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Archive for July, 2010

As promised, I’ve taken a retrospective look to see how the Beat the BTSX and David Stanley’s Beating the TSX would have done in 2009-2010. Here are the results for both indexes, assuming a purchase date of May 23rd 2009 and a sale date of May 14th 2010:

Beat the BTSX

Symbol Price May 14 2010 Price May 23 2009 % Change Dividend Dividend Yield Net Payout
Biovail $16.84 $14.56 15.66% $0.36 2.47% 11.57%
Telus $40.30 $30.96 30.17% $1.90 6.14% 8.98%
TransAlta $20.80 $20.15 3.23% $1.16 5.76% 8.65%
Royal Bank $59.98 $42.25 41.96% $2.00 4.73% 7.89%
TransCanada $35.79 $31.59 13.30% $1.54 4.87% 6.77%
Sun Life Financial $30.37 $27.12 11.98% $1.44 5.31% 6.69%
BCE $31.90 $23.91 33.42% $1.63 6.82% 6.66%
Magna Intl. $76.47 $36.24 111.01% $0.18 0.50% 6.55%
Husky Energy $27.10 $32.02 -15.37% $1.20 3.75% 6.23%
Shaw Comm. $19.20 $19.00 1.05% $0.85 4.47% 5.25%

This yields a capital gain of 24.64% and a dividend yield of 4.48% for a total return of 29.12%.

David Stanley’s Beating the TSX

Symbol Price May 14 2010 Price May 23 2009 % Change Dividend Dividend Yield Net Payout
Biovail $16.84 $14.56 15.66% $0.36 2.47% 11.57%
Bank of Montreal $60.58 $40.87 48.23% $2.80 6.85% 3.89%
CIBC $73.12 $53.70 36.16% $3.48 6.48% -9.30%
BCE $31.90 $23.91 33.42% $1.63 6.82% 6.66%
Husky Energy $27.10 $32.02 -15.37% $1.20 3.75% 6.23%
Telus $40.30 $30.96 30.17% $1.90 6.14% 8.98%
TransAlta $20.80 $20.15 3.23% $1.16 5.76% 8.65%
Bank of Nova Scotia $52.33 $35.97 45.48% $1.96 5.45% 1.47%
Sun Life Financial $30.37 $27.12 11.98% $1.44 5.31% 6.69%
National Bank $60.47 $47.52 27.25% $2.48 5.22% -11.78%

This method results in a capital gain of 23.62% and a dividend yield of 5.42% for a total return of 29.05%.

The two methods yielded virtually the same total return. Unsurprisingly, the Beat the BTSX had a slightly higher capital appreciation while the BTSX had a slightly higher dividend yield. Over the same period, the iShares S&P/TSX 60 Index Fund (symbol XIU on the TSX) would have yielded a capital gain of 19.70% with a dividend yield of 3.74% for a total return of 23.44%. So both lists would have significantly outperformed the index. Of course, I wouldn’t extrapolate any long term results based on a single year of data; however it is encouraging to see the degree of outperformance, given the market’s turbulence.

More interesting to me, however, are the differences between the two lists: the Beat the BTSX is far less concentrated in financials with only the Royal Bank (RY) and Sun Life Financial (SLF) making the cut, while the BTSX contains 5 financials. The greater diversity in the Beat the BTSX is expected because high dividend payers on the TSX 60 are concentrated in financials, telecoms and utilities while large volume stock repurchase is a tool used by a wider variety of companies in the index.

Technically, dividend payout and stock repurchase are both executed at the discretion of management, however in practice, dividend payout tends to be a more regular event. In contrast, large stock repurchases can be executed opportunistically by managers who deem their company’s share price too low. For example, none of the banks cut their dividends in 2009 even in the face of a cataclysmic event like the Credit Crunch. Of course, they were forced to raise capital which they did by issuing shares, thus keeping many off the Beat the BTSX list. Interestingly, the top performing stock from either list was Magna International (MG-A), which made the cut despite its low dividend yield because of a large stock repurchase. Magna is neither a larger dividend payer nor does it consistently buy back its shares so I don’t expect to see it make the Beat the BTSX very often. I do, however, expect to have various companies appear on the Beat the BTSX as a result of this kind of opportunistic repurchase – companies that wouldn’t make the BTSX.

A couple of technical notes: the calculation for both the BTSX and the Beat the BTSX used the TSX 60 index for 2009 so the BTSX list differs from the one actually posted by David Stanley in the May 2009 issue of CanadianMoneySaver. Also, rather than calculate trailing twelve month values for stock repurchases and/or buybacks I simply used the previous years’ figures.

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