For those new to the blog, I like to keep my readers up to date on portfolio changes. One of the reasons I started this blog was to educate others, but also to improve my own investing. By keeping an open book of my portfolio and changes to it, I hope to generate discussion so others can see how I put my investing philosophy into practice. For the most up to date portfolio changes follow my twitter account as I will usually tweet first and then follow-up with a blog post.
National Bank of Canada
On Friday August 21, 2015 I purchased National Bank of Canada [TSE:NA Trend] for $42.27 plus the commission.
National Bank of Canada is the leading bank in Quebec and the sixth largest bank in Canada with branches in almost every province. It operates in three business segments–Personal and Commercial, Wealth Management and Financial Markets – with total assets of $216 billion as at July 31, 2015.
Since 2011, National Bank has been in the habit of increasing their quarterly dividend twice a year with the two most recent announcements increases from $0.48 to $0.50 and then to $0.52. This amounts to an annual increase of 8.3%. As they have already recorded two $0.52 dividends, I’d guess that the next dividend will be higher. If I was a betting man, my guess would be $0.54 as a two cent raise has been their recent trend. A two cent raise would also leave them in their payout ratio target of 40-50%.
National Bank has increased its dividend for 5 consecutive calendar years and currently yields 4.9%. They have 5 and 10 year dividend growth rates of 9.1% and 9.8% respectively. I’d expect similar dividend growth rates in the future. When I last looked at Valueline a couple of months ago they were estimating a 3-5 year annual dividend growth rate of 8.5%. I’d classify this as high yield high dividend growth stock which is the sweet spot of dividend growth investing.
You can see from the credit ratings below that the company has good financial strength. Valueline gave them a B++ for financial strength rating which is good, but not great.
I start to get interested in investing in National Bank of Canada around a dividend yield of 4.9%. This should be no surprise as my recent purchase resulted in a yield on cost of 4.9%.
Exxon Mobil Corporation
On Friday August 21, 2015 I purchased Exxon Mobil Corporation [NYSE:XOM Trend] for $73.26 plus the commission. This was the second purchase of Exxon Mobil as I averaged down from my initial purchase at $83.
Related article: Portfolio Update: Exxon Mobil Corp. Purchased
Exxon Mobil Corporation has an impressive dividend streak having increased its dividend for 33 years in a row. Their most recent increase was 5.8%. When you consider the oil and gas industry has been hurting, the recent increase is also impressive. To give you some perspective, Chevron [NYSE:CVX Trend]; another dividend aristocrat (25 or more years of increases), did not increase their dividend when a full year came around and instead kept it steady.
Their 5 and 10 year average annual dividend growth rates are 10.2% and 9.8%. Valueline is estimating that over the next 3 to 5 years dividend growth will be about 5% annually. They have very good financial strength with an A++ financial strength rating from Valueline.
The company currently offers a dividend yield of 4.0% which is historically quite high for the company as you can see from the chart below.
I start to get interested in investing around the 3.5% dividend yield mark.
This article just discusses the stocks I purchased on August 21, 2015, but on a particularly volatile Monday August 24, 2015 I purchased another three stocks: Bank of Nova Scotia [TSE:BNS Trend], Caterpillar [NYSE:CAT Trend] and Emerson Electric [NYSE:EMR Trend]. I purchased Bank of Nova Scotia for $55.04 plus commission, Caterpillar for $72.00 plus commission, and Emerson Electric for $45.12 plus commission. More recently I purchased Potash Corporation of Saskatchewan for $28.00 after commission on September 25, 2015. Keep an eye out as I’ll be going over these purchases in more detail in future articles.
What do you think of my purchases of National Bank of Canada and Exxon Mobil Corporation?
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