Last updated by BM on March 18, 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 down from the previous week with a YTD price return of +3.8% (capital). Dividends were up and have increased by +7.4% YTD, highlighting the dependable growth in our income.
- Last week, there was one dividend announcement from a company on ‘The List’.
- Last week, there was one earnings report from a company on ‘The List’.
- One company on ‘The List’ is due to report earnings this week.
DGI Scorecard
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’ is not a standalone portfolio, it functions admirably as an initial guide for those seeking to broaden their investment portfolio and attain superior returns in the Canadian stock market. Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our Canadian dividend growth investing strategy. This evidence-based, unbiased approach empowers DIY investors to outperform both actively managed dividend funds and passively managed indexes and dividend ETFs over longer-term horizons.
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 model portfolio.
Performance of ‘The List’
Last week, ‘The List’ was down from the previous week with a YTD price return of +3.8% (capital). Dividends were up and have increased by +7.4% YTD, highlighting the dependable growth in our income.
The best performers last week on ‘The List’ were Toromont Industries (TIH-T), up +3.74%; Dollarama Inc. (DOL-T), up +2.56%; and Waste Connections (WCN-N), up +2.48%.
Enghouse Systems Limited (ENGH-T) was the worst performer last week, down -11.04%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $83.72 | 9.1% | $0.70 | 17.4% | 14 |
| BCE-T | Bell Canada | 8.6% | $46.61 | -14.0% | $3.99 | 3.1% | 15 |
| BIP-N | Brookfield Infrastructure Partners | 5.5% | $29.44 | -4.1% | $1.62 | 5.9% | 16 |
| CCL-B-T | CCL Industries Inc. | 1.6% | $71.35 | 23.4% | $1.16 | 9.4% | 22 |
| CNR-T | Canadian National Railway | 1.9% | $174.28 | 4.4% | $3.38 | 7.0% | 28 |
| CTC-A-T | Canadian Tire | 5.3% | $131.88 | -4.8% | $7.00 | 1.4% | 13 |
| CU-T | Canadian Utilities Limited | 5.8% | $30.70 | -4.4% | $1.79 | 0.0% | 52 |
| DOL-T | Dollarama Inc. | 0.3% | $105.32 | 10.8% | $0.28 | 5.8% | 13 |
| EMA-T | Emera | 6.0% | $47.70 | -6.1% | $2.87 | 3.0% | 17 |
| ENB-T | Enbridge Inc. | 7.6% | $48.06 | -0.7% | $3.66 | 3.1% | 28 |
| ENGH-T | Enghouse Systems Limited | 3.2% | $30.87 | -9.1% | $1.00 | 18.3% | 17 |
| FNV-N | Franco Nevada | 1.3% | $114.48 | 3.9% | $1.44 | 5.9% | 16 |
| FTS-T | Fortis Inc. | 4.4% | $53.80 | -1.9% | $2.36 | 3.3% | 50 |
| IFC-T | Intact Financial | 2.2% | $224.96 | 10.6% | $4.84 | 10.0% | 19 |
| L-T | Loblaw Companies Limited | 1.2% | $150.64 | 17.2% | $1.78 | 2.4% | 12 |
| MFC-T | Manulife Financial | 4.9% | $32.67 | 13.1% | $1.60 | 9.6% | 10 |
| MGA-N | Magna | 3.6% | $52.52 | -5.4% | $1.90 | 3.3% | 14 |
| MRU-T | Metro Inc. | 1.8% | $73.92 | 7.9% | $1.34 | 10.7% | 29 |
| RY-T | Royal Bank of Canada | 4.1% | $134.63 | 1.2% | $5.52 | 3.4% | 13 |
| SJ-T | Stella-Jones Inc. | 1.5% | $74.12 | -3.2% | $1.12 | 21.7% | 19 |
| STN-T | Stantec Inc. | 0.7% | $114.93 | 9.8% | $0.83 | 7.8% | 12 |
| T-T | Telus | 6.7% | $22.42 | -5.5% | $1.50 | 5.2% | 20 |
| TD-T | TD Bank | 5.0% | $81.37 | -3.9% | $4.08 | 6.3% | 13 |
| TFII-N | TFI International | 1.1% | $151.08 | 15.2% | $1.60 | 10.3% | 13 |
| TIH-T | Toromont Industries | 1.5% | $128.23 | 13.7% | $1.92 | 11.6% | 34 |
| TRI-N | Thomson Reuters | 1.4% | $157.35 | 9.8% | $2.16 | 10.2% | 30 |
| TRP-T | TC Energy Corp. | 7.0% | $54.49 | 4.2% | $3.84 | 3.2% | 23 |
| WCN-N | Waste Connections | 0.7% | $170.93 | 15.4% | $1.14 | 8.6% | 14 |
| Averages | 3.4% | 3.8% | 7.4% | 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
“A true investor buys for the dividend return and it’s growth.”
– Tom Connolly
How Dividend Growth Companies Pay You Back – Big Time!
When I was first introduced to the dividend growth investing strategy, I was no different than most investors. I wanted to know how much total return I would make annually if I invested in dividend growth companies. However, what truly astonished me was not the gain derived from the rise in stock prices but the substantial income gained solely from dividends. I had not anticipated that a significant portion of my initial investment would be repaid through dividends, making my original investment progressively safer as time passed.
Below is a chart of ‘The List’ we follow showing the ten-year total dividends paid for each company on ‘The List’.
The first takeaway is just how much of our original investment is returned to us in dividends alone.
About a third of ‘The List’ returns over half our money in just ten years. On average that number is ~42% or $4,194 if you take into account all the companies on ‘The List’. This is money we can reinvest, pay bills with or have fun with regardless of what the stock market is doing.
The second key point, which we frequently emphasize in our strategy, underscores that the compound annual dividend growth rate (CAGR 10Y DG) is driving the compound annual price growth rate (CAGR 10Y PG). With an average dividend growth rate of 9.5% and an average price growth rate of 9.1% over the last decade, this correlation is unmistakable.
Lastly, attention should be drawn to the positioning of companies on the chart. Those with higher initial yields tend to dominate the upper half, while those with lower starting yields occupy the lower half—a logical arrangement when you are sorting based on dividends paid over a shorter time period. To demonstrate how our strategy works over a longer investment horizon we have added a couple of extra columns to the far right of the chart. These columns display the dividend return from our original investment after ten years (10Y DIV RETURN) and the dividend return after twenty years (20Y DIV RETURN). This number is calculated by dividing the current dividend in 2024 and the projected dividend in 2034 by your original investment (PRICE 2014) using the actual dividend growth rate (CAGR 10Y DG) as our estimate. It is worth noting that many companies with initially low yields but high dividend growth rates would now sit at the top of the chart and generate more dividend income than those with higher starting yields and lower dividend growth rates.
Crafting a portfolio with a balanced mix of starting yields—some high, some low—is pivotal. With this approach, we avoid prematurely selling high dividend growth companies, safeguarding total returns, and vice versa, retaining high dividend payers to ensure sufficient retirement income until the low yield high growth companies catch up.
Check us out on magicpants.substack.com for more info in this week’s issue….
