Last updated by BM on January 8, 2024
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 +0.5% (capital). Dividends have increased by +2.7% YTD, highlighting the growth in the dividend (income).
- Last week, there were no dividend announcements from companies on ‘The List’.
- Last week, there were no earnings reports from companies on ‘The List’.
- No companies on ‘The List’ are due to report earnings this week.
DGI Scoreboard
The List (2024)
The Magic Pants 2024 list includes 28 Canadian dividend growth stocks. Here are the criteria to be considered a candidate on ‘The List’:
- Dividend growth streak: 10 years or more.
- Market cap: Minimum one billion dollars.
- Diversification: Limit of five companies per sector, preferably two per industry.
- Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.
Based on these criteria, companies on ‘The List’ are added or removed annually on Jan. 1. Prices and dividends are updated weekly.
While ‘The List’ does not function as a portfolio on its own, it serves as an excellent initial reference for individuals looking to diversify their investments and achieve higher returns in the Canadian stock market. Through our newsletter, readers gain a deeper understanding of how to implement and benefit from our Canadian dividend growth investing strategy.
For those interested in something more, please upgrade to a paid subscriber; you get the enhanced weekly newsletter, access to premium content, full privileges on the new Substack website magicpants.substack.com and DGI alerts whenever we make stock transactions in our portfolio.
Performance of ‘The List’
Last week, ‘The List’ got off to a positive start with a price return of +0.5% (capital). Dividend growth is looking as dependable as always with several announcements in the fourth quarter of 2023. Dividends are already rising and have increased by +2.7% in 2024, highlighting the growth in the dividend (income) this calendar year.
The best performers last week on ‘The List’ were Alimentation Couche-Tard Inc. (ATD-T), up +3.1%; Enghouse Systems Limited (ENGH-T), up +2.7%; and TC Energy Corp. (TRP-T), up +2.1%.
Loblaw Companies Limited (L-T) was the worst performer last week, down -1.4%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $79.17 | 3.1% | $0.70 | 17.4% | 14 |
| BCE-T | Bell Canada | 7.1% | $54.48 | 0.6% | $3.87 | 0.0% | 15 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $30.30 | -1.3% | $1.53 | 0.0% | 15 |
| CCL-B-T | CCL Industries | 1.8% | $58.11 | 0.5% | $1.06 | 0.0% | 22 |
| CNR-T | Canadian National Railway | 1.9% | $168.24 | 0.8% | $3.16 | 0.0% | 28 |
| CTC-A-T | Canadian Tire | 5.0% | $139.80 | 0.9% | $7.00 | 1.4% | 13 |
| CU-T | Canadian Utilities Limited | 5.6% | $32.32 | 0.6% | $1.79 | 0.0% | 52 |
| DOL-T | Dollarama Inc. | 0.3% | $94.29 | -0.8% | $0.28 | 5.8% | 13 |
| EMA-T | Emera | 5.6% | $50.86 | 0.1% | $2.87 | 3.0% | 17 |
| ENB-T | Enbridge Inc. | 7.5% | $49.06 | 1.4% | $3.66 | 3.1% | 28 |
| ENGH-T | Enghouse Systems Limited | 2.5% | $34.89 | 2.7% | $0.88 | 4.1% | 17 |
| FNV-N | Franco Nevada | 1.2% | $110.04 | -0.1% | $1.36 | 0.0% | 16 |
| FTS-T | Fortis Inc. | 4.2% | $55.64 | 1.4% | $2.36 | 3.3% | 50 |
| IFC-T | Intact Financial | 2.2% | $201.90 | -0.7% | $4.40 | 0.0% | 19 |
| L-T | Loblaw Companies Limited | 1.4% | $126.78 | -1.4% | $1.78 | 2.4% | 12 |
| MFC-T | Manulife Financial | 5.0% | $29.14 | 0.9% | $1.46 | 0.0% | 10 |
| MGA-N | Magna | 3.3% | $56.03 | 1.0% | $1.84 | 0.0% | 14 |
| MRU-T | Metro Inc. | 1.8% | $67.62 | -1.3% | $1.21 | 0.0% | 29 |
| RY-T | Royal Bank of Canada | 4.1% | $134.63 | 1.2% | $5.52 | 3.4% | 13 |
| SJ-T | Stella-Jones Inc. | 1.2% | $76.14 | -0.6% | $0.92 | 0.0% | 19 |
| STN-T | Stantec Inc. | 0.7% | $104.43 | -0.2% | $0.78 | 2.0% | 12 |
| T-T | Telus | 6.3% | $23.95 | 1.0% | $1.50 | 5.2% | 20 |
| TD-T | TD Bank | 4.7% | $86.08 | 1.6% | $4.08 | 6.3% | 13 |
| TFII-N | TFI International | 1.2% | $131.48 | 0.2% | $1.60 | 10.3% | 13 |
| TIH-T | Toromont Industries | 1.5% | $114.48 | 1.5% | $1.72 | 0.0% | 34 |
| TRI-N | Thomson Reuters | 1.4% | $143.93 | 0.4% | $1.96 | 0.0% | 30 |
| TRP-T | TC Energy Corp. | 7.0% | $53.41 | 2.1% | $3.72 | 0.0% | 23 |
| WCN-N | Waste Connections | 0.8% | $146.48 | -1.1% | $1.14 | 8.6% | 14 |
| Averages | 3.2% | 0.5% | 2.7% | 21 |
Note: Stocks ending in “-N” declare earnings and dividends in US dollars. To achieve currency consistency between dividends and share price for these stocks, we have shown dividends in US dollars and share price in US dollars (these stocks are listed on a US exchange). The dividends for their Canadian counterparts (-T) would be converted into CDN dollars and would fluctuate with the exchange rate.
DGI Clipboard
“The real key to making money in stocks is not to get scared out of them.”
– Peter Lynch
The 2023 calendar year is now behind us!
Results from last year varied depending on the investments you held. REITs and Utilities performed poorly, while Tech stocks excelled, particularly in the U.S. The Canadian market, on the whole, remained relatively stable until the final two months of the year. In general, the indexes we monitor ended the year in positive territory, driven by expectations of interest rate cuts in 2024.
Stocks on ‘The List’ were also uneven but eke out an average price gain of 5.8% in 2023. Overall, 14 of the 27 stocks on ‘The List’ registered a positive capital return. Our income was up 8.7% on average last year with 26 of 27 companies raising their dividend once again, proving how reliable dividends are compared to price returns year to year.
The standout performers on ‘The List’ were:
- Stantec Inc. (STN-T) up 62.8%
- Stella Jones Inc. (SJ-T) up 55.5%
- TFI International (TFII-N) up 35.8%
While the clear loser was:
Franco Nevada (FNV-N) down -19.8%.
Here is a little background on each of those companies and a look ahead in 2024.
Stantec Inc. experienced robust growth in 2023 but is expected to ease in 2024. Value Line’s forecast indicates a slight expansion of the top line by just under 10%, reaching $5.545 billion in the upcoming year. The majority of revenues are expected to come from the existing backlog, which has increased by nearly 6% to $6.4 billion since the beginning of 2023. Value Line also anticipates that high-margin U.S. water projects and diverse environmental contracts will play a disproportionately significant role in the projected low-teens earnings improvement for 2024.
Due to valuation concerns, we did not have an opportunity to invest in STN-T in 2023. Perhaps 2024 will provide us with a better entry point.
Stella Jones Inc. has consistently been a favourite dividend growth stock of ours, having been purchased multiple times in the past. I currently maintain it in my family portfolios. The 55.5% one-year capital return was a pleasant surprise for this quality dividend grower.
In their Q3 earnings report, management attributes the success of 2023 to the consistently strong performance of their infrastructure-related businesses and the residential lumber segment meeting expectations. Favorable pricing dynamics continued to benefit utility pole sales, and there was a progressive increase in sales volumes during the quarter. Substantial production volume gains were realized, thanks to capital projects and the recent acquisition of Baldwin. Management is confident in the growth continuing into 2024.
Like Stantec Inc., we did not add to our position or open a new one in our model portfolio due to valuation concerns with SJ-T. Our valuable lesson here was not to “get scared out” of our position in 2021 and to let our investment thesis play out. More often than not, we are rewarded.
TFI International continues to make a strong impression. In 2023, the stock saw a further increase of 35.8%, driven by twelve additional acquisitions, including their most recent one in the last week of the year involving flatbed heavyweight Daseke.
In their Q3 earnings report, management praised the TFI International team’s performance in quickly adapting to changing market conditions while further streamlining operations. The CEO believes that the company is well-positioned to sustain its rapid growth as demand increases later this year.
In contrast to Stantec Inc. and Stella Jones Inc., we had the opportunity to enter a starting position in TFII-N for our model portfolio.
The worst performer on ‘The List’ was:
Franco-Nevada, while enjoying positive momentum due to rising gold prices for most of the year, faced a setback in late November when the Supreme Court of Panama declared the agreement (Law 406) between the government and the owner of the Cobre Panama mine, First Quantum Minerals, as unconstitutional, rendering the agreement null and void. Both the Panamanian government and First Quantum Minerals are contesting the ruling.
As an update to last week’s newsletter article, it appears that one of the major players in the industry, Barrick Gold, is contemplating a takeover offer for First Quantum. Barrick’s Chief Executive, Mark Bristow, possesses significant experience in resolving resource disputes with host countries, given the company’s history of encountering such challenges.
Despite the short-term headwind, our investment thesis for Franco-Nevada remains unchanged. Anticipating a resolution to this issue in 2024, we expect our investment in FNV-N to yield positive results in the long term.
To recap, most investors made money in 2023, although it didn’t look that way at the end of October. The late rally across the board helped shelter what we believe is a near-term recession. We enter 2024 cautiously with our hard-earned capital. Our approach emphasizes patience, as we actively seek opportunities to enhance our portfolio by acquiring shares in quality companies listed on ‘The List’ when they attain reasonable valuations.
For those interested in something more, please upgrade to a paid subscriber; you get the enhanced weekly newsletter, access to premium content, full privileges on the new Substack website magicpants.substack.com and DGI alerts whenever we make stock transactions in our portfolio.
