Back in August 2011 I adopted a modified Beating the TSX method for selecting my stocks. Out of curiosity I decided to take a look at which stocks might make up the BTSX portfolio if I was just starting today. Here is the analysis.
- Begin with the TSX60 stocks.
- Remove any stocks with a dividend of less than 3%. This minimizes the number of stocks I need to analyze.
- Remove any stocks that might have an unsustainable dividend. For this I remove any stock with a payout ratio above 1.2 (equivalent to a coverage of less than 83%). I also remove any former trusts.
- Finally, select the ten stocks with the highest dividends.
The analysis looks like this:
- BCE Inc.
- Bank of Montreal
- Canadian Imperial Bank Of Commerce
- Husky Energy Inc.
- Power Corporation of Canada
- Rogers Communications Inc.
- Shaw Communications Inc.
- TELUS Corporation
- TransAlta Corporation
- TransCanada Corporation
There is only one change since 2011: Sun Life is out and Rogers is in. Sun Life had no earnings in 2011 after surprise losses in European investments, so its dividend coverage is now unacceptable. It pays a great dividend of 6.22% but could be a value trap. Analysts estimates are strong for 2012 onward, suggesting that losses are now behind us. Additionally, I already own Telus and BCE, so adding Rogers might make my portfolio too Telco-heavy. I will hold Sun Life.