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Looking to Diversify

The Situation:

As some of you might have noticed in my dividend updates, I receive most of my dividends from one source. This source if Financial 15 (FTN). FTN currently represents about 30% of my TFSA and 87% of my RRSP. Yeah, 87%! This is the result of a big FTN transfer I’ve made recently from my TFSA to my newly opened RRSP. So, for a short while there, FTN actually made up 100% of my RRSP.

In the weeks following my transfer, I added funds and made some new purchases. My RRSP currently holds 5 stocks, 2 of which are common to both my RRSP and TFSA (SIS and FTN).

As my side income is creeping in, and piling up in my RRSP, it’s again slowly approaching an amount at which I’m willing to make a purchase (around $500).

But what? Do I add to my existing purchases? Initiate a new position?

Let’s look at some of my current options in terms of potentially interesting (to me) positions to initiate.

Stocks I’m keeping an eye on:

Black_Eye_Scope

(in no particular order)

Alimentation Couche-Tard Inc (ATD.B)

Description: Alimentation Couche Tard Inc is a Canada-based company, which is engaged in the convenience store industry. It focuses on the sale of goods for immediate consumption, road transportation fuel and other products through stores and franchise operations. It operates its convenience store and road transportation fuel retailing chain under several banners, including Circle K, Couche-Tard, Mac’s, Kangaroo Express, Statoil, Ingo, Topaz and Re.Store. The Company focuses on various categories, including merchandise and services, road transportation fuel and other.

  • PPS: $60.53
  • P/E: 22.4x
  • Dividend: $0.09 Quarterly
  • Yield: 0.59%
  • Payout Ratio: 17%
  • 10 year Div Growth Rate: 24.5% (wow)
  • 5/10 Ratio: 1.3
  • Beta: -0.8
  • DRIP Eligible: Yes
  • DRIP Discount: n/a
  • Div YoC in 10 yrs (if current trend maintains): 5.3% (that’s why the current low yield is nothing too too worrisome)

Opinion: They have been very active in terms of expansion, particularly in Europe. They have plans to push through to Asia. They are quite enthusiastic about eventually selling marijuana and derivative products. One thing you can’t buy online is petrol. The low yield is compensated by the value potential and the favourable Div growth and payout ratio!

Jean Coutu Group PJC Inc (PJC.A)

Description: The Jean Coutu Group (PJC) Inc. is a Canada-based company, which is engaged in franchising pharmacy chains. The Company operates through two segments: franchising and generic drugs. Within the franchising segment, the Company carries on the franchising activity under the banners of PJC Jean Coutu, PJC Clinique, PJC Jean Coutu Sante and PJC Jean Coutu Sante Beaute; operates approximately two distribution centers, and coordinates various other services for its franchisees. In the generic drugs segment, the Company owns Pro Doc Ltd, a Canadian manufacturer of generic drugs whose revenues come from the sale of generic drugs to wholesalers and pharmacists. The Company has approximately 420 PJC franchised stores in Quebec, Ontario and New Brunswick.

  • PPS: $23.10
  • P/E: 21.8x
  • Dividend: $0.13 Quarterly
  • Yield: 2.25%
  • Payout Ratio: 49%
  • 10 year Div Growth Rate: 14.6%
  • 5/10 Ratio: 1.0
  • Beta: -0.04
  • DRIP Eligible: Yes
  • DRIP Discount: n/a
  • Div YoC in 10 yrs (if current trend maintains): 8.7%

Opinion: Sales per store have been increasing steadily. If they can take advantage of the online aspect that is inevitably taking the world over, they could be in a seriously good position. Recession or not, people need their meds.

Saputo Inc (SAP)

Description: Saputo Inc. produces, markets and distributes dairy products, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. The Company has three geographic sectors. The Canada Sector consists of Dairy Division (Canada). The USA Sector aggregates the Cheese Division (USA) and the Dairy Foods Division (USA). The International Sector combines the Dairy Division (Argentina), the Dairy Ingredients Division and the Dairy Division (Australia). The Dairy Ingredients Division includes national and export ingredients sales from the North American divisions, as well as cheese exports from these same divisions. The Company’s products are sold under brand names, such as Saputo, Alexis de Portneuf, Armstrong, COON, Cracker Barrel, Dairyland, DairyStar, Friendship Dairies, Frigo Cheese Heads, La Paulina, Milk2Go/Lait’s Go, Neilson, Nutrilait, Scotsburn, Stella, Sungold, Treasure Cave and Woolwich Dairy.

  • PPS: $43.36
  • P/E: 22.8x
  • Dividend: $0.16 Quarterly
  • Yield: 1.48%
  • Payout Ratio: 33.5%
  • 10 year Div Growth Rate: 14.3%
  • 5/10 Ratio: 1.0
  • Beta: 0.73
  • DRIP Eligible: Yes
  • DRIP Discount: n/a
  • Div YoC in 10 yrs (if current trend maintains): 5.6%

Opinion: Active in acquisitions and expansions. Asian presence. Highly diverse set of products and brand names. Sort of the Canadian Nestle? Assets are increasing rapidly while Liabilities are decreasing.

Metro Inc (MRU)

Description: METRO INC. is engaged in food and pharmaceutical distribution. The Company operates under various grocery banners in the supermarket and discount segments. The Company operates or supplies a network of over 940 food stores under various banners, including Metro, Metro Plus, Super C, Food Basics, Adonis and Premiere Moisson, as well as approximately 260 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners.

  • PPS: $40.05
  • P/E: 16.0x
  • Dividend: $0.1625 Quarterly
  • Yield: 1.62%
  • Payout Ratio: 25.9%
  • 10 year Div Growth Rate: 15%
  • 5/10 Ratio: 1.2
  • Beta: -0.10
  • DRIP Eligible: Yes
  • DRIP Discount: n/a
  • Div YoC in 10 yrs (if current trend maintains): 6.6%

Opinion: Exposure to pharmaceuticals make this less risky than purely groceries. Recession resistant. Earnings are moving along well but liabilities are following the trend.

Conclusion:

Not an easy choice.

I have to admit that I’m leaning a little more towards SAP for their balance sheet and ATD for their active growth and  presence in Asia. At this point, ATD would be more of a value play but would eventually become a dividend growth play as made clear by the projected 10 yr YoC. While SAP or ATD could very well be my next purchases, I think I would eventually like to hold a long (I’m talking 30+ years) position in all of these well-run companies.

My current ranking in order of preference could go a little something like this:

  1. ATD.B (strong European and Asian presence, attractive financials, great div growth/payout ratio)
  2. SAP (staple products and extremely attractive financials)
  3. MRU (has exposure to pharma as well, which is nice. they are currently setting up and testing online/delivery services in a few regions)
  4. PJC.A (pure pharmacy retail scares me a little and a lot rests on their initiative to move into an online mode, time will tell)

Let me know what you think! Which of these are you holding? Which of these did you currently have in your sight?

Cheers,

DI

Info from: RBC website and Canadian Dividend All-Star List on the 21st Sept 2017

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Dividend Investor View All

Money Lover, Dividend Growth Investor, Youtuber, and Blogger!

7 thoughts on “Looking to Diversify Leave a comment

  1. I own SAP so yeah i like it. I had EMP.A and sold after last weeks pop too competitive a space. Nice touch on SIS. Look at ZCL, IPL, ADW>A, VCI and CCL.B all liked by Peter Hodson. Best to you..

    Like

  2. I’m following you because you made some excellent vids (imho) on the basic stuff concerning dividend stocks.
    I started out early this year buying stocks. I’m a member of Dividend Stock Rocks and Sure Dividend – Retirement. I lack the time to investigate but did use the time to read/watch (like your vids) the basics to get a grasp of what they are talking about.
    I got 17 years upon retirement so I like to pick some stocks that have a bit more dividend yield than most Aristocrats.
    One of the reasons I also bought FTN and is currently my biggest within my portfolio. Only could buy 100 shares instead of the amount of $500 I use for buying stocks. Thanks for the tip!
    My list:
    NasdaqGS:GLAD
    NYSE:ETP
    NYSE:VLO
    NYSE:RDS.A
    NYSE:WDR
    NYSE:TGT
    NSYE:O
    NYSE:TU
    NYSE:SPH
    NYSE:NNN
    NasdaqGS:QCOM
    NYSE:T
    NYSE:NRZ
    NYSE:ABR
    NYSE:APU
    NYSE:GAIN
    AMEX:GGN
    NYSE:OHI
    NYSE:GEL
    NYSE:WPC
    NasdaqGS:SNH
    NYSE:VZ (used to have them, sold them on a signal for a possible split. They didn’t)

    I hope this will give you some new possibilities.
    kind regards,
    Tom

    Like

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