The third quarter of 2016 continued its merry ways as the Dividend Champions portfolio notched up another good gain in August: 1.2% in U.S. dollar terms, following a 2.3% gain in July. Year to date the returns have now extended to 24%, with great performances notched up by some of our holdings.

The Canadian market is also up by about 25% in 2016 placing it among the best-performing markets in the world. By comparison the S&P 500 gained 6% and the MSCI World Equity Index 3% so far this year.

Over the 16 months since inception of the portfolio, the Dividend Champions managed to beat its benchmark by over 6%, as indicated in the table below.

The big news for the Dividend Champions portfolio during August was that the board of Whistler Blackcomb (TSX: WB, OTC: WSBHF) agreed to a takeover proposal from Vail Resorts for a C$36 per share cash-and-stock deal. The bid represented a 43% premium to Whistler’s closing price prior to the announcement.

There are numerous hurdles that the transaction will have to clear, including approvals from Whistler shareholders, the British Columbia Supreme Court and approvals under the Investment Canada Act and the Competition Act. Whistler 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 master operating contracts and agreements to expand the facilities.

Whistler is a unique and world-famous ski facility and clearly a prized asset for Vail. However, the proposed price was 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 held in the Dividend Champions Portfolio for a profit of 101% since first recommended a little more than a year ago.

Other portfolio holdings that performed well during the month included Finning International (TSX: FTT, OTC: FINGF) and Shawcor (TSX: SCL, SAWLF) after delivering what could well be bottom-of-the-cycle results. Apart from these two, Inter Pipeline (TSX: IPL, NYSE: IPL), CAE Inc (TSX: CAE, NYSE: CAE) and WestJet Airlines (TSX: WJA, OTC: WJAVF) also gained 5% or more for the month.

Riocan REIT (TSX: REI-U, OTC: RIOCF) and Choice Properties REIT (TSX: CHP-u, OTC: PPRQF) brought up the rear with 5% and 4% declines, respectively, after notching up good gains in previous months.

While we are pleased with the strong absolute performance of the portfolio so far this year, we are cognizant of the fact that the portfolio 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 are comfortable that our objective will be met over the target period of five years or longer.

After the sale of our Whistler holding, the cash holding in the portfolio currently moved up to 14%. To utilize some of the excess cash we have decided to add 1% to our holding in North West Company (TSX: NWC, OTC: NWTUF). The selloff after the recent below-par profit announcement was, in our view, overdone. Although the next six months may be equally tough for the business, we do not believe that the longer-term prospects have deteriorated at all. We find the stock at the current price level and with a 4.7% dividend yield  very attractive. Please see our full report on the company elsewhere in the publication.