I’ve been thinking a lot about how I had my portfolio set up and found that, while REITs were great for yield, I needed a much larger level of diversification and something more solid to work off and kick start an early retirement. My interest has been swayed greatly towards the level of dividend growth as opposed to simply dividend yield. It’s wonderful to get free raises year after year for the hard work companies put in when given your hard-earned cash. You make more and more every year with consistent dividend growers, meaning your portfolio will compound even greater, and you’ll find a lot more security; especially considering these type of companies are taking care of their shareholders and would not want to break a dividend streak.
And with that, I made my jump into the Canadian Industrials sector with my purchase of SNC-Lavalin Group Inc (TSE: SNC), purchasing 25 shares at $42.47. This company is a bit of a risky investment at the moment due to it being under legal fire, which caused many investors to fly the coup and leaving the company at a fantastic value for contrarian and value investors who believe in it to swoop in. I won’t go into detail about the lawsuit, but I am personally not too worried in relation to future prospects; especially since it seems to have possibly bottomed out and is starting to make a small climb back up as people are seeing the value.
So… Let’s get into the nitty gritty of why I thought this is an attractive company to own. It’s now the end of the day (I bought the shares this morning) and SNC’s share price has grown to $42.98 (up 1.54% in total today). SNC is trading at an astoundingly low trailing P/E of 4.8, and a (not incredible) dividend of 2.33%. At first, this pushed me away from the company, but after studying the dividend growth I decided I would let it go and invest anyway. The company has a 5-year yield growth rate of 9.14%. They’ve steadily increased dividends for the past 14 years, and their payout ratio is a very low 10.96%. The low payout ratio means they have a lot of room to increase dividends, and I would hope for them to do so as investors stick around through their legal issues. I also put the company through regardless of current dividend yield because I’m fairly certain the share price will appreciate greatly considering it’s very close to the 52-week low of 36.24, where the 52-week high is 59.63. Not to mention, Thomson Reuters forecasts a 13% increase for the 12-month mean price target of $48.00/share, with a high of $57.20 and a low of $42.00.
This is my second Canadian blue-chip dividend grower and I’m quite pleased with the purchase. I still have a lot of purchases to make since there’s just a wad of cash sitting in my accounts gathering dust instead of working, but prefer to make the decisions slow and steady and enter at decent times with the intention of holding these companies for a very long time.
Not sure if this is my last purchase for April as its coming to a close, but my next entry will probably be in the Communications sector, between Rogers, Telus and Bell.
Happy dividend growing everyone!