Managing an investment portfolio can be time-consuming and frustrating for many people. That’s why many seek professional help in choosing their securities and asset allocation.
The Buy and Hold Portfolio I created for readers of my Internet Wealth Builder newsletter was designed for those investors who prefer to do it themselves and save advisor fees. You don’t have to do much with it, just keep an eye on it to make sure one or more of your holdings doesn’t go rogue.
The portfolio was launched 14 years ago, in June 2012. The idea was to invest in high-quality stocks, with the intention of holding them through bull and bear markets. The core premise was that the long-term trend of the markets is up and if you own good stocks, they’ll move with it.
The portfolio consists mainly of Canadian and U.S. blue-chip stocks that offer long-term growth potential. It also has a bond ETF holding. The original weighting was 10 per cent for each stock with the bond ETF starting with a 20 per cent position. That has now been reduced because equity increases have outpaced the bond market.
I used several criteria to choose the stocks. These included a superior long-term growth profile, industry leadership, a good balance sheet, a history of dividend increases, and relative strength in down markets.
The objective is to generate decent cash flow (all the stocks pay dividends), minimize downside potential, and provide slow but steady growth. The target rate of return was originally set at 8 per cent annually.
These are the securities we hold with comments on how they performed since my last review in November. Prices are as of the close on Aug. 12.
iShares Canadian Universe Bond Index ETF (XBB-T). The unit price is down $0.70 since our last review as investors worry about inflation and its impact on bonds. We received monthly distributions that totalled 72.3 cents per unit, so effectively we broke even during the period.
BCE Inc. (BCE-T). The stock is faltering again with the shares down 57 cents since the last review. Fortunately, that was more than offset by three dividend payments during the period for a total of $1.3125 per share.
Brookfield Corp. (BN-T). The shares slipped by $3.37 in the latest period. Because of timing we received three dividend payments, but they were small, totalling 27.7 cents per share.
Proctor & Gamble Co. (PG-N). P&G offers a steady business profile, a decent dividend, and long-term growth. But the shares slipped $4.17 in the latest period. We received three dividends for a total of $3.235 per share.
Canadian National Railway Co. (CNR-T). CN shares ended their long slide, gaining $44.90 in the latest period, as worries about the strength of the Canadian economy faded. The company raised its dividend in March, and we received three payments totalling $2.72 per share.
Enbridge Inc. (ENB-T). Enbridge shares posted another decent gain, up $4.32 for the period. We received two quarterly dividends for a total of $1.94 per share.
Royal Bank of Canada (RY-T). Bank stocks have soared in recent months. RBC is among the top performers, gaining $82.15 in the period under review. We received three dividend payments for a total of $5.04 per share.
Alphabet Inc. (GOOGL-Q). The tech sector is losing momentum as investors worry about the massive costs of AI, but Alphabet is holding up well. The shares are ahead US$23.59 since our last review. The company pays a small dividend of 22 US cents per quarter.
UnitedHealth Group Inc. (UNH-N). After a deep dive early this year which saw the stock drop to the US$256 range, it has staged a strong recovery. The shares are up US$75.88 during the latest period plus the quarterly dividend was increased by 11 US cents per share in June to US$2.32 per share. We received three dividend payments for a total of US$6.74 per share during the review period.
Walmart Inc. (WMT-N). The giant retailer saw its shares gain US$6.91 in the latest period and raised its dividend in March. We received three dividend payments totalling 73 US cents per share.
Cash. The portfolio had cash and retained earnings of $4,530.64 at the time of the last review. We moved the money to Steinbach Credit Union, which was offering a promo rate of 4.6 per cent for four months. We earned $69.40.
Here is the status of the portfolio as of Aug. 12. The Canadian and U.S. dollars are shown at par, but obviously the U.S. holdings are doing better thanks to the strength of the greenback. Trading commissions are not factored in, although in a buy and hold portfolio they are not significant.
Comments: The new portfolio value (market price plus retained dividends/distributions) is $253,070.42. That compares to $229,454.89 at the time of the last review, for a gain of 10.3 per cent.
The big winners during the period were CNR, Royal Bank, UnitedHealth, and Alphabet. None of our securities took a major hit.
Since inception, we have a total return of 406.7 per cent. That represents an average annual compound growth rate over 14 years of 12.5 per cent. That is well ahead of our 8 per cent target.
Changes: This is a Buy and Hold Portfolio so we should always resist making changes. However, I am not happy with the performance or the prospects for BCE. Despite a huge dividend cut last year, the shares continue to stumble along in a range of $30-$35. BCE is not alone; most telecoms are trading at depressed prices, hit by high capital costs and the threat of disruptive new communications options like Starlink.
Accordingly, I have decided to say goodbye to BCE. We’ll sell our shares for $8,057.50. With retained earnings of $460.36, we have a total of $8,517.86 to reinvest.
We’ll use the money to buy 140 shares of Manulife Financial Corp. (MFC-T) at $61.06. The total cost is $8,548.40 so we will take $30.54 from cash to make up the difference.
We will also add to our position in Enbridge by buying 10 shares at $71.74 for an outlay of $717.40. We now own 260 shares and have $65.24 left in retained earnings.
And we will purchase another 20 units of XBB for $554.20. That gives us a total of 590 units and reduces retained earnings to $61.91.
The portfolio has cash and retained earnings of $5,042.52. We’ll move the money to Oaken Financial, which is offering a rate of 2.8 per cent and has CDIC coverage.
Here is the revised portfolio. I will update it again in December.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.