August turned out to be a brutal wake-up call for equity investors. Around the world volatility spiked and share prices declined. The MSCI Global Equities Index declined by 6.8% closely followed by the S&P 500 Index with a 6.2% decline. Dividend based investment strategies were not spared with the Global Dividend Aristocrats Index down by 6.1%. The Dividend Champions portfolio fared much better but still lost 2.4% in Canadian dollar or 4.6% in U.S. dollar.

The highlights from the Dividend Champions portfolio during the month included the solid returns from Whistler Blackomb Holdings (TSX:WB, OTC:WSBHF) and InnVest REIT (TSX:INN-U, OTC:IVRF.F) which increased by 9.2% and 6.5% respectively. Both companies were recently highlighted as “Best Buys” in CE, and are benefitting from a boost to tourism as a result of the weaker Canadian dollar.

Two more recent “Best Buys” rounded out the best performing quartet, namely WestJet Airlines Ltd (TSX:WJA, OTC:WJAVF) and Inter Pipeline Ltd (TSX:IPL, OTC:IPPLF) with respective price increases of 4.6% and 3.5%.

After being the best performing Dividend Champions stock in July, Canadian National Railway Co. (TSX:CNR, NYSE:CNI) lost 10% during August without any further company news subsequent to solid quarterly results and a 25% increase in the dividend. Aimia Inc (TSX:AIM, OTC: GAPFF), the loyalty card manager and the worst performer in the month, dropped by 19% as investors ignored the juicy 6% dividend yield and kicked the share out of their portfolios. We are not aware of any negative developments in the company except that the recent quarterly results were somewhat below par.

For September we are making the following changes to the portfolio and stock recommendations:

Move the advice from Hold to Buy based on the price decline for Canadian National Railway.

Buy shares in K-Bro Linen Inc. (TSX:KBL,OTC: KBRLF) to the equivalent of 1.5% of the portfolio. This is a high quality company operating in a stable but steadily growing industry. We start with a small position but intend to increase the weight if the opportunity arises. The full motivation is provided on page 8 in the publication.

Sell the full holding in Pembina Pipeline Corp. (TSX:PPL, NYSE:PBA) and buy more of our favoured pipeline company, Inter Pipeline Ltd (TSX:IPL, OTC:IPPLF). Pembina has ambitious plans to expand their pipeline capacity over the next few years in what may be a challenged energy market. On the other hand, Inter Pipeline has gone through major expansions over the past few years and has far lower remaining capital requirements to meet. The dividend yields are about the same but Inter Pipeline should be able to grow their dividends at a much faster rate over the next few years than Pembina. Also please see the full report on the pipelines on page 1 of the publication.

Sell the full holding in George Weston Ltd (TSX:WN, OTC:WNGRF) as the 10% price increase since we included the stock in the portfolio in May leaves it somewhat exposed in a market that has declined by 10% over the same time period. In addition, the dividend yield on the stock is now only 1.5% and expected dividend growth of only 3% per year until 2017 does not justify the low initial yield. We will keep the stock on the watch list for possible future re-inclusion.

The portfolio now holds about 3% in cash, which we will invest as we find more opportunities.