We started 2016 with a friendly stock picking contest, which means that it’s high time to look at the results – and to issue a new challenge for 2017.
Last year’s challenge was to build a fantasy portfolio using the 10 Canadian dividend paying stocks in the Safer Canadian Dogs list. Each fantasy portfolio started out with an equal amount of money in each stock and each contestant had to pick one stock to sell and one stock to buy. After making that fateful choice, each fantasy portfolio was fixed for the year with $20,000 in the favourite stock, nothing in the one that was sold, and $10,000 in each of the remaining eight. The best performing portfolio was the winner.
You can see how each of last year’s stocks fared in the table below. The 2016 contest ran from January 8, 2016 to December 31, 2016 and the table shows results for that period.
|The Safer Canadian Dogs for 2016|
|National Bank (NA)||47.27%|
|Bank of Nova Scotia (BNS)||43.06%|
|Bank of Montreal (BMO)||36.94%|
|Royal Bank (RY)||35.21%|
|Power Corp (POW)||13.88%|
|Data Source: Bloomberg|
The best performer was National Bank which chalked up a 47.3% total return (including reinvested dividends) while the worst showing came from BCE with a 12.1% total return. But, on average, it was a pretty good period for the Safer Dogs of the TSX, which provided average total returns of 30.3%. By way of comparison, the market, as represented by the S&P/TSX Composite index, trailed the Safer Dogs with gains of 26.5%.
I’ve been going over the contest entries from last year and no one got it quite right by buying National Bank and selling BCE. But Barbara fared the best by buying TransCanada and selling BCE. Congratulations Barbara!
A New Contest for 2017
As we head into 2017 it’s time reboot the contest. This year the rules are the same as last year but the list of stocks has changed to reflect this year’s Safer Canadian Dogs.
The list for 2017 is composed of: the Bank of Nova Scotia (BNS), BCE (BCE), CIBC (CM), Emera (EMA), Fortis (FTS), National Bank (NA), Power (POW), Rogers (RCI.B), Shaw (SJR.B), and TELUS (T). You can find additional data on each stock in the table in the following section.
Which dividend stock would you move money from and which one would you move it to? When you come to a decision, enter the contest by sending an email with the stock you want to “buy” and the one you want to “sell” to firstname.lastname@example.org.
To be eligible for the prize, your email has to be delivered before Monday, January 9, 2017 and, please, only one entry per person. The person with the fantasy portfolio that gains the most from the close of Friday, January 6, 2017 through to the end of the 2017 will be sent a modest mystery reward.
(If there is a tie, the winner will be determined by random draw. The winner will be contacted early in 2018 via email. If they don’t respond within two weeks, the prize will go to the next runner up under the same conditions. I reserve the right to make changes to the contest to preserve its integrity and lighthearted nature.)
Put your thinking cap on and pick a winner, and a loser, for 2017.
Safer Canadian Dogs
Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.
The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.
My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.
Here’s the updated Safer Dogs of the TSX, representing the top yielders as of December 31. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase – barring some calamity.
|Name||Price||P/B||P/E||Earnings Yield||Dividend Yield|
|National Bank (NA)||$54.53||1.91||16.47||6.07%||4.11%|
|Bank of Nova Scotia (BNS)||$74.76||1.71||12.87||7.77%||3.96%|
Source: Bloomberg, December 31, 2016
Price: Closing price per share
P/B: Price to Book Value Ratio
P/E: Price to Earnings Ratio
Earnings Yield: Earnings divided by Price, expressed as a percentage
Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage
As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)