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By Dale Roberts, cutthecrapinvesting
Special to the Financial Independence Hub
In this post I’ll offer up charts on our U.S. stock portfolio and the Canadian stock portfolio. And I’ll put them together so that we can see how they work together. The total portfolio was designed to be retirement-ready. The fact that it beats the market benchmarks is a welcome surprise. At the core of the portfolio is wonderful Canadian dividend payers – the U.S. stocks fill in some portfolio holes. Let’s have a look at our U.S. and Canadian stock portfolio.
I recently received requests to share our U.S. stock portfolio holdings. While I often track that portfolio on Seeking Alpha (the land of stock pickers) that’s not a regular event on this blog. I have certainly shared the Canadian Wide Moat Portfolio on Cut The Crap Investing.
On Seeking Alpha, here is our U.S. stock portfolio. The post may be paywalled for those who have exceeded the 3 free reads on Seeking Alpha. Again, that’s why I will share some details here. But keep in mind, this is not advice. But you may be on the receiving end of some ‘good’ lessons on building the simple stock portfolio.
Skimming the dividend achievers index
In early 2015 I skimmed 15 of the largest-cap dividend achievers. What does skim mean? After extensive research into the portfolio “idea” I simply bought 15 of the largest cap dividend achievers. For more info on the index, have a look at the U.S. Dividend Apprecation Index ETF (VGG.TO) from Vanguard Canada. At the core is a meaningful dividend growth history working in concert with financial health screens. It leads to a high quality skew.
You will find that index ETF in the ETF portfolio for retirees post.
At Questrade you can buy ETFs for free.
I won’t get too deep into the methodology and how and why I constructed our portfolio in this post. I will offer more details in a post next week. Today, I will just get to the fun stuff – the holdings and the return charts and tables.
The U.S. Dividend Achievers
The 15 companies that I purchased in early 2015 are 3M (MMM), PepsiCo (PEP), CVS Health Corporation (CVS), Walmart (WMT), Johnson & Johnson (JNJ), Qualcomm (QCOM), United Technologies, Lowe’s (LOW), Walgreens Boots Alliance (WBA), Medtronic (MDT), Nike (NKE), Abbott Labs (ABT), Colgate-Palmolive (CL), Texas Instruments (TXN) and Microsoft (MSFT).
United Technologies merged with Raytheon (RTX) and then spun off Carrier Global Corporation (CARR) and Otis Worldwide (OTIS). We continue to hold all three and they have been wonderful additions to the portfolio.
Previous to 2015 we had three picks by way of Apple (AAPL), BlackRock (BLK) and Berkshire Hathaway (BRK.B). In total it is a portfolio of 20 U.S. stocks.
The returns from 2015
Here’s the total return history from 2015 to end of September 2022. All charts and tables are courtesy of portfoliovisualizer.com. That’s a very good free service.
I have included our seven Canadian Wide Moat stocks. While we are closer to a 60% U.S. to 40% Canadian weighting, I’ve split it down the middle at 50/50 for argument’s sake in this evaluation. The U.S. stock picks are overweight as well – double the weighting of the dividend achievers skims.
I have added Canadian high-dividend stocks as a benchmark. For that I’ve used Vanguard High Dividend VDY. Looking at that benchmark, Canadian investors can get a sense of what they are giving up thanks to any Canadian home bias.
Related post: Living off the dividends? Don’t sell yourself short.
The annual returns table …
- For the period U.S. stocks (S&P 500) delivered 9.33% annual.
- Canadian stocks (XIC.TO) offered 6.12% annual.
Our U.S. stocks and Canadian stocks both beat the market. The total portfolio offered much less drawdown (decline) thanks to the all-weather portfolio construction. Also, our returns are much more favourable than shown as we have oil and gas stocks that have contributed greatly over the last year and more. Energy stocks are up over 60% over the last year. Those energy stocks are not included in the evaluation and charts.
All-weather stocks, less bonds
Thanks to the all-weather nature of the stock selection, one might consider using less bonds in retirement. Also, the defensive dividend payers (think telcos, utilities, pipelines, staples, healthcare) can work as bond proxies.
Given that I am in semi-retirement and my wife will likely retire within the next 5 years, we do hold bonds and cash. I will give more detail on that in an upcoming post that will look at our asset allocation and how things might shape up and play out in retirement.
Dale Roberts is the owner operator of the Cut The Crap Investing blog, and a columnist for MoneySense. This blog originally appeared on Cut the Crap Investing on Oct. 9, 2022 and is republished on the Hub with permission.
