Greetings to everyone out there, we hope you’re all doing great today.
Now that we are well on our way through May and hopefully have the worst of the current global situation behind us we’d like to take a look at how this market downturn and economic halt has affected our investment strategy if at all.
The spring of 2020 saw a market downturn that resulted in the S&P500 taking a haircut of about a third or so.
This as you may expect, resulted in many many of our fellow investors out there also losing out on 33% give or take dependent on your exact allocations.
Our portfolio was no different, at one point I believe we were down about 35% even, which was hard to stomach but the thought of selling never did cross our minds.
This isn’t really the point of this post though, the real numbers we want to look at are the overall market drop vs the drop in our passive income we receive via dividends.
Calculating the lost income
So, let’s kick things off with the companies that we’ve had either reduce or entirely cut their dividends. The list looks like”
NFI Group
Suncor
Cenovus
Inter Pipeline
Now let’s calculate the income we’ve lost from these cuts:
NFI Group:
Cut dividend from $0.425 per quarter to $0.2125 or 50%
Our income with 92 shares went from $156.40 to $78.20
This is a loss of $78.20 in income.
Suncor:
Cut dividend from $0.465 per quarter to $0.21 or 55%
Our income with 76 shares went from $141.36 to $63.84
This is a loss of $77.52 in income.
Cenovus:
Cut dividend from $0.23 per year to $0.00 or 100%
Our income with 124 shares went from $28.52 to $0.00
This is a loss of $28.52 in income.
Inter Pipeline:
Cut dividend from $0.1425 per month to $0.04 or 72%
Our income with 326 shares went from $557.46 to $156.48
This is a loss of $400.98 in income.
TOTAL LOST INCOME: $585.22
TOTAL LOST INCOME: 6.2%
Ouch, losing well over $500 in dividend income definitely stings a bit, this reflects having to invest over $10,000 to be able to get this income back.
All things considered though, we’re not that upset about it because this is almost the worst of the worst case scenarios that we could face with the oil situation going on globally as well as the obvious halt to the worldwide economy as a whole. Now let’s all knock on wood as I’ve definitely just jinx’d us all.
When comparing our 6% loss in income it really does seem to be pretty palatable in comparison to a 30+% loss in the overall market.
Losing some dividend income is easy going compared to having to sell shares during this time, although a good chunk of the market losses have already been recovered somehow.
So will we ditch these companies?
Short answer? No.
The only company we are considering selling is Cenovus because they are no longer a dividend payer – just not now. We’re still fairly bullish on the oil sector mainly because it’s just so badly beaten up that things have a lot more upside than they do downside at this point in time.
If Cenovus rebounds to near where our purchase price is and does not announce a dividend for the rest of 2020 into early 2021 then it will have to go.
As for Suncor, Inter Pipeline and NFI Group we still strongly believe in their business models and believe they truly are industry leaders in oil and gas and bus manufacturing (NFI Group), so we see them as long term holds in our portfolios.
Buy quality!
What we have seen during these hard times are that the dividend leaders are still paying out and in some cases like Apple, PG, IBM, PEP and others are still increasing their payouts.
The losses we sustained were in riskier stocks that weren’t pure dividend plays, they were stocks that had high yields that we were willing to take our chances on in order to boost our overall income – but the bulk of our portfolio will always remain in quality dividend payers to ensure that in times like these we aren’t hit too significantly in our income.
This is also (referring to our last post) why we’re looking at having a beefed up cash position as well especially as we officially head into retirement. We want to have multiple years worth of funds saved away in high interest accounts for rainy days.
So that about does it for today, we hadn’t actually calculated just how much we’ve lost and we were pleasantly surprised with only losing 6% of our income overall and it really does go to show that we’ve allocated most of our funds into high quality dividend stocks.
How have your stock portfolios held up during these times? Are there any changes you’ll be looking to make? Let us know in the comments below or over on our
Instagram @FindependenceCanada
Thanks for stopping by,
FIC.
Disclaimer: Please remember to do your own research and consult an investing professional before making any personal finance moves as there is always risk involved.