Hello, folks! It’s been a while since my last post, but the beauty of investing in dividend growth companies is that we can take our time to review their performance, guidance and how it fits into our portfolio, according our goals and risk tolerance.
The watchlist update will be good for the remainder of 2024 and valid for 2025. My approach to quality and valuation hasn’t changed, so the updated list is about “what” to buy, while valuation can guide us “when” to buy (or not to buy if overvalued).
Canadian portfolio:
I am removing the following companies from my portfolio:
Allied Properties (AP.UN): Business performance peaked a few years ago, and there are no estimates to improve it; high debt, high vacancy rate means current dividend is in jeopardy. I am not aligned with the risks that they are currently exposed to, so I sold it.
Transalta Renewables (RNW): Removing it since it was acquired by Transalta and delisted from TSX. Transalta (TA) doesn’t meet my objectives, so I won’t be investing on them.
Canadian Wester Bank (CWB): Removing it since it was acquired by National Bank and delisted from TSX.
From a valuation perspective, I am adding the companies on my watchlist that are fairly valued (or undervalued) and estimated to grow in the long term: ENB, FTT, CTC.A, EQB, IAG, TD, BNS and ACO.X. The process to screen and rank them is now automated using most of the metrics that I employ on the automated trading models, but below are the FastGraphs snapshot as a initial point of research for valuation for these companies:
US portfolio:
I am removing the following companies from my portfolio:
VF Corp (VFC): Business performance has been deteriorating since 2020 and haven’t improved nor are estimated to improve to previous levels. Dividends were cut twice. They are estimated to grow from here, but I will only evaluate VFC back on my watchlist after results are published and the pitfalls that drove current business performance gets addressed.
Walgreens (WBA): Business performance in steady decline since 2020, with no estimates to improve. Dividends were cut. It no longer meets the rules to be part of my portfolio.
Intel (INTC): Intel business performance deteriorated quickly since 2021 and they have been slow to catch up to competition. Dividends were cut. In comparison, IBM has slowed down their financial metrics for much longer, but dividends were always safe given the number of businesses / patents IBM had, allowing time to steer that ship and finally post improving metrics again. Intel now represents too much risk for me, and I will re-evaluate after it has been confirmed via business results and valuation is aligned to long term growth.
T (AT&T): Business performance has been mediocre with the whole sector, but the dividend cut was the main reason to eliminate it from my portfolio. Lots of headwinds currently and dividends are not estimated to grow. I rather maintain the exposure of this sector via the companies that might be struggling in price, but business results and dividends remain steady or growing slowly.
AmerisourceBergen (ABC) got rebranded to Cencora in 2023, under ticker COR. It remains part of the watchlist and my portfolio.
From a valuation perspective, I am adding the companies on my watchlist that are fairly valued (or undervalued) and estimated to grow in the long term: PPG, MO, AMP, CCI, QCOM and V. The process to screen and rank them is now automated using most of the metrics that I employ on the automated trading models, but below are the FastGraphs snapshot as a initial point of research for valuation for these companies:
I am still cautious from a macro perspective – my recession models still flag that we are in a recessionary state, with some indicators improving while others are deteriorating. For that reason, I will wait to add consumer discretionary companies until there are more macro metrics indicating expansion. Also, many of my holdings are extremely overvalued, and the US market continues to be overvalued. It’s a matter of time for them to correct, so I am being patient before adding the companies that are presently overvalued.
Please let me know if you have any questions or comments. Happy Investing!