Month: April 2023

MP Market Review – April 28, 2023

Last updated by BM on May 01, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down with a YTD price return of +7.4% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, six earnings reports from companies on ‘The List’.
Eight companies on ‘The List’ are due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

“You have a pair of pants. In the left pocket, you have $100. You take $1 out of the left pocket and put it in the right pocket. You now have $101. There is no diminution of dollars in your left pocket. That is one magic pair of pants.”

This ‘magic pants’ analogy was from a Seeking Alpha article on dividend investing I read about a decade ago and was one of the catalysts for me to take a closer look at this type of investing and see if it truly was magical.

After conducting additional research, I have shifted towards utilizing a dividend growth investing (DGI) strategy as my primary investment approach. While I maintain portfolios consisting of high-quality dividend growers from both the United States and Canada, I have opted to concentrate on Canadian (CDN) dividend growth companies in this blog. This is due to several reasons, including a smaller pool of DGI companies to track, a lack of coverage for the DGI strategy by the North American investment media, and a tendency for those who do cover DGI to narrowly focus on only a handful of sectors (Energy and Financials).

While ‘The List’ is not a portfolio in itself, it serves as an excellent initial reference for individuals seeking to diversify their investments and attain higher returns in the Canadian stock market. Through our blog, we provide weekly updates on ‘The List’ and offer valuable perspectives and real-life examples of the dividend growth investing strategy in practice. This helps readers gain a deeper understanding of how to implement and benefit from this investment approach.

DGI Thoughts

“Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn’t the head, but the stomach that determines the fate of the stockpicker.”

– Peter Lynch

Last week, a subscriber asked about a storyline regarding a company that I had recently included in our model portfolio. Typically, we don’t give much weightage to such news. Nevertheless, this inquiry prompted me to contemplate why I no longer experience unease when I invest in a top-notch dividend growth stock that is priced reasonably. While I cannot assure that I have purchased at the rock-bottom price, I take solace in knowing that our approach and methodology, coupled with a long-term investment horizon, make it highly probable to attain a positive return.

Here is a chart of U.S. Stock Market returns over the last 150 years over different holding periods.

In the long run, stocks have delivered strong returns. The longer you hold the higher the probability of a positive outcome. By building a concentrated portfolio of quality stocks that pay a growing dividend we do even better.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Recent News

A lot of acquisition activity recently from companies on ‘The List’. We like acquisitions because they allow our quality dividend growers to increase earnings. Growing earnings translates into growing dividends. Growing dividends drives our stock prices higher.

TFI INTERNATIONAL ANNOUNCES TWO ACQUISITIONS

https://twitter.com/MagicPants_DGI/status/1653038464521183232?s=20

CCL INDUSTRIES ACQUIRING DATA MANAGEMENT INC.

https://twitter.com/MagicPants_DGI/status/1653018756119920647?s=20

ALIMENTATION COUCHE-TARD TO BUY RETAIL SITES FROM MAPCO EXPRESS

https://twitter.com/MagicPants_DGI/status/1653043466002219008?s=20

To receive breaking news about companies on ‘The List’ follow us on Twitter @MagicPants_DGI.

The List (2023)

Last updated by BM on April 28, 2023

The Magic Pants List contains 27 Canadian dividend growth stocks. ‘The List’ contains Canadian companies that have raised their dividend yearly for at least the last ten years and have a market cap of over a billion dollars. Below is each stock’s symbol, name, current yield, current price, price return year-to-date, current dividend, dividend growth year-to-date and current dividend growth streak. Companies on ‘The List’ are added or subtracted once a year, on January 1. After that, ‘The List’ is set for the next twelve months. Prices and dividends are updated weekly.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.52	26.6%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.62	12.4%	$0.56	19.1%	13
BCE-T	Bell Canada	5.9%	$65.12	8.1%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$34.83	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.7%	$63.71	9.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$161.50	-0.8%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.9%	$177.61	21.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.6%	$39.17	6.0%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$83.92	5.1%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.65	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.6%	$53.87	1.0%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.3%	$37.29	4.4%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$151.78	9.9%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.49	7.5%	$2.26	4.1%	49
IFC-T	Intact Financial	2.1%	$204.94	4.7%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$127.43	5.9%	$1.62	5.2%	11
MGA-N	Magna	3.5%	$52.16	-9.3%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$77.22	2.3%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	3.9%	$134.51	5.1%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$53.02	6.9%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.44	24.7%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$82.07	-6.4%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$107.80	7.7%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$109.48	12.0%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$56.31	5.6%	$3.69	3.4%	22
T-T	Telus	4.9%	$28.72	9.1%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$139.15	5.6%	$1.02	7.9%	13
Averages		3.1%		7.4%		8.1%	19

Six Canadian stocks on ‘The List’ declare earnings and dividends in US dollars and are inter-listed on a US exchange in US dollars. The simplest way to display dividend and price metrics for these stocks is to show their US exchange symbols along with their US dividends and price. The stocks I am referring to have a -N at the end of their symbols. You can still buy their Canadian counterparts (-T), but your dividends will be converted into CDN dollars and will fluctuate based on the exchange rate.

Note: When the dividend and share price currency match, the calculation is straightforward. But it’s not so simple when the dividend is declared in one currency, and the share price is quoted in another. Dividing the former by the latter would produce a meaningless result because it’s a case of apples and oranges. To calculate the yield properly, you must express the dividend and share price in the same currency.

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was down with a YTD price return of +7.4% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Algonquin Power & Utilities (AQN-N), up +2.04%; Loblaws (L-T), up +2.02%; and Metro (MRU-T), up +1.23%.

TFI International (TFII-N) was the worst performer last week, down -9.5%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Last week, no dividend increases from companies on ‘The List’.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Earnings growth and dividend growth tend to go hand in hand, so this information can tell us a lot about the future dividend growth of our quality companies. Monitoring our dividend growers periodically is part of the process, and reading the quarterly earnings releases is a good place to start.

Eight companies on ‘The List’ ares due to report earnings this week.

Q1 earnings season continues in a big way. Eight companies on ‘The List’ are due to report earnings this week.

Franco Nevada (FNV-N) will release its first-quarter fiscal 2023 results on Tuesday, May 2, 2023, after markets close.

Loblaws (L-T) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Fortis (FTS-T) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Brookfield Infrastructure Partners (BIP-N) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Bell Canada (BCE-T) will release its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets open.

Telus (T-T) will release its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets open.

Enbridge Inc. (ENB-T) will release its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets open.

Magna (MGA-N) will release its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets open.

Last week, six earnings report from companies on ‘The List’.

Canadian National Railway (CNR-T) released its first-quarter fiscal 2023 results on Monday, April 24, 2023, after markets closed.

“We are very proud of our performance this quarter. Safety is at the heart of everything we do and I’m particularly proud of our safety performance. We remain confident in our long-term growth despite current economic uncertainty. Our updated guidance reflects the strength of our scheduled operating model and its ability to drive strong operational results. For the immediate future, we remain focused on running our plan and providing reliable service to our customers.”

– President and Chief Executive Officer, Tracy Robinson

Highlights:

Record first quarter Revenues of C$4,313 million, an increase of C$605 million, or 16%.
Record first quarter Operating income of C$1,662 million, an increase of C$435 million, or 35%.
Operating ratio, defined as operating expenses as a percentage of revenues, of 61.5%, an improvement of 5.4- points, or an improvement of 5.1-points on an adjusted basis.
Record first quarter Diluted EPS of C$1.82, an increase of 39%, or an increase of 38% on an adjusted basis.
Free cash flow of C$593 million, an increase of 4%.

Outlook:

In light of the strength of its first quarter results, CN is now expecting to deliver adjusted diluted EPS growth in the mid single digits over 2022 (compared to its January 24, 2023 target of low single digits).

Source: (CNR-T) Q1-2023 Quarterly Review

TFI International (TFII-N) release its first-quarter fiscal 2023 results on Tuesday, April 25, 2023, after markets closed.

“We generated 69% growth in net cash from operating activities and our free cash flow more than doubled over the past year even as intensifying macro headwinds drove reduced volumes, and despite unfavorable FX fluctuations and the sale of CFI assets last summer,” said Alain Bédard, Chairman, President and Chief Executive Officer. “During the quarter we remained active with our many self-help initiatives, including cost reductions through a streamlining of our workforce and the conversion of accounting and finance systems at TForce Freight. At the same time, the many talented individuals of TFI continue to push ahead every day and deliver results through adherence to our operating principles that capitalize on our business line diversity and favorable niche market positioning. We also continue to allocate capital in the interest of enhancing long-term shareholder value. TFI has remained active with opportunistic M&A, completing five acquisitions year to date, each strategically expanding our geographic reach and capabilities. Also during the quarter, our Board of Directors approved our dividend, 30% higher than a year earlier, reflecting our confidence in the long-term outlook for TFI International even as economic uncertainty persists.”

– President and Chief Executive Officer, Alain Bedard

Highlights:

First quarter operating income of $166.4 million compares to $219.8 million the same quarter last year, primarily reflecting reduced freight volumes, non-recurring costs of $21.1 million, including $9.5 million in severance and early retirement buyouts in US LTL, $7.9 million of IT systems and related transition expenses in US LTL and $3.7 million of mark-to-market expense related to deferred share units (“DSUs”). In addition to these items, the results were also impacted by $6.2 million unfavorable currency translation impact relative to the same period last year and $17.4 million from the divestiture of CFI, from which the proceeds largely remain to be invested.
Net income of $111.9 million compares to $147.7 million in Q1 2022. Diluted earnings per share (diluted “EPS”) of $1.27 compares to $1.57 in Q1 2022, due in part to the costs discussed above.
Adjusted net income , a non-IFRS measure, of $116.5 million compares to $157.6 million in Q1 2022, due in part to the costs discussed above.
Adjusted diluted EPS , a non-IFRS measure, of $1.33 compares to $1.68 in Q1 2022, due in part to the costs discussed above.
Net cash from operating activities of $232.1 million increased 69% compared to $137.7 million in Q1 2022, the increase being driven primarily by favorable movements in working capital.
Free cash flow , a non-IFRS measure, of $195.7 million increased 113% compared to $91.8 million in Q1 2022, with the increase again primarily driven by favorable movements in working capital.
The Company’s reportable segments performed as follows:
- Package and Courier operating income increased 5% to $27.3 million;
- Less-Than-Truckload operating income decreased 39% to $57.9 million, driven primarily by weaker volume and the non-recurring items listed above;
- Truckload operating income decreased 1% to $70.5 million, even though the comparative period includes $17.4 million contribution from the divested operations of CFI; and
- Logistics operating income decreased 9% to $31.7 million.
On March 15, 2023, the Board of Directors of TFI declared a quarterly dividend of $0.35 per share paid on April 17, 2023, a 30% increase over the quarterly dividend of $0.27 per share declared in Q1 2022. The annualized dividend represents 12.3% of the trailing twelve month free cash flow .
During the quarter, TFI International acquired selected assets of Stallion Express, LLC, D.M. Breton Inc. which will operate in the TL segment, the Axsun Group which will operate in the logistics segment, and Hot-Line Freight Inc which will operate in the less-than-truckload segment. Subsequent to quarter end TFI International completed the acquisition of SM Freight which will operate in the TL segment.

Outlook:

The North American economic growth forecast from leading economists remains subdued due to a variety of factors including elevated interest rates, high inflation, early signs of weakness in labor markets, global supply chain challenges, and slower growth in many international markets. TFI International’s diversity across industrial and consumer end markets and across many modes of transportation, along with the Company’s disciplined approach to operations, helped support results during the first quarter, but macro conditions have slowed and the possibility of economic recession over the coming year remains.

TFI International remains vigilant in its monitoring for new potential risks that could cause further economic disruption, resulting in additional rounds of declining freight volumes and higher costs that could adversely affect TFI’s operating companies and the markets they serve. Lower diesel prices in the months ahead are likely to cause a headwind. Other uncertainties include but are not limited to geopolitical risk such as the ongoing war in Ukraine, weakening labor market conditions that can affect consumer demand, policy changes surrounding international trade, environmental mandates, and changes to the tax code in any jurisdictions in which TFI International operates.

While North American economic weakness is likely to continue weighing on freight demand dynamics, management believes the Company is well positioned to navigate these difficult operating conditions, benefiting from its financial foundation and strong cash flow that allows for a strategic approach to the business. The Company strives for a lean cost structure and has a longstanding focus on profitability, efficiency, network density, customer service, optimal pricing, driver retention, and capacity rationalization. TFI also continues to have material synergy opportunities related to the 2021 acquisition of TForce Freight, and has opportunities to enhance performance within most of its other operations. Longer term, TFI’s diverse industrial exposure through its specialized TL and LTL segments should continue to benefit from a gradual shift toward domestic manufacturing, while its P&C and Logistics business segments should benefit over the long term from the expansion of e-commerce.

Regardless of the operating environment, management’s goal is to build shareholder value through consistent adherence to its operating principles, including customer focus, an asset-light approach, and continual efforts to enhance efficiencies. In addition, TFI International values free cash flow generation and strong liquidity with a conservative balance sheet that features a high portion of attractive fixed-rate spreads and limited near-term debt maturities. This strong financial footing allows the Company to prudently invest and pursue select, accretive acquisitions while returning excess capital to shareholders.

Source: (TFII-N) Q1-2023 Quarterly Report

Waste Connections (WCN-N) released its first-quarter fiscal 2023 results on Wednesday, April 26, 2023, after markets closed.

“Record solid waste pricing growth, strong operational execution and continuing acquisition activity in the first quarter provided a strong start to the year. Q1 was recognized to be a difficult year-over-year comparison given the precipitous decline in resource recovery values during the second half of 2022, and results in the period were further affected by weather-related impacts to solid waste roll-off activity and landfill volumes, particularly on the West Coast. Underlying adjusted EBITDA margins were in line with our expectations, but acquisitions completed since the year-ago period were 30 basis points dilutive to reported margins, or more than 20 basis points higher than expected, given the disproportionate weather-related impacts on West Coast acquisitions.”

– President and Chief Executive Officer, Ronald J. Mittelstaedt

Highlights:

Price-led organic growth, strong operational execution, and continuing acquisition activity drive strong start to 2023
Revenue of $1.901 billion, up 15.4%
Net income of $197.8 million and adjusted EBITDA of $566.9 million
Net income and adjusted net income of $0.77 and $0.89 per share, respectively
Net cash provided by operating activities of $442.4 million and adjusted free cash flow of $274.0 million
On track to achieve full year outlook as provided in February, with potential upside from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures

Outlook:

“Continued visibility on pricing, improving trends in labor availability and retention, and recent normalization of weather patterns position us to deliver the full year outlook we provided in February. And as we also noted then, upside potential to this outlook remains from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures. We’ve already closed approximately $45 million of acquired revenue year-to-date, and currently expect that pace of activity to continue throughout the year.”

– President and Chief Executive Officer, Ronald J. Mittelstaedt

Source: (WCN-N) Q1-2023 Earnings Release

Toromont Industries (TIH-T) released its first-quarter fiscal 2023 results on Thursday, April 27, 2023, after markets closed.

“We are pleased with the solid start to the year, buoyed in part by a solid opening order backlog. The Equipment Group executed well delivering on several large customer orders, as well as growing rental and product support results. CIMCO revenue improved in the quarter on project construction and higher product support activity. Across the organization, we remain committed to our operating disciplines, driving our after-market strategies and delivering customer solutions.”

– President and Chief Executive Officer, Scott J. Medhurst

Highlights:

Revenue increased $201.1 million (23%) to $1.1 billion for the quarter. Revenue increased in both groups, with the Equipment Group up 24%, compared to last year on higher equipment sales (+33%), product support (+20%) and rental activity (+6%), while CIMCO was up 17% versus the first quarter last year, on higher package revenue (+29%) and product support activity levels (+8%).
Operating income increased 48% in the quarter, and was 12% of revenue compared to 10% in the similar period last year, reflecting a lower relative expense ratio.
During the quarter, a vacant property was sold for $7.4 million, resulting in an after-tax gain of $3.1 million ($0.04 per share basic).
For the quarter, net earnings increased $36.5 million or 61% to $96.0 million, or $1.17 EPS (basic) and $1.16 EPS (fully diluted).
Bookings decreased 33% compared to the similar period last year. Equipment Group booking decreased against a tough comparable which included several large orders, exacerbated by cautious market ordering during the uncertain economic environment. CIMCO bookings increased on solid demand for our products and services. A number of factors previously reported have impacted booking activity over the past several years, over-riding typical seasonality.
Backlog was $1.2 billion as at March 31, 2023, compared to $1.5 billion as at March 31, 2022, reflecting progress on construction and delivery schedules as well as some improvement in general equipment flow through the supply chain.

Outlook:

Expecting the business environment to gradually improve, however a number of factors are at play:
- Dynamics of the supply chain and improving availability
- Inflationary & macro-economic trends
- Balancing customer credit risk in light growth opportunities
Our focus areas:
- Execute safely
- Serve and support our customer requirements
- Disciplined focus on building our business for the future (leverage operating model & managing risks)
Backlogs remain well positioned, as bookings are shifting toward pre-pandemic levels – careful monitoring of customer buying patterns
Technician hiring is a key priority, we made progress in 2022 and it remains an essential focus to support the growing customer demand for our products and services
Operationally and Financially, we are well positioned with ample liquidity and our strong leadership teams, disciplined culture and focused operating models

Source: (TIH-T) Q1-2023 Earnings Release

Canadian Utilities Limited (CU-T) released its first-quarter fiscal 2023 results on Thursday, April 27, 2023, before markets opened.

“Overall, it was a great quarter that saw our newly acquired assets contribute to earnings in a meaningful way and our core businesses continue to deliver great performance during this key regulatory transition period.”

– Executive Vice President and Chief Financial Officer, Brian Shkrobot.

Highlights:

Canadian Utilities achieved adjusted earnings of $217 million, or $0.81 per share, in the first quarter of 2023, compared to $219 million in the first quarter of last year.
Invested $304 million in capital expenditures in the first quarter of 2023, of which 86 per cent was invested in regulated utilities and 14 per cent mainly in Energy Infrastructure.
Closed the acquisition of the renewable generation portfolio on January 3, 2023. The 232-MW of operating Forty Mile and Adelaide wind assets have contributed revenues of $27 million for the three months ended March 31, 2023. Uprating work is currently underway for the Forty Mile wind assets with expected completion in the fourth quarter of 2023. This uprating is expected to increase Forty Mile Wind generation capacity from 202-MW to 225-MW.
In 2023, the Electricity Distribution and Natural Gas Distribution businesses, following the conclusion of the second performance-based regulation (PBR) term, began a one-year cost-of service rebasing. The cost efficiencies generated over the second generation PBR term are now being passed along to customers, providing lower rates and creating long-term savings for Albertans. Following a one-year cost-of-service rebasing in 2023, these businesses will move to a third generation of performance-based regulation (PBR3) beginning in 2024.

Outlook:

“Overall, with our 2023 estimates remaining largely intact, including AFFO/sh at $3.56 (was $3.54) and D/EBITDA at 5.2x, our $37 target remains unchanged.”

– National Bank

Source: (CU-T) Q1-2023 Earnings Release

TC Energy (TRP-T) released its first-quarter fiscal 2023 results on Friday, April 28, 2023, before markets opened.

“First quarter 2023 results were underpinned by the strong demand for our assets and our ability to safely and reliably deliver essential energy services across North America. Comparable EBITDA was $2.8 billion, up 16 per cent compared to first quarter 2022, and segmented earnings were $2.2 billion compared to $1.2 billion in first quarter 2022. Comparable earnings per share for the quarter was $1.21, up eight per cent compared to $1.12 in first quarter 2022. Net income per common share was $1.29, up from $0.36 in first quarter 2022.

Over the winter construction season, the Coastal GasLink project progressed in line with our revised cost and schedule and is now approximately 87 per cent complete. The entire project route has been cleared, grading is approximately 99 per cent complete, welding is approximately 95 per cent complete and we continue to target mechanical completion in late 2023.”

– President and Chief Executive Officer, François Poirier

Highlights:

First quarter 2023 results were underpinned by strong utilization and demand for our assets and services
- NGTL System total deliveries averaged 14.5 Bcf/d, up compared to first quarter 2022
- Throughput across U.S. Natural Gas Pipelines averaging 28.5 Bcf/d with several assets performing at near record levels during peak demand
- S. Natural Gas Pipelines achieved a new all-time record for deliveries to LNG export facilities
- Alberta cogeneration power plant fleet reached 100 per cent peak price availability in February
- Bruce Power achieved 95 per cent availability
First quarter 2023 financial results:
- Net income attributable to common shares of $1.3 billion or $1.29 per common share compared to $0.4 billion or $0.36 per common share in first quarter 2022. Comparable earnings1 of $1.2 billion or $1.21 per common share compared to $1.1 billion or $1.12 per common share in 2022
- Segmented earnings of $2.2 billion compared to segmented earnings of $1.2 billion in 2022 and comparable EBITDA of $2.8 billion compared to $2.4 billion in 2022
Dividend Reinvestment and Share Repurchase Plan (DRP) participation rate amongst common shareholders was approximately 38 per cent, resulting in $363 million reinvested in common equity from the dividends declared on February 13, 2023
Continuing to advance our industry leading secured capital program, placing $1.4 billion of projects in service in first quarter 2023 and on track to place $6.0 billion in service during 2023
Canadian Natural Gas Pipelines brought $1.1 billion of projects in service in first quarter 2023, enabling 700 MMcf/d of additional market access with an incremental 500 MMcf/d expected in second quarter 2023
Placed Port Neches Link Pipeline System in service in March 2023 providing last mile connectivity to key demand markets
Acquired 155 MW Fluvanna Wind Farm for US$99 million in cash, before post-closing adjustments in Scurry County, Texas. Entered into an agreement to acquire 148 MW Blue Cloud Wind Farm for US$125 million in cash, before post-closing adjustments in Bailey County, Texas. Closing of the Blue Cloud acquisition is pending regulatory approval
Received FERC approval for ANR Section 4 Rate Case on April 11, 2023
Bruce Power Unit 3 removed from service March 1, 2023 to begin its Major Component Replacement (MCR) outage with return to service expected in 2026.

Outlook:

We reaffirm our 2023 comparable EBITDA growth outlook of five to seven per cent relative to 2022, while comparable earnings per common share is expected to be modestly higher than 2022, showcasing the resiliency and sustainability of our earnings and cash flows. In addition, we expect capital spending in 2023 to continue to be $11.5 to $12.0 billion. Our 2023 outlook reflects our commitment to driving long-term growth and value for our shareholders. Based on the confidence of our business and growth outlook, TC Energy’s Board of Directors declared a quarterly dividend of $0.93 per common share for the quarter ending June 30, 2023, equivalent to $3.72 per common share on an annualized basis. We expect to continue to grow the common share dividend at an annual rate of three to five per cent, enabling our shareholders to benefit from our growth and success in the coming years.

Source: (TRP-T) Q1-2023 Earnings Release

MP Market Review – April 21, 2023

Last updated by BM on April 24, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up again with a YTD price return of +8.3% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, one earnings report from companies on ‘The List’.
Six companies on ‘The List’ are due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Thoughts

“Most managers of dividend funds skew toward income: our strategy picks up both, income and growth. When you have the growing income, you have growing capital.”

-Tom Connolly

The average 12-month result for the 10 dividend funds in this fifth instalment of the 2023 Globe and Mail ETF Buyer’s Guide was a loss of -5.7 per cent (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-2023-globe-and-mail-etf-buyers-guide-part-five-canadian-dividend-etfs/

The financial media published a couple of articles on Dividend ETFs last week that finally shed some light for the everyday investor on what we have been saying all along. This article not only highlights some of the issues with dividend ETFs but the problem with ETFs in general.

Here are a few takeaways from the article:

Yields vary widely amongst dividend ETFs depending on the mandate of the fund.
Canadian dividend ETFs are overweighted in too few sectors which can affect returns when those sectors experience a downturn (think energy and financials).
The bar for entry is low (3 years dividend growth in some cases).
Some ETFs payout dividends received while others reinvest which limits the dividend income you’ve earned.

Here are few more reasons why dividend ETFs are not as good as holding some of your own individual dividend growth companies:

Not enough emphasis on growth and too much on yield.
ETFs are typically fully invested. No ‘dry powder’ when downdraft begins.
You pay fees which chip away at returns.
Professionals can’t afford to lose alone. They must conform.

If you rely on dividend ETFs or funds for income, it’s worth examining their track records and considering whether you could have achieved better results with your own dividend growth portfolio. You may be pleasantly surprised by how well you perform compared to the professionals. Additionally, managing your own portfolio ensures a more reliable and growing income stream.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Recent News

Why dividend growth investors may want to pass on ETFs (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-rob-carrick-why-dividend-growth-investors-may-want-to-pass-on-etfs/

“Unfortunately, dividend growth in the stocks held by a dividend ETF doesn’t always translate into dividend growth for investors holding the fund. If you look at the dollar amount of eligible dividends these funds pay, you’ll find they tend to move both up and down over the years.”

Our blog has long been critical of ETFs, especially dividend ETFs, as they often suffer from issues such as under-diversification, too many subpar holdings, and high fees, all of which can erode income and returns.

Although the ETF may be constructed with dividend-growth stocks, the varying levels of cash dividends instead of steadily increasing payouts makes you wonder what is going on. By building your own portfolio of only the best dividend growers, your income is dependable and always growing. This article provides another compelling reason to be cautious of dividend ETFs.

If you have time, check out our decade long performance versus the CDZ-T ETF here and you will understand why.

Algonquin Power & Utilities terminates deal to buy Kentucky Power (Globe & Mail)

https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-algonquin-power-utilities-terminates-deal-to-buy-kentucky-power/

“The US$2.6-billion deal to acquire Kentucky Power from American Electric Power Co. Inc. was announced in October, 2021, when borrowing costs were low and Algonquin – a significant renewable-energy producer and regulated electricity provider – was riding a wave of investor confidence that supported debt and share issuance necessary for larger acquisitions.”

It’s common knowledge what occurred subsequently: Algonquin reduced its dividend by 40% in January and unveiled plans to offload $1 billion worth of assets in order to bolster its balance sheet and safeguard its credit rating.

The piece highlights Ancora Holdings Group, an activist investor holding Algonquin shares, which recommends that Algonquin proceed with its asset sales to restore investor confidence. As Algonquin will no longer be on ‘The List’ next year after their dividend cut, we need not be concerned about the eventual outcome. Rather, our attention will be on management teams that we are familiar with and have faith in.

The List (2023)

Last updated by BM on April 21, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	6.1%	$8.35	24.1%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.70	12.6%	$0.56	19.1%	13
BCE-T	Bell Canada	5.9%	$64.44	7.0%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.19	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$65.55	12.9%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$166.53	2.2%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$183.00	24.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.6%	$39.09	5.8%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$84.77	6.1%	$0.27	23.8%	12
EMA-T	Emera	4.7%	$58.40	11.0%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.7%	$53.23	-0.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$37.93	6.2%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$152.30	10.2%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.82	8.1%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$203.44	3.9%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$124.91	3.8%	$1.62	5.2%	11
MGA-N	Magna	3.5%	$52.56	-8.6%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$76.28	1.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	3.9%	$135.30	5.7%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$53.73	8.4%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.93	25.4%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$83.55	-4.7%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$119.11	19.0%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$108.16	10.7%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$55.78	4.7%	$3.69	3.4%	22
T-T	Telus	4.9%	$28.73	9.2%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$145.10	10.2%	$1.02	7.9%	13
Averages		3.0%		8.3%		8.1%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up again with a YTD price return of +8.3% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Stantec Inc. (STN-T), up +3.62%; TD Bank (T-T), up +2.77%; and Intact Financial (IFC-T), up +2.50%.

Enghouse Systems Limited (ENGH-T) was the worst performer last week, down -5.08%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Last week, no dividend increases from companies on ‘The List’.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Six companies on ‘The List’ ares due to report earnings this week.

Q1 earnings season is about to kick into high gear. Six companies on ‘The List’ are due to report earnings this week.

Canadian National Railway (CNR-T) will release its first-quarter fiscal 2023 results on Monday, April 24, 2023, after markets close.

TFI International (TFII-N) will release its first-quarter fiscal 2023 results on Tuesday, April 25, 2023, after markets close.

Waste Connections (WCN-N) will release its first-quarter fiscal 2023 results on Wednesday, April 26, 2023, after markets close.

Toromont Industries (TIH-T) will release its first-quarter fiscal 2023 results on Thursday, April 27, 2023, after markets close.

Canadian Utilities Limited (CU-T) will release its first-quarter fiscal 2023 results on Thursday, April 27, 2023, before markets open.

TC Energy (TRP-T) will release its first-quarter fiscal 2023 results on Friday, April 28, 2023, before markets open.

Last week, one earnings report from companies on ‘The List’.

Metro (MRU-T) released its second-quarter fiscal 2023 results on Wednesday, April 19, 2023, before markets opened.

“We are pleased with our results in the second quarter as our teams continued to deliver value to our customers in the current high food inflation environment with competitive everyday prices, growing private label sales and effective promotional strategies. We will continue to invest in our people, our retail network and the modernization of our supply chain, and we are well positioned to achieve our long-term growth objectives. Finally, we are looking forward to the launch of our new loyalty program MOİ later this spring.”

– President and Chief Executive Officer, Eric La Fleche

Highlights:

2023 SECOND QUARTER HIGHLIGHTS

Sales of $4,554.5 million, up 6.6%
Food same-store sales up 5.8%
Pharmacy same-store sales up 7.3%
Net earnings of $218.8 million, up 10.4%, and adjusted net earnings of $225.4 million, up 10.1%
Fully diluted net earnings per share of $0.93, up 13.4%, and adjusted fully diluted net earnings per share of $0.96, up 14.3%

Outlook:

We remain focused on offering quality products at competitive prices as higher than normal inflation and market challenges persist. While we are not able to predict how the current macro-economic environment will evolve, we are seeing some moderation in food inflation, although it is still elevated compared to pre-pandemic levels. With this backdrop, we remain resilient and committed to providing the best value for our customers.

Source: (MRU-T) Q2-2023 Earnings Release

MP Market Review – April 14, 2023

Last updated by BM on April 17, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up again with a YTD price return of +7.9% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no earnings reports from companies on ‘The List’.
One company on ‘The List’ is due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Thoughts

“A dividend is something tangible; it’s not an earnings projection, it’s something solid, ‘in hand’. A dividend is a true return on the investment. Everything else is hope and speculation.”

– Richard Russell, The editor and publisher of the Dow Market Theory Letter, 2007

The calendar Q1 2023 earnings season is about to begin. See our earnings calendar at the bottom of ‘The List’ page for more information as our quality dividend growers begin to report.

In the fourth quarter of 2022, nine out of the twenty-seven companies featured on ‘The List’ failed to meet earnings expectations, marking the highest level of underperformance since the blog’s inception two years ago. Tom Connolly, my mentor, characterizes this quarterly earnings expectations game as a fixation on short-term figures that often detract from long-term thinking. Companies frequently lower their outlook before the earnings announcement, only to surprise investors by exceeding the lowered bar they had set for themselves.

Tom Connolly and his adherents contend that dividends, not earnings, provide a better measure of a corporation’s performance. We agree with Mr. Connolly’s view on this. Nevertheless, we publish estimates versus actual earnings, along with links to earnings reports, to apprise our readers of the reasons why a company on ‘The List’ might experience short-term pressure on its stock price, and to serve as a starting point for further investigation.

If you’re interested in learning more about the ongoing debate on the accuracy of earnings reporting, you may find it helpful to read ‘Accounting and the Truth of Earnings Reports: Philosophical Considerations’ by Norman B. McIntosh, a Canadian academic at Queens University.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Recent News

TD is a lagging bank stock, and a rare opportunity (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-td-bank-stock-opportunity/

“…investors may want to focus on the bank’s curiously low valuation and ask themselves if the selloff is overdone.”

This article supports our blog post from last week and DGI Alert to subscribers in mid-March that Toronto-Dominion Bank is trading at a discount to historical fundamentals.

For more information on why we too think that the selloff is overdone click here for our analysis.

Brookfield to acquire freight container company Triton International for $4.7-billion (Globe & Mail)

https://www.theglobeandmail.com/business/article-brookfield-acquisition-triton-international/

“The COVID-19 pandemic led to widespread problems in global supply chains, but many of the issues are now being resolved. Still, shifts in consumer demand have led to some imbalances in the market. According to market forecaster Container xChange, the shipping industry is experiencing a freight recession as retailers who overstocked use up their excess stock.”

Brookfield Infrastructure Partners (BIP-N) is a quality dividend growth company on ‘The List’ due to its long-term investment strategy and ability to acquire businesses that generate increasing cash flow. This quality dividend grower is particularly attractive due to its focus on investing in infrastructure assets, which are typically long-lived and provide stable cash flows.

Triton International, a leading container leasing company with a large fleet of containers leased under long-term contracts, appears to be a good fit for (BIP-N). However, valuing Brookfield Infrastructure Partners can be challenging due to the complexity of the Brookfield empire, which has many moving parts. Despite this, the average dividend yield is currently at its ten-year average, and trending upwards. A sign that a ‘sensible price’ may yet appear.

The List (2023)

Last updated by BM on April 14, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.63	28.2%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.95	13.0%	$0.56	19.1%	13
BCE-T	Bell Canada	6.0%	$63.55	5.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.89	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$66.45	14.5%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$163.57	0.4%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$180.71	23.3%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.7%	$38.54	4.3%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$82.80	3.7%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.69	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.6%	$53.56	0.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.1%	$39.96	11.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$156.19	13.1%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.29	7.1%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$198.47	1.4%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$126.16	4.8%	$1.62	5.2%	11
MGA-N	Magna	3.4%	$54.35	-5.5%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$75.53	0.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$132.79	3.7%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$52.89	6.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$79.07	21.0%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.30	-7.3%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$117.50	17.3%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$106.37	8.9%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.5%	$56.55	6.1%	$3.69	3.4%	22
T-T	Telus	5.0%	$28.31	7.6%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$143.10	8.6%	$1.02	7.9%	13
Averages		3.1%		7.9%		8.1%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up again with a YTD price return of +7.9% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Magna (MGA-N), up +6.26%; Brookfield Infrastructure Partners (BIP-N), up +5.87%; and TFI International (TFII-N), up +5.46%.

CCL Industries (CCL-B-T) was the worst performer last week, down -1.80%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Last week, no dividend increases from companies on ‘The List’.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

One company on ‘The List’ is due to report earnings this week.

Metro (MRU-T) will release its second-quarter fiscal 2023 results on Wednesday, April 19, 2023, before markets open.

Last week, no earnings reports from companies on ‘The List’.

Toronto-Dominion Bank: Time To Supercharge Your Dividend Growth Investing (DGI) Returns

Last updated by BM on April 13, 2023

Summary

The banking crisis of 2023 has now spread to global banks.
Are Canadian banks such as Toronto-Dominion Bank vulnerable?
How does Toronto-Dominion’s pending acquisition of First Horizon Corporation (FHN-N) impact our decision?
Our DGI process is simple and intuitive. We review ‘quality’ indicators and ‘valuation’ metrics that are readily available and easy to understand.
In this article, we make the case that an investment in Toronto-Dominion Bank today will help ‘supercharge’ your investment returns in the future.

Source: We Just Bought TD Bank (TD-T) for our MP Wealth-Builder Model Portfolio (CDN)

Background

In mid-March, we sent out a DGI-Alert to all our paid subscribers confirming a transaction. As you may recall, the banking sector faced significant turmoil after Silicon Valley Bank in the United States and Credit Suisse in Europe encountered some issues. We utilize such circumstances to guide our readers through our methodology, ensuring a more rational approach to opportunities when they arise.

This article substantiates our quality and valuation analysis of Toronto-Dominion Bank at that time. We also wanted to give all our readers the inside scoop on our process in action. We used the closing price of $79.65 from last week for our analysis here.

Always be sure that any purchase you make meets your own personal objectives and risk tolerances.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Intro

“Be fearful when others are greedy and greedy when others are fearful.”

– Warren Buffett

As we grow older, we tend to accumulate a wealth of experience that we can draw upon. During the first decade of our journey as dividend growth investors, we experienced the ups and downs that are typical of the market. However, we were fortunate to learn from our mistakes and document five valuable lessons in our post, MP Wealth-Builder Portfolio (CDN); The First Ten Years. Recently, we put one of these lessons into practice by purchasing Toronto-Dominion Bank’s stock for our model portfolio.

Lesson #5

Supercharge your returns by having the confidence in a market sell-off to purchase the quality companies on your list. We had a few opportunities over the last ten years to either initiate or add to our core positions at a steep discount. We ended up being too conservative when the opportunities presented themselves and our returns were not as good as they could have been. Have a chat with yourself prior to a sell-off on what your strategy would be and try and eliminate the emotion for when the time comes. Trust the process.

Investment Thesis

Toronto-Dominion Bank’s stock has been impacted by the recent barrage of negative news surrounding the banking industry, credit delinquencies and concerns over the First Horizon Corporation acquisition. In our opinion, Canadian banks are distinct from other banks worldwide. Canadian banks are well-capitalized and enjoy oligopoly power in Canada, with dominant positions in deposit-taking, lending, investment banking, insurance and wealth management.

We also believe that the acquisition or non-acquisition of First Horizon Corporation is only a short-term issue. If the bank can renegotiate the deal to more favourable terms, this could be seen as a positive development and could potentially boost investor confidence in the company. On the other hand, if the bank decides to walk away from the deal entirely, this could also be seen as a positive development if investors believe it will be in the company’s best interest in the long run. Either way, the share price should regain support.

Given the current price, we believe that (TD-T) stock is being unjustly penalized, presenting an excellent opportunity to purchase this quality dividend grower at a discount.

About

Toronto-Dominion Bank is one of Canada’s two largest banks and operates three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking. The bank’s U.S. operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 13% ownership stake in Charles Schwab.

Not only is The Toronto-Dominion the biggest bank in Canada in terms of assets and deposits, but it also ranks as the sixth largest bank in North America in terms of assets and the fifth largest in terms of market capitalization.

TD operates as a global bank, with 60% of its operations in Canada, 37% in the United States, and the remaining 3% overseas. It has a significant presence with 2,220 retail locations in Canada and the U.S. and 16 offices worldwide.

Our Process

The process we use is a ‘rules-based’ process. It is a repeatable process in all markets that tilts the odds of making a good investment decision in our favour. We will review the first two rules in our process to see if now is the time to add Toronto-Dominion Bank to our DGI portfolios.

Quality; only buy large-cap companies with a long dividend growth streak and good financial safety metrics in an industry that is stable and growing.
Valuation; look to buy a company that is sensibly priced or undervalued by looking at a company’s track record. Undervaluation introduces a margin of safety. You are in essence, tilting the odds in your favour that future price movements will be upwards.
Monitor; keep an eye on your dividend growers, especially the current yield; fluctuations in yields send signals. The consistency of a firm’s dividend growth is the best measure of management’s confidence in the long-term growth outlook for a company.

Quality

To assess the quality in the dividend growth stocks we follow, we look at several indicators. A company we invest in rarely satisfies all of our criteria, but the more ‘indicators’ we check off, the higher the quality of the business.

Dividend Growth Streak

We begin assessing quality with a streak of dividend increases of at least 10 years. The longer streak, the higher the ‘quality’.

Toronto-Dominion Bank had a dividend growth streak of 12 years coming into 2022. An increase already in this fiscal year (2023) means the streak will continue.

Growth Yield

Growth yield refers to the yield on cost of a stock, which takes into account the current annualized dividend payments in relation to the original cost basis of the investment. We like the term growth yield better as it proves that growth (a key part of our strategy) has indeed happened and highlights the yield you are now making on dividends alone. The magic of growth yield is typically lost in all statements and conversations about investing. Knowing the subtle difference between a good yield and growing yield is fundamental in what we do.

According to our experience, creating a stock portfolio with an average estimated growth yield and historical growth yield of greater than 7% after ten years has proven to be a reliable indicator of quality.

Historical growth yield calculation for Toronto-Dominion Bank:

Current Dividend / Price Jan. 1, 2013, = Historical Growth Yield

$3.84/$41.60 = 9.2%

Estimated growth yield calculation for Toronto-Dominion Bank:

Current Yield * Average Annual Forward Dividend Growth Rate ^ Period = Estimated Growth Yield

4.9% * 1.08 ^ 10 = 10.6%

In this instance, the Toronto-Dominion Bank satisfies our minimum growth yield criteria regarding historical and projected figures. The historical growth yield was based on a tangible value from an investment in TD Bank ten years ago, whereas the estimated growth yield is a forecasted figure for the next ten years.

Dividend Growth Rates (5YR and 10YR)

We are looking for consistent dividend increases. The lower the starting yield, the higher the growth rate and time horizon required to achieve our income goals.

Toronto-Dominion Bank has a good dividend growth rate for an above-average yielding stock. Toronto-Dominion Bank has a 10YR average annual growth rate of 9.5% and a 5YR average of 8.7%

Recent Dividend Increase

This is a positive statement by management that they have confidence in the business going forward.

The Toronto-Dominion Bank has declared a dividend boost of +7.87% for the year 2023, signifying the bank’s 13th uninterrupted year of increasing dividends and 166th year of maintaining a consistent dividend payment record.

Source: TD Bank Q1 2023 Investor Presentation (March 2, 2023)

Dividend Growth and Price Growth Alignment

Identifying companies whose dividend growth aligns closely with price growth can considerably enhance the predictability of future returns. With the exception of a few abnormalities, such as the pandemic in 2020 and banking concerns in early 2023, the dividend growth of Toronto-Dominion Bank closely corresponds with its price growth. Moreover, the dip in price in 2020 turned out to be a favourable buying opportunity. Toronto-Dominion’s dividend continues to grow. Dividend growth investors know that the dividend drives the price in a predictable way, not the other way around.

Source: YCHARTS

Payout Ratio (Dividends vs Earnings)

Low-payout dividend payers have traditionally done better than companies with high or negative payout ratios. Figure out the industry and company averages and measure against them. Low payout ratios protect your dividend.

Source: YCHARTS

With payout ratios below historical averages, there is ample room for further dividend growth at Toronto-Dominion Bank without adversely affecting financial health even if earnings are impacted in the short term, as its payout ratio currently sits comfortably below its ten-year average.

Independent Research

Although we review the above indicators as they are readily available for all the stocks we invest in, we find the independent research from services that sell information for a living to be the most informative. Value Line (VL) and S&P ratings can typically be found with a little digging.

Value Line’s Safety Rank

Measures the total risk of a stock relative to approximately 1,700 other stocks covered by Value Line. The safest stocks are assigned a rank of 1, whereas the riskiest stocks are assigned a rank of 5.

Toronto-Dominion Bank has a VL Safety Rank of 2.

Value Line Financial Strength

Ratings, from A++ to C in nine steps. The lowest rating is reserved for companies in serious financial difficulty. Factors considered in assigning ratings include balance sheet strength, corporate performance, market capitalization, and stability of returns.

Toronto-Dominion Bank has a VL Financial Strength Rating of A.

S&P Credit Ratings

Help investors determine investment risks. Ratings are either investment grade (AAA through BBB–) or speculative (BB+ through D).

Toronto-Dominion Bank has an S&P Credit Rating of AA-.

Market Cap

Market capitalization is also an important indicator to consider when evaluating a company’s quality. It represents the total value of a company’s outstanding shares of stock and is calculated by multiplying the number of outstanding shares by the current market price per share. Companies with larger market capitalizations generally have more resources, a more established track record, and less volatility than smaller companies. Toronto-Dominion Bank has a market cap of $145 billion dollars making it the second-largest company in Canada.

Quality Summary

Toronto-Dominion Bank is one of Canada’s highest-quality dividend growth companies, ranking highly on almost every quality indicator we use. Quality companies have historically been good investments when purchased at a sensible price.

Valuation

Irrespective of the superior quality of our dividend growers, we exercise caution and do not initiate or augment a position unless the stock is ‘sensibly priced’. To evaluate valuation, we utilize a few different metrics.

Historical Fundamentals

Source: FAST Graphs

When we review the fundamentals FAST Graphs chart of Toronto-Dominion Bank, we notice that Price (Black Line) has historically followed its Normal P/E (Blue Line). Recent price weakness has it separating from its normal trading range. A narrow valuation corridor (a stock price that follows a path that rarely deviates from its trading range ie P/E ratio in this case) shows the predictability of this stock’s price movements.

We are below the Normal P/E of 11.75, which points to undervaluation at the current price. The current level is now ~ 30% below this level, which gives us the margin of safety we are looking for in this market.

Dividend Yield Theory

The dividend yield theory is a simple and intuitive approach to valuing dividend growth stocks. It suggests that the dividend yield of quality dividend growth stocks tends to revert to the mean over time, assuming that the underlying business model remains stable.

In practical terms, this means that if a stock is currently paying a dividend yield above its ten-year average annual yield, there is a higher probability that its price will increase to bring the yield back to its historical average.

Source: YCHARTS

CAPE

The cyclically adjusted price-to-earnings CAPE ratio can assist investors in determining whether a stock is appropriately valued (sensibly priced). By averaging earnings over a longer period, such as ten years, the CAPE ratio helps smooth out short-term fluctuations. It provides a more reliable individual measure of a company’s earnings potential. When the CAPE ratio is low, it may suggest that the stock is undervalued and could be a good investment opportunity. Conversely, when the CAPE ratio is high, it may indicate that the stock is overvalued and could be a potential risk for investors. It is also important to consider the specific industry and market conditions that may affect a company’s earnings potential.

We typically look for stocks with a cyclically adjusted price-to-earnings ratio CAPE under 20. We calculate the CAPE by taking the average of the last ten years of a company’s earnings and dividing it by the current price.

Toronto-Dominion Bank’s CAPE ratio is ~13.8, representing undervaluation at today’s price.

Graham Value

The Graham number is a formula developed by Benjamin Graham, the father of value investing, to determine the intrinsic value of a stock. The formula uses a combination of a company’s earnings per share (EPS) and book value per share (BVPS) to calculate the fair value of a stock.

The Graham value/price we use: square root of (( average of last three years earnings per share * book value per share) * 22.5). The multiplier 22.5 is what Graham believed was appropriate for a company with a price-to-earnings (P/E) ratio of 15 and a price-to-book ratio of 1.5.

According to Graham’s theory, any stock price below the calculated Graham number is considered undervalued and thus worth investing in.

When we compute Toronto-Dominion Bank’s Graham number, we arrive at a price of $94.85. Given last Friday’s price of $79.65, we have a margin of safety here of ~19%, according to Graham, for this quality dividend grower.

Valuation Summary

Purchasing stocks at a ‘sensible price’ is as important as selecting quality companies in what we do. There is no one metric we rely on completely. The primary valuation indicators we use (Dividend Yield Theory, CAPE and Graham Value) all point to the undervaluation of Toronto-Dominion’s stock price at current levels. The historical fundamentals chart from FAST Graphs provides support for our hypothesis.

Forecast

“You can learn from the past, but you make money on the future.”

– Chuck Carnevale

Source: FAST Graphs

Using the “Normal Multiple’ estimating tool from FAST Graphs, we see a normal P/E average over the last five years of 11.21. Based on analyst forecasts for eighteen months out, we estimate an annualized return, based on today’s price, of 27.0% should Toronto-Dominion Bank trade at its five-year normal P/E.

Analyst Scorecard

Source: FAST Graphs

To provide weight to the estimated earnings component of our analysis, we review the analysts’ historical track record covering this stock. You can see from the data that analysts have an above-average record of predicting earnings both one year (1Y) and two years (2Y) out. They have beaten or hit estimates on 1Y estimates 82% of the time and 91% on 2Y timeframes.

Forecast Summary

Due to the predictive power of dividend growth, its narrow historical valuation corridor, its historical track record of analysts’ forward earnings estimates and the conservative assumption that Toronto-Dominion Bank will trade again at its normal (P/E), we believe we have a high probability of above-average returns eighteen months out and beyond on an investment today.

News

TORONTO, March 2, 2023 – TD Bank Group (“TD” or the “Bank”) today announced its financial results for the first quarter January 31, 2023. Reported earnings were $1.6 billion, down 58% compared with the first quarter last year, and adjusted earnings were $4.2 billion, up 8%.

“TD had a strong start to 2023 with Canadian and U.S. retail businesses delivering robust revenue growth and record earnings, demonstrating the benefits of our diversified business mix,” said Bharat Masrani, Group President and Chief Executive Officer, TD Bank Group. “We continued to invest to strengthen our businesses and deliver the legendary customer experiences our customers and clients have come to expect from TD.”

“Yesterday, we announced the close of the Cowen Inc. acquisition, an important step forward in the expansion of our global dealer. TD Securities now has 6,500 colleagues in 40 cities around the world and is able to serve clients with an even broader product and services offering,” added Masrani.

Acquisition of Cowen Inc.

On March 1, 2023, the Bank completed the acquisition of Cowen Inc. (“Cowen”). The results of the acquired business will be consolidated by the Bank from the closing date and primarily reported in the Wholesale Banking segment.

Pending Acquisition of First Horizon Corporation

On February 28, 2022, the Bank and First Horizon Corporation (ׅ“First Horizon”) announced a definitive agreement for the Bank to acquire First Horizon in an all cash transaction valued at US$13.4 billion, or US$25.00 for each common share of First Horizon.

On February 9, 2023, the parties announced they had mutually agreed to extend the outside date to May 27, 2023, in accordance with the terms of the merger agreement. The closing of the transaction is subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities, which now are not expected to be obtained prior to May 27, 2023. Regulatory approvals are not within the Bank’s control. If the merger does not close by May 27, 2023, then an amendment to the merger agreement would be required to further extend the outside date. TD and First Horizon are discussing a potential further extension.

Source: TD Earnings Release Q1 2023 (March 2, 2023)

The recent challenges facing the global banking system and the pending acquisition of First Horizon Corporation have harmed Toronto-Dominion Bank’s investors in recent weeks. Although there is an increased likelihood of additional banks being affected by these challenges, we remain confident that Toronto-Dominion Bank will weather the current financial storm and make prudent decisions for investors regarding the First Horizon Corp. acquisition. The bank’s successful track record of sound financial management over three centuries provides us with additional reassurance.

Conclusion

Utilizing our quality indicators and valuation metrics while drawing from our experience as dividend growth investors over the past decade, we have learned the significance of utilizing market sell-offs to acquire high-quality companies at reduced prices. Accumulating this high-quality, sensibly priced dividend grower today is an opportunity that will end up supercharging your DGI returns for years to come.

MP Market Review – April 06, 2023

Last updated by BM on April 10, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +6.5% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no earnings reports from companies on ‘The List’.
No company on ‘The List’ is due to report earnings this week.
If you’re interested in creating your own income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Thoughts

“Bear markets are a great opportunity for investors in the accumulation phase of their investing journey.”

– Austin Rogers, Seeking Alpha Contributor

A quick Easter update on our MP Wealth-Builder Model Portfolio (CDN) compared to major North American indexes over the same period.

The inception date of the portfolio was May 1, 2022. Dividends and Prices reflect the amounts as of close on Thursday, April 06, 2023.

Bear markets have been kind to us as we build our model portfolio together.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Recent News

Short seller bets against Canadian banks are nothing to worry about (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-should-we-worry-about-the-canadian-banks-when-it-comes-to-short/

“One way to assess the risk is to look at short-selling activity in bank stocks. Are short-sellers ramping up their bets to an extent that would suggest they are expecting a banking crisis is on the horizon?”

The article is in reference to a previous article published by Bloomberg News earlier in the week in which they pointed out that the bank with the largest short position in the world is Toronto-Dominion Bank.

The absolute number of shares sold short by a bank does not necessarily indicate whether there is cause for concern. Instead, the percentage of a bank’s float that is sold short can provide a more accurate measure of the level of short interest.

The float refers to the number of company shares available for trading on the open market, excluding shares held by insiders, such as executives and major shareholders. The higher the percentage of a bank’s float that is sold short, the greater the level of short interest in the stock.

If a bank has a relatively low percentage of its float sold short, then there may not be cause for alarm, as this suggests that the market does not have significant concerns about the bank’s future performance. On the other hand, if a bank has a high percentage of its float sold short, it may indicate that investors are betting against the bank’s success, potentially due to concerns about its financial health or other factors.

In the case of TD Bank, the author reassures investors that the percentage of its float sold short has not risen much since January 2022 and currently stands at a low of 4 percent.

Misleading narratives in the financial media can often lead to good buying opportunities for our quality dividend growers.

CCL Industries Announces Two Intelligent Label Acquisitions (MT Newswire)

eAgile, located in Grand Rapids, Michigan, is a privately held start-up technology company with proprietary, patented hardware and software solutions for the healthcare industry supplied alongside RFID inlays embedded into labels. The $54 million purchase price includes an estimated $1 million net cash assumed with $7 million deferred for five years. The new business will become an integral part of CCL Label’s Healthcare & Specialty business while adding RFID know-how across the Company.

Privately owned Alert, based in Denmark, provides patented anti-theft solutions currently sold alongside Checkpoint’s Merchandise Availability Solutions (“MAS”) product lines to many European retailers. The acquired technology is expected to add approximately $0.5 million EBITDA to Checkpoint in its first full year, compared to a purchase price of $3 million.

Geoffrey T. Martin, President & Chief Executive Officer of CCL, commented, “By 2027, we expect eAgile products to generate at least an incremental $15 million EBITDA through a combination of augmenting sales to CCL Label’s existing healthcare customer base globally and new business wins. Alert’s technology is an important addition to our MAS platform at Checkpoint.”

The strategy of acquiring and integrating companies quickly has been successful for many companies over the years, and CCL Industries is no exception. This is because it allows companies to expand their operations, enter new markets, and increase their revenue streams without building everything from scratch. Acquisitions also provide companies with access to new technologies, expertise, and intellectual property, which can help them gain a competitive advantage.

When we added CCL Industries to our MP Wealth-Builder Model Portfolio (CDN) in November 2022, I am sure we raised a few eyebrows. (CCL-B-T) is certainly not a household name for a lot of Canadian investors. Our investment thesis is now playing out, and these acquisitions will only add to the success CCL Industries has enjoyed over the past two decades as a dividend growth company.

The List (2023)

Last updated by BM on April 06, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.61	27.9%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.10	11.6%	$0.56	19.1%	13
BCE-T	Bell Canada	6.1%	$62.95	4.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$33.90	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$67.67	16.6%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$159.84	-1.9%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$180.88	23.4%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.7%	$38.37	3.9%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$82.26	3.0%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.67	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.8%	$52.57	-1.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$39.27	10.0%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$154.04	11.5%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.67	7.8%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$197.15	0.7%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$126.00	4.7%	$1.62	5.2%	11
MGA-N	Magna	3.6%	$51.15	-11.1%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$75.95	0.6%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$130.55	2.0%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.8%	$51.18	3.2%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$77.83	19.1%	$0.77	8.5%	11
TD-T	TD Bank	4.8%	$79.65	-9.1%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$111.42	11.3%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$104.63	7.1%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.7%	$54.94	3.1%	$3.69	3.4%	22
T-T	Telus	5.0%	$27.98	6.3%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$137.83	4.6%	$1.02	7.9%	13
Averages		3.1%		6.5%		8.1%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up with a YTD price return of +6.5% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Franco Nevada (FNV-N), up +5.65%; TC Energy Corp. (TRP-T), up +4.51%; and Telus (T-T), up +4.29%.

TFI International (TFII-N) was the worst performer last week, down -6.60%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Last week, no dividend increases from companies on ‘The List’.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No company on ‘The List’ is due to report earnings this week.

Last week, no earnings reports from companies on ‘The List’.

MP Market Review – March 31, 2023

Last updated by BM on April 03, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up sharply with a YTD price return of +5.5% (capital). Dividend growth also increased and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, one dividend increase from companies on ‘The List’.
Last week, one earnings report from companies on ‘The List’.
No company on ‘The List’ is due to report earnings this week.
If you’re interested in creating your own income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Thoughts

“Success in investing has two parts: finding edge and fully taking advantage of it through proper position sizing. Almost all investment firms focus on edge, while position sizing generally gets much less attention.”

– Michael J. Mauboussin (2016). Thirty Years: Reflections on the Ten Attributes of Great Investors.

A question from a subscriber recently highlights the importance of position sizing when building your dividend growth investing portfolio. We go into a bit more detail on this important concept in one of our ‘Top Posts,’ Position Sizing: It Matters!

What should I do if I am overly concentrated in one of my quality dividend growth stocks and the price drops significantly?

When considering whether to sell a stock that has dropped significantly, it’s important to assess the reason for the decline. If it’s due to temporary factors, such as a short-term dip in the market or a company-specific issue that is expected to be resolved, then it may be wise to hold onto the stock. However, if the decline is due to longer-term fundamental issues with the company or industry, then it may be necessary to sell the stock to avoid further losses.

Concerning the stock being overweight in your portfolio, you have a couple of options. However, it’s important to review your portfolio and determine if it’s still aligned with your investment goals and risk tolerance. Sleeping well at night is an important part of our strategy.

One option is to rebalance your portfolio by trimming the holding incrementally on ‘up days’ in the market. Short-term narratives in the financial media have a way of working themselves out, especially if the stock in question is a stock we categorize as a ‘Core’ holding in your dividend growth portfolio.

Secondly, you may want to hold on to the stock and let dividend reinvestment and new contributions to your portfolio dilute your position size to a level that aligns with your goals and risk tolerance.

Remember, it’s important to always focus on the long-term when it comes to dividend growth investing. Short-term market fluctuations can be unpredictable, but over the long term, quality dividend growth stocks tend to perform well and provide a steady stream of growing income.

Diversification and position sizing are important for managing risk in a dividend growth investing portfolio. By using these strategies, investors can help minimize the impact of market fluctuations on their portfolios and build a more stable, sustainable income stream over the long term.

If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.

Recent News

Dollarama profit jumps nearly 19% as high inflation drives Canadians to discount retailer (Globe & Mail)

https://www.theglobeandmail.com/business/article-dollarama-profit-inflation/

“Over the past year, the retailer has introduced higher price points up to $5 for products on its shelves, both to offset rising costs – such as for shipping and raw materials – and to bring in new items it could not offer at its previous maximum price of $4. Among the products it now sells with a $5 price tag are yoga mats, shoe racks and gardening trellises. Mr. Rossy said on the call that the new price points have been “well accepted” by shoppers.”

It appears that Dollarama has successfully navigated the effects of inflation on its business by introducing higher price points for its products (pricing power). By increasing its maximum price from $4 to $5, Dollarama has been able to offset rising costs and bring in new items that were not previously available at the lower price point. This move has been well-received by shoppers, indicating that they are willing to pay slightly higher prices for certain products.

In addition to increasing its maximum price point, Dollarama’s expansion into new markets and opening new stores have likely contributed to its continued success. By increasing its presence in the discount retail sector, Dollarama has attracted customers seeking affordable options in the face of high inflation.

Overall, it appears that Dollarama’s strategy of introducing higher price points and expanding its store network has helped it maintain its competitive edge in a challenging economic environment.

These dividend stocks beat inflation two ways (Globe & Mail)

https://www.theglobeandmail.com/investing/personal-finance/carrick-on-money/article-rob-carrick-these-dividend-stocks-beat-inflation-two-ways/

“There may not be a better inflation fighter than the double-duty dividend stock.

The double-duty stock offers a dividend yield at or better than the inflation rate, and a history of raising dividends by average annual amounts that meet or exceed inflation. In the S&P/TSX 60 index of big blue chips, there are seven such stocks right now.”

The author has discovered one of our dividend truths:

DGI Truth #3: Dividend growth investors enjoy inflation-protected income.

While seeking out high-yield dividend stocks can be tempting for those seeking inflation-protected income, it is important to prioritize quality first. High-yielding stocks may come with risks, such as poor financial health or unsustainable dividends, which can ultimately result in lower returns or losses.

Instead, investors should look for companies with a history of consistent dividend growth and strong financials. Such companies are more likely to continue raising dividends and outperforming the market over the long term, even in inflationary environments.

By focusing on quality dividend growth stocks, investors can enjoy the inflation-protected income and benefit from long-term capital appreciation and higher total returns.

The List (2023)

Last updated by BM on March 31, 2023

The Magic Pants List contains 27 Canadian dividend growth stocks. ‘The List’ contains Canadian companies that have raised their dividend yearly for at least the last ten years and have a market cap of over a billion dollars. Provided below is each stock’s symbol, name, current yield, current price, price return year-to-date, current dividend, dividend growth year-to-date and current dividend growth streak. Companies on ‘The List’ are added or subtracted once a year, on January 1. After that, ‘The List’ is set for the next twelve months. Prices and dividends are updated weekly.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	6.0%	$8.40	24.8%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.95	13.0%	$0.56	19.1%	13
BCE-T	Bell Canada	6.3%	$60.54	0.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$33.77	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$67.14	15.7%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$159.47	-2.1%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.9%	$176.37	20.3%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.8%	$37.66	1.9%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$80.77	1.1%	$0.27	23.8%	12
EMA-T	Emera	5.0%	$55.52	5.5%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.9%	$51.53	-3.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$38.25	7.1%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$145.80	5.5%	$1.36	6.3%	15
FTS-T	Fortis	3.9%	$57.45	3.8%	$2.26	4.1%	49
IFC-T	Intact Financial	2.3%	$193.42	-1.2%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$123.17	2.4%	$1.62	5.2%	11
MGA-N	Magna	3.4%	$53.57	-6.9%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$74.34	-1.5%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.1%	$129.25	1.0%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.8%	$51.79	4.5%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$79.01	20.9%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$80.95	-7.7%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$119.29	19.1%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$110.93	13.5%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.0%	$52.57	-1.4%	$3.69	3.4%	22
T-T	Telus	5.2%	$26.83	1.9%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$139.07	5.6%	$1.02	7.9%	13
Averages		3.1%		5.5%		8.1%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up sharply with a YTD price return of +5.5% (capital). Dividend growth also increased and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Magna (MGA-N), up +6.76%; TFI International (TFII-N), up +6.27%; and Brookfield Infrastructure Partners (BIP-N), up +2.05%.

Telus (T-T) was the worst performer last week, down -1.72%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Last week, one dividend increase from companies on ‘The List’.

Dollarama Inc. (DOL-T) on Wednesday, March 29, 2023, said it increased its 2023 quarterly dividend from $0.0553 to $0.0708 per share, payable May 05, 2023, to shareholders of record on April 14, 2023.

This represents a dividend increase of +28.0%, marking the 13th straight year of dividend growth for this quality operator of discount retail stores.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No company on ‘The List’ is due to report earnings this week.

Last week, one earnings report from companies on ‘The List’.

Dollarama Inc. (DOL-T) released its fourth-quarter 2023 results on Wednesday, March 29, 2023, before markets opened.

“Our outstanding performance in Fiscal 2023, including a 12% increase in comparable store sales and EPS growth of 27%, further reinforces the relevance of our value retail concept for consumers, the enduring strength of our unique business model and our disciplined execution.”

– Neil Rossy, President and Chief Executive Officer

Highlights:

Comparable store sales growth of 15.9% for fourth quarter and 12.0% for Fiscal 2023
Diluted net earnings per common share up 23.0% to $0.91 for fourth quarter; up 26.6% to $2.76 for Fiscal 2023
Fiscal 2023 annual guidance met on all key metrics
Quarterly dividend increase of 28% to $0.0708 per common share

Outlook:

In the first half of Fiscal 2024, the Corporation expects to benefit from strong demand for its affordable, everyday items in the context of continued inflationary pressures on consumers. These demand trends are expected to normalize through the second half of the fiscal year. While the Corporation expects higher sales of lower-margin consumable products to carry over into Fiscal 2024, lower freight and logistics costs on imported goods are expected to positively impact gross margins. Wage pressures on SG&A are expected to be more substantial in Fiscal 2024 compared to the prior year, partially offset by the positive impact of scaling as well as ongoing efficiency and labour productivity initiatives.

In Fiscal 2024, the Corporation will maintain its balanced approach to capital allocation, investing in organic growth and returning capital to shareholders. The Corporation intends to maintain its pace of new store openings and investments in maintenance and transformational capital expenditures. Higher capital expenditures primarily reflect remaining investments in the Corporation’s Laval warehouse, namely racking.

In addition to its intent to maintain a dividend subject to quarterly approval, the Corporation intends to continue allocating the majority of its available cash toward the repurchase of shares through its normal course issuer bid. Management believes share repurchases continue to represent an appropriate and efficient use of excess cash to increase shareholder value.

In the current macro-economic and higher interest rate environment, the Corporation also continues to actively manage its capital structure. As such, the Corporation anticipates that its leverage ratio (adjusted net debt to EBITDA will remain below its historical target ratio of 2.75x-3.00x throughout Fiscal 2024. As at January 29, 2023, the Corporation’s adjusted net debt to EBITDA ratio was 2.71x.

Source: (DOL-T) Q4-2023 Earnings Release

Month: April 2023

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