Month: March 2025

Intro

Is Now a Good Time to Invest?

That’s the question on everyone’s mind. But for dividend growth investors, it’s the wrong question. Trying to catch the exact top or bottom is a futile exercise. Our focus is on consistency, discipline, and long-term results.

That’s why we prefer to deploy capital gradually—especially when managing a larger sum. In our model portfolio, for instance, we invest our $100,000 of initial capital over a four-year period, adjusting based on valuation and market direction, while always keeping a long-term horizon of 5 to 10 years (or more) in mind.

We Take a Different Approach

While many investors try to time the market, we focus on keeping our cash-generating machine running at full throttle—through every market cycle, in any condition. This ensures a steady stream of income consistently flows into our account, giving us the flexibility to meet our needs and reinvest opportunistically, whether markets are rallying or retreating.

The financial markets have been the most powerful engine of wealth in human history—but only for those who can ignore the noise. While others react emotionally to headlines and volatility, we stay the course, confident that our dividends will continue to roll in—rain or shine.

Why Dividend Growth?

The key is having a strategy built on quality, reliability, and growing income. Dividend growth investing delivers all three. Instead of sitting in cash and waiting for the “perfect” time to enter the market, we prefer to own high-quality companies with long track records of increasing their dividends.

Cash rarely keeps pace with inflation. A dollar in 2000 is worth just 52 cents today. But a carefully selected portfolio of dividend growers doesn’t just preserve purchasing power—it increases it, through rising income and compounding returns.

While many index and ETF investors panic and try to guess the bottom, we remain calm, patient, and disciplined—ready to purchase our quality dividend growers when prices become sensible.

The Power of Compounding Dividends

Our annual CAGR sheets tell the story best. They show ten years of dividend growth across the page—clear, consistent, and compounding. It’s one thing to see the numbers; it’s another to understand the impact. These annual increases don’t just drive wealth creation—they are the wealth. Every dividend raise is a powerful signal: income is growing, purchasing power is compounding, and time is on our side.

Below are the sheets (as of January 1, 2025) we keep close by—because they remind us exactly why we do what we do.

Intro

Q4 earnings season has wrapped up! Curious how The List performed compared to last year’s earnings and analyst expectations? Check out our earnings calendar for a full breakdown.

Last week we talked about ‘doing less badly’ than other strategies during periods of volatility. It might sound strange, but sometimes just losing less than others is what makes a good investor. When the market is booming, everyone looks smart—but the real test is how well you handle the tough times. Historically, dividend growth stocks have outperformed during periods of uncertainty.

When Chuck Carnevale said, “It’s a market of stocks, not a stock market,” he was emphasizing that the stock market is not a single, uniform entity that moves in the same direction for all stocks. Instead, it is made up of individual stocks, each with its own fundamentals, valuations, and performance patterns.

Below are the ten most undervalued dividend growth companies from our Canadian and U.S. watchlists, based on last Friday’s closing prices.

Here’s a recap on how we select our ‘Timely Ten’:

Step three in our process involves monitoring our quality dividend growers regularly, which can become quite challenging depending on the number of companies we track. Fortunately, we rely on ‘The List’ instead of the vast array of stocks in the index, which streamlines our task. Nevertheless, we continually seek methods to enhance our efficiency. Through dividend yield theory, we’ve discovered an approach that has proven remarkably effective in aiding us with our efforts over the years.

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, if a stock pays a dividend yield above its ten-year average annual yield, its price will likely increase to return the yield to its historical average. Knowing that price and yield go in opposite directions, this theory helps us find stocks poised for a favourable price correction.

We have pre-screened our candidates using the criteria we initially laid out in building our watchlists. This helps us considerably narrow the universe of investable stocks.

1. Dividend growth streak: 10 years or more.
2. Market cap: Minimum one billion dollars.
3. Diversification: Limit of five companies per sector, preferably two per industry.
4. Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.

Next, we rank our Canadian and American watchlists based on how far each stock’s price is below its fair value (Low Price), as determined by dividend yield theory. To find fair value, divide the current dividend (Dividend) by the stock’s historical high yield (High Yield).

Since price and yield move in opposite directions, a lower price results in a higher yield, and vice versa. The ten companies above the thick black line have a current price (Price) below fair value (Low Price). Put simply, these stocks have a current dividend yield higher than their historically high yield. According to dividend yield theory, these companies are sensibly priced and have the highest probability of a price increase in the shorter term. These are our ‘Timely Ten.’

Intro

The United States has imposed new tariffs on goods from Canada, Mexico, and China, with more expected on the EU. In response, these countries have retaliated with their own tariffs, increasing costs and uncertainty for businesses.

The key takeaway? No one truly wins in a trade war.

Meanwhile, heightened inflation, persistent higher interest rates, and renewed market volatility have created a challenging environment, particularly for long-term investors with lower risk tolerance. In this landscape, dividend growth stocks are gaining prominence as a strategy that not only enhances returns but also dampens volatility, offering both resilience and opportunity.

Intro

We haven’t shared an updated version of The List-USA since early January. Meanwhile, the Canadian edition appears weekly in our DGI Scorecard section.

While our investment strategy remains consistent across both countries, our U.S. holdings tend to deliver higher total returns—despite starting with an average yield that’s a full percentage point lower.

Can you guess why?