Last updated by BM on October 24, 2022
Summary
- This article is part of our weekly series (MP Market Review) highlighting the performance and activity from the previous week related to the financial markets and Canadian dividend growth companies we follow on ‘The List’.
- Last week, ‘The List’ was up a couple of percentage points with a minus -7.3% YTD price return (capital). Dividend growth of ‘The List’ remains at +10.3% YTD, demonstrating the rise in income over the last year.
- Last week, there were no dividend increases from companies on ‘The List’.
- Last week, there were no earnings reports from companies on ‘The List’.
- Four companies on ‘The List’ are due to report earnings this week.
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“I think a recession is most likely globally. And most probable in Canada,” Mr. Carney said. “I would put it this way. I’m afraid it’s a bit like air travel these days: We know where we’re headed, we just don’t know when we’re going to get there.”
– Mark Carney, former Governor of the Bank of Canada and England
Earnings season in Canada is now in full swing, with the majority of the companies on ‘The List’ due to report Q3 earnings over the next few weeks. If you scroll down to the bottom of ‘The List’ menu item, you will see our current table of reporting dates and earnings estimates. Knowing when a company reports gives you a heads up if you happen to wake up to a volatile price on one of your favourite companies.
Earning reports are part of our research when we get close to a ‘sensible price’ on our good dividend growers. After all, we want to make sure that management still feels confident in the business moving forward. Dividends are paid from earnings, so the ability to grow earnings is important in the companies we invest in.
The market tends to punish companies that don’t meet earnings estimates, so we take advantage of this sentiment if we believe that the company is only suffering a short-term setback. This can be difficult to determine, so you may have to drill down into company event presentations and updated guidance along with independent analyst reports for the answer.
This earnings season, we are particularly interested in the effect that higher interest rates and inflation will have on the fundamentals of the businesses we follow. Much of the downward trend in prices thus far has been due to elevated valuations coming into this year. Investors aren’t willing to pay for the valuations they placed on stocks a year ago with all the uncertainty. The next shoe to drop could be a pullback based on reduced earnings expectations.
Performance of ‘The List’
At the end of the post is a snapshot of ‘The List’ from last Friday’s close. Feel free to click on the ‘The List’ menu item above for a sortable version.
Last week, ‘The List’ was up a couple of percentage points with a minus -7.3% YTD price return (capital). Dividend growth of ‘The List’ remains at +10.3% YTD, demonstrating the rise in income over the last year.
The best performers last week on ‘The List’ were Waste Connections (WCN-N), up +4.75%; TC Energy Corp. (TRP-T), up +4.50%; and Magna (MGA-N), up +4.13%.
Emera (EMA-T) was the worst performer last week, down -2.27%.
Recent News
Market turbulence has claimed utilities as an unlikely victim. Maybe that’s good news (Globe & Mail)
For the last couple of years, many of our good dividend growers in the utility sector have been trading at elevated valuations. For the past 18 months, it seemed that there was no end in sight as to how high the prices would go. Investors tend to flock to defensive stocks like utilities when there is market uncertainty, and utilities were one of the top-performing sectors in 2022.
According to the author, the recent pullback is due to a couple of factors. First, the valuation of Canadian utility companies had become stretched, so a pullback was inevitable. Secondly, as interest rates rise, competition is created from alternative asset classes like fixed income.
Nonetheless, the author believes that utility companies will continue to prosper due to their regular dividend increases and the trend toward electrification, which should boost the sector’s growth profile.
Pain is good, and the beatings to the markets will continue until the FOMO stops (Globe & Mail)
“The continuing hope that too many investors hold out for old, higher, asset prices in lieu of a sober application of reasonable multiples, a fair discounted-cash-flow analysis, and a consideration of the overall economic outlook is simply misguided.”
In this article, the author warns that the ‘cheap money shuffle’ is over and to have patience when it comes to investing. Waiting for a reasonable, fair value instead of buying all the dips in the market is a safer path to follow.
Four companies on ‘The List’ are due to report earnings this week.
Canadian National Railway (CNR-T) will release its third-quarter 2022 results on Tuesday, October 25, 2022, after markets close.
Canadian Utilities Limited (CU-T) will release its third-quarter 2022 results on Thursday, October 27, 2022, before markets open.
TFI International (TFII-N) will release its third-quarter 2022 results on Thursday, October 27, 2022, after markets close.
Fortis (FTS-T) will release its third-quarter 2022 results on Friday, October 28, 2022, before markets open.
Dividend Increases
Last week, there were no dividend increases from companies on ‘The List’.
Earnings Releases
Last week, there were no earnings reports from companies on ‘The List’.
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. Instead, its purpose is to provide investment ideas and a real-time illustration of dividend growth investing in action. It is not a ‘Buy List’ nor does it reflect the composition or returns of our Magic Pants Wealth-Builder (CDN) Portfolio. It is only a starting point for our analysis and discussion.
The List (2022)
Last updated by BM on October 21, 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 | 6.7% | $10.45 | -27.2% | $0.70 | 5.4% | 11 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $58.19 | 11.7% | $0.44 | 18.1% | 12 |
| BCE-T | Bell Canada | 6.2% | $58.93 | -10.6% | $3.64 | 4.0% | 13 |
| BIP-N | Brookfield Infrastructure Partners | 4.3% | $33.67 | -17.3% | $1.44 | 5.9% | 14 |
| CCL-B-T | CCL Industries | 1.4% | $66.80 | -1.5% | $0.96 | 14.3% | 20 |
| CNR-T | Canadian National Railway | 1.9% | $153.96 | -0.6% | $2.93 | 19.1% | 26 |
| CTC-A-T | Canadian Tire | 3.9% | $149.31 | -18.5% | $5.85 | 24.5% | 11 |
| CU-T | Canadian Utilities Limited | 5.1% | $34.57 | -5.6% | $1.78 | 1.0% | 50 |
| DOL-T | Dollarama Inc. | 0.3% | $79.96 | 26.1% | $0.22 | 9.2% | 11 |
| EMA-T | Emera | 5.2% | $51.12 | -18.3% | $2.68 | 4.1% | 15 |
| ENB-T | Enbridge Inc. | 6.7% | $51.67 | 4.3% | $3.44 | 3.0% | 26 |
| ENGH-T | Enghouse Systems Limited | 2.5% | $29.15 | -36.4% | $0.72 | 16.3% | 15 |
| FNV-N | Franco Nevada | 1.1% | $119.70 | -12.0% | $1.28 | 10.3% | 14 |
| FTS-T | Fortis | 4.2% | $51.26 | -15.2% | $2.17 | 4.3% | 48 |
| IFC-T | Intact Financial | 2.0% | $195.21 | 19.2% | $4.00 | 17.6% | 17 |
| L-T | Loblaws | 1.4% | $111.12 | 8.2% | $1.54 | 12.4% | 10 |
| MGA-N | Magna | 3.5% | $50.89 | -37.6% | $1.80 | 4.7% | 12 |
| MRU-T | Metro | 1.6% | $70.58 | 5.3% | $1.10 | 12.2% | 27 |
| RY-T | Royal Bank of Canada | 4.0% | $123.73 | -9.6% | $4.96 | 14.8% | 11 |
| SJ-T | Stella-Jones Inc. | 1.9% | $41.46 | 1.9% | $0.80 | 11.1% | 17 |
| STN-T | Stantec Inc. | 1.1% | $63.57 | -9.4% | $0.71 | 6.8% | 10 |
| TD-T | TD Bank | 4.1% | $86.26 | -13.2% | $3.56 | 12.7% | 11 |
| TFII-N | TFI International | 1.2% | $91.24 | -17.6% | $1.08 | 12.5% | 11 |
| TIH-T | Toromont Industries | 1.5% | $98.37 | -13.5% | $1.52 | 15.2% | 32 |
| TRP-T | TC Energy Corp. | 6.1% | $58.73 | -1.7% | $3.57 | 4.4% | 21 |
| T-T | Telus | 4.8% | $27.86 | -6.4% | $1.33 | 6.2% | 18 |
| WCN-N | Waste Connections | 0.7% | $130.45 | -2.7% | $0.92 | 8.9% | 12 |
| Averages | 3.1% | -7.3% | 10.3% | 18 |
