Goodbye, 2018. And good riddance.
As this tumultuous year draws to a close, it’s time to look back at my hits and misses of the past 12 months or so. There’s no sugar-coating it: With rising interest rates and trade tensions buffeting markets, 2018 was a rough year for stocks in general and for dividend stocks in particular.
Today, I’ll focus on investments that, apart from the banks mentioned, aren’t part of my model Yield Hog Dividend Growth Portfolio. After the final 2018 numbers are in, I’ll look at my model dividend portfolio’s performance.
First, here’s what I got right.
Bitcoin
Back in December of 2017, with bitcoin approaching US$20,000, I (and plenty of other people) warned that the cryptocurrency had all the hallmarks of a bubble: It’s difficult to understand, virtually impossible to value and generates no earnings. “It’s a classic illustration of investing behaviour gone berserk,” I wrote in my Investor Clinic column. Now that the bubble has burst, bitcoin has tumbled about 80 per cent from its 2018 peak. This is why I am sticking with real money.
Corus Entertainment Inc.
Investors love juicy dividends, but in Corus Entertainment’s case the 13-per-cent yield the stock was sporting last January was a red flag. “If you think you can earn 13 per cent without the risk of further share price declines, a dividend cut, or both, I have some oceanfront property in Saskatchewan to sell you,” I wrote. Sure enough, the TV, radio and content company, aiming to reduce debt, slashed its dividend by 79 per cent in June. Adding to investors’ pain, the stock has skidded nearly 40 per cent since my column appeared. Double ouch.
InterRent REIT
Real estate investment trusts aren’t generally known for producing big capital gains, but apartment owner InterRent REIT has turned the tight housing market into some juicy returns for investors. Since I profiled the company in April, the units have surged about 33 per cent, and in November, InterRent hiked its distribution by 7.6 per cent – the seventh consecutive annual increase.
Boyd Group Income Fund
Boyd Group Income Fund’s name is a bit misleading. The operator of collision repair and auto glass shops doesn’t pay much income – the units yield just 0.5 per cent – but by reinvesting its cash into acquisitions the company has produced some impressive capital gains. That includes a total return of more than 16 per cent since I wrote about the company in November of last year. With sales rising 18.6 per cent to $1.37-billion through the first nine months of 2018, Boyd Group recently hiked its distribution for the 11th consecutive year.
Now, the misses.
Dollarama Inc. ; Premium Brands Holdings Corp.
With growth stocks, it’s all about timing. And with Dollarama and Premium Brands – which I featured in the same column as Boyd Group – my timing stunk. After years of double-digit stock price gains, both companies posted disappointing quarterly earnings in 2018 that crushed their shares. This should not have come as a complete surprise. As I had warned in my column: “High-growth stocks with above-average [price-to-earnings multiples] have a lot of bullish expectations baked into their share prices. If growth unexpectedly slows, they could sell off in a hurry.” Yup.
Canadian bank stock splits
In October of 2017, with Royal Bank of Canada (RY), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CM) all trading near or above $100 a share, I wrote that “we could see some stock splits as soon as the banks' fourth-quarter earnings season, which begins in late November.” More than a year and five quarterly earnings seasons later, I’m still waiting. Clearly, this was a co-ordinated effort by the banks to make me look bad.
Cineplex Inc.
“Despite Weaker Box Office, Cineplex’s Picture Is Improving,” read the headline on my column in June. With a strong slate of summer movies to come, the stock could be poised for a rebound, I wrote. Initially, I looked like a genius: Over the next five months, the shares posted a total return of about 24 per cent. But when Cineplex’s third-quarter results in November missed estimates, hurt by a steep decline of in-theatre advertising, the stock plummeted 21 per cent in a day – and it has continued to fall. Now I just look like something out of Dumb and Dumber.
Disclosure: The author personally owns shares of IIP.UN, BMO, CM and RY.
John Heinzl