The third quarter of 2016 started well for the Dividend Champions portfolio, with a U.S. dollar gain of 2.3% in July. We’re now up 20% year to date, with great performances notched by some of our holdings.

The Canadian market is also up by about 20% in 2016, placing it among the best-performing markets in the world. By comparison, the S&P 500 is up 5.5% and the MSCI World equity index 2.6% year to date.

Over the 15 months since the portfolio’s inception, the Dividend Champions has beaten its benchmark by 5.1%, as indicated in the table below.

Portfolio holdings performing well so far this year include TMX Group (TSX: X, OTC: TMXXF), with a 57% gain since we added it to the portfolio in January. Since the start of August, the stock has extended its gains, as second-quarter results were much better than expected.

InnVest REIT (TSX: INN-U; OTCIVR.F) is up 38%, with a take-over proposal from BlueSky Hotels supporting the unit price. The acquisition has now also received regulatory approvals, and the transaction is now expected to close on 18 August.

Transcanada Corp (TSX: TRP, NYSE:TRP) and Inter Pipeline (TSX: IPL, OTC: IPPLF) added 37% and 28%, respectively, so far this year. Riocan REIT (TSX: REI-U, OTC: RIOCF) rounds out the top five with a 26% gain so far in 2016.

We were also pleased to see that a recent addition to the portfolio, CAE Inc. (TSX: CAE, NYSE: CAE), is off to a good start, up 8.2% during July. We would like to buy more of the stock but will wait for a pullback in the share price.

Despite being down by almost 12% so far this year, K-Bro Linen (TSX: KBL, OTC: KBRLF) had a good July with a 5.7% gain. We expect financial results to improve gradually during the year as the benefits of the Regina expansion kick in.

While we are very pleased with the strong absolute performance of the portfolio so far this year and its relative return since inception, we recognize that the portfolio’s return since inception is still below our annual target of 8%-15%. With a current dividend yield of 3.6% and growth of around 6% per year, we’re comfortable that our objective will be met over the target period of five years or longer.

After the sale of our holding in Whistler Blackcomb (as explained below), the cash component in the portfolio moved up to 13%. We intend to hold the cash until we find other interesting opportunities.

Portfolio Changes

The board of directors of Whistler Blackcomb (TSX: WB, OTC: WSBHF) has agreed to a take-over proposal from Vail Resorts for C$36/share in cash and stock. The bid represents a 43% premium to the closing price on August 5. The proposed deal will have to clear numerous hurdles, including approvals by WB shareholders and the BC Supreme Court, as well as other regulatory approvals. WB is also engaged in sensitive discussions with the Squamish and Lil’wat First Nations, on whose traditional lands the facilities are operated, for the extension of the master operating contracts and agreements to expand the facilities.

Whistler is a unique and world-famous ski facility and probably a very attractive proposition for Vail. However, the proposed price is well above our fair value estimate of C$26 and likely but not completely certain to proceed. We have therefore decided to sell the shares that we hold in the Dividend Champions portfolio for a profit of 101% since acquired in May 2015.