Category: MP Market Reviews

Intro

An interesting article in the ‘News’ section below highlights the risks of retiring at market highs while following the 4% Rule. This chart sums it up perfectly.

Intro

The Trump tariff policies have brought significant market volatility, with The Wall Street Journal even calling it “the dumbest trade war in history.” As dividend growth investors, we see short-term negativity as an opportunity—market dips allow us to buy more income at better prices. While tariff threats may impact some of our quality dividend growers, both positively and negatively, our focus remains on long-term fundamentals.

Earnings season also adds to the turbulence, with several stocks on our watchlists taking a hit after they reported. Some have now entered our ‘Timely Ten’, while others have climbed higher on the list. We’ll be watching these opportunities most closely in the weeks ahead.

Below are the ten most undervalued dividend growth companies from our Canadian and U.S. watchlists, based on last Friday’s closing prices.

Here’s a recap on how we select our ‘Timely Ten’:

Step three in our process involves monitoring our quality dividend growers regularly, which can become quite challenging depending on the number of companies we track. Fortunately, we rely on ‘The List’ instead of the vast array of stocks in the index, which streamlines our task. Nevertheless, we continually seek methods to enhance our efficiency. Through dividend yield theory, we’ve discovered an approach that has proven remarkably effective in aiding us with our efforts over the years.

Dividend yield theory is a simple and intuitive approach to valuing dividend growth stocks. It suggests that the dividend yield of quality dividend growth stocks tends to revert to the mean over time, assuming that the underlying business model remains stable. In practical terms, if a stock pays a dividend yield above its ten-year average annual yield, its price will likely increase to return the yield to its historical average. Knowing that price and yield go in opposite directions, this theory helps us find stocks poised for a favourable price correction.

We have pre-screened our candidates using the criteria we initially laid out in building our watchlists. This helps us considerably narrow the universe of investable stocks.

• 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.

Next, we rank our Canadian and American watchlists based on how far each stock’s price is below its fair value (Low Price), as determined by dividend yield theory. To find fair value, divide the current dividend (Dividend) by the stock’s historical high yield (High Yield).

Since price and yield move in opposite directions, a lower price results in a higher yield, and vice versa. The ten companies above the thick black line have a current price (Price) below fair value (Low Price). Put simply, these stocks have a current dividend yield higher than their historically high yield. According to dividend yield theory, these companies are sensibly priced and have the highest probability of a price increase in the shorter term. These are our ‘Timely Ten.’

Intro

Below is our decade-long CAGR dividend data spreadsheet, with dividends year-by-year from January 1, 2015, to January 1, 2025 and their corresponding returns.

This year brings an added layer of insight with the inclusion of our list of American dividend growth companies, now featured on the blog.

As successful dividend growth investors, we understand that rising dividends lay the foundation for higher share prices. To illustrate this, we highlight in blue the ten-year columns showing the compound annual growth rate (CAGR 10Y) of total return (TR), dividend growth (DG), and price growth (PG) for stocks on our lists. The data speaks for itself—when dividends grow, so does the price.

Intro

Before discovering dividend growth investing (DGI), I constantly worried about outliving my capital in retirement.

What if I lived well into my 90s? How would I cover unpredictable healthcare costs? How can I help my kids buy their first home? What will inflation do to my retirement savings? Questions like these kept me up at night—and they’re the same fears that force many people to work into their 60s and 70s, cutting short the years when they could truly enjoy an active retirement.

Thankfully, everything changed when I found DGI. It gave me the confidence and financial security to retire years earlier than I ever imagined.

Our dividend growth investing strategy is highly adaptable, designed to meet the unique needs of investors regardless of age or starting capital. Whether you’re starting with modest savings or managing a significant portfolio, we can tailor the approach to align with your financial goals.

For example, instead of the $100,000 model portfolio we used for illustrative purposes last week, let’s consider a more ambitious scenario for our older subscribers: a $1,000,000 initial investment with 10+ years until retirement.

Take a look at the last two highlighted columns on the spreadsheet—Annual Dividends Collected and End of Year Portfolio Value—to see how powerful DGI can be in both generating income and growing capital over time.

Intro

In just a couple of weeks, we’ll be sharing another quarterly review of our model portfolio, highlighting the consistent power of dividend growth investing across all market conditions.

What makes this journey even more compelling is that we started our model portfolio back in 2022, a year when the market posted negative returns. Despite those challenging conditions, our strategy has continued to deliver steady progress—proving that dividend growth investing thrives even in uncertain times.

Stay tuned as we dive into the numbers and showcase the long-term potential of this disciplined approach!

The quote above perfectly reflects Charlie Munger’s practical wisdom on the challenges of building wealth and the importance of reaching that crucial first financial milestone. His focus on the first $100,000 highlights the need for disciplined saving, consistent investing habits, and, most importantly, patience.

Why is this milestone so significant? Once your financial “snowball” hits a certain size, the magic of compounding begins to take over. At that point, wealth-building shifts from being a grind to a process where exponential growth does much of the heavy lifting. It’s the hardest part of the journey—but also the most rewarding.

On the blog, we walk you through our step-by-step process (The MP Wealth-Builder Model Portfolio (CDN) – Business Plan) for conservatively growing your initial “snowball” into a sustainable source of wealth. Our approach includes buy/sell alerts whenever we make trades in the model portfolio, so you can follow along with confidence. With consistent monthly contributions of $1,000, you’ll keep the snowball rolling and growing over time.

If you’ve got some runway before retirement, this business plan is designed to help most DIY investors achieve a comfortable and secure retirement. The key is simple: start now.

Our last two columns highlight the incredible power of compounding, showing how your dividend income and capital can grow exponentially over time. This tried-and-true strategy rewards patience and discipline. Ready to build your snowball?

Intro

Each month, we spotlight the top ten most undervalued companies on ‘The List’, identified using dividend yield theory, to assist subscribers in their research. While we issue DGI Alerts whenever we add a company to our model portfolio, we understand that new subscribers may need guidance on leveraging our process effectively—especially when they receive our current ‘Timely Ten’ list. To illustrate, we will feature a company that found its way into the ‘Timely Ten’ not so long ago.

TC Energy Corp. (TRP-T) faced significant challenges throughout 2022 and 2023, which pushed its dividend yield to a ten-year high. Since price and yield move inversely, a lower share price results in a higher yield, and vice versa. During this period, TRP-T was trading in the mid-$40 range, offering an attractive yield of approximately 7.5%—a key factor in our decision to take it to our maximum position size at that time as part of our model portfolio.

Intro

2024 was undoubtedly a strong year for stocks, driving valuations to near-record highs. However, value can always be found within the market. As one of my mentors, Chuck Carnevale, often says: “It’s a market of stocks, not a stock market.”

Below are the ten most undervalued dividend growth companies from our Canadian and U.S. watchlists, based on last Friday’s closing prices.

Here’s a recap on how we select our ‘Timely Ten’:

Step three in our process involves monitoring our quality dividend growers regularly, which can become quite challenging depending on the number of companies we track. Fortunately, we rely on ‘The List’ instead of the vast array of stocks in the index, which streamlines our task. Nevertheless, we continually seek methods to enhance our efficiency. Through dividend yield theory, we’ve discovered an approach that has proven remarkably effective in aiding us with our efforts over the years.

Dividend yield theory is a simple and intuitive approach to valuing dividend growth stocks. It suggests that the dividend yield of quality dividend growth stocks tends to revert to the mean over time, assuming that the underlying business model remains stable. In practical terms, if a stock pays a dividend yield above its ten-year average annual yield, its price will likely increase to return the yield to its historical average. Knowing that price and yield go in opposite directions, this theory helps us find stocks poised for a favourable price correction.

We have pre-screened our candidates using the criteria we initially laid out in building our watchlists. This helps us considerably narrow the universe of investable stocks.

1. Dividend growth streak: 10 years or more.
2. Market cap: Minimum one billion dollars.
3. Diversification: Limit of five companies per sector, preferably two per industry.
4. Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.

Next, we rank our Canadian and American watchlists based on how far each stock’s price is below its fair value (Low Price), as determined by dividend yield theory. To find fair value, divide the current dividend (Dividend) by the stock’s historical high yield (High Yield).

Since price and yield move in opposite directions, a lower price results in a higher yield, and vice versa. The ten companies above the thick black line have a current price (Price) below fair value (Low Price). Put simply, these stocks have a current dividend yield higher than their historically high yield. According to dividend yield theory, these companies are sensibly priced and have the highest probability of a price increase in the shorter term. These are our ‘Timely Ten.’

Intro

Reflecting on 2024 and Looking Ahead

Another year is in the books, and it’s time to gear up for what lies ahead. Overall, 2024 was a strong year for index investors, with many benchmark indexes reaching new highs. Optimism was fueled by receding inflation, lower interest rates, advances in AI, renewed interest in cryptocurrencies, and shifts in the U.S. political landscape.

However, as seasoned investors know, a single year’s performance doesn’t tell the full story. It’s the consistent, compounding results over 5, 10, or more years that truly matter.

That’s why, as dividend growth investors, we focus on the metric that matters most in the short term: growing cash flow. Reflecting on 2024, there’s really one key question for us: How much did our income grow?

We’re proud to report that every company on ‘The List’—our curated watchlist of high-quality dividend growth companies—increased their dividends in 2024. The average income growth from ‘The List’ was an impressive 9.2%, aligning with historical dividend growth rates of 8.1%, 9.1%, 11.2%, and 9.9% over the past four years.

If you’re following along with our model dividend growth portfolio—or managing a similar DGI portfolio—you’ve likely experienced similar results. While capital appreciation is inevitable as dividends grow, it’s important to stay focused on what we control: the growing income our investments provide.

Never lose sight of our unique approach. As the dividend grows, so does the value of the portfolio. Patience and discipline remain the cornerstones of dividend growth investing.

Here’s to another year of building wealth, one dividend at a time!

Introducing ‘The List-USA’: A Watchlist of Quality American Dividend Growth Companies

In 2025, we are excited to publicly launch ‘The List-USA’, our curated watchlist of high-quality American dividend growth companies, alongside the MP Wealth-Builder Model Portfolio (USA). This initiative builds on the proven methodology we use for Canadian dividend growth companies and applies it to the vast U.S. market.

What is ‘The List-USA’?

It’s important to note that ‘The List-USA’ is not a portfolio but a powerful coaching tool designed to inspire ideas and help us effectively manage risk in building the MP Wealth-Builder Model Portfolio (USA). While we own some of the companies on the list, it primarily serves as a resource for identifying potential opportunities when valuations become attractive.

How We Build ‘The List-USA’

The creation of this watchlist involves a disciplined and rigorous screening process.

Initial Screening Criteria:

• Dividend Growth: Companies must have a minimum of 10 consecutive years of dividend growth.
• Market Capitalization: A market cap of $1 billion or more is required.

This step narrows the field of NYSE and NASDAQ listed companies to approximately 350 candidates.

Refinement Through Final Criteria:

• Diversification: We limit the watchlist to five companies per sector, with no more than two companies from the same industry.
• Cyclicality: To manage risk, we exclude REITs and pure-play energy companies due to their higher cyclicality.

After this extensive filtering and evaluation process, we arrive at the finalized USA Watchlist for 2025.

Why It Matters

This watchlist offers a strategic foundation for dividend growth investors looking to build a high-quality U.S.-focused portfolio. It’s designed to encourage thoughtful decision-making, focusing on both income growth and long-term stability.

It is now time to reveal ‘The List-USA’—your guide to quality dividend growth investing in the United States.

Intro

As dividend growth investors, we see ourselves as an asset management business. Our “assets” are the many high-quality dividend growth companies we own in Canada and the United States.

One of the most powerful lessons I’ve learned about both investing and running a business came from two of my greatest mentors: Bill Gates and Warren Buffett. In a memorable moment, they were each asked to write down the one word they believed was most responsible for their success. Remarkably, they both wrote the same word: focus.

Gates and Buffett believe that focus, concentration on key goals, and the ability to say “no” to distractions are crucial to success in their respective fields.

Inspired by their words, I’ve created ‘The List’—a curated watchlist of quality dividend growth companies. This focused approach helps me avoid the noise of the broader market, making it easier to track key metrics and develop a deeper understanding of the selected businesses I may invest in.

‘The List’ is not a portfolio but a coaching tool that helps us think about ideas and risk manage our model portfolio. We own some but not all the companies on ‘The List’. In other words, we might want to buy these companies when valuation looks attractive.

To begin our selection for 2025, we review the listed companies on the Toronto Stock Exchange (TSX). The TSX is one of the world’s largest stock exchanges and the third largest in North America. It is home to over 700 companies across all sectors of the Canadian economy.

Here are the criteria to be considered a candidate on ‘The List’:

1. Dividend growth streak: 10 years or more.
2. Market cap: Minimum one billion dollars.
3. Diversification: Limit of five companies per sector, preferably two per industry.
4. Cyclicality: Exclude REITs and pure-play energy companies due to higher cyclicality.

By screening for the first two criteria, ten years of consecutive dividend growth and a market cap of one billion dollars or more, we narrow our candidates down to only 67 companies (less than 10% of the companies on the TSX).

We then winnow further using the final two criteria, diversification and cyclicality to ensure the companies selected represent stable businesses in all sectors of the Canadian economy.

Unless their dividend streaks are interrupted, we typically don’t remove companies on ‘The List’. All 28 companies currently on ‘The List’ increased their dividends in 2024, securing their place on our watch list for 2025.

Intro

A couple of weeks ago, we discussed how the short-term predictability of dividend growth serves as the cornerstone of our dividend growth investing strategy. Knowing we can rely on the steady income generated by our investments allows us to sleep well at night, even during periods of market volatility. Moreover, the dependable growth of that income stream helps eliminate concerns or panic about whether it will keep pace with inflation and continue meeting our spending needs when we eventually retire. What may not be immediately obvious is how this same predictability extends to our long-term capital returns.

John Bogle, the founder of Vanguard Group, and Ed Easterling of Crestmont Research both claim they can accurately calculate expected long-term capital returns for dividend growth companies.

They believe stock market returns can be broken down into three key components:

1. Dividend Yield – The income generated by dividends relative to the stock price.
2. Growth – The increase in earnings and dividends over time.
3. P/E Change – The shift in price-to-earnings (P/E) ratios, reflecting changes in market valuation or “expensiveness.”

By focusing on these fundamental drivers, investors can better understand and forecast the long-term performance of dividend growth stocks.

Bogle calls the first two components, Yield + Growth, investment aspects of the investment return and the last component, +/- Change in P/E Ratio, the speculative return – what will people pay for a dollar’s worth of earnings. 

The table below presents the ten-year dividend growth and annualized returns for ‘The List’ as of January 1, 2024. The highlighted averages at the bottom assume an equal investment in each company on January 1, 2014, regardless of valuation.