has benefitted significantly from having one of the largest “discount” presences out of the major grocers here in Canada. This was noted as a tailwind in our Foundational Stock writeup:
“The company’s “discount factor” will become key moving forward. It simply has cheaper brands and more discount stores than its competition. In times of rising prices and tough economic conditions, this is key.”
Will this continue moving forward despite falling interest rates? I believe it will. Although food inflation has settled, it’s important to understand that food prices will never come down. Lower inflation does not mean deflation.
As a former Sobeys (Empire Co.) shopper myself, I’m not sure I’ve stepped foot in one in over a year. I now shop almost exclusively at No Frills (Loblaw) and Costco (COST). Even if rates were to come down and my discretionary spending was to increase, I don’t think my habits regarding grocery shopping would ever change.
Crazy high grocery costs are here to stay, and if that’s the case, Loblaw should have plenty of continued tailwinds behind it.
The company is trading at a relatively large premium to its historical averages. The company would normally trade around 12x free cash flow, and right now, it’s trading at 15x. However, considering its results are night and day above any other grocer here in Canada, it’s possible that the multiple expansion could be permanent.
Right now, I’m more than happy to hold it inside this portfolio.
The bad
Franco Nevada (TSE:FNV)
Franco Nevada has had a rough go of things over the last year, primarily stemming from its issues at First Quantum Minerals Cobre Panama operation. Why is this important? Well, Franco Nevada has a large streaming contract for the mine. In fact, it made up more than 20% of revenue.
With a glass-half-full attitude, Franco Nevada is the only company in this portfolio that is currently in the red after a year, and even then, it’s only around 10%.
Patience should pay off with this company. Despite it losing the Cobre Panama mine, it is not necessarily gone forever. The mine is on care and control, but if there is a resolution to the current issues, it could be started back up again.
Even if it isn’t, however, this company will operate just fine without Cobre Panama and should be able to benefit significantly from the rising price of gold.
Outside of that, I can’t really think of any stocks in particular I’m all that upset with.
The changes
Selling Toronto Dominion and adding Royal Bank
When this portfolio was initially constructed, Toronto Dominion was one of the best dividend growth stocks out of all the major 6 banks.
Operationally, the company is doing fine. However, the anti-money laundering issues it got itself into have caused me to sell the stock inside of this portfolio and move on to what I feel is one of the best institutions in the country, Royal Bank.
Yes, I am well aware I’m selling what appears to be a “cheap” bank stock for an expensive bank stock. However, I’ve been impressed with Royal Bank’s performance, and I believe accelerated rate cuts here in Canada should cause its Canadian segment to continue to witness tailwinds.
Selling Abbvie Position, adding Toromont
Abbvie has had quite a nice run since being added to the portfolio on its inception date back in 2023.
However, I believe the company is fully valued at this point. Because of that, I’m more than happy to sell the company.
In its place, I’m going to be adding Bull List stock Toromont Industries (TSE:TIH). Toromont is a recent addition to the Bull List and a company I have recently purchased myself.
The company should benefit from a cyclical uptrend in industrial and infrastructure activity. As a result, I believe there is not only share price upside here, but double-digit dividend growth upside as well.
