Last updated by BM on April 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’.
- In the DGI Clipboard section, find out how we view ‘risk’ as a dividend growth investor.
- Last week, dividend growth was up and has increased by +8.3% YTD, highlighting the dependable growth in our income.
- The YTD price return of ‘The List’ was down from the previous week with a return of +3.5% (capital).
- 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’.
- No companies on ‘The List’ are 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 are added or removed from ‘The List’ annually on January 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, dividend growth was up and has increased by +8.3% YTD, highlighting the dependable growth in our income.
The YTD price return of ‘The List’ was down from the previous week with a return of +3.5% (capital).
Last week’s best performers on ‘The List’ were Dollarama Inc. (DOL-T), up +10.96%; Franco Nevada (FNV-N), up +2.64%; and Toromont Industries (TIH-T), up +2.41%.
Brookfield Infrastructure Partners (BIP-N) was the worst performer last week, down -7.59%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $75.45 | -1.7% | $0.70 | 17.4% | 14 |
| BCE-T | Bell Canada | 8.9% | $44.75 | -17.4% | $3.99 | 3.1% | 15 |
| BIP-N | Brookfield Infrastructure Partners | 5.6% | $28.84 | -6.0% | $1.62 | 5.9% | 16 |
| CCL-B-T | CCL Industries Inc. | 1.7% | $69.15 | 19.6% | $1.16 | 9.4% | 22 |
| CNR-T | Canadian National Railway | 1.9% | $176.30 | 5.7% | $3.38 | 7.0% | 28 |
| CTC-A-T | Canadian Tire | 5.2% | $133.86 | -3.4% | $7.00 | 1.4% | 13 |
| CU-T | Canadian Utilities Limited | 6.0% | $30.13 | -6.2% | $1.79 | 0.0% | 52 |
| DOL-T | Dollarama Inc. | 0.3% | $114.50 | 20.5% | $0.35 | 29.5% | 13 |
| EMA-T | Emera | 6.1% | $47.38 | -6.7% | $2.87 | 3.0% | 17 |
| ENB-T | Enbridge Inc. | 7.6% | $48.04 | -0.7% | $3.66 | 3.1% | 28 |
| ENGH-T | Enghouse Systems Limited | 3.3% | $30.22 | -11.0% | $1.00 | 18.3% | 17 |
| FNV-N | Franco Nevada | 1.2% | $122.31 | 11.1% | $1.44 | 5.9% | 16 |
| FTS-T | Fortis Inc. | 4.5% | $52.74 | -3.8% | $2.36 | 3.3% | 50 |
| IFC-T | Intact Financial | 2.2% | $220.16 | 8.3% | $4.84 | 10.0% | 19 |
| L-T | Loblaw Companies Limited | 1.2% | $149.52 | 16.3% | $1.78 | 2.4% | 12 |
| MFC-T | Manulife Financial | 4.8% | $33.13 | 14.7% | $1.60 | 9.6% | 10 |
| MGA-N | Magna | 3.6% | $52.18 | -6.0% | $1.90 | 3.3% | 14 |
| MRU-T | Metro Inc. | 1.9% | $71.06 | 3.7% | $1.34 | 10.7% | 29 |
| RY-T | Royal Bank of Canada | 4.0% | $139.11 | 4.6% | $5.52 | 3.4% | 13 |
| SJ-T | Stella-Jones Inc. | 1.4% | $79.60 | 3.9% | $1.12 | 21.7% | 19 |
| STN-T | Stantec Inc. | 0.7% | $112.20 | 7.2% | $0.83 | 7.8% | 12 |
| T-T | Telus | 6.9% | $21.77 | -8.2% | $1.50 | 5.2% | 20 |
| TD-T | TD Bank | 5.1% | $80.63 | -4.8% | $4.08 | 6.3% | 13 |
| TFII-N | TFI International | 1.0% | $158.91 | 21.1% | $1.60 | 10.3% | 13 |
| TIH-T | Toromont Industries | 1.4% | $133.49 | 18.3% | $1.92 | 11.6% | 34 |
| TRI-N | Thomson Reuters | 1.4% | $151.94 | 6.0% | $2.16 | 10.2% | 30 |
| TRP-T | TC Energy Corp. | 7.4% | $51.93 | -0.7% | $3.84 | 3.2% | 23 |
| WCN-N | Waste Connections | 0.7% | $168.01 | 13.4% | $1.14 | 8.6% | 14 |
| Averages | 3.5% | 3.5% | 8.3% | 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
“Once you attain competence, diversification is undesirable.”
– Gerald Loeb, The Battle for Investments Survival
Redefining Risk as a Dividend Growth Investor
“If you are living off income and, in particular, if you want to pass down your capital to children and grandchildren, you’re going to have to invest and spend in a thoughtful manner. And you’re also going to have to steel yourself to ignore most of the advice that’s being thrown your way.
The world doesn’t understand who you are.”
This quote comes from a paper titled, ‘Memo to the Darcy Family: To Thine Own Self Be True’ written by Jim Garland in 2013.
As Mr. Garland points out, the world does not understand who we are (dividend growth investors), and the wealth management industry certainly does not. Try asking your wealth advisor to put together a concentrated portfolio of stocks that gives you a high probability of a growing, inflation-protected income in your retirement account. The look on their face should be priceless.
This request will likely unsettle most wealth advisors because they believe they act in your best interest. Their approach involves investing in a low beta, highly diversified stock portfolio alongside no-growth fixed-income investments, which they see as a way to minimize your risk.
Advisors learn this in school through the teachings of Harry Markowitz’s 1952 ‘Portfolio Selection’, William Sharpe’s, ‘Capital Assets Pricing Model (with beta) and Eugene Fama’s ‘Efficient Market Hypothesis’. They also know that to keep their jobs, they better not deviate too much from what every other wealth manager does (career risk).
In his 2015 paper, ‘A value investor’s take on diversification and risk’, George Athanassakos, debunks these teachings of Modern Portfolio Theory (MPT).
Mr. Athanassakos and others have now discovered that risk is not volatility and is not mitigated through diversification.
“Value investors have concentrated portfolios, not because they reject diversification, but rather because they operate within the boundaries of their competence; they select only securities they understand; they prefer companies with stable cash flows and a history of steady earnings that can be reliably valued.”
Like value investors, we need to ‘steel ourselves’ away from the myth of MPT.
“Dividend growth investors focus on the stream of future income from common stocks purchased via the market. With dividend growth, we know our capital will grow eventually. In the meantime, price fluctuations are of slight concern. Why? Dividend growth investors don’t need to sell to finance retirement. We are interested in protecting our retirement income flow. With common stocks, unlike deposits, there is no guarantee that you will get your money back. However, by following some essential practices, you can have the very reasonable assurance of both an increasing retirement income and growing capital.”
-Tom Connolly
Like our mentors, we see risk differently from the rest of the world. Our risk of loss depends on what is in our portfolios and what we paid for it. When you have quality dividend growers purchased at sensible prices, we have less risk without foregoing our growing capital and income.
Check us out on magicpants.substack.com for more info in this week’s issue….
