Portfolio Update – Why I Sold Part of My Home Capital Group Inc. Position

Sold!

On April 19, 2016 I sold off some of my Home Capital Group Inc. [TSE:HCG Trend] position at $38.46/share less the commission. There are two main reasons I sold part of my position in the company: allocation and a chance to fix a mistake while taking some profit.

Allocation

You can see from the pie charts below that this was my largest stock holding making up 16% of my portfolio. In addition to that I had a 44% exposure to the financial sector. This sale helped me reduce both those numbers.

I’m OK with having a high allocation to one stock while I grow my portfolio, but I don’t think Home Capital Group is a stock that you build your portfolio around. I’m not saying my reasons for buying the stock in the first place were wrong, it is just that I bought too much of it and it became my largest holding.

Home Capital has a long history of strong dividend growth with a dividend streak of 17 years and 5 and 10 year annual average dividend growth rates of 21.7% and 26.3% respectively. Coupled with its low payout ratio

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Home Capital Group Dividend Stock Analysis

Money House

So first let me apologize … this article is over 4,000 words. I could have split this analysis into multiple articles, but when I read other blogs I like it when all the information is in one place so I kept this as one big article. Feel free to jump around to the areas you are interested in as there are four general topics:

  • Overall dividend stock analysis of Home Capital Group Inc.
  • Financial strength & stress testing of the company.
  • Why I’d consider investing in the company when I think the housing market is over-valued.
  • Home Capital Group Inc. valuation metrics.
  • Company Description

    Home Capital Group Inc. [TSE:HCG Trend] is a Canadian holding company that operates primarily through its federally regulated subsidiary Home Trust Company, a non-traditional mortgage lender. They are Canada’s largest alternative mortgage lender. Home Capital Group Inc.’s main source of income is from residential mortgage lending, but they also offer non-residential mortgage lending, consumer lending and credit card products. Their mortgages are a mix of uninsured mortgages and securitized mortgages that are insured by Canada Mortgage Housing Corp. or other mortgage insurers. The uninsured mortgages are made with

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