November Sitrep 2016

November was another great month for dividend increases.

Leading the pack was Fourbucks, Starbucks with a whopping 25% dividend increase. This company just keeps growing from strength to strength. Its like selling legal crack. I don’t drink coffee myself, but my friends who do are pure addicts.

Starbucks plans to open 12,000 new stores worldwide by 2021. That’s a staggering amount of new shops and will continue to fund well above average dividend & capital growth for the next decade.

Its a business model that doesn’t seem to have geographical or cultural limits. I remember when we were living in the UK in the mid 90’s and my wife complained that she couldn’t get a decent cup of coffee. A couple of clever Americans opened some shops modelled on Starbucks called the Seattle coffee company, I didn’t really think it would catch on, the Brits being big tea and instant coffee drinkers.

Wow, was I wrong. Starbucks bought out the these first few shops and rebranded them as Starbucks and the rest is history, walk down a UK high street and Starbucks are everywhere. Where we lived in Southend-on-Sea, the demand was so great the high street has two of them.

I thought the same thing as Starbucks continued their march around Europe and the middle east, and once again I was proven wrong. Starbucks is now one of our biggest holdings and I plan on willing these shares to my kids as they continue to generate significant wealth for us. I’m not missing out again!

One of the many things I really like about the business is how sticky their customers are. All of my Starbucks drinking friends will happily pass by several other coffee establishments, stand in a line up that I would consider unacceptable to pay a hefty premium for their ground up beans in hot water. That’s smells like pure profit to me.

Its also not just the coffee itself, but walking around holding a Starbucks cup has also become a subliminal fashion icon. I notice the “cool”  moms at my kids soccer stand around and gossip whilst holding their Starbucks cups, long after they are empty or the coffee is cold. I’m not a religious man, but god bless everyone of them with low self esteem that feels the need to fit in.

The big surprise this month was the Canadian oil company CNRL gave us an 8.6% dividend increase. Suncor and CNRL are two very successful low cost long life oil companies. Both have projects coming on line that will significantly increase production, profit & dividend growth even in a low oil price environment. Take a look at CNRL’s dividend history with this link. When oil dropped to $28 a barrel, I loaded up on more Suncor and CNRL.

Next up were Telus, interpipeline fund and the Canadian Imperial Bank of Commerce giving the second of their twice annual dividend increases.

I have said this before and I will say it again, Canada is a dreadful place to be a customer of our banks and telecom companies, owing to the large oligopolies, but its a wonderful place to be an investor because of the lack of competition.

Telus leads the pack in customer satisfaction in Canada and their dividend growth has been nothing short of stellar. They are targeting a 7-10% dividend growth rate through to 2019.

Unlike Shaw who is largely reliant on cable subscribers, a business in terminal decline with the rise of Android TV boxes, Telus sees much of their growth from handheld data usage. I don’t see that business model slowing down anytime soon. My kids in grades 4&7 are one of they few who don’t have a data plan on their phones.

My daughter in grade 7 has her granddads old iPhone 4s on a pay as you go, only for emergencies plan. She can Viber and WhatsApp her friends when she is on wifi.

I bought my son, who is now walking himself back and forth to school, who is in grade four a cheap THL T6C for $70 CDN which works on the speakout wireless network where he has a pay as you go, quit at any time plan. I bought him a $25 top-up voucher when he started school in September and he still has $20 left.

He’s also a very active boy who is very forgetful, hanging his clothes on the floor most days, so he’s bound to lose or break it in the next year. Interestingly, he’s one of the few kids in his class not to be on a phone contract. That should bode well for continued dividend growth for the Canadian telecom companies.

So if you have kids, please get them an new iPhone and at least a 6gb/month data plan, they need it.

Remember, some of these dividend growths rates don’t seem that high, but a 7% compounding annual increase doubles your income every 10 years.

Company Date Number of Shares old dividend new dividend % increase old annual new annual Amount increase
SBUX Nov-16 920 0.8 1 25 736 920 184 USD
CNQ Nov-16 2247 0.92 1 8.6 2067.24 2247 179.76 CDN
IPPL Nov-16 1477 1.56 1.62 3.8 2304.12 2392.74 88.62 CDN
TU Nov-16 1781 1.84 1.92 4.4 3277.04 3419.52 142.48 CDN
CM 30-Nov-16 383 4.84 4.96 2.4 1853.72 1899.68 45.96 CDN

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