# Yield Hog Dividend Portfolio



## newfoundlander61 (Feb 6, 2011)

Came across this article earlier, "Say hello to John Heinzl’s new Yield Hog dividend portfolio". When you click on the image it should be readable.


----------



## Eder (Feb 16, 2011)

Looks like a nice bullet proof portfolio. I'm a bit leery of the number of REITS and the 2 food trusts that might be a bit of a drag,especially in a non registered account. Other than that it should beat XIU handily and I like the international exposure it gets without associated forex risks.


----------



## newfoundlander61 (Feb 6, 2011)

I am not a fan of REITS or the 2 food trusts either.


----------



## andrewf (Mar 1, 2010)

Sounds like another case of the yield illusion. Yield is not everything--what matters is total return.


----------



## james4beach (Nov 15, 2012)

I see that XIU (TSX 60) is in there too. What is the overall sector breakdown of this portfolio? The portfolio could be fine if it's well diversified among many sectors, but most of the yield-chasing portfolios I've seen have very lopsided sector exposures.


----------



## kelaa (Apr 5, 2016)

I think it's okay as a Canadian core portfolio. I don't think one should discount the psychological anchor a solid yield can provide (to stay put minimize trading). One way to diversify is to use the dividend/distribution payments to buy into US and International funds. I personally would feel better about edging into foreign markets a few percent per year and accumulate over many years rather than buying say X% US and X% internationals from the start. One thing is FX. Another is the ready availability of analyst coverage. It's easy to read a report on the current performance and likely direction of Royal Bank, for instance. Can the same to be said the MSCI Europe Index, for instance?


----------



## OnlyMyOpinion (Sep 1, 2013)

andrewf said:


> Sounds like another case of the yield illusion. Yield is not everything--what matters is total return.


_Over the past five years,the portfolio's annual dividend income increased by 80 per cent. The total return – from dividends and share price gains – clocked in at 11.6 per cent on an annualized basis, easily topping the S&P/TSX composite index's annualized total return of 7.2 per cent over the same period._

https://beta.theglobeandmail.com/globe-investor/investment-ideas/say-hello-to-john-heinzls-new-dividend-portfolio/article36476670/?ref=http://www.theglobeandmail.com&


----------



## fatcat (Nov 11, 2009)

OnlyMyOpinion said:


> _Over the past five years,the portfolio's annual dividend income increased by 80 per cent. The total return – from dividends and share price gains – clocked in at 11.6 per cent on an annualized basis, easily topping the S&P/TSX composite index's annualized total return of 7.2 per cent over the same period._
> 
> https://beta.theglobeandmail.com/gl...36476670/?ref=http://www.theglobeandmail.com&


i think that was his strategy lab portfolio, this is a new portfolio as of yesterday ... i think he has too many names and i don’t get the inclusion of the etf’f


----------



## OnlyMyOpinion (Sep 1, 2013)

fatcat said:


> i think that was his strategy lab portfolio, this is a new portfolio as of yesterday ... i think he has too many names and i don’t get the inclusion of the etf’f


That is true. Here is what John says in the article (relevent to some of the posts above):

_You'll notice some overlap with the stocks in my old Strategy Lab portfolio, but there are also some key differences. The new portfolio is bigger – it has 22 securities, up from 12 – and the starting value has doubled to $100,000...

Not all of the companies in the portfolio are as specific about their future plans, but all have a history of raising their payments to shareholders. Over the past five years, their dividends have grown at an average compound annual rate of 7.7 per cent.

In addition to pipelines and utilities, other sectors represented include banks, telecoms, real estate investment trusts, power producers, insurance and restaurant royalty companies.

... I chose to get my U.S. exposure through a broadly diversified fund – the iShares Core Dividend Growth ETF (DGRO-N) ... DGRO is an economical way to own the best U.S. dividend-growing companies.

The portfolio also contains one Canadian ETF, the iShares S&P/TSX 60 Index fund (XIU-T)... to increase diversification, and to provide a convenient place to reinvest my dividends if I'm feeling a) indecisive; b) lazy; or c) paralyzed by fear ... Reinvesting dividends is one of the keys to building wealth and I'll be doing it regularly..._


----------



## fatcat (Nov 11, 2009)

OnlyMyOpinion said:


> That is true. Here is what John says in the article (relevent to some of the posts above):
> 
> _You'll notice some overlap with the stocks in my old Strategy Lab portfolio, but there are also some key differences. The new portfolio is bigger – it has 22 securities, up from 12 – and the starting value has doubled to $100,000...
> 
> ...


bah, kind of wishy washy ... he should have picked 3 or 4 usa dividend growers, i’ll sell him some of my JNJ, no wait, i’m keeping mine .... and the XIU thing is a cop out ... sheesh why not just buy a usa dividend grower etf and canadian dividend grower etf and a european dividend grower etf and be done with it ... thumbs down from me


----------



## OnlyMyOpinion (Sep 1, 2013)

fatcat said:


> ... sheesh why not just buy a usa dividend grower etf and canadian dividend grower etf and a european dividend grower etf and be done with it ... thumbs down from me


Can't write G&M articles from the likes of that :biggrin-new:


----------



## milhouse (Nov 16, 2016)

fatcat said:


> bah, kind of wishy washy ... he should have picked 3 or 4 usa dividend growers, i’ll sell him some of my JNJ, no wait, i’m keeping mine .... and the XIU thing is a cop out ... sheesh why not just buy a usa dividend grower etf and canadian dividend grower etf and a european dividend grower etf and be done with it ... thumbs down from me


Even though JH has the two ETF's in his portfolio, I think one of things he's trying to accomplish with the majority of individual holding is a limiting the fees/MER's. Granted however, he's not DRIP'ing which aligns with his other philosophy of accumulating enough dividends to then making a decision on a purchase at that point in time. There's also the issue of tracking ACB if you DRIP in a non-registered account.


----------



## Eder (Feb 16, 2011)

fatcat said:


> why not just buy a usa dividend grower etf and canadian dividend grower etf and a european dividend grower etf and be done with it ... thumbs down from me


Because his portfolio will do better than those etf's...big difference over 20 years. Especially for those using non registered accounts.

Over the last 5 years his portfolio would have grown to $204810 compared to only $164750 for a portfolio of iShares S&P/TSX 60 Index ETF,iShares Core High Dividend ETF, and First Trust STOXX European Sel Div ETF

The CAGR of the etf portfolio is 9% over 5 years...CAGR of the Yield Hog portfolio is 14% over 7 years. Can't go back further than that but hope we see the difference picking cream of the crop businesses as opposed to buying the whole farm.


----------



## milhouse (Nov 16, 2016)

andrewf said:


> Sounds like another case of the yield illusion. Yield is not everything--what matters is total return.


Generally agree that yield isn't everything. But a couple of other considerations.
I think JH's yield hog portfolio is trying to achieve is to buy and hold to limit fees. How do you constantly achieve best total return without timing and trading? 
From a Canadian market perspective, most of these dividend growers have provided great total returns over the last 10 to 20 years. I haven't checked all but I suspect most of them have trounced the TSX index. Some of them have even quite well against the S&P500.


----------



## caltran (Mar 16, 2017)

fatcat said:


> bah, kind of wishy washy ... he should have picked 3 or 4 usa dividend growers, i’ll sell him some of my JNJ, no wait, i’m keeping mine .... and the XIU thing is a cop out ... sheesh why not just buy a usa dividend grower etf and canadian dividend grower etf and a european dividend grower etf and be done with it ... thumbs down from me


I don't think there's actually a good CAD dividend growth ETF that you can't recompose yourself, which is essentially what he did.

It would've actually been good to have some Euro stocks since they have lots of companies that provide good yield.


----------



## fatcat (Nov 11, 2009)

Eder said:


> Because his portfolio will do better than those etf's...big difference over 20 years. Especially for those using non registered accounts.
> 
> Over the last 5 years his portfolio would have grown to $204810 compared to only $164750 for a portfolio of iShares S&P/TSX 60 Index ETF,iShares Core High Dividend ETF, and First Trust STOXX European Sel Div ETF
> 
> The CAGR of the etf portfolio is 9% over 5 years...CAGR of the Yield Hog portfolio is 14% over 7 years. Can't go back further than that but hope we see the difference picking cream of the crop businesses as opposed to buying the whole farm.


well, yes, i have only 1 etf (QQQ) and all individual stocks, i was sort of being a little flippant and just pulled those etf’s out of the air ... pluto posted another thread that shows how smart buying best of breed companies is ...


----------



## james4beach (Nov 15, 2012)

If dividends and "dividend growth" are what you're after, just buy XIU... pretty much all the top holdings are dividend growers.


----------



## andrewf (Mar 1, 2010)

OnlyMyOpinion said:


> _Over the past five years,the portfolio's annual dividend income increased by 80 per cent. The total return – from dividends and share price gains – clocked in at 11.6 per cent on an annualized basis, easily topping the S&P/TSX composite index's annualized total return of 7.2 per cent over the same period._
> 
> https://beta.theglobeandmail.com/globe-investor/investment-ideas/say-hello-to-john-heinzls-new-dividend-portfolio/article36476670/?ref=http://www.theglobeandmail.com&


Is this just data mining, though? You can always find a strategy that worked well in the past 5 years. Problem is it will tend to underperform over the next five years, due to mean reversion in relative factor pricing.


----------



## james4beach (Nov 15, 2012)

andrewf said:


> Is this just data mining, though? You can always find a strategy that worked well in the past 5 years. Problem is it will tend to underperform over the next five years, due to mean reversion in relative factor pricing.


I agree. Also, stock picking is more than just a one-time list of stocks. You also have to _maintain_ the portfolio. What happens in a few years when one of these companies disappears (whether bankruptcy takeover or merger), or another great one appears? What rebalancing strategy should be used? These are all critical questions. They may not matter for the next 3 years, but once you're at 10 or 15 years from now these are very important questions -- and lists like these don't have answers for that.

These are nuances to stock picking that I discovered when working on my 5 pack and Lowdiv portfolios. The first problem is creating the portfolio and the second problem is maintaining that portfolio.


----------



## OnlyMyOpinion (Sep 1, 2013)

andrewf said:


> Is this just data mining, though? You can always find a strategy that worked well in the past 5 years. Problem is it will tend to underperform over the next five years, due to mean reversion in relative factor pricing.


I was simply providing the historical results of Heinzl's dividend porftolio. In calling it yield illusion and noting that total return is what matters, some might have concluded that the portfolio's total return was poor or was limited to dividends. I don't know if that is data mining, the results are what they are. 

Of course we know past performance does not guarantee future performance. In five years we'll know if his current portfolio iteration was the right choice or not, the same as we will with all the other investment decisions people are making currently.

Added: I'm not going to do your homework for you James but the Strategy Lab portfolio's were selected, discussed and reported on in the G&M for 5 years. 

I'm sure you read(?) in the latest iteration that _"The Yield Hog dividend growth portfolio isn't meant to be copied exactly. Rather, the goal is to provide a real-time illustration of dividend growth investing that informs and educates people...
In future columns... writing about my stock picks in more detail... discussing other dividend stocks and ETFs... interviewing dividend fund managers for their ideas."_

I don't know, I just find it more interesting than bipolar Trump threads.


----------



## andrewf (Mar 1, 2010)

OnlyMyOpinion said:


> I was simply providing the historical results of Heinzl's dividend porftolio. In calling it yield illusion and noting that total return is what matters, some might have concluded that the portfolio's total return was poor or was limited to dividends. I don't know if that is data mining, the results are what they are.
> 
> Of course we know past performance does not guarantee future performance. In five years we'll know if his current portfolio iteration was the right choice or not, the same as we will with all the other investment decisions people are making currently.
> 
> ...


Okay. I guess my point is that you shouldn't give two figs what the yield is. You should care what total return you get. Using yield as a selection criteria might work because high yield tends to be highly correlated to value measures (low P/B, P/E, EV/EBIT etc.). But the yield is incidental. If all you care about is yield, I will gladly take any capital gains you receive.


----------



## caltran (Mar 16, 2017)

The old dividend portfolio had a total return of 75% for the five year period starting Sept 13, 2012.


----------



## andrewf (Mar 1, 2010)

^ That's great. Unfortunately, you can't go back in time and buy it in 2012. So what matters is expected future returns. And trailing returns are a poor predictor of future returns.


----------



## caltran (Mar 16, 2017)

andrewf said:


> ^ That's great. Unfortunately, you can't go back in time and buy it in 2012. So what matters is expected future returns. And trailing returns are a poor predictor of future returns.


You wondered what the total return was, I told you. *shrug*


----------



## Eder (Feb 16, 2011)

andrewf said:


> ^ That's great. Unfortunately, you can't go back in time and buy it in 2012. So what matters is expected future returns. And trailing returns are a poor predictor of future returns.


Actually many here did buy like this long before 2012 and have,are,and will reap the total return in excess of Yield Hog.


----------



## andrewf (Mar 1, 2010)

^ And so? You can find someone who bought the winning lottery ticket last week and repeat his strategy (same number). It worked for him, right?


----------



## newfoundlander61 (Feb 6, 2011)

"Answers to your questions about the new Yield Hog dividend portfolio"

John Heinzl


"After I unveiled my new Yield Hog dividend growth portfolio this week, readers sent in lots of questions. I've selected a few of them to answer here for the benefit of all readers.

If you missed my column introducing the portfolio, you can read it here.

I noticed that you have four banks in the portfolio but not Bank of Nova Scotia, which I own. Can you share your rationale for excluding BNS?

Please don't read anything into that. Bank of Nova Scotia is a great company and, like the other big banks, it has an attractive yield and has raised its dividend regularly. But I needed to keep the number of stocks in the portfolio manageable and did not want to concentrate too much on any one sector, which inevitably meant that some very worthy companies (not just banks) were left out. I also set the bar for dividend yield relatively high at a minimum of 3 per cent, which automatically excluded certain companies with lower yields but excellent dividend growth records.

A few examples that come to mind are Canadian National Railway (CNR), Metro (MRU) and Toromont Industries (TIH). Bottom line: Just because a stock isn't in the portfolio doesn't mean it's a bad investment.

I see you have both A&W Revenue Royalties Income Fund (AW.UN) and Pizza Pizza Royalty Corp. (PZA) in the portfolio. Can you comment on the tax implications for each and whether it's best to hold them in a registered or non-registered account?

Pizza Pizza is a corporation whose dividends are eligible for the enhanced dividend tax credit. As such, the tax treatment is no different from the banks, utilities and other Canadian companies in the portfolio. A&W is different: As a "limited purpose trust," its distributions are taxed as non-eligible dividends. Because non-eligible dividends are subject to a different gross-up and tax-credit system than eligible dividends, the effective tax rate on non-eligible dividends is higher.

How much higher depends on the person's income and province. For example, according to taxtips.ca, an Ontario resident with taxable income of $80,000 would have a marginal tax rate of about 8.9 per cent on eligible dividends and 19.5 per cent on non-eligible dividends. If you only have room in your registered accounts for one of the two stocks, AW.UN would probably be the better choice because you would save more tax. But there's no reason you couldn't also hold PZA in a registered account if you have the room.

You state that you will be tweaking the portfolio from time to time. My question is, will you be letting the readers know when and how much you tweak the portfolio?

The portfolio was designed with a buy-and-hold investor in mind. Unless the outlook for one of the companies changes for the worse, I don't expect to do a lot of selling. My focus will be on reinvesting dividends that accumulate in the portfolio.

However, unlike a dividend reinvestment plan (DRIP) that automatically reinvests dividends in shares of the company that paid them, I will be waiting for sufficient cash to build up and then choosing how to invest the money. I might buy additional shares of a stock already in the portfolio, or I might add a new stock altogether. I will disclose these purchases and discuss the rationale in my Yield Hog columns.

How will you track the portfolio's performance?

The portfolio started with $100,000 in virtual dollars and no new "money" will be added. Calculating the total return will therefore be relatively simple: If the portfolio is worth $112,000 one year from now, for example, the total return (from dividends and share price gains) will be 12 per cent.

All transactions – including dividend payments and any buys or sells – will be tracked on an arm's length basis by a third party.

In other words, I can't fudge any of the numbers. Also, returns will be reported on a pretax basis, just as they are by mutual funds and exchange-traded funds. One small advantage I have over a real-life portfolio is that I don't have to pay transaction fees. Yay!

Are you concerned at all that your portfolio is way overweight in utilities, real estate and telecoms compared to the S&P/TSX composite index? Your utilities weighting, for example, is about 27.7 per cent, compared to about 3.8 per cent for the index.

No, I'm not concerned. I did that deliberately. Because many utilities are regulated, they are among the most stable dividend payers – and dividend growers – around. (Incidentally, if you exclude Brookfield Infrastructure Partners, which is classified as a utility but also owns many other assets, my utility and power weighting drops to about 22.3 per cent).

The telecoms and real estate investment trusts in the portfolio also have above-average yields and a history of raising their payouts. Another respect in which my portfolio differs from the index is that I have no energy producers.

As we saw when the price of oil collapsed, dividends paid by oil and gas companies can shrink or disappear altogether when commodity prices tumble. That said, if the price of oil rebounds, my portfolio will not benefit to the same extent as the index."


----------



## mikeyrofl (Jul 12, 2016)

the canadian market is so overpriced, developing and international markets would improve this


----------

