Month: January 2026

Intro

“The hardest truth about investing:

You won’t feel rich when your portfolio hits six figures.

You’ll still check prices.

You’ll still worry about corrections.

You’ll still wonder if you’re doing it right.

But one morning, dividends will cover your grocery bill. Then your car payment. Then your mortgage.

That’s when everything changes.

You start to understand that you should have started income investing sooner.

Not because you feel wealthy. Because you feel free.” 

Great quote from a fellow Substack author, Investing Lawyer.

Intro

Every year, when I publish our new watchlists, I run the same simple exercise. I do it to show new investors just how predictable the long-term returns of quality dividend growth stocks can be when you look across a full market cycle.

John Bogle, the founder of Vanguard and a pioneer of index investing, gave investors a powerful way to understand long-term stock returns:

Total Return = Investment Return + Speculative Return

This formula separates what actually builds wealth from what merely creates short-term noise.

Investment Return is the part you can measure and rely on. It has two components:

• Dividend yield: the cash income paid to shareholders
• Earnings growth: how fast the company’s profits grow over time

If a company pays a 3% dividend and grows earnings at 6% per year, the investment return is about 9%. No forecasting. No market timing. Just business performance.

Speculative Return comes from changes in valuation. When investors are willing to pay more for a dollar of earnings, prices rise. When enthusiasm fades, prices fall, even if the business itself is doing well. Bogle warned investors not to depend on this part of the equation because it is unstable and often reverses over time.

This framework fits perfectly with dividend growth investing.

As dividend growth investors, we focus almost entirely on investment return. We look for high-quality businesses with growing earnings and a long history of raising dividends. We care far less about what the market might do next year and far more about what the company is producing today.

Dividend growth and earnings growth are closely linked. They often have similar growth rates. A company cannot raise its dividend for decades unless profits are also rising.

Here’s the exercise I run using our watchlist, The List. I take:

• The average dividend yield from ten years ago
• The actual annualized dividend growth over the past decade

Then I apply Bogle’s formula.

Intro

Our Timely Ten lists remain the fastest way to spot potential value opportunities, which explains why they continue to be the most-read articles every month.

Timely Ten (Canadian version)

With three of the top four candidates from last month’s Timely Ten (CDN) now removed from the 2026 Canadian watchlist, some early-year reshuffling was inevitable.

goeasy Ltd., Alimentation Couche-Tard Inc., and Canadian National Railway have stepped onto the podium, and all three screen as attractive rebound candidates in 2026 based on our valuation metrics. That said, portfolio discipline matters. I am already at my maximum position size in both Couche-Tard and Canadian National Railway within the MP Model Portfolio CDN, which means patience, not action, is the correct move for now. goeasy Ltd. stands out as the most actionable name, as I still have room to add under our position sizing guidelines.

Excluding Canadian Tire, which remains too cyclical for our purposes, the rest of the top ten is compelling. We already own most of these businesses, and in several cases still have capacity to add. The setup is promising, but as always, further research comes first.

Timely Ten (United States version)

Similar to the Canadian edition, the Timely Ten (USA) saw some reshuffling to start 2026. With two of last month’s candidates removed from the 2026 American watchlist, several names moved meaningfully up and down the rankings.

Two companies stand out this month: Visa and Domino’s Pizza.

Visa jumped from #12 last month to #7, immediately catching our attention. It has been one of the strongest dividend growth and total return performers in the U.S. market over the past fifteen years. High-quality businesses like Visa rarely stay attractively priced for long. With a full position already in the model portfolio, we are on the sidelines, but new investors may want to take a closer look.

Domino’s Pizza remains a company we continue to monitor closely. We have been watching it for over a year but have yet to initiate a position. Recent price weakness reflects a challenging operating environment, as a budget-conscious consumer shifts toward value promotions, which pressure margins and growth, or toward more at-home eating. The long-term value proposition remains compelling, but for now we are not convinced the risk-reward has fully turned in our favour.

As always, the Timely Ten is not a call to action on its own, but a disciplined starting point for deeper research and patient capital deployment.

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 short term. These are our Timely Ten.

Intro

January is the most dangerous month of the year for investors.

Everyone gets a psychological reset. Last year’s bad decisions are erased. Confidence is restored. And once again, investors convince themselves that this is the year they will predict the market correctly.

If they get lucky, they celebrate.

If they are wrong, they blame the market.

I know this cycle well because I lived it.

The problem is simple. You never know whether you were smart or just lucky until it no longer matters. By the time the truth shows up, the opportunity is gone and the lesson is expensive.

This is why dividend growth investing (DGI) exists.

I can say with conviction today that your income will be higher at the end of this year than it is right now. Not because I know where the market is going, but because the businesses we own are designed to raise cash payouts year after year. A 7 to 10 percent income increase is not a guess. It is the probable outcome of owning quality companies that grow dividends.

Over a full market cycle, portfolio value follows income higher. Not through prediction. Through discipline.

That is not exciting.

It is effective.

Powerful dividend growth portfolios are built from a good watchlist. Closely tracking every stock in the dividend growth universe is neither practical nor necessary, so we curate a focused list of high-quality companies and monitor it weekly. When valuations become compelling, we act.

Last week, we released the Canadian version of The List. This week, it’s our neighbors to the south.

Our American watchlist is called The List (USA). While it is published on this blog only once per month, it is monitored continuously alongside our weekly Canadian watchlist. Paid subscribers receive the same DGI alerts when we trade, at roughly the same pace as our Canadian alerts.

With far more dividend growth companies available in the U.S. market, curating this list is more demanding. Still, our approach remains consistent. We do not make changes for the sake of activity. Quality businesses tend to remain quality businesses. Every company on last year’s American watchlist increased its dividend in 2025.

Changes to the 2026 American Watchlist

For 2026, United Parcel Service, Lockheed Martin, and Starbucks have been removed from the watchlist.

They have been replaced by Waste Management and Carlisle Companies Inc.

These additions strengthen the overall dividend growth profile of the list, improve long-term income metrics, and increase the probability of attractive capital returns within our portfolios. 

Introducing the 2026 American Dividend Growth Watchlist (The List-USA):

Intro

As dividend growth investors, we think like asset managers, not stock pickers.

Our assets are not tickers.

They are high-quality businesses. The kind that generate durable cash flow, raise dividends consistently, and quietly compound wealth over time.

Every year, we begin with focus.

Not the most companies.

The best companies.

Businesses that are essential to the Canadian and U.S. economies. Businesses we can understand, track, and own with conviction. While much of the market is busy forecasting headlines and guessing outcomes, we stay anchored to what actually matters: cash flow. One dividend at a time.

This week, I’m unveiling the 2026 Canadian edition of The List, with the U.S. version coming in next week’s issue.

Why Focus Matters

One of the most powerful lessons I’ve learned, both in investing and in business, came from two of my greatest mentors.

When asked to write down the single word most responsible for their success, both chose the same word:

Focus.

Focus means concentration.

It means saying no far more often than yes.

It means ignoring noise so you can do the important work better than anyone else.

That idea is the foundation of The List.

It is a curated watchlist of quality dividend growth companies designed to help us think clearly, measure what matters, and manage risk in our model portfolios. We own some of these businesses. We do not own all of them. The List is not a portfolio. It is a coaching tool that helps us identify what to buy when valuation becomes compelling.

Changes to the 2026 Canadian Watchlist

Using last year’s List as our starting point, several changes were necessary.

Clear Removals

Bell Canada (BCE) cut its dividend in 2025 and has not committed to restoring the prior level within a defined timeframe. While management outlined a new, more flexible dividend framework tied to free cash flow, a broken dividend growth streak is a hard stop for us. That alone removes BCE from our watchlist for at least the next decade.

Telus (T) announced a pause in its dividend growth program. While the dividend remains intact and the company technically extended its growth streak in 2025, we decided to step back. The priority now is to repair the balance sheet and improve free cash flow. We’ll reassess once leverage is clearly moving in the right direction.

Coaching-Driven Removals

Canadian Utilities Limited (CU) has an extraordinary 54-year dividend growth streak, but recent growth has averaged roughly 1 percent annually. Our strategy has two engines: dividend growth and price growth, with the former setting the table for the latter. At this stage, we believe there are better opportunities to follow.

Enghouse Systems Limited (ENGH) was the hardest decision. Dividend growth has been exceptional, but the underlying business is no longer growing. A stagnant business paired with aggressive dividend metrics creates distortion. We want quality companies that grow both income and value.

A Key Addition for 2026

Our addition this year is Canadian Natural Resources (CNQ).

Historically, we excluded pure-play energy companies due to cyclicality. What changed is the data.

CNQ has delivered above-average dividend growth and capital returns over the past decade, operates as one of the lowest-cost producers globally, and generates free cash flow at oil prices that would bankrupt weaker competitors. That resilience matters.

Even more important is the company’s dividend framework. As net debt continues to decline, management has committed to directing a growing share of free cash flow toward dividends. That alignment between balance sheet strength and shareholder returns earns CNQ a place on The List. 

Introducing the 2026 Canadian Dividend Growth Watchlist (The List):