Managing an investment portfolio is a challenging task, often prompting individuals to seek professional guidance. However, for those who prefer a DIY approach, the Buy and Hold Portfolio strategy offers an appealing alternative. This portfolio, designed for self-directed investors, aims to simplify the process while saving on advisor fees.
The Buy and Hold Portfolio, introduced 14 years ago, focuses on high-quality stocks with long-term growth potential. The core philosophy is rooted in the belief that markets trend upwards over time, and quality stocks will ride this wave. The portfolio primarily consists of Canadian and U.S. blue-chip stocks, along with a bond ETF holding.
Stock Selection Criteria
I chose these stocks based on several key criteria: superior long-term growth prospects, industry leadership, a strong balance sheet, a history of dividend increases, and resilience in down markets. The objective is to generate steady cash flow through dividends, minimize downside risks, and achieve slow but consistent growth. The initial target rate of return was set at 8% annually.
Performance Review
Let's take a look at how the portfolio has performed since my last review in November. Prices are as of August 12th:
- iShares Canadian Universe Bond Index ETF (XBB-T): The unit price decreased by $0.70 due to investor concerns about inflation. However, we received monthly distributions totaling 72.3 cents per unit, resulting in a break-even period.
- BCE Inc. (BCE-T): The stock has faltered, with shares down 57 cents. Fortunately, this was offset by three dividend payments totaling $1.3125 per share.
- Brookfield Corp. (BN-T): Shares slipped by $3.37, but we received three small dividend payments totaling 27.7 cents per share.
- Procter & Gamble Co. (PG-N): P&G offers a stable business profile and a decent dividend, but shares slipped $4.17. We received three dividends totaling $3.235 per share.
- Canadian National Railway Co. (CNR-T): CN shares ended their slide, gaining $44.90. The company raised its dividend in March, and we received three payments totaling $2.72 per share.
- Enbridge Inc. (ENB-T): Enbridge shares continued their decent performance, up $4.32. We received two quarterly dividends totaling $1.94 per share.
- Royal Bank of Canada (RY-T): Bank stocks have been on a surge, and RBC is a top performer, gaining $82.15. We received three dividend payments totaling $5.04 per share.
- Alphabet Inc. (GOOGL-Q): Despite the tech sector's loss of momentum, Alphabet is holding strong. The shares are ahead by US$23.59, and the company pays a small quarterly dividend of 22 US cents.
- UnitedHealth Group Inc. (UNH-N): After a dip earlier this year, the stock has recovered strongly. The shares are up US$75.88, and the quarterly dividend was increased to US$2.32 per share. We received three dividend payments totaling US$6.74 per share.
- Walmart Inc. (WMT-N): The giant retailer saw its shares gain US$6.91 and raised its dividend in March. We received three dividend payments totaling 73 US cents per share.
- Cash: The portfolio had cash and retained earnings of $4,530.64, which we invested in Steinbach Credit Union at a promo rate of 4.6% for four months, earning $69.40.
Portfolio Status
As of August 12th, the new portfolio value (market price plus retained dividends/distributions) is $253,070.42. This represents a gain of 10.3% since the last review. The top performers during this period were CNR, Royal Bank, UnitedHealth, and Alphabet. Notably, none of our securities suffered major losses.
Since inception, the portfolio has achieved a total return of 406.7%, averaging an annual compound growth rate of 12.5% over 14 years. This significantly exceeds our initial 8% target.
Portfolio Adjustments
While a Buy and Hold strategy typically resists changes, I've decided to make some tweaks. I'm not satisfied with the performance and prospects of BCE, which continues to trade within a narrow range despite a significant dividend cut last year. The telecom sector as a whole is facing challenges due to high capital costs and disruptive new options like Starlink.
As a result, I've decided to part ways with BCE. We'll sell our shares for $8,057.50 and use the proceeds, along with retained earnings of $460.36, to reinvest in other securities. Specifically, we'll purchase 140 shares of Manulife Financial Corp. (MFC-T) at $61.06, adding 10 shares of Enbridge (ENB-T) at $71.74, and 20 units of the bond ETF XBB. This leaves us with a total of 590 units of XBB and reduces retained earnings to $61.91.
The portfolio now has cash and retained earnings of $5,042.52, which we've invested in Oaken Financial at a rate of 2.8% with CDIC coverage.
I'll provide an updated review of the revised portfolio in December.
