Posted by BM on January 31, 2022
“We are going to be buyers of things over time. And if you’re going to be buyers of groceries over time, you like grocery prices to go down. If you’re going to be buying cars over time, you like car prices to go down. We buy businesses. We buy pieces of businesses: stocks. And we’re going to be much better off if we can buy those things at an attractive price than if we can’t.” – Warren Buffett
We received our first earnings reports from ‘The List’ in 2022 and they were good ones. Both MRU-T and CNR-T had earning beats and announced dividend increases. This will likely continue over the next quarter, and we should have a very good year for dividend growth. Dividends on ‘The List’ are already up over 6% YTD and we are only a month into the new year. Price volatility however is likely to continue as much of the general stock markets previous years capital gains will likely be eroded before finding their way again. It is comforting to know that we still get paid (dividends) regardless of what the market does in the short term. Buying and holding for the future cash flow is what we do as dividend growth investors. We are waiting and watching for good entry points to buy more of our good dividend growers at sensible prices.
Performance of ‘The List’
The best performers last week on ‘The List’ were Metro (MRU-T) up 6.1%; Loblaws (L-T) up 6.0%; Dollarama Inc. (DOL-T) up 4.5%.
Brookfield Infrastructure Partners (BIP-N) was the worst performer this week, down -3.6%.
‘The List’ was up this week 1.0% with a -1.9% YTD price return loss (capital) and an average of 6.1% in dividend increases (income) reported so far in 2022.
Dividend Increases
There were three companies on ‘The List’ that announced dividend increases this past week.
Metro Inc. (MRU-T) on Tuesday said it increased its 2022 quarterly dividend from $0.250 to $0.275 per share, payable March 7, 2022, to shareholders of record on Feb. 10, 2022.
This represents a dividend increase of 10%, marking the 27th straight year of dividend growth for this quality food retailer.
Canadian National Railway (CNR-T) on Tuesday said it increased its 2022 quarterly dividend from $0.615 to $0.7325 per share, payable March 31, 2022, to shareholders of record on Mar. 10, 2022.
This represents a dividend increase of 19%, marking the 26th straight year of dividend growth for this quality railroad.
Franco Nevada (FNV-N) on Thursday said it increased its 2022 quarterly dividend from $0.30 to $0.32 per share, payable March 31, 2022, to shareholders of record on Mar. 17, 2022.
This represents a dividend increase of 6.7%, marking the 14th straight year of dividend growth for this quality precious-metals and energy royalty company.
Earnings Releases
There were two earnings releases announced from companies on ‘The List’ this past week.
Metro Beats Estimates, Upgrades Outlook and Raises Dividend
07:38 AM EST, 01/25/2022 (MT Newswires) — Grocer Metro Inc. (MRU-T) on Tuesday reported Q1 2022 earnings and also hiked its quarterly dividend by 10%, to $0.275 per share.
The supermarket chain recorded quarterly revenue of $4.3 billion, slightly below the Capital IQ consensus mean forecast of $4.33 billion. Metro had reported $4.27 billion in revenue for the year ago period. Food same-store sales were down 1.4% versus the same quarter last year (up 10% in 2021). Online food sales were flat versus last year (up about 170% in 2021). Metro’s food basket inflation was 3.5%. Pharmacy same-store sales were up 7.7% (1.3% in 2021), with a 7.1% increase in prescription drugs due to a rise in physician visits and a 8.9% increase in front-store sales supported by OTC growth, mainly Cough & Cold products, and the lower sales last year as a result of the labour conflict at the Jean Coutu distribution center
Net earnings were $207.7 million, or $0.88 per diluted share, compared with net earnings of $191.2 million, or $0.76 per diluted share, last year.
Adjusted net earnings were $214.2 million, or $0.88 per adjusted share, beating a Capital IQ average forecast of $0.87 per share. Metro had reported adjusted earnings of $197.7 million, or $0.79 per share for the previous corresponding quarter.
Outlook
In the short term, food sales are expected to remain relatively stable as restaurant closures and work from home advisories persist. On the pharmacy side, Mretro expect sales to increase versus the prior year with launch of COVID-19 rapid test distribution in its network coupled with less restrictive government measures as 2021 was unfavorably impacted by a six-week ban on the sale of non-essential goods in Quebec. The industry continues to experience cost inflationary pressures, particularly in cost of goods, and labour shortages which have increased with the latest strain of COVID. Labour shortages are also affecting suppliers and logistics providers which in turn impact the grocery supply chain and it is difficult to predict how long this situation will last, Metro said.
CNR Appoints New CEO After Earnings Beat and Dividend Increase
04:39 PM EST, 01/25/2022 (MT Newswires) — Canadian National Railway (CNR-T) was up 2.1% in after hours New York trading after the company on Tuesday said its fourth-quarter profit rose 17% on a 2.6% rise in revenue as it boosted its dividend and put a share-buyback program in place as it announced a replacement for its retiring chief executive.
The railway said it earned C$1.2 billion, or C$1.69 per share, in the quarter, up from C$1.02 billion, or C$1.43, in the year-prior period. Adjusted profit, which excludes most one-time items, rose 18% to C$1.21 billion, or C$1.71, topping the average analyst estimate for the measure of C$1.53 per share, according to Capital IQ.
Revenue rose to C$3.75 billion from C$3.66 billion, while the railway’s adjusted operating ratio, a closely watched efficiency measure for which lower is better, fell to a record 57.9%, down 3.5 percentage points from the year-prior quarter.
“The last months of 2021 allowed us to tangibly demonstrate our resilience, our ability to make significant progress against the goals of our Strategic Plan, and what it means to build the premier railway of the 21 st century. Our previous strategic investments in safety, technology, and capacity enabled us to continue delivering high-quality service to customers while generating profitable growth and enhanced value to shareholders,” chief executive JJ Ruest said in a release.
Ruest plans to retire in response to shareholder pressure following the company’s failed bid for the Kansas City Southern Railroad, which was blocked by regulators. The railroad on Tuesday announced he will be replaced by Tracy Robinson, who is an executive vice president at TC Energy (TRP-T) and president of its Coastal GasLink pipeline unit. She had previously spent three decades working at rival Canadian Pacific Railway (CP-T). Her appointment begins on Feb.28.
“We are thrilled to have Tracy join CN as President and CEO and are confident that CN has the right team to lead it into the next phase of growth. She brings more than 35 years of operational management, strategy development, and project execution experience to drive growth and profitability,” board chair Robert Pace said in a release.
Canadian National said it plans to spend C$5 billion repurchasing as many as 42-million shares over the 12 months beginning Feb.1 through a normal-course issuer bid. It is also raising its quarterly dividend by 19%, to C$0.7325 per share, with the first higher payout coming March 31 to shareholders of record on March 10.
CN said it expects earnings per share to rise 20% in 2022 and is targeting a rise in free cash flow to C$4 billion this year from C$3.3 billion in 2021.
Recent News
South of the border the Federal Reserve held another meeting. The central bank strongly suggested that it will raise interest rates in March. The last time the Fed raised rates was more than three years ago.
We also got the Q4 GDP report, which showed that the U.S. economy had its best year for growth since 1984.
Rising rates are generally not good for the stock market especially now that growth has peaked and is slowing. The U.S. market is a lot more ‘tech heavy’, with frothy valuations, than the dividend growth stocks we follow in Canada so we don’t expect as much of a correction but there will be volatility.
Here are a couple of companies on ‘The List’ due to report earnings this week:
Brookfield Infrastructure Partners (BIP-N) is scheduled to report earnings Wednesday Feb. 02
Bell Canada (BCE-T) is scheduled to report earnings Friday Feb. 04
Below is a snapshot of ‘The List’ from last Friday’s close. For a sortable version of ‘The List’ please click on The List menu item.
‘The List’ is not meant to be a template for investors to copy exactly. Rather, its purpose is to provide investment ideas and a real-time illustration of dividend growth investing in action. It is not a ‘Buy List’, only a starting point for our analysis and discussion.
The List (2022)
Last updated by BM on January 31, 2022
*Note: The following graph is wide, you can scroll to the right on your device to see more of the data.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| AQN-N | Algonquin Power & Utilities | 4.9% | $13.99 | -2.5% | $0.68 | 2.3% | 11 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $49.74 | -4.5% | $0.44 | 18.1% | 12 |
| BCE-T | Bell Canada | 5.3% | $66.44 | 0.8% | $3.50 | 1.2% | 13 |
| BIP-N | Brookfield Infrastructure Partners | 3.5% | $58.25 | -4.6% | $2.04 | 0.0% | 14 |
| CCL-B-T | CCL Industries | 1.3% | $65.33 | -3.6% | $0.84 | 0.0% | 20 |
| CNR-T | Canadian National Railway | 1.9% | $153.05 | -1.2% | $2.93 | 19.1% | 26 |
| CTC-A-T | Canadian Tire | 2.9% | $178.36 | -2.6% | $5.20 | 10.6% | 11 |
| CU-T | Canadian Utilities Limited | 4.8% | $36.39 | -0.6% | $1.76 | 0.0% | 50 |
| DOL-T | Dollarama Inc. | 0.3% | $64.39 | 1.5% | $0.20 | 1.7% | 11 |
| EMA-T | Emera | 4.4% | $60.52 | -3.3% | $2.65 | 2.9% | 15 |
| ENB-T | Enbridge Inc. | 6.5% | $53.00 | 7.0% | $3.44 | 3.0% | 26 |
| ENGH-T | Enghouse Systems Limited | 1.5% | $43.00 | -6.2% | $0.64 | 4.1% | 15 |
| FNV-N | Franco Nevada | 1.0% | $128.34 | -5.7% | $1.28 | 10.3% | 14 |
| FTS-T | Fortis | 3.6% | $59.80 | -1.1% | $2.14 | 4.4% | 48 |
| IFC-T | Intact Financial | 2.1% | $169.98 | 3.8% | $3.64 | 7.1% | 17 |
| L-T | Loblaws | 1.5% | $98.04 | -4.6% | $1.46 | 6.6% | 10 |
| MGA-N | Magna | 2.2% | $77.68 | -4.8% | $1.72 | 0.0% | 12 |
| MRU-T | Metro | 1.6% | $67.46 | 0.6% | $1.10 | 10.0% | 27 |
| RY-T | Royal Bank of Canada | 3.4% | $143.18 | 4.6% | $4.80 | 11.1% | 11 |
| SJ-T | Stella-Jones Inc. | 1.8% | $39.68 | -2.5% | $0.72 | 0.0% | 17 |
| STN-T | Stantec Inc. | 1.0% | $66.64 | -5.1% | $0.66 | 0.0% | 10 |
| TD-T | TD Bank | 3.6% | $100.21 | 0.9% | $3.56 | 12.7% | 11 |
| TFII-T | TFI International | 1.1% | $120.07 | -14.4% | $1.36 | 17.4% | 11 |
| TIH-T | Toromont Industries | 1.3% | $106.15 | -6.6% | $1.40 | 6.1% | 32 |
| TRP-T | TC Energy Corp. | 5.3% | $65.61 | 9.8% | $3.48 | 1.8% | 21 |
| T-T | Telus | 4.4% | $29.89 | 0.4% | $1.31 | 4.4% | 18 |
| WCN-N | Waste Connections | 0.7% | $123.54 | -7.8% | $0.92 | 8.9% | 12 |
| Averages | 2.7% | -1.9% | 6.1% | 18 |
