Month: April 2025

Intro

New retirees and novice investors often seek straightforward guidance when making investment choices. To meet this need, we provide a clear and accessible DGI model portfolio featuring precise buy/sell alerts and detailed valuation analyses for every transaction. Our structured approach allows investors to comfortably familiarize themselves with our Dividend Growth Investing (DGI) strategy, gradually building their portfolios alongside ours.

For investors who prefer to invest a lump sum immediately, we offer the ‘No-Look’ DGI Portfolio. Inspired by the sports concept of a ‘no-look’ pass—where an athlete instinctively passes to a teammate without needing to look—this strategy simplifies the investing process. Instead of waiting for individual stocks to become sensibly priced according to our valuation metrics, investors select a single date to equally invest in the highest-rated companies from our curated list, based on reputable third-party quality ratings from Value Line and S&P.

The Value Line ratings are based on the rating services’ proprietary ranking system, which evaluates stocks on various factors, including financial strength, earnings potential, and risk. S&P ratings assess the creditworthiness of entities such as corporations, governments, and other issuers of debt. The better the ratings, the higher the quality of the company.

This approach eliminates guesswork, detailed analysis, and timing concerns, focusing instead on the inherent quality of established dividend-growing companies. Here’s a look at how our ‘No-Look’ DGI Portfolio of the top 20 DGI stocks in Canada has performed year-to-date relative to our broader list of dividend growers and tracked indexes.

Intro

It’s the dividend growth mindset that helps you successfully navigate challenging markets like today’s. A simple shift in how you approach investing can truly make all the difference. Imagine your retirement portfolio as a business—a business designed to generate steady profits, consistent revenue, and regular payments to you, the owner, every single quarter and year.

Although our model portfolios are still relatively young, our yield-on-cost (dividend return) is already beginning to take shape. Regularly reviewing this data provides reassuring confirmation that our retirement strategy remains on the right track.

One of my investing mentors, Tom Connolly, offers valuable advice: “If market gyrations bother you, study the yield on the original price of stocks you purchased years ago. Such data is relaxing.”

Below you’ll find ‘timestamps’ marking the first year of investing in both our Canadian and American model portfolios. The columns ‘YLD THEN’ (Starting Yield) and ‘YOC NOW’ (Yield on Cost) clearly illustrate the growth in our yields. After just a few short years, our dividend returns alone (currently 3.87% and 4.08%) already surpass those of most fixed-income investments, and these yields will likely continue to increase.

Our capital appreciation has also been solid, with eleven of the thirteen companies now valued higher than our original purchase price, even following recent market sell-offs!

Intro

Last week was a clear reminder of the importance of staying the course. Those who panicked and sold are likely regretting it now—patience and discipline once again proved to be the investor’s greatest advantage.

When the broader market sells off, the share prices of even high-quality dividend growth stocks can fall. But as their prices drop, their dividend yields rise (since yield = dividend ÷ price). At a certain point, the higher yield becomes too attractive for investors to ignore, especially for income-focused or value-conscious buyers.

This rising yield acts like a magnet, drawing in new buyers who want that growing income stream. As demand increases, the stock price stabilizes and often rebounds, creating a natural price floor.

This dynamic is especially strong with dividend growth stocks because:

• Their dividends are reliable (often backed by decades of increases).
• Investors trust the payout will keep rising, even during downturns.
• Retirees, institutions, and income-seekers step in when yields get juicy.

So, while growth stocks might keep falling in a panic, dividend growth stocks often find support sooner—because the rising yield makes them increasingly attractive the lower they go.

Timely Ten

Below are the ten most undervalued dividend growth companies from our Canadian and American 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

“You have a pair of pants. In the left pocket, you have $100. You take $1 out of the left pocket and put 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.”

I came across this magic pants analogy in an article on dividend investing about twenty years ago, and it stuck with me. It was one of the early sparks that led me to seriously explore dividend growth investing and question whether there really was something “magical” about it.

The past week in the stock market served as a great reminder of why I made the switch. I was looking for an approach that could deliver reliable, growing income even when markets were falling. The year-to-date income for ‘The List’ is now up 7.5%, thanks to another dividend increase last week from Dollarama Inc. And the best part? We didn’t have to sell a single share to achieve that. While the broader market declined, our capital held up far better. That’s the power of dividend growth investing, steady income and downside protection, no matter what the market’s doing.

Why Dividend Growth Investing Offers a More Sustainable Path

Relying on total return investing—especially when it means selling shares for income—introduces unnecessary complexity and risk. Selling shares to generate cash flow forces investors to constantly monitor the market, time their sales, and make judgment calls that can be clouded by emotion or volatility. It turns investing into a kind of ongoing speculation rather than a disciplined wealth-building strategy.

Dividend growth investing, by contrast, shifts the focus from selling to holding. It replaces the need to create your own income with a reliable, growing income stream that comes to you—quarter after quarter, year after year. There’s comfort and confidence in knowing your portfolio is paying you to hold it.

And unlike broad-market ETFs, which often dilute quality by holding “too many losers,” a curated portfolio of quality dividend growers focuses only on high-conviction, proven businesses with long-term track records of shareholder returns. It allows investors to concentrate on excellence, not just participate in averages.

While diversification is often sold as protection, real downside protection comes from owning resilient, cash-generating businesses bought at sensible prices, that raise dividends even in tough times. Dividend growth investing isn’t about chasing the highest returns, it’s about building a dependable, inflation-beating income that grows over time, with the added bonus of long-term capital appreciation.

Intro

In The past few months have tested the resolve of many investors. With stocks retreating from recent all-time highs, it’s in moments like these that the difference between true long-term investors and short-term speculators becomes crystal clear.

As dividend growth investors, we understand that wealth is built not by timing the market, but by time in the market. Staying the course during volatility gives us the best opportunity to harness the power of compounding, leading to growing streams of dividend income and the potential for substantial capital appreciation over time.

This is when discipline matters most. When sentiment is low and prices are falling, buying high-quality dividend growers may feel uncomfortable in the short term, but history has shown it can be a brilliant move over the next 10 to 20 years.

It’s natural to feel the urge to protect your portfolio from further price declines. But for those focused on growing reliable income, market pullbacks are not threats, they’re opportunities. Opportunities to accumulate shares of great businesses at more attractive yields, setting the stage for future income and long-term gains.

One of the ways we deal with volatile times is to focus on our income (dividends). Knowing that our income is unaffected by markets is another magical thing about what we do. The chart below (10YR DIV PAID) helps us sit tight during market volatility waiting patiently for an opportunity to purchase our quality dividend growers at better prices.