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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. My main goal is financial freedom. I plan to achieve this goal by investing in quality dividend growth stocks and using the dividend payments to cover my expenses.

Today (January 15, 2014), I sold my shares of Sun Life Financial (Trend Analysis) for $38.15. With the $5 commission my average selling price was $38.10. I first purchased these shares on September 12, 2011 for an average price of $24.01. The total gain without dividends works out to 58.7% and my annual return without dividends is 21.9% CAGR. When you consider that my yield on cost was 6% this is a pretty decent return. Overall I’m happy with the investment.

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Why did I sell?

I’m a dividend growth investor and Sun Life Financial hasn’t increased their dividend in 6 years. Before selling I tried to figure out if dividend growth was expected soon. I came to the conclusion that it’s unlikely that Sun Life Financial will increase their dividend over the next few years.

Related Article: Hey Sun Life, Where’s My Dividend Growth?

I’m trying to achieve 8% annual dividend growth over the long term, so a stock like Sun Life doesn’t really belong in my portfolio. With its stalled dividend growth likely to continue and the recent run up in price I took this as a good opportunity to sell.

I’ve gone over the conditions in which I’d sell a stock before, and one of those considerations was stalled dividend growth. Hence, the main reason I’m selling.

Related Article: In What Conditions Would I Consider Selling A Stock?

Another reason that I decided to sell, was the recently run up price. My selling price is 0.5% off of the 52 week high of $38.35. If you look at the stock price over the past 5 years it is very close to the 5 year high stock price too. Just because you have a stock close to a 52 week high isn’t a reason to sell a stock, but it was an indication to me that the shares are getting overvalued. This was confirmed by Morningstar’s 2 out of 5 star rating and their fair value estimate of $31. At today’s prices Sun Life is over 20% above Morningstar’s estimated fair value. With the markets heating up recently I took it as a good time to unload a company that didn’t really fit my investing strategy. When markets are up it can be a good time to sell stocks that no longer fit with your overall plan.

I had a look at the trend analysis report for Sun Life and it indicated a strong uptrend, which would suggest I’m leaving some money on the table. While this may be the case I believe that Sun Life is over valued and I put more weight in the fundamental analysis versus a trend analysis.

Lessons learned

When I bought Sun Life Financial in 2011 my dividend growth strategy wasn’t as honed as it is now. I bought shares because I was enticed by the high yield (6% at the time) and what I thought was a cheap price. The investment has turned out well, but if I could go back in time, I don’t think I would have purchased Sun Life knowing what I know now. My strategy has evolved since then, and I’m more focused on dividend growth. This strategy will serve me better especially when you consider that I’m relatively young (mid to late 20s) and I’m in the accumulation stage of my investing life. Dividend growth stocks have compounding effects over a long period of time. If you are invested in stocks that aren’t increasing their dividend you can miss out on these powerful effects.

If I look back at when I purchased Sun Life I would say that yes the shares were undervalued, being that they increased 58.7%, but there were other better dividend growth candidates out there that I could have purchased. I find as the more time passes the number of companies that I’m willing to invest in decreases. This is because I’m looking to buy companies that once I purchase, I won’t have to sell. I want to invest in companies that have a sustainable competitive advantage that allows them to pay increasing dividends over a long period of time. This only leaves you with a limited number of great companies to pick from. Add to the fact that I want a cheap valuation, and it gets difficult to find a company to invest in.

Waiting for a great company to go out of favor can take years. Patience; therefore, is a key part of my investing strategy. I like buying stocks; I get a euphoric rush from investing similar to the rush a gambler gets. This makes patience even more difficult, as I’m always resisting the urge to buy more stocks. I’ve found over time it’s become easier to resist this urge. I’m making better more informed decisions. Developing my watch list with target buy prices really helped as it takes a lot of the emotion out of the decision.

It usually takes losing some money to learn valuable lessons. This time around I was able to learn from my mistakes and make some money.

Readers: Do you have any hard lessons learned?

 

Photo credit: Hinode JAXA/NASA / Foter.com / Public domain

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18 Comments

  1. Should I sell SLF now as I got 500 shares for free in 2000 which soared to US$57.37 before crashing to $12.29.
    Presently struggling along and crawling up to $35.15 which leaves me sitting on $17,575

  2. First off thank you for the Canadian Dividend All-Stars list. I use it to whittle down the list of Canadian stocks I want and it saves me a load of time having to come up with all that stuff manually. You Rock!

    Now to the questions:

    It doesn’t look like you have bought a single stock since July ’13 , 6 months ago, when you bought some Potash. Are you just building up cash until you get your price?

    Also your watch list seems short at 13 stocks. I am surprised that some very good companies aren’t on there like Coca-Cola , Procter and Gamble, Colgate-Palmolive and Exxon. Yet Rogers, with its relatively brief decade long dividend streak, is there. What is the criteria for a company to get on your watch list?

    1. You are correct, the last stock I bought was Potash. My stock prices are pretty conservative, so a lot of the time I am just saving up cash before I purchase. Having a lot of cash usually bugs me, because I like to have it invested where it can make more than the 1.8% I’m currently getting from my savings account. My fiancé has been working temp jobs and only recently started her new full time job after returning from our year of travelling. We also have a wedding to pay for coming up, so I haven’t minded the elevated cash levels.

      The watch list I use for my investing decisions is quite a bit longer. It includes the companies you mentioned and a bunch more. I don’t want to add companies to the watch list until I’ve completed a dividend stock analysis, so readers can understand why they are on the list and how I came up with the target prices. It takes me quite a while to complete a dividend stock analysis, so the list isn’t very long yet. As time passes the list will get longer.

  3. “bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past” –Charlie Munger

  4. Thanks for that, but I don’t have any other shares as these were given to me years ago when SLF “privatised” I think.
    I suppose I’ll just have to console myself with $720 a year in dividends for something I received for nothing and wait for SLF to get back above $50 giving me a minimum $25000.

  5. “if I could go back in time, I don’t think I would have purchased Sun Life knowing what I know now.”
    – 21% CAGR and you wouldn’t do it again? You made how many years of income from dividends on that trade?

    Notwithstanding the fact that you gained nearly 50% in 3 years, I don’t really understand why you bought it in the first place if it hadn’t increased its dividend in 3 years? For my dividend portfolio I love the dividend champion list but that is only US based.

    1. My investing strategy wasn’t as focused on dividend growth when I first purchased Sunlife. This was more the point I was trying to make. Because they hadn’t increased their dividend in 3 years and it was unlikely that they’d start increases soon, I wouldn’t have invested knowing what I know now. My investing knowledge has grown since then, so I won’t be investing in non dividend growth companies. Also while the returns were good, there were still better options out there at the time that also had dividend growth.

      If you haven’t already, you should check out the Canadian Dividend All-Star List. The list is like the US Dividend Champion list, but for Canadian companies. It covers Canadian companies that have increased their dividend for 5 or more consecutive years in a row.

      1. I misunderstood – your rationale makes a lot more sense. It seemed more like you were unhappy despite your 50% gains just b/c you lost a few dollars on the dividend increase.

        I don’t own any Canadian stocks, but will absolutely take a look at your list. I wonder if I receive qualified dividend status (i.e. lower tax rate) on Canadian traded stocks?

    1. I use Questrade’s democratic pricing plan. The per share commission is a cent per share with a $4.95 minimum and a $9.95 maximum. To sell 500 shares it would be $5 (500 x $0.01). If you interested in signing up or finding out more information check this link out: Questrade

  6. I am also considering selling my Sun Life – zero dividend growth. First I’m going to get them away from my full-service broker and register in my name (I know, big mistake 15 years ago). I refuse to pay him almost 3% just to sell them for me.
    Does anyone know what the cost is if you’re enrolled in the Sun Life DRIP and sell through them? Their website mentions a commission but no indication of the amount or %.

  7. HI,

    Why is MCAN Mortgages on your all-star list? in 2011 their dividend was 1.80, 2012 – 1. 36, and 2013 – 1.15

    “The Canadian Dividend All-Star List is comprised of Canadian companies that have increased their dividend for 5 or more calendar years in a row. ”

    Also, is it noted on your list that the dividend is an “interest” dividend?
    Just looking for some clarity here.

  8. HI,

    I found your answer in another forum from the all-star list:

    The company pays out a regular dividend and then once a year they have an special dividend that is usually recorded on top of the regular dividend. The special dividend fluctuates from year to year which is why the totals fluctuate. My list ignores the special dividends. I used old annual reports on sedar.com to determine the streak. The website doesn’t have the entire dividend history shown.

    But another question I had – do you base the dividends per year on the record date, or the payout date. If you base it on the record date, then MCAN should have fallen off the list back in 2011. Just curious.

    1. I use the record date to determine streaks. Take a look at the dividend history for MCAN here: http://performance.morningstar.com/stock/performance-return.action?p=dividend_split_page&region=CAN&t=mkp and you’ll see that the streak is still intact. In 2010 they had $1.04 ($0.26 x 4) in regular dividend payments, in 2011 they had $1.08 ($0.27 x 4) in regular dividends, and in 2012 they had a regular dividend payment of $1.09 ($0.26 x 3, plus $0.27).

      Cheers,

      DGI&R

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