Equity markets continued dropping in February, with most of the major indexes losing value. The MSCI World Equities Index declined 1%, the MSCI Emerging Markets Index shed 0.3%, and the S&P 500 lost 0.5%. The Thomson Reuters Canadian Equity index (in U.S. dollars) was the star performer with a 4.3% increase.

The Dividend Champions Portfolio gained 4.4% in U.S. dollars for the month (+0.8% in Canadian dollars).

Since the portfolio’s inception nine months ago, the Dividend Champions managed to beat their benchmark by almost 8%.

Highlights for the month include another strong performance from Whistler Blackcomb Holdings (TSX: WB, OTC: WSBHF), which has now gained 38% since it was added to the portfolio. We visited Whistler in late February and can report that hotels, bars and restaurants were full and the ski lifts busy even midweek, which is usually the slowest time.

Another welcome appearance in February’s top-performer list was Inter Pipeline (TSX: IPL, OTC: IPPLF). It gained 10% after posting strong results.

WestJet Airlines Ltd. (TSX: WJA, OTC: WJAVF) continued to disappoint and declined 6% despite jumping 5% on the last trading day of February. But we remain confident about the future of this high-quality operator.

Fortis Inc. (TSX: FTS, OTC: FRTSF) dropped 7%, as the company announced the acquisition of a major U.S.–based utility, ITC. We struggle to see the benefits of the acquisition but will give management the benefit of the doubt because it has a solid acquisition track record.

On Feb. 29 we alerted readers that we planned to sell our small holding in Aimia Inc. (TMX: AIM, OTC: GAPFF) from the portfolio. This was after the company reported results that somehow pleased the market, prompting the share price to jump 10% in the days following the announcement. On closer inspection, though, we found no evidence to placate our concerns that the company was struggling in a highly competitive environment.

At the same time we decided to buy Thomson Reuters Corp. (TSX: TRI, NYSE: TRI) for the portfolio. A full description of the business is available in this issue, but in short we like the company’s global dominance in many of the product categories that it competes in, the abundance of cash flow generated by the various operations, the prudent allocation of capital to expansion projects and shareholders, the opportunities for growth, the reasonable valuation and 3.7% dividend yield.

We also used the recent share price weakness of K-Bro Linen (TSX:KBL, OTC: KBRLF), the hospital laundry processor, to move our advice from Hold to Buy and to increase the holding in the Dividend Champion portfolio from 1.7% to 2.7%. The share price weakness came about after news surfaced that a potential acquisition of Booth Centennial, a prominent institutional linen services provider in the Toronto area fell through. On the same day, K-Bro announced the award of a new 10 year contract covering hospitals in the Vancouver area and the expansion and upgrade of laundry facilities in Vancouver as well as Toronto.   

The cash holding in the portfolio currently amounts to around 6%. We will hold the cash until we find other investing opportunities.