In 2017 it makes sense to favor Yield over growth

After 8 years of recovery in the stock market, we stand at a valuation that’s over the historical average. see below graph

Unless we experience the same 2000 style buble, in terms of P/E ratio I don’t think there is much fuel left for growth stocks in general, of course you always have exceptions like Facebook, amazon and few others that seems to always find a way to be worth more everyday. But if you’re managing your own dividend stocks portfolio, I think it’s time to get more defensive and load up on stocks like DUK, SO, PG, D, to secure your 3 to 4 % yield and avoid getting slapped to hard on the next bear market.

It used to be easy to do a rotation back to Bonds, but yields are barely matching inflation which makes no sense to park your money there.

500

 

Of course there is a but….. If you look at the graph below we could be looking at a 3 year old secular bull market that could last another 10 to 15 years. Time will tell.

hypothese-1

Be well & get Wealthy

SOLD AT&T & BOUGHT CVS

Sometimes it makes sense to cash in some capital gain and reinvest in another opportunity. And so this is what I did. I sold AT&T

at &t

not because it’s a bad investment but I cashed in 420$ of capital gain which would take me around 5 years to receive from the company. ( 50 shares at 49cents a share/quarter). With the proceeds I bought 27 shares of CVS

CVS

I believe this stock has been oversold lately, I am happy to get in to this type of valuation. This company has a very strong dividend growth track record and has a payout ratio of only 30%. The economies of scale and the moat of this company have not been damaged for the long run.

So the 2 main Reasons for this Trade are:

  1. Expected dividend raise from CVS in the coming years is much higher. Most likely 10 to 15% a year VS At&t Raise of 1 to 2 %.
  2. I believe valuation of CVS at 79$ a share is a lot more attractive than At&t, which would eventually bring a better total return in the long run.

Be well & get wealthy

SOLD CVX & BOUGHT WBA & ENB

JUST UPDATING MY LATEST PORTFOLIO ADJUSTMENTS.

I sold 25 shares of CVX, chevron corp. As I mentioned previously, I don’t see the price of oil going up by much, and that’s going to affect the dividend raise chevron can give to their shareholders.

Image result for cvx logo

 

 

 

 

I bought 50 shares of ENB enbridge corp. Since the merger of ENB and Spectra energy, I believe the new entity gained traction in terms of economic moat, and will be able to do really well in raising the dividend by an estimated 10 to 12% on a yearly basis.

Image result for enbridge logo

I also bought 11 shares of WBA, Walgreen boots alliance. I think this company is undervalued in purely technical terms. With an estimated 150 billion$ in revenue the stock trades at 0.6 times future sales. clearly this is too cheap for based on its growth and it’s current valuation history.

Image result for walgreens boots alliance new logo

 

Doing 23.6% annually since 2013

I am very proud of the total return on my investments I have been able to achieve so far.

I don’t count my son’s education fund because this money will fund his tuition not my retirement ūüôā

As you can see below My TFSA is at 29.82% & my RRSP at 19.92% since inception.

total return

So far I am averaging 23.6% a year since 2013. Which I believe is really fantastic, At this pace I can reach my goal of 800 000$ target in 7 years and be FINANCIALLY INDEPENDANT!!

 

Apple stock’s 20% annual return

Today I am sharing key metrics for this cash machine that is Apple computers as a business. These are observed facts and I had to check them several times on the internet to make sure of the accuracy. Sometimes the market gives you the opportunity to buy a Porsche for the price of a Toyota corolla, ¬†unfortunately there is so much noise in the media that most people can’t focus on what’s very important when owning a business.

That is FREE CASH FLOW GENERATION.  

First I wanted to share this graph that shows how dominant this company is in terms of revenues. You have to basically add all those big tech companies to come up to what Apple is making.

APPL REVNUE

now let’s look at FREE CASH FLOW GENERATION¬†

You’re looking at a company that makes 138 millions $ of PROFITS EVERY DAY OF THE YEAR

fcf apple

see below to compare

other guys

 

Now let’s look at the current payout ratio of the dividend which the % of profits Apple pays in dividends. As you can see the company can easily grow dividend payout to shareholders for the coming years no problem. I would say by at least 10% yearly. Can you find a safer dividend growth stock at current valuations?

div growth

Now let’s look at the dividend growth since 2013, as you can see free cash flow plays a big role in outpacing other less profitable companies.¬†

growth of the dividend

The cherry on the sunday is that the comany ability to create this free cash flow will eventually go towards buybacks. If the company buy 4% of its shares on average for the next 10 years the outstanding shares will drop by 40%

NOW WE’RE READY TO GIVE YOU WHAT WILL HAPPEN AT THIS PACE OF WORLD CLASS BUSINESS EXECUTION.

YOU’RE LOOKING AT A TOTAL RETURN OF : current ¬†Dividend yield + dividend growth rate * share buybacks ratio = ¬†1.6% + 10% * 1.4 = 16.24% yearly return. I believe Capital gain can bring it to 20% annually.

 

 

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