Last updated by BM on April 10, 2023
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 +6.5% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
- Last week, no dividend increases from companies on ‘The List’.
- Last week, no earnings reports from companies on ‘The List’.
- No company on ‘The List’ is due to report earnings this week.
- If you’re interested in creating your own income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More
Introduction
“You have a pair of pants. In the left pocket, you have $100. You take $1 out of the left pocket and put it in the right pocket. You now have $101. There is no diminution of dollars in your left pocket. That is one magic pair of pants.”
This ‘magic pants’ analogy was from a Seeking Alpha article on dividend investing I read about a decade ago and was one of the catalysts for me to take a closer look at this type of investing and see if it truly was magical.
After conducting additional research, I have shifted towards utilizing a dividend growth investing (DGI) strategy as my primary investment approach. While I maintain portfolios consisting of high-quality dividend growers from both the United States and Canada, I have opted to concentrate on Canadian (CDN) dividend growth companies in this blog. This is due to several reasons, including a smaller pool of DGI companies to track, a lack of coverage for the DGI strategy by the North American investment media, and a tendency for those who do cover DGI to narrowly focus on only a handful of sectors (Energy and Financials).
While ‘The List’ is not a portfolio in itself, it serves as an excellent initial reference for individuals seeking to diversify their investments and attain higher returns in the Canadian stock market. Through our blog, we provide weekly updates on ‘The List’ and offer valuable perspectives and real-life examples of the dividend growth investing strategy in practice. This helps readers gain a deeper understanding of how to implement and benefit from this investment approach.
DGI Thoughts
“Bear markets are a great opportunity for investors in the accumulation phase of their investing journey.”
– Austin Rogers, Seeking Alpha Contributor
A quick Easter update on our MP Wealth-Builder Model Portfolio (CDN) compared to major North American indexes over the same period.
The inception date of the portfolio was May 1, 2022. Dividends and Prices reflect the amounts as of close on Thursday, April 06, 2023.
Bear markets have been kind to us as we build our model portfolio together.
If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.
Recent News
Short seller bets against Canadian banks are nothing to worry about (Globe & Mail)
“One way to assess the risk is to look at short-selling activity in bank stocks. Are short-sellers ramping up their bets to an extent that would suggest they are expecting a banking crisis is on the horizon?”
The article is in reference to a previous article published by Bloomberg News earlier in the week in which they pointed out that the bank with the largest short position in the world is Toronto-Dominion Bank.
The absolute number of shares sold short by a bank does not necessarily indicate whether there is cause for concern. Instead, the percentage of a bank’s float that is sold short can provide a more accurate measure of the level of short interest.
The float refers to the number of company shares available for trading on the open market, excluding shares held by insiders, such as executives and major shareholders. The higher the percentage of a bank’s float that is sold short, the greater the level of short interest in the stock.
If a bank has a relatively low percentage of its float sold short, then there may not be cause for alarm, as this suggests that the market does not have significant concerns about the bank’s future performance. On the other hand, if a bank has a high percentage of its float sold short, it may indicate that investors are betting against the bank’s success, potentially due to concerns about its financial health or other factors.
In the case of TD Bank, the author reassures investors that the percentage of its float sold short has not risen much since January 2022 and currently stands at a low of 4 percent.
Misleading narratives in the financial media can often lead to good buying opportunities for our quality dividend growers.
CCL Industries Announces Two Intelligent Label Acquisitions (MT Newswire)
eAgile, located in Grand Rapids, Michigan, is a privately held start-up technology company with proprietary, patented hardware and software solutions for the healthcare industry supplied alongside RFID inlays embedded into labels. The $54 million purchase price includes an estimated $1 million net cash assumed with $7 million deferred for five years. The new business will become an integral part of CCL Label’s Healthcare & Specialty business while adding RFID know-how across the Company.
Privately owned Alert, based in Denmark, provides patented anti-theft solutions currently sold alongside Checkpoint’s Merchandise Availability Solutions (“MAS”) product lines to many European retailers. The acquired technology is expected to add approximately $0.5 million EBITDA to Checkpoint in its first full year, compared to a purchase price of $3 million.
Geoffrey T. Martin, President & Chief Executive Officer of CCL, commented, “By 2027, we expect eAgile products to generate at least an incremental $15 million EBITDA through a combination of augmenting sales to CCL Label’s existing healthcare customer base globally and new business wins. Alert’s technology is an important addition to our MAS platform at Checkpoint.”
The strategy of acquiring and integrating companies quickly has been successful for many companies over the years, and CCL Industries is no exception. This is because it allows companies to expand their operations, enter new markets, and increase their revenue streams without building everything from scratch. Acquisitions also provide companies with access to new technologies, expertise, and intellectual property, which can help them gain a competitive advantage.
When we added CCL Industries to our MP Wealth-Builder Model Portfolio (CDN) in November 2022, I am sure we raised a few eyebrows. (CCL-B-T) is certainly not a household name for a lot of Canadian investors. Our investment thesis is now playing out, and these acquisitions will only add to the success CCL Industries has enjoyed over the past two decades as a dividend growth company.
The List (2023)
Last updated by BM on April 06, 2023
The Magic Pants List contains 27 Canadian dividend growth stocks. ‘The List’ contains Canadian companies that have raised their dividend yearly for at least the last ten years and have a market cap of over a billion dollars. Below is each stock’s symbol, name, current yield, current price, price return year-to-date, current dividend, dividend growth year-to-date and current dividend growth streak. Companies on ‘The List’ are added or subtracted once a year, on January 1. After that, ‘The List’ is set for the next twelve months. Prices and dividends are updated weekly.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| AQN-N | Algonquin Power & Utilities | 5.9% | $8.61 | 27.9% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $67.10 | 11.6% | $0.56 | 19.1% | 13 |
| BCE-T | Bell Canada | 6.1% | $62.95 | 4.5% | $3.82 | 5.0% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $33.90 | 5.2% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.6% | $67.67 | 16.6% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 2.0% | $159.84 | -1.9% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 3.8% | $180.88 | 23.4% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 4.7% | $38.37 | 3.9% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $82.26 | 3.0% | $0.27 | 23.8% | 12 |
| EMA-T | Emera | 4.8% | $57.67 | 9.6% | $2.76 | 3.0% | 16 |
| ENB-T | Enbridge Inc. | 6.8% | $52.57 | -1.4% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.2% | $39.27 | 10.0% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 0.9% | $154.04 | 11.5% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis | 3.8% | $59.67 | 7.8% | $2.26 | 4.1% | 49 |
| IFC-T | Intact Financial | 2.2% | $197.15 | 0.7% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.3% | $126.00 | 4.7% | $1.62 | 5.2% | 11 |
| MGA-N | Magna | 3.6% | $51.15 | -11.1% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.6% | $75.95 | 0.6% | $1.21 | 10.0% | 28 |
| RY-T | Royal Bank of Canada | 4.0% | $130.55 | 2.0% | $5.28 | 6.5% | 12 |
| SJ-T | Stella-Jones Inc. | 1.8% | $51.18 | 3.2% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 1.0% | $77.83 | 19.1% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.8% | $79.65 | -9.1% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.3% | $111.42 | 11.3% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.6% | $104.63 | 7.1% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 6.7% | $54.94 | 3.1% | $3.69 | 3.4% | 22 |
| T-T | Telus | 5.0% | $27.98 | 6.3% | $1.40 | 5.4% | 19 |
| WCN-N | Waste Connections | 0.7% | $137.83 | 4.6% | $1.02 | 7.9% | 13 |
| Averages | 3.1% | 6.5% | 8.1% | 19 |
Six Canadian stocks on ‘The List’ declare earnings and dividends in US dollars and are inter-listed on a US exchange in US dollars. The simplest way to display dividend and price metrics for these stocks is to show their US exchange symbols along with their US dividends and price. The stocks I am referring to have a -N at the end of their symbols. You can still buy their Canadian counterparts (-T), but your dividends will be converted into CDN dollars and will fluctuate based on the exchange rate.
Note: When the dividend and share price currency match, the calculation is straightforward. But it’s not so simple when the dividend is declared in one currency, and the share price is quoted in another. Dividing the former by the latter would produce a meaningless result because it’s a case of apples and oranges. To calculate the yield properly, you must express the dividend and share price in the same currency.
Performance of ‘The List’
Feel free to click on this link, ‘The List’ for a sortable version from our website.
Last week, ‘The List’ was up with a YTD price return of +6.5% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
The best performers last week on ‘The List’ were Franco Nevada (FNV-N), up +5.65%; TC Energy Corp. (TRP-T), up +4.51%; and Telus (T-T), up +4.29%.
TFI International (TFII-N) was the worst performer last week, down -6.60%.
Dividend Increases
“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”
– Arnold Bernhard (the founder of Value Line)
“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”
– Tom Connolly (the founder of dividendgrowth.ca)
Last week, no dividend increases from companies on ‘The List’.
Earnings Releases
Benjamin Graham once remarked that earnings are the principal factor driving stock prices.
Each quarter we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.
The updated earnings calendar can be found here.
Earnings growth and dividend growth tend to go hand in hand, so this information can tell us a lot about the future dividend growth of our quality companies. Monitoring our dividend growers periodically is part of the process, and reading the quarterly earnings releases is a good place to start.
No company on ‘The List’ is due to report earnings this week.
Last week, no earnings reports from companies on ‘The List’.
