Category: MP Market Reviews

Being Lucky vs Being Good

Imagine we sponsor a global contest to find the world’s best coin flippers.

100,000 people enter. Everyone flips a coin at the same time. After each round, anyone who lands tails is eliminated. This continues until only those who flip 10 heads in a row remain.

Simple math tells us what happens next.

The odds of flipping 10 straight heads are 1 in 1,024. So out of 100,000 participants, roughly 98 people will make it to the end.

And what do we call them?

Experts.

They will build audiences. They will write books. They will explain their “process.” They will tell you what they did differently.

But we know the truth.

They got lucky.

Timely Ten: High Quality on Sale… If You’re Paying Attention

Our Timely Ten lists remain the fastest way to spot potential value opportunities, which explains why they continue to be the most-read articles every month.

Timely Ten – Canada

Very little changed in this month’s Timely Ten (CDN).

Just one name moved on, and one moved off. When that happens, new ideas don’t jump off the page. You have to look a little harder. That is where the opportunity usually is.

One name that quietly stood out this month is Waste Connections.

The stock moved from number six to number four on the list, driven by recent price weakness. That matters.

Outside of Canadian National Railway, Waste Connections has one of the highest quality rankings in the Timely Ten. That alone should get your attention.

This is the playbook.

We are not chasing headlines. We are not guessing direction. We are simply waiting for high-quality businesses to come back to sensible prices and then acting accordingly.

From a portfolio standpoint, this is where things get interesting.

We already have close to a full position in Canadian National. Waste Connections, on the other hand, sits at roughly 3.5%. Not quite at its 5% maximum. That leaves room.

And when a business of this quality starts moving up the list due to price weakness, we pay attention.

That is how the income snowball gets built.

Dividend Return: The Investment Return You Can Actually Control

My mentor, Tom Connolly didn’t hold back on how he felt about dividend return (growth yield). I included some of his best quotes above.

It is hard to stay focused and patient as a DIY investor. Markets move. Headlines scream. Prices fall. And in those moments, all the talk about temperament, discipline, and process gets tested.

Most investors think they understand these ideas. Very few actually live them.

At Magic Pants, we approach investing differently. We are not chasing price. We are building income. And more specifically, we are building dividend return.

That distinction matters.

Dividend return is the portion of your total return that comes from cash paid to you by the business. It is real. It is measurable. And most importantly, it grows over time when you own the right companies.

Capital return, on the other hand, is unpredictable in the short term. It depends on sentiment, multiples, and narratives. You cannot control it.

But dividend return? That is where you focus.

Here is what that looks like in practice.

Everyone Has Buffett’s Playbook. Very Few Have His Results.

When Warren Buffett was asked why so few investors have been able to replicate his success, despite him openly sharing his methods, his answer may surprise you.

Here is what he said:

“The philosophy either takes immediately or it doesn’t at all. The reason gets down to temperament. People want to make money fast, but it doesn’t happen that way. Graham’s philosophy doesn’t promise enough for many people. You don’t know when it will happen, but you just wait for the fat pitches within your circle of competence. It’s not as exciting as guessing whether the stock price will go up the next day. Most investors in internet companies didn’t know the market cap. They were buying because they thought the stock would move, but if you asked them to write, ‘I would buy XYZ company for 6 billion because,’ they wouldn’t get halfway through the sentence. It’s the classic tortoise versus hare, bound to work over time.”

Why most investors fail and we win

Every investor says they want long-term success.

Very few are willing to behave in a way that produces it.

When Warren Buffett was asked why so few people have been able to replicate his approach, despite him sharing it openly for decades, his answer had nothing to do with intelligence.

It came down to temperament.

That is the part most investors ignore.

And it is exactly why dividend growth investing works so well.

The strategy is simple. The execution is not.

Dividend growth investing is not complicated.

We:

buy high-quality businesses

at sensible prices

that grow their dividends over time

and hold them

That’s it.

No forecasts.
No predictions.
No guessing.

But here is the catch.

You have to stick with it.

And that is where most investors fail.

Most investors want speed. We want durability.

Buffett said it clearly.

People want to make money fast.

That is why they chase:

• hot sectors
• trending stocks
• short-term price moves

They are not thinking like owners.

They are thinking like traders.

In our strategy, we do the opposite.

We focus on:

• earnings growth
• income (dividend) growth
• long-term value

It is slower.

It is quieter.

But it works.

Because real wealth is built through compounding, not excitement.

The real edge is temperament

Let’s be honest.

This strategy can feel uncomfortable at times.

You will:

• watch prices fall
• hold positions that go nowhere for months
• buy when sentiment is negative

We have lived it.

• buying Toronto-Dominion Bank during weakness
• adding to Canadian National Railway on pullbacks
• building a position in TC Energy when sentiment was poor
• holding Nexterra Energy after a 20% decline right after purchase

None of those decisions felt good in the moment.

But they were correct.

Because they were grounded in process, not emotion.

This is the difference.

Successful investors are not fearless.

They are disciplined.

Waiting is a strategy

Buffett talks about waiting for “fat pitches.”

This is Dividend Yield Theory in action.

We are not swinging every day.

We wait for:

• higher-than-normal historical yields
• price weakness in quality companies
• valuation to return to sensible levels

That is how we use:

• The List
• The Timely Ten
• the three-dot rule

Patience is not passive. It is selective.

Know what you own or don’t own it

Buffett made another critical point.

Most investors cannot explain why they own what they own.

They buy because:

• the price is moving
• someone recommended it
• it “feels” like a good idea

That is speculation.

We stay in areas we understand:

• banks
• railroads
• pipelines
• utilities
• essential service businesses

These are not exciting.

They are predictable.

Predictability is what allows dividends to grow.

And dividend growth is what drives:
earnings → income → price

The tortoise wins

This is not a race to the next trade.

It is a process.

We are building:

• a growing income stream
• that increases every year
• regardless of what the market is doing

While others:

• panic
• chase
• react

We collect.

And reinvest.

And repeat.

That is how the income snowball forms.

Slow at first.

Then unstoppable.

This is why it works

Buffett’s message is simple.

The strategy is available to everyone.

The results are not.

Because most investors:

• lack patience
• chase excitement
• abandon discipline

Dividend growth investing removes those variables.

It replaces them with:

• process
• consistency
• time

And over a full market cycle, that is what wins.

All-Canadian DGI Portfolio: Built to Survive Anything the Market Throws at It

It has been a volatile month in the markets. Prices are down. The S&P 500 and TSX Composite have both dropped more than 6%.

For many investors, that creates pressure.

If your strategy depends on selling shares to fund your life, this is where things get uncomfortable. You are forced to sell into weakness. Losses become real.

Dividend growth investors operate differently.

Our income keeps showing up. More importantly, it keeps growing.

That is the quiet advantage of this strategy.

When prices fall, yields rise.
When yields rise, future income improves.
And nothing has changed with the underlying businesses.

Same companies. Same cash flow. Better prices.

Introducing The All-Canadian DGI Portfolio

We do not build portfolios based on where oil, gold, or interest rates might go next month.

We build portfolios around one thing: growing cash flow.

At all times, we hold quality businesses purchased at sensible prices. The common thread is simple. These companies have paid and increased dividends for decades.

No forecasting. No guessing. No micro-managing.

Just ownership.

On this blog, I have shown every trade in our model portfolios since May 2022. Real money. Real decisions. Full transparency. It has taken us four years to build out our portfolio and invest our initial capital.

If you are new to our strategy, the All-Canadian DGI Portfolio is your starting point.

Start with quality, invest slowly with proper position sizing. Then build over time as opportunities appear.

That is the process.

Here is the portfolio. Fourteen companies across six sectors with decades of dividend growth.

Timely Ten: Your Monthly Valuation Compass for Dividend Growth Stocks

Our Timely Ten lists remain the fastest way to spot potential value opportunities, which explains why they continue to be the most-read articles every month.

Timely Ten – Canada

Last month was a typical month in terms of movement within our Timely Ten (CDN). Two companies moved off the list, and two new companies moved on. All four changes occurred near the bottom of the ranking, where most of the smaller shifts tend to occur.

For newer investors, it is helpful to remember what the Timely Ten represents. The list ranks companies from The List based on valuation using Dividend Yield Theory. When prices rise, yields fall and companies tend to move down or off the list. When prices decline, yields rise and companies often move up the list. In other words, price strength can move a stock off the list, while price weakness can move a stock onto it.

Last month, Thomson Reuters and Canadian Natural Resources moved out of the Timely Ten due to price strength. Their share prices rose enough to make their valuations less attractive relative to other companies on our watchlist. Coincidentally, or perhaps simply the result of following a disciplined process, we had already either added to or increased our positions in both companies before those price increases occurred.

Meanwhile, Intact Financial and Magna moved onto the Timely Ten as their share prices weakened. Lower prices can sometimes create opportunity if the underlying business remains strong. Both companies are worth a closer look based on the recent pullback. In our case, we still have room within our position sizing guidelines to add to both if the valuation becomes compelling.

For dividend growth investors, these monthly movements are not signals to trade frequently. Instead, they serve as a valuation compass, highlighting where prices may be creating opportunities to accumulate quality companies at sensible prices.

Over time, consistently acting on these opportunities is what allows the income snowball to grow.

While Markets Bounce Around, Our Paychecks Keep Rising

Remember the message from last week’s newsletter and the charts that support the thesis:

Income is built first. Capital appreciation follows.

This is the foundation of dividend growth investing.

We are not trying to predict short-term market moves.
We are not chasing the hottest stocks.

Instead, we focus on something much more durable.

We build income.

And we do it the same way every time.

By purchasing high quality dividend growth companies at sensible prices and holding them as their dividends grow over time.

The Quiet Superpower of Dividend Growth Investing

One of the most powerful aspects of this strategy is also one of the least talked about.

Growing income.

Markets will always move up and down. That is simply the nature of markets.

But the businesses we own continue to operate.
They continue to generate profits.
And they continue to send a growing stream of cash back to shareholders.

Every dividend increase is essentially a small raise.

Stack enough of those raises together and something remarkable begins to happen.

The math of compounding quietly starts working in your favor.

Not loudly.
Not dramatically.

But relentlessly.

Dividend Increases Announced So Far in 2026

Here are the dividend raises announced so far this year from companies we follow and own.

TD Bank (TD-T) 1.05 to 1.08 up 2.9% payable January 31, 2026

Royal Bank of Canada (RY-T) 1.54 to 1.64 up 6.5% payable February 24, 2026

Canadian Tire (CTC-A-T) 1.775 to 1.80 up 1.4% payable March 1, 2026

Enbridge Inc. (ENB-T) .9425 to .97 up 2.9% payable March 1, 2026

Metro Inc. (MRU-T) .37 to .4075 up 10.1% payable March 10. 2026

Franco Nevada (FNV-N) .38 to .44 up 15.8% payable March 26, 2026

Brookfield Infrastructure Partners (BIP-N) .43 to .455 up 5.8% payable March 31, 2026

Canadian National Railway (CNR-T) .8875 to .915 up 3.1% payable March 31, 2026

Thomson Reuters (TRI-Q) .595 to .655 up 10.0% payable March 10, 2026

Magna (MGA-N) .485 to .495 up 2.1% payable March 13, 2026

Manulife Financial (MFC-T) .44 to .485 up 10.2% payable March 19, 2026

CCL Industries Inc. (CCL-B-T) .32 to .36 up 12.5% payable March 31, 2026

Intact Financial (IFC-T) 1.35 to 1.47 up 10.5% payable March 31, 2026

Toromont Industries (TIH-T) .52 to .56 up 7.7% payable April 2, 2026

Canadian Natural Resources (CNQ-T) .5875 to .625 up 6.4% payable April 7, 2026

Stantec Inc. (STN-T) .225 to .245 up 8.9% payable April 15, 2026

Stella-Jones Inc. (SJ-T) .31 to .34 up 9.7% payable April 24, 2026

TC Energy (TRP-T) .85 to .8775 up 3.2% payable April 30, 2026

These are not random events.

They are the direct result of owning high quality businesses with growing earnings.

Growing earnings drive growing dividends.

And over time, growing dividends drive higher stock prices.

Intro

One of the most powerful ideas in long-term investing is simple: build your income stream before you need it. Dividend growth investing turns that idea into a disciplined, repeatable strategy. Rather than waiting until retirement to generate cash flow, you steadily accumulate ownership in high-quality businesses that raise their dividends year after year. Over time, that rising income becomes the engine that funds financial freedom.

In our recent Portfolio Letter, the Wealth-Builder Model Portfolio (CDN) demonstrates how this works in practice. Since inception in May 2022, annualized dividend income has increased every year, reaching $4,612 by January 31, 2026. This progress did not come from chasing high yield. It came from consistent investment in companies with durable earnings, strong balance sheets, and proven dividend growth. As dividends increased and new capital was deployed, the portfolio’s income stream compounded.

Intro

Same word. Completely different outcomes.

Investors often use the terms dividend investing and dividend growth investing as if they mean the same thing. They don’t.

Both involve owning companies that pay dividends. But the strategy, the mindset, and most importantly the long-term results are very different.

Understanding this distinction is one of the biggest turning points for new income investors.

Dividend Investing: Income Today

Traditional dividend investing focuses on current yield.

The goal is simple: generate the highest possible income right now.

Investors following this approach typically buy:

• High-yield stocks
• Utilities and telecoms with slow growth
• REITs and income vehicles
• Mature or stagnant businesses

The portfolio often looks attractive at first glance. A 6%–8% yield feels powerful. Cash flow starts immediately.

But there is a trade-off.

High current yield usually means low growth. Sometimes no growth at all.

Over time, inflation erodes purchasing power, dividends stagnate, and share prices often go nowhere. In weaker businesses, both income and capital can eventually decline.

Dividend investing gives you income today.
But it rarely builds wealth tomorrow.

Dividend Growth Investing: Income That Compounds

Dividend growth investing flips the focus from yield to growth of income.

Instead of asking, “What pays the most now?” the question becomes: “Which companies will pay far more in the future?”

Dividend growth investors target:

• Companies with durable competitive advantages
• Consistent earnings growth
• Strong balance sheets
• Long histories of raising dividends

These businesses often start with moderate yields of 1%–3%. That can feel unimpressive to yield-focused investors.

But the power is in the growth.

If a company increases its dividend 7%–10% annually, the income doubles roughly every 7–10 years. Over decades, this creates what we call bondified equities: stocks that eventually yield far more on your original cost than any fixed-income investment ever could.

The Critical Link: Dividend Growth and Price Appreciation

Here is the part many investors miss.

Dividend growth and price appreciation are not separate outcomes.
They are the same economic force expressed in two ways.

Dividends come from earnings.
Rising dividends require rising earnings.
And rising earnings ultimately drive rising share prices.

Over long periods, stock prices follow dividend growth because both reflect the growth of the underlying business.

This is why the best dividend growth companies show a powerful pattern:

Earnings up → Dividend up → Price up

Not every year. Markets fluctuate. Valuations expand and contract.

But over full cycles, dividend growth is one of the most reliable predictors of long-term capital appreciation.

In other words:

Dividend growth investing is not just an income strategy.
It is a total return strategy driven by business growth.

Intro

Our Timely Ten lists remain the fastest way to spot potential value opportunities, which explains why they continue to be the most-read articles every month.

Timely Ten – Canada

Typically, movement up and down the Timely Ten is gradual. Candidates often sit on the list for months before valuation becomes the catalyst and the stock finally moves. Not last month. Two names repriced dramatically in under 30 days.

Magna is the clearest example. It spent nearly two years in the top ten with little movement. Then a strong earnings report hit and the stock surged 27%, falling from #6 last month to #12 today. Moves like this are rare, but they remind us of a core truth: quality companies cannot stay undervalued forever. Magna’s cyclical business adds an element of timing, which is why we built positions in 2023 and again in 2025. When the market finally caught up last week, we were already there collecting a rising dividend. We never know when valuation will normalize, but patience plus dividend growth makes the wait pay.

At the opposite extreme was Thomson Reuters. The business remains strong: recurring revenue, strong free cash flow, and durable dividend growth. What changed was sentiment. The market has pulled software and information services into the AI disruption narrative, and TRI’s valuation compressed faster than expected. The stock’s jump up the Timely Ten from #21 to #9 in one month got our full attention and triggered our second DGI Alert. Unlike Magna’s surge, this was a valuation reset moving in our favor.

Timely Ten – United States

Union Pacific appears to be following Magna’s path. After a long stretch of undervaluation, it has moved out of the Timely Ten and now sits at #12 on our U.S. list. Railroads remain core infrastructure businesses with durable dividend and price growth over full cycles. We have waited patiently for this repricing, and it now looks close.

Automatic Data Processing and Intuit are now firmly embedded in the U.S. Timely Ten after price weakness last month. Intuit’s jump from #20 to #6 mirrors Thomson Reuters in Canada. The market is broadly derating software right now, and high-quality franchises are being marked down with the rest.

One more notable move: Microsoft. The stock climbed from #24 to #17 on the Timely Ten after its recent pullback. It is rare for one of the world’s highest-quality companies to even approach our undervalued range. We used the opportunity to initiate a position in the U.S. model portfolio. When elite businesses briefly go on sale, we act.

As always, the Timely Ten is not a call to action on its own, but a disciplined starting point for deeper research and patient capital deployment.

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 short term. These are our Timely Ten.