Category: MP Market Reviews

MP Market Review – April 1, 2022

Last updated by BM on April 4, 2022

“The buying frenzy of the past 12 years has lured many market participants into speculative holdings that someday will seem like roach motels, easier to get into than out of.” – Seth Klarman

In an earlier post, ‘Estimating Future Returns’, we talked about speculation and how it can affect market returns in even the best companies.

The post is highlighted by Jack Bogle’s formula for estimating future market returns:

Future Market Returns = Dividend Yield + Earnings Growth +/- Change in P/E Ratio

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?

A few stocks on ‘The List’ have experienced falling prices YTD, not because of the investment aspects of the formula but because they were priced to perfection (speculative return) coming into 2022. People paid a lot for their earnings. When the economy hits a bump in the road or financial results aren’t perfect…down goes the price. A falling price lowers the P/E, so now the speculative return component takes away from the investment return which can turn the future market returns negative in the short run. As dividend growth investors, the way we protect our capital is to be patient and only purchase our companies when they are sensibly priced. This gives our good dividend growers a higher probability of a positive Total Return going forward.

Here is an example of Bogle’s theory in action from a company on ‘The List’:

At one-point last year, Magna (MG-T) was trading at a P/E of 22. Understanding Bogle’s formula, we had a pretty good idea what our future return would look like if we added to our position at that point. Magna (MG-T) has a historical average P/E closer to 11. The investment aspects of Bogle’s formula (Yield + Growth) would not be enough to overcome a significant drop in P/E back to the historical average. We decided to wait until the speculative return came back down to earth. In the end, we were patient and when Magna (MG-T) finally touched its historical P/E in March of this year, we added to our position. At a P/E of 10 we determined the P/E was no longer speculative and the probability of further P/E reductions had decreased considerably. It was time to execute on our process.

Having a time-tested process to value our dividend growers helps increase the odds in our favour for a future positive return and keeps us out of Klarman’s ‘roach motels’.

Performance of ‘The List’

‘The List’ was up last week with a 3.1% YTD price return (capital). Dividend growth of ‘The List’ continues upward with a 9.4% YTD increase in our income over last year.

The best performers last week on ‘The List’ were Dollarama Inc. (DOL-T) up 7.2%; Brookfield Infrastructure Partners (BIP-T) up 5.0%; with both Emera (EMA-T) and Fortis (FTS-T) up 4.0%.

Canadian National Railway (CNR-T) was the worst performer last week, down -5.8%.

One company on ‘The List’, Dollarama Inc. (DOL-T), announced both a dividend increase and an earnings report for Q4 and Full Fiscal Year 2022 (January 2022 year-end).

Recent News

I watched a few videos and listened to some podcasts this week which all had their take on the current state of our economies both here in Canada and abroad. One thing that everyone can agree on is that inflation is no longer ‘transitory’, it is real, and it is here to stay for a while. We see rising prices at the gas pumps, in the grocery stores and now at our ‘dollar’ stores. Dollarama Inc. (DOL-T) announced that price tags up to $5 will begin appearing on its store shelves in the coming year. Until now, Dollarama’s highest price point was $4. I can still remember everything at Dollarama Inc. (DOL-T) being a dollar (as the name implies) only a few years ago.

A good book I am now reading, The Price of Tomorrow by Jeff Booth, has an interesting take on inflation. In the book, Booth equates inflation to ‘theft’. He talks about how inflation is only accelerating the divide between the haves and the have-nots. Owning real assets (quality businesses) instead of holding cash and fixed income is one of the better ways to keep pace with inflation.

One of the things that first attracted us to dividend growth investing was its built-in inflation protected cash flow (growing dividend). Owning companies like Dollarama Inc. (DOL-T) who also have pricing power helps as well.

There are no companies on ‘The List’ due to report earnings this week.

Dividend Increases

There was one company on ‘The List’ that announced a dividend increase this week.

Dollarama Inc. (DOL-T) on Wednesday said it increased its 2022 quarterly dividend from $0.0503 to $.0553 per share, payable May 6, 2022, to shareholders of record on April 15, 2022.

This represents a dividend increase of 10.0% and the 12th consecutive year in which the company has increased its dividend.

Earnings Releases

There was only one company on ‘The List’ to report as we now move into the next quarter (Q1 2022) of earnings releases in late April and May. Not all companies on the list have a fiscal year-end of December 31. Dollarama Inc. (DOL-T) is one such company with a year end of January 31 which moves them into Fiscal 2023 earnings next.

Dollarama Inc. (DOL-T)

“Dollarama delivered strong operational and financial results in Fiscal 2022, including EPS growth of 20%, all this while navigating the ebb and flow of the pandemic’s impacts on retailers and consumer shopping patterns and in the context of supply chain and inflationary pressures. This remarkable performance speaks to the resilience of our business model and the relevance of our value promise to Canadian consumers, a promise we are committed to fulfilling in what remains a complex and volatile environment as we enter Fiscal 2023,” said Neil Rossy, President and CEO.

Fiscal 2022 Fourth Quarter Results Highlights Compared to Fiscal 2021 Fourth Quarter Results

Sales increased by 11.0% to $1,224.9 million
Comparable store sales grew 5.7%
Gross margin was 45.2% of sales, compared to 45.5% of sales
EBITDA increased by 20.4% to $393.7 million, or 32.1% of sales, compared to 29.6% of sales
Operating income increased by 23.3% to $315.7 million, or 25.8% of sales, compared to 23.2% of sales
Incremental direct costs related to COVID-19 measures totaled $4.4 million, compared to $23.8 million
Diluted net earnings per share increased by 32.1% to $0.74, compared to $0.56
24 net new stores were opened, compared to 23 net new stores
5,090,587 common shares were repurchased for cancellation for $318.5 million

Fiscal 2022 Results Highlights Compared to Fiscal 2021 Results

Sales increased by 7.6% to $4,330.8 million
Comparable store sales grew 1.7%
Gross margin was 43.9% of sales, compared to 43.8% of sales
EBITDA increased by 13.4% to $1,282.6 million, or 29.6% of sales, compared to 28.1% of sales
Operating income increased by 14.4% to $984.6 million, or 22.7% of sales, compared to 21.4% of sales
Incremental direct costs related to COVID-19 measures totaled $35.5 million, compared to $84.0 million, of which $2.9 million relates to cost of sales and $81.1 million to SG&A
Diluted net earnings per share increased by 20.4% to $2.18, compared to $1.81
65 net new stores were opened, same as prior year, bringing total store count to 1,421
18,176,760 common shares were repurchased for cancellation for $1,059.9 million

See full Q4 2022 Earnings Release here

We liked Dollarama’s report. Twenty percent earnings growth YoY, a 10% dividend increase and plans to add more stores sends a lot of positive messages to investors. It is no wonder it was the top performer on ‘The List’ this past week. At a P/E of 32 (21% above its average) however, we will wait for a better entry point.

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’ 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 April 1, 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	4.4%	$15.59	8.6%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$55.56	6.6%	$0.44	18.1%	12
BCE-T	Bell Canada	5.2%	$70.23	6.6%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.2%	$67.26	10.1%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.7%	$56.55	-16.6%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.8%	$159.94	3.3%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.8%	$185.80	1.4%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.6%	$38.23	4.4%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$72.42	14.2%	$0.22	9.2%	11
EMA-T	Emera	4.2%	$62.92	0.5%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	5.9%	$58.08	17.2%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.8%	$39.99	-12.8%	$0.72	16.3%	15
FNV-N	Franco Nevada	0.8%	$163.67	20.3%	$1.28	10.3%	14
FTS-T	Fortis	3.4%	$62.73	3.7%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$184.67	12.8%	$4.00	17.6%	17
L-T	Loblaws	1.3%	$110.88	7.9%	$1.46	6.6%	10
MGA-N	Magna	2.8%	$64.33	-21.2%	$1.80	4.7%	12
MRU-T	Metro	1.5%	$71.57	6.8%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.5%	$137.32	0.4%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	2.2%	$37.00	-9.0%	$0.80	11.1%	17
STN-T	Stantec Inc.	1.1%	$62.11	-11.5%	$0.71	6.8%	10
TD-T	TD Bank	3.6%	$99.47	0.1%	$3.56	12.7%	11
TFII-T	TFI International	1.1%	$125.60	-10.4%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$118.53	4.3%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.0%	$71.46	19.6%	$3.57	4.4%	21
T-T	Telus	3.9%	$33.31	11.9%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$139.73	4.2%	$0.92	8.9%	12
Averages		2.6%		3.1%		9.4%	18

MP Market Review – March 25, 2022

Last updated by BM on March 28, 2022

“Risk comes from not knowing what you are doing.” – Warren Buffett

You could almost quote Warren Buffett every week. Buffett has been the source of so many valuable insights into investing during his lifetime that you can never go wrong reading anything he writes. It seems there is always some tidbit of wisdom no matter what the market is doing.

While others may see the current market as ‘risky’, we do not. We embrace these types of markets because it gives us more opportunities to execute our process. Our DGI strategy has built-in risk-reduction. Risk for us is more about what is in our portfolio and what we paid for it. Both of which we do well.

Dividend growth investing, although not without short-term price volatility, is inherently one of the best risk mitigation strategies you will find.

Performance of ‘The List’

‘The List’ metrics were the same as last week with a 2.0% YTD price return (capital) and dividend growth stabilizing at an average increase of 9.1% in income so far in fiscal 2022.

The best performers last week on ‘The List’ were TC Energy (TRP-T) up 5.2%; Canadian National Railway (CNR-T) up 3.2%; and Enbridge (ENB-T) up 2.4%.

CCL Industries (CCL-B-T) was the worst performer lasts week, down -4.7%.

There were no companies on ‘The List’ that announced an earnings release.

Recent News

The biggest news in Canada last week was the power-sharing deal announced between the Liberals and NDP. A political deal that will see the New Democratic Party prop up the minority Liberals until the next election.

In it, the Liberals appear more committed than ever to begin impacting the profits and earnings of some of Canada’s largest industries (Banks, REITs and Pharmacies to begin). The Banks will more than likely receive a surtax on profits over a certain amount and REITs, although details are not out yet, may not receive as favorable tax treatment as they do now. The national Pharmacare initiative, trumpeted by the NDP, could see pharmacies lose some of their earnings to the new program.

Last August, the Canadian Bankers Association criticized the Liberal plan for singling out financial services.

“The proposed tax increase would reduce income that would otherwise benefit the majority of Canadians who are bank shareholders, either directly through share ownership or indirectly through pension and mutual funds, including the Canada Pension Plan,” the group said in a statement at the time, adding that pension funds and RRSPs are some of the main beneficiaries of the billions of dollars that the banks pay in dividends each year.

Canadians own shares and receive dividends in pharmacies and REITs as well. We are never shocked when we hear about politicians screaming ‘tax the rich’ to get reelected or stay in power. It is a narrative we hear often today with very little substance to prove it even works in practice. Nonetheless, it is a short-term narrative that we will monitor closely for any opportunities within our portfolios.

One company on ‘The List’ is due to report earnings this week:

Dollarama Inc. (DOL-T) is scheduled to report earnings for Q4 and Fiscal Year 2022 before the market opens Wednesday, Mar. 30.

Dividend Increases

There were no dividend increases from companies on ‘The List’ this past week.

Earnings Releases

There were no earnings releases to report on this past week.

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 (2022)
Last updated by BM on March 25, 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	4.4%	$15.45	7.7%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$54.30	4.2%	$0.44	18.1%	12
BCE-T	Bell Canada	5.4%	$67.92	3.0%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.4%	$64.06	4.9%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.7%	$56.08	-17.3%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.7%	$169.73	9.6%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.8%	$186.41	1.8%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.7%	$37.42	2.2%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$67.53	6.5%	$0.20	1.7%	11
EMA-T	Emera	4.4%	$60.51	-3.3%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.0%	$57.79	16.7%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.8%	$39.71	-13.4%	$0.72	16.3%	15
FNV-N	Franco Nevada	0.8%	$158.09	16.2%	$1.28	10.3%	14
FTS-T	Fortis	3.5%	$60.33	-0.2%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$184.94	13.0%	$4.00	17.6%	17
L-T	Loblaws	1.3%	$109.47	6.6%	$1.46	6.6%	10
MGA-N	Magna	2.8%	$63.56	-22.1%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$70.32	4.9%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.4%	$141.28	3.2%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	2.1%	$37.95	-6.7%	$0.80	11.1%	17
STN-T	Stantec Inc.	1.1%	$63.00	-10.2%	$0.71	6.8%	10
TD-T	TD Bank	3.5%	$101.81	2.5%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$131.43	-6.2%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$114.58	0.8%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	4.9%	$72.37	21.2%	$3.57	4.4%	21
T-T	Telus	4.1%	$32.12	7.9%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$134.88	0.6%	$0.92	8.9%	12
Averages		2.7%		2.0%		9.1%	18

MP Market Review – March 18, 2022

Last updated by BM on March 21, 2022

“The goal in any sport is to finish with the best score, but it would be ridiculous to spend the whole game staring at the scoreboard. The only way to actually win is to get better each day. In the words of three-time Super Bowl winner Bill Walsh, “The score takes care of itself.” The same is true for other areas of life. If you want better results, then forget about setting goals. Focus on your system instead.” James Clear, Atomic Habits

Each week we report on the components of our system (quality, valuation, dividend growth) and are less concerned about the score (capital growth). We know that our quality dividend growers purchased at a sensible price will eventually produce market-beating returns.

With full 2021 and Q4 earnings now behind us, we will wait for the market to give us opportunities. Our recent purchases (FNV, MG) in the Magic Pants Wealth-Builder (CDN) Portfolio, show us that patience, even in volatile markets can pay off when you focus on your system.

Performance of ‘The List’

‘The List’ was up slightly this week with a 2.0% YTD price return (capital) with dividend growth stabilizing. An average increase of 9.1% in dividends (income) so far in fiscal 2022.

The best performers last week on ‘The List’ were TFI International (TFII-T) up 14.2%; Alimentation Couche-Tard Inc. (ATD-T) up 8.7%; and Magna International (MGA-N) up 8.2%.

Bell Canada (BCE-T) was the worst performer this week, down -3.4%.

One company on ‘The List’ announced an earnings report for their Q3 2022 earnings season.

Recent News

We had some big news from Loblaws (L-T) this week.

Loblaws (L-T)

“Lifemark is the largest single provider of physiotherapy and rehabilitation services in Canada and also provides an array of other healthcare services including massage therapy, occupational therapy, chiropractic and mental health services, seeing over 3M patients annually,” Analyst Patricia Baker said in a note to clients.

“The acquisition of Lifemark extends Loblaw’s push in healthcare services which has seen the company take a stake in telemedicine firm Maple in 2020 and acquire QHR, an electronic medical records company in 2016,” the analyst said.

With this acquisition, you are continuing to see the evolution of Loblaws away from just being a grocer and real estate company. Health and wellness have much more growth potential than exists in selling groceries, according to an article in the Globe & Mail this week detailing Loblaws’ transition over the past few years.

“It’s no longer the great grandfather’s baking company, but investors have been well-rewarded by his heir’s strategy.” Globe & Mail, March 14, 2022

One of the reasons we added Loblaws (L-T) to ‘The List’ this year was because we saw dividend growth accelerating, which is a requirement for lower yielding portfolio candidates. With Loblaws transformation ongoing, we will be interested to see if the recent rate of increases continues.

Dividend Increases

There were no dividend increases from companies on ‘The List’ this past week.

For those of you who still don’t believe quality dividend growers increase their dividends, like clockwork every year, here is a summary of nineteen dividend increases (70% of ‘The List’) announced in the first quarter of 2022:

ATD-T from .088 to .11 up 25.7%
RY-T from 1.08 to 1.20 up 11.1%
TD-T from .79 to .89 up 12.7%
ENGH-T from .16 to .185 up 15.6%
CNR-T from .615 to .733 up 19.1%
MRU-T from .25 to .275 up 10.0%
BIP-N from .51 to .54 up 5.9%
BCE-T from .875 to .92 up 5.1%
IFC-T from .91 to 1.0 up 9.9%
TIH-T from .35 to .39 up 11.4%
T-T from .316 to .327 up 3.5%
ENB-T from .835 to .86 up 3.0%
MGA-N from .43 to .45 up 4.7%
TRP-T from .87 to .90 up 3.5%
CU-T from .44 to .444 up 1.0%
STN-T from .165 to .18 up 9.1%
CCL-B-T from .21 to .24 up 14.3%
FNV-N from .30 to .32 up 6.7%
SJ-T from .18 to .20 up 11.1%

Earnings Releases

We had one earnings report from companies on ‘The List’ this past week. Alimentation Couche-Tard Inc. (ATD-T) reported impressive earnings.

Alimentation Couche-Tard Inc. (ATD-T)

“Two years after the start of the pandemic and during a quarter where the Omicron variant surged across our network, I am proud to announce that we had good results during the third quarter in both convenience and fuel. Same store merchandise sales were particularly strong in Europe as well as in the U.S. with our freshly prepared food programs and packaged beverages among the main drivers of growth,” chief executive Brian Hannasch said in a release.

Highlights

Net earnings were $746.4 million, or $0.70 per diluted share for the third quarter of fiscal 2022 compared with $607.5 million, or $0.55 per diluted share for the third quarter of fiscal 2021. Adjusted net earnings were approximately $746.0 million compared with $622.0 million for the third quarter of fiscal 2021. Adjusted diluted net earnings per share were $0.70, representing an increase of 25.0% from $0.56 for the corresponding quarter of last year.
Total merchandise and service revenues of $4.8 billion, an increase of 5.8%. Same-store merchandise revenues increased 3.7% in the United States, 7.2% in Europe and other regions, and decreased 0.8% in Canada. On a 2-year basis, same-store merchandise revenues increased at a compound annual growth rate of 3.4% in the United States, 5.0% in Europe, and 2.1% in Canada.
Merchandise and service gross margin increased 1.0% in the United States to 33.6%, 0.2% in Canada to 31.6%, and decreased 0.7% in Europe and other regions to 37.8%, which was impacted by the integration of Circle K Hong Kong.
Same-store road transportation fuel volume increased 3.2% in the United States, 3.2% in Europe and other regions, and 7.2% in Canada. On a 2-year basis, same-store road transportation fuel volume decreased at a compound annual rate of 6.8% in the United States, 3.4% in Europe, and 7.4% in Canada, still impacted by work from home trends and resurgence of COVID-19 cases toward the end of the quarter.
Road transportation fuel gross margin of 39.63¢ per gallon in the United States, an increase of 8.87¢ per gallon, and CA 11.78¢ per liter in Canada, an increase of CA 1.45¢ per liter. In Europe and other regions, it decreased by US 0.53¢ per liter to US 10.83¢ per liter. Fuel margins remained healthy throughout our network, due to favorable market conditions and the continued work on the optimization of our supply chain.
On a 2-year basis, excluding the costs of employee retention measures implemented, which totaled approximately $28.0 million, normalized expenses increased at a compound annual growth rate of 3.7%, slightly below inflation level.
Under its share repurchase program, the Corporation repurchased shares for an amount of $509.7 million during the quarter, and an amount of $230.7 million subsequent to the end of the quarter, reaching a total of $1.3 billion under the current program. Subsequent to the end of the quarter, the Toronto Stock Exchange approved the amendment of our current share repurchase program to increase the maximum number of shares that may be repurchased.
Subsequent to the end of the quarter, and following the escalation of the conflict in Ukraine, the Corporation announced that it is suspending the operations of its 38 company-operated stores in Russia and is implementing plans to take care of its employees in a responsible and safe manner.

See full Q3 2022 Earnings Release here

ATD-T was one of the companies that was adversely impacted by the pandemic. Fuel sales are now on the increase which should help margins and earnings when people start to travel more and return to the office. ATD-T depends on the morning commute as customers stop for gas and visit their stores. Management is one of the best we have seen for acquiring assets and integrating them efficiently. This company came close to our sensible price range of 6.5% EPS yield in February and early March, so we are monitoring closely.

It seems that management agreed that shares were in a ‘sensible price’ range, buying back over 500 million dollars’ worth of shares during the last quarter.

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 (2022)
Last updated by BM on March 18, 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	4.5%	$15.27	6.4%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$53.09	1.9%	$0.44	18.1%	12
BCE-T	Bell Canada	5.4%	$67.94	3.1%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.4%	$62.72	2.7%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.6%	$58.82	-13.2%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.8%	$164.52	6.2%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.7%	$189.44	3.4%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.8%	$37.11	1.4%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$69.02	8.8%	$0.20	1.7%	11
EMA-T	Emera	4.4%	$59.88	-4.3%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.1%	$56.46	14.0%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.8%	$40.02	-12.7%	$0.72	16.3%	15
FNV-N	Franco Nevada	0.8%	$154.60	13.6%	$1.28	10.3%	14
FTS-T	Fortis	3.6%	$60.07	-0.7%	$2.14	4.4%	48
IFC-T	Intact Financial	2.1%	$186.49	13.9%	$4.00	17.6%	17
L-T	Loblaws	1.3%	$111.16	8.2%	$1.46	6.6%	10
MGA-N	Magna	2.9%	$62.89	-22.9%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$69.42	3.6%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.4%	$142.13	3.9%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	2.0%	$39.30	-3.4%	$0.80	11.1%	17
STN-T	Stantec Inc.	1.1%	$64.17	-8.6%	$0.71	6.8%	10
TD-T	TD Bank	3.5%	$101.79	2.5%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$135.15	-3.6%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$118.44	4.2%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.2%	$68.81	15.2%	$3.57	4.4%	21
T-T	Telus	4.1%	$32.29	8.5%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$138.10	3.0%	$0.92	8.9%	12
Averages		2.7%		2.0%		9.1%	18

MP Market Review – March 11, 2022

Last updated by BM on March 14, 2022

“If I can buy streams of cash flows at lower prices, I am happy.” Buttonwood, March 20, 2020

Dividend growth for the companies on ‘The List’ stands at 9.1% so far in 2022. Imagine getting a salary raise every year of over nine percent!

If you are new to dividend growth investing this is perhaps the most ‘magical’ concept. We still have the same number of shares in our accounts even after the dividends are paid. We are fine waiting on our existing shares to appreciate and excited about adding more at lower prices.

For the most part, the narratives in the news continue to be about the Russia-Ukraine war and the sanctions being imposed. More companies came out this week and severed ties or have temporarily shut down their Russian operations. As we mentioned last week, this was more of a buying opportunity for some of these companies than a significant adjustment to their future earnings as the companies on our list had such a small portion of their revenue’s dependent on Russian operations. We still believe there is more downside than upside in the market but will enter incrementally into individual positions when they reach our valuation corridor.

Performance of ‘The List’

‘The List’ was up slightly this week with a 0.6% YTD price return (capital) with an uptick in dividend growth for an average increase of 9.1% in dividends (income) so far in fiscal 2022.

The best performers last week on ‘The List’ were Enghouse Systems Limited (ENGH-T) up 12.4%; Loblaws (L-T) up 8.2%; and Toromont Industries (TIH-T) up 4.9%.

TFI International (TFII-T) was the worst performer this week, down -9.9%.

Two companies on ‘The List’ announced a dividend increase coupled with an earnings report for Q4 and Full Year 2021.

Recent News

Along with the last of our two dividend growers reporting 2021 earnings (SJ-T, FNV-N) we had some news from Canadian Tire and Stantec.

Canadian Tire (CTC-A-T) announced plans to invest more than $3.4 billion over the next four years on its online presence. If you recall from their Q4 2021 earnings release, their eCommerce sales were the biggest growth area for the business, and they are looking to build on those gains.

“We have clearly laid out our strategic growth plan, and we firmly believe that investments targeting organic growth in the right places represent the best use of capital,” said Gregory Craig, Executive Vice President & Chief Financial Officer. “Our focus on investing in the business will be coupled with our balanced approach to dividends and share buybacks which positions us to continue to generate attractive returns to shareholders over the longer-term.”

Stantec (ST-T) announces its intention to acquire Barton Willmore, the leading UK-based planning and design consulting firm. This announcement is the most recent in a series of acquisitions by Stantec in the UK market and enhancing their global presence. Companies that seek out and integrate acquisitions quickly and efficiently go on to reach new earnings records.

“Stantec’s cultural values also mirror our own, and through comprehensive inter-disciplinary working, we are looking forward to delivering a unique, integrated, and highly attractive workplace for planners and designers, alongside their broad existing teams,” said Mark Sitch, fellow Senior Partner at Barton Willmore. “We look forward to seeing how these integrated teams can transform project solutions for our clients across the UK and beyond.”

There is one company on ‘The List’ due to report earnings this week:

Alimentation Couche-Tard Inc. (ATD-T) is scheduled to report earnings for their Q3 2022 period before the market opens Wednesday, Mar. 16.

Dividend Increases

There were two companies on ‘The List’ that announced a dividend increase this week. This completes our Q4 2021 earnings season. We will publish a summary of Q4 earnings next week.

Stella Jones (SJ-T) on Thursday increased its 2022 quarterly dividend from $0.18 to $.20 per share, payable April 22, 2022, to shareholders of record on April 4, 2022.

This represents a dividend increase of 11.11% and the 18^th consecutive year in which the company has increased its dividend.

Franco Nevada (FNV-N) on Thursday increased its 2022 quarterly dividend from $0.30 to $.32 per share, payable March 31, 2022, to shareholders of record on March 16, 2022.

This represents a dividend increase of 6.67% and the 15th consecutive year in which the company has increased its dividend.

Earnings Releases

We had two earnings reports from companies on ‘The List’ this past week. Let’s start with Stella Jones.

Stella Jones (SJ-T)

“Stella-Jones delivered a record performance on many fronts in 2021, resulting in increased sales, strong EPS growth and solid cashflows. We utilized our collective expertise and longstanding industry relationships to successfully navigate through complex procurement challenges and volatile lumber markets to produce yet another successful year,” said Éric Vachon, President and CEO of Stella-Jones.

2021 Highlights

Sales of $2,750 million, up 8%
Record high EBITDA of $400 million, or a margin of 14.5%
Net income reached $227 million, or $3.49 per share
Acquired wood treating facilities in Alabama
Quarterly cash dividend increased 11% to $0.20 per share
Amends Normal Course Issuer Bid to increase maximum shares to be repurchased
Company details its three-year financial outlook

Outlook

To better reflect its business dynamics, the Company is shifting its financial guidance to a three-year outlook. Over the next 3 years, Stella-Jones anticipates continued sales and EBITDA growth. It expects to generate an annual sales growth rate in the mid-single digit range from the 2019 pre-pandemic levels and continues to target EBITDA margin of approximately 15% for the 2022-2024 period.

By core product categories for 2022-2024:

The Company will expand its capital expenditure program and invest an additional $90 to $100 million to support the anticipated high single-digit organic growth in the utility poles category.
The Company continues to project growth in the railway ties category in the low single-digits; and
For residential lumber, the Company anticipates stable long-term demand but believes the market price of lumber will normalize. As a result, the Company expects its residential lumber sales to decrease compared to 2021 and assumes sales in the 2022-2024 period will be approximately 35% above the 2019 pre-pandemic levels.

Based on its current business model, the Company projects returning to shareholders approximately $500 to $600 million in the 2022-2024 period.

The Company plans to pursue acquisitions that further support growth in its infrastructure-related products categories. It also plans to evaluate growth opportunities in adjacent businesses where it can leverage its core knowledge and key attributes to generate continued strong cash flow. For strategic acquisitions, the Company anticipates increasing its leverage to finance such opportunities. As per its capital allocation strategy, the Company targets a leverage ratio of 2.0x-2.5x and may temporarily deviate and exceed its target to pursue acquisitions.

See full Q4 2021 Earnings Release here

We like the fact that Stella Jones is a shareholder-friendly company. Through dividend growth and share buy-backs, they send the message that the shareholder comes first. By switching to a three-year outlook they also seem to be implying that in the near term they are not expecting earnings growth to be significant.

Franco Nevada (FNV-N)

“Franco-Nevada is reporting its best results ever,” stated Paul Brink, CEO. “We achieved record annual top-line and bottom line results. GEO sales growth was driven by an increased contribution from Cobre Panama, outperformance by Antamina, and contributions from new acquisitions. The advantage of our diverse portfolio was again demonstrated in 2021. High iron ore prices during the year boosted revenues from our iron ore holdings and rising energy prices resulted in our energy revenues more than doubling. Following 2021’s rapid GEO growth, we expect slightly lower GEOs in 2022 and then to continue our growth through 2026. With limited exposure to inflation, our top-line growth translated directly into expanded margins and record earnings. Franco-Nevada is debt-free, is growing its cash balances, and has a strong pipeline of growth opportunities.”

Highlights

Strong Financial Position

No debt and $1.6 billion in available capital as at December 31, 2021
Generated $279.0 million in operating cash flow for the quarter
Quarterly dividend increased 6.7% to $0.32/share, effective Q1 2022

Sector-Leading ESG

Ranked #1 gold company by Sustainalytics, AA by MSCI, and Prime by ISS ESG
Committed to the World Gold Council’s “Responsible Gold Mining Principles”
Partnering with our operators on community and ESG initiatives
Goal of 40% diverse representation at the Board and top leadership levels as a group by 2025

Diverse, Long-Life Portfolio

Most diverse royalty and streaming portfolio by asset, operator, and country
Core assets outperforming since time of acquisition
Long-life reserves and resources

Growth and Optionality

Acquisitions, mine expansions, and new mines driving long-term growth
Long-term optionality in gold, copper, and nickel

Guidance

2021 was a year of significant growth for Franco-Nevada, with record revenue and a 27.0% year-over-year increase in total GEOs. In 2022, we anticipate a slightly lower production profile in comparison to 2021, with our attributable GEOs expected to range between 680,000 and 740,000 GEOs. Of this, our Precious Metal assets are expected to contribute between 510,000 and 550,000 GEOs. The outlook reflects an expected lower contribution from our Guadalupe-Palmarejo stream and expected lower grades at Antamina and Antapaccay in 2022. We estimate depletion expense to be between $270 and $300 million. Our remaining capital commitment to the Royalty Acquisition Venture with Continental is $91.6 million. Please see our MD&A for the year ended December 31, 2021, for more details on our guidance and see “Forward-Looking Statements” below.

5-Year Outlook

We expect our portfolio to produce between 765,000 and 825,000 GEOs by 2026, of which 570,000 to 610,000 GEOs are expected to be generated from Precious Metal assets. This outlook assumes that Cobre Panama will have expanded its mill throughput capacity to 100 million tonnes per year during 2023. It also assumes the commencement of production at Salares Norte, Greenstone (Hardrock), Rosemont, Valentine Lake, and Eskay Creek, continued deliveries from Sudbury through 2026, and that the stream at MWS will have reached its cap in 2024.

For both our 2022 guidance and 5-year outlook, when reflecting revenue earned from gold, silver, platinum, palladium, iron ore, oil, and gas commodities to GEOs, we assumed the following prices: $1,800/oz Au, $23.00/oz Ag, $1,000/oz Pt, $2,100/oz Pd, $125/tonne Fe 62% CFR China, $85/bbl WTI oil and $3.75/mcf Henry Hub natural gas. Our 2022 guidance, as set out above, and our 5-year outlook does not assume any other acquisitions and does not reflect any incremental revenue from additional contributions we may make to the Royalty Acquisition Venture with Continental as part of our remaining commitment of $91.6 million. The 2022 guidance and 5-year outlook are based on public forecasts and other disclosure by the third-party owners and operators of our assets and our assessment thereof.

See full Q4 2021 Earnings Release here

In January of this year, we did a portfolio review on the fundamentals of Franco-Nevada (FNV-N). We saw the stock as in a ‘sensible price’ range based on its historical numbers. In addition, we knew that gold and precious metals typically do better in periods were both the rate of change in GDP and inflation are slowing. To date, our thesis is playing out with FNV-N up over 20%.

In the most recent earnings report we note that production has levelled off (GEO) in the short term and the catalyst for further growth will come from an increase in the price of the commodities Franco Nevada holds streams and royalties on. Any significant uptick in the prices of gold, silver, iron, palladium, platinum, natural gas or oil will reflect favorably on FNV’s bottom line.

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 (2022)
Last updated by BM on March 11, 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	4.5%	$15.08	5.1%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.9%	$48.84	-6.3%	$0.44	18.1%	12
BCE-T	Bell Canada	5.2%	$70.35	6.7%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.6%	$60.74	-0.6%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.7%	$57.78	-14.8%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.8%	$160.98	3.9%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.9%	$177.73	-3.0%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.8%	$36.70	0.2%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$69.31	9.3%	$0.20	1.7%	11
EMA-T	Emera	4.3%	$61.07	-2.4%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.1%	$56.66	14.4%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.8%	$39.00	-15.0%	$0.72	16.3%	15
FNV-N	Franco Nevada	0.8%	$158.05	16.1%	$1.28	10.3%	14
FTS-T	Fortis	3.5%	$60.30	-0.3%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$185.72	13.4%	$4.00	17.6%	17
L-T	Loblaws	1.3%	$114.75	11.7%	$1.46	6.6%	10
MGA-N	Magna	3.1%	$58.10	-28.8%	$1.80	4.7%	12
MRU-T	Metro	1.5%	$71.74	7.0%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.5%	$138.15	1.0%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	2.1%	$38.78	-4.7%	$0.80	11.1%	17
STN-T	Stantec Inc.	1.1%	$63.25	-9.9%	$0.71	6.8%	10
TD-T	TD Bank	3.6%	$98.06	-1.3%	$3.56	12.7%	11
TFII-T	TFI International	1.2%	$118.33	-15.6%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$115.78	1.8%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.1%	$69.66	16.6%	$3.57	4.4%	21
T-T	Telus	3.9%	$33.33	12.0%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$134.22	0.1%	$0.92	8.9%	12
Averages		2.7%		0.6%		9.1%	18

MP Market Review – March 4, 2022

Last updated by BM on March 7, 2022

“The big money is not in the buying or selling but in the waiting.” – Charlie Munger

We woke up this morning with oil prices at $125/barrel! The prior high was $135 in 1980. There is a direct correlation between rising oil prices and recessions according to Josh Steiner. “Since 1946 there have been twelve recessions, eight have followed major oil price shocks, while a further three have occurred immediately following more modest, but still notable, oil price run-ups… That leaves just one out of twelve recessions that didn’t have any oil fingerprints left at the crime scene (Recession Recipe, Josh Steiner). “

Coincidence or not, the run up in oil prices is not good for the stock markets. Couple that with rising interest rates (Bank of Canada just announced one last week) and an overvalued market coming into 2022 and I think you know where we are headed. Our existing dividend growers were bought with a ‘margin of safety’ well before the run up in oil prices so we will sit tight and enjoy the rising income growth for now. Forego the temptation to chase prices into a volatile market and be more like Charlie. ‘Sensible prices’ are just around the corner.

Performance of ‘The List’

‘The List’ was up slightly this week with a neutral 0.0% YTD price return (capital) but an uptick in dividend growth with another big dividend announcement, for an average increase of 8.7% in income so far in fiscal 2022.

The best performers last week on ‘The List’ were Waste Connections (WCN-N) up 8.7%; Franco Nevada (FNV-N) up 7.6%; and TC Energy (TRP-T) up 7.6%.

Magna International (MGA-N) was the worst performer this week, down -18.0%.

One company on ‘The List’ announced a dividend increase and one company an earnings report for Q4 and Full Year 2021. In addition, TD Bank and Enghouse Systems reported on their Q1 2022 earnings.

Recent News

There was an article in the Globe & Mail this week about Magna (MGA-N), CCL Industries (CCL-B-T), and Alimentation Couch-Tard (ATD-T) having to shut down their Russia operations due to sanctions imposed from the war in Ukraine. All of their stock prices suffered when the news came out. If you look closer however you discover that the Russian operations account for a very small percentage of each company’s revenues. Sometimes the narratives in the media create opportunities for investors who focus more on fundamentals.

With the acquisition of First Horizon, TD Bank vaults itself from #10 to #6 in the United States. As the second largest bank in Canada and now the sixth largest in the United States, TD Bank solidifies itself as not only a quality Canadian dividend grower but a North American one. Although TD may face both regulatory and integration challenges with this acquisition, there is a lot to like about the acquisition. TD Bank management is expecting significant cost synergies from the deal, as well as revenue synergy opportunities from fixed income trading and mortgage warehouse lending. Glad to see TD Bank putting some of their cash (they did not pay in dividends last year) to good use.

Here are a couple of the companies on ‘The List’ due to report earnings this week:

Stella Jones (SJ-T) is scheduled to report earnings before the market opens Wednesday, Mar. 09

Franco Nevada (FNV-N) is scheduled to report earnings after hours Wednesday, Mar. 09

Dividend Increases

There was one company on ‘The List’ that announced a dividend increase this week as we wind down our Q4 2021 earnings calendar and begin to report on 2022.

Enghouse Systems (ENG-T) on Thursday said it increased its 2022 quarterly dividend from $0.16 to $.185 per share, payable May 31, 2022, to shareholders of record on May 17, 2022.

This represents a dividend increase of 15.6% and the 14^th consecutive year in which the company increased its dividend by over 10%.

Earnings Releases

We had three earnings reports from companies on ‘The List’ this past week. Let’s start with TD Bank.

TD Bank (TD-T)

“TD started the year strong, delivering revenue growth across all our business segments as customer activity gained additional momentum,” said Bharat Masrani, Group President and CEO, TD Bank Group. With a focus on growth, we continue to make investments in technology and new capabilities, positioning us well to meet our customers’ and clients’ evolving needs.” “I am also pleased to have announced our deal with First Horizon earlier this week. A bold acceleration of our U.S. strategy to acquire a premier regional bank, with a strong presence in highly attractive markets across the U.S. Southeast – a terrific strategic fit for TD,” added Masrani.

FIRST QUARTER FINANCIAL HIGHLIGHTS, compared with the first quarter last year:

Reported diluted earnings per share were $2.02, compared with $1.77.
Adjusted diluted earnings per share were $2.08, compared with $1.83.
Reported net income was $3,733 million, compared with $3,277 million.
Adjusted net income was $3,833 million, compared with $3,380 million.

See full Q1 2022 Earnings Release here

TD Bank continues to exceed earnings expectations and grow their business with acquisitions. With a 30% increase in price over the last year, the recent pullback is self-explanatory. We will continue to add to our position at a sensible price as they don’t get much better than TD Bank for a core position in any dividend growth portfolio.

Enghouse Systems (ENGH-T)

“Fiscal 2021 was another year of positive income and operating cash flows, improved Adjusted EBITDA margins and record distributions to shareholders. Although record revenue was not achieved this year, we again demonstrated the benefit of maintaining our financial discipline during times of significant market fluctuations. In doing so, we achieved Adjusted EBITDA margins of 36.1% and cash flows from operations, excluding changes in working capital, of $167.8 million. We closed the year with $198.8 million in cash, cash equivalents and short-term investments while completing several acquisitions and returning dividends to our shareholders of $115.7 million.” Stephen J. Sadler Chairman of the Board and Chief Executive Officer

Financial and operational highlights for the three months ended January 31, 2022 compared to the three months ended January 31, 2021 are as follows:

Revenue achieved was $111.1 million compared to revenue of $119.1 million;
Results from operating activities was $35.7 million compared to $40.7 million;
Net income increased to $21.6 million compared to $20.6 million;
Adjusted EBITDA was $38.6 million compared to $44.5 million;
Cash flows from operating activities excluding changes in working capital was $38.7 million compared to $41.7 million.

“During the year, we focused on scaling costs to revenues, improving our gross profit margins and decreasing overheads by reducing facilities, travel and headcount costs. This, combined with higher margins associated with reduced acquisition integration requirements during the fiscal year, increased our Adjusted EBITDA margins for the year to 36.1% from 35.1% in the prior year. We completed three acquisitions during the year, broadening our product portfolio, geographic reach and hosted solutions portfolio, deploying $35.5 million for the acquisitions of Altitude, Nebu and Momindum. We continue to actively pursue acquisition opportunities and expand our acquisition pipeline. However, valuations for technology acquisitions remain high and many opportunities did not meet our acquisition, financial and operating criteria during the year. We also returned record dividends to shareholders during the year, including a special dividend of $83.2 million or $1.50 per common share.” Stephen J. Sadler Chairman of the Board and Chief Executive Officer

See full Q1 2022 Earnings Release here

Enghouse Systems has struggled to reach the revenue and profitability numbers it achieved during the COVID era. The market does not like companies who do not continue to grow year over year. Perhaps a lesson here for dividend growth investors looking to start a portfolio…the fundamentals for ENGH-T are above average when it comes to their decade long track record, but it seems every little bit of bad news hits their stock price hard. We have seen this before with the market punishing smaller capitalized companies like ENGH-T more severely on any type of negative news. Be careful with how many small cap (non-core) dividend growers you have in your portfolio, if you want to minimize volatility.

Algonquin Power and Utilities Corp. (AQN-N)

“We are pleased that the Company has successfully delivered on many of its strategic priorities in 2021, including the continued execution of several exciting new renewable projects and a further advancement of sustainability initiatives. Despite weaker weather conditions, we are pleased to report solid fourth quarter operating results from the Company’s diversified and resilient business model,” said Arun Banskota, President and Chief Executive Officer of AQN. “Looking forward, we remain confident that the Company’s $12.4 billion capital expenditure plan from 2022 through 2026 will continue to drive long term shareholder value.”

Fourth Quarter and Full Year Financial Highlights

Annual revenue of $2,285.5 million, an increase of 36%;
Annual Adjusted EBITDA of $1,076.9 million, an increase of 24%;
Annual Adjusted Net Earnings of $449.6 million, an increase of 23%;
Annual Adjusted Net Earnings per share of $0.71, an increase of 11%;
Fourth quarter revenue of $594.8 million, an increase of 21%;
Fourth quarter Adjusted EBITDA of $297.6 million, an increase of 18%;
Fourth quarter Adjusted Net Earnings of $136.3 million, an increase of 7%; and
Fourth quarter Adjusted Net Earnings per share of $0.21, representing no change, in each case on a year-over-year basis.

See full Q4 2021 Earnings Release here

A revenue increase of 36% is impressive but at what expense. Shareholder dilution is worrisome as are stretched credit metrics. Over the last ten years, AQN-N has gone from 119 million shares outstanding to over 619 million today. Shares have been diluted by more than five times. Luckily, EDITDA and FFO numbers have kept pace. An investment in AQN-N means you believe the growth will continue.

If you are looking for a defensive investment in a regulated utility, there may be better options with less risk than Algonquin Power & Utilities right now.

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 (2022)
Last updated by BM on March 4, 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	4.6%	$14.70	2.4%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.9%	$48.52	-6.9%	$0.44	18.1%	12
BCE-T	Bell Canada	5.2%	$71.15	8.0%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.6%	$59.68	-2.3%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.7%	$57.23	-15.6%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.8%	$161.48	4.3%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.9%	$179.59	-2.0%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.9%	$36.32	-0.8%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$66.66	5.1%	$0.20	1.7%	11
EMA-T	Emera	4.3%	$61.56	-1.6%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.0%	$56.90	14.9%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	2.1%	$34.71	-24.3%	$0.72	16.3%	15
FNV-N	Franco Nevada	0.8%	$158.24	16.3%	$1.28	10.3%	14
FTS-T	Fortis	3.5%	$60.29	-0.3%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$184.04	12.4%	$4.00	17.6%	17
L-T	Loblaws	1.4%	$106.02	3.2%	$1.46	6.6%	10
MGA-N	Magna	2.9%	$62.45	-23.5%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$69.65	3.9%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.5%	$138.25	1.0%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	1.9%	$38.71	-4.8%	$0.72	0.0%	17
STN-T	Stantec Inc.	1.1%	$61.98	-11.7%	$0.71	6.8%	10
TD-T	TD Bank	3.6%	$98.54	-0.8%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$131.29	-6.3%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.4%	$110.36	-2.9%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.0%	$71.73	20.1%	$3.57	4.4%	21
T-T	Telus	3.9%	$33.50	12.6%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$134.83	0.6%	$0.92	8.9%	12
Averages		2.7%		0.0%		8.7%	18

MP Market Review – February 25, 2022

Last updated by BM on February 28, 2022

“Most of the returns in stocks are concentrated in sharp bursts beginning in periods of great pessimism or fear, as we saw most recently in the 2020 pandemic decline. We believe time, not timing, is key to building wealth in the stock market.” – Bill Miller

After several years of market exuberance, we are finally seeing a correction in 2022. Outside of the ‘story stocks’, which never really had any solid fundamentals to begin with, many companies are simply coming back down to earth from their excessive valuations. JPMorgan stated last week that even with the correction so far in 2022, the markets still have another 11% to decline before they return to their historical fair value. Throw in the threat of rising interest rates and the geopolitical concerns with the Russian invasion of Ukraine and you have a market that has still not found its footing.

One of the reasons we were attracted to dividend growth investing initially was because we were tired of obsessing over every geopolitical event or what central bankers will do next. We were looking for a proven strategy that doesn’t care what happens with the economy over the long-term.

Right now, we think it is prudent to be patient when it comes to entering or adding to many of our positions until the markets do what they always do, revert to the mean. We will be ready when they do.

Performance of ‘The List’

‘The List’ was flat this week with a negative 0.6% YTD price return (capital) but another uptick in dividend growth with two new dividend announcements for an average increase of 8.2% in income so far in fiscal 2022.

The best performers last week on ‘The List’ were Alimentation Couche-Tard Inc. (ATD-T) up 3.1%; Enbridge Inc. (ENB-T) up 2.9%; Loblaws (L-T) up 2.8%.

CCL Industries (CCL-B-T) was the worst performer this week, down -5.7%.

Two companies on ‘The List’ announced a dividend increase and four companies announced their Q4 and Full Year 2021 earnings reports. In addition, Royal Bank reported on their Q1 2022 earnings.

Recent News

If you were like most people, you were glued to the television when Russia invaded Ukraine this past week. Equally disconcerting for investors was the significant volatility in the markets as a result. Although market corrections are unpleasant, they typically don’t last long, and they provide great opportunities to investors who don’t panic. Having a time-tested process, as we do, tells us not to panic and wait for our good dividend growers to reach a ‘sensible price’ or even better, go on sale.

I’ll go over all our earnings reports in a moment. I’ll also preview three more earnings reports for next week.

Here are a few of the companies on ‘The List’ due to report earnings this week:

TD Bank (TD-T) is scheduled to report earnings before the market opens Thursday, Mar. 03

Enghouse Systems Limited (ENGH-T) is scheduled to report earnings after hours Thursday, Mar. 03

Algonquin Power & Utilities (AQN-T) is scheduled to report earnings after hours Thursday, Mar. 03

Dividend Increases

There were two companies on ‘The List’ that announced a dividend increase this past week.

Stantec Inc. (STN-T) on Wednesday said it increased its 2022 quarterly dividend from $0.165 to $.18 per share, payable April 18, 2022, to shareholders of record on Mar. 31, 2022.

This represents a dividend increase of 9.1%, for this global leader in design and engineering.

CCL Industries (CCL-B-T) on Thursday said it increased its 2022 quarterly dividend from $0.21 to $.24 per share, payable March 31, 2022, to shareholders of record on Mar. 17, 2022.

This represents a dividend increase of 14.3%, for this world leader in specialty label, security, and packaging solutions.

Earnings Releases

We had five earnings reports from companies on ‘The List’ this past week. Let’s start with Canadian Utilities.

Canadian Utilities Limited (CU-T)

“Overall, Canadian Utilities had a great 2021 that saw us advance key growth initiatives while delivering strong year-over-year earnings growth for our shareholders. The groundwork that we’ve laid to establish ourselves as leaders in the energy transition space positions us well heading into 2022, and I am excited to continue pushing the business and these key initiatives forward.”

The company published these highlights:

Q4 2021 Financial Results

Invested $334 million in capital projects in the fourth quarter of 2021, of which 75 per cent was invested in regulated utilities and 25 per cent mainly in Energy Infrastructure.
Announced the acquisition of the Alberta Hub natural gas storage facility near Edson, Alberta. The Alberta Hub underground natural gas storage facility has a capacity of approximately 49 petajoules and is connected to the NOVA Gas Transmission (NGTL) system.
On January 18, 2022, Canadian Utilities’ parent company, ATCO, announced a comprehensive set of 2030 environmental, social and governance targets, and a commitment to achieve net zero greenhouse gas (GHG) emissions by 2050.
On January 13, 2022, Canadian Utilities declared a first quarter dividend of 44.42 cents per share or $1.78 per Class A non-voting and Class B common share on an annualized basis, a 1 per cent increase over the 43.98 cents paid in each of the four previous quarters. Canadian Utilities has increased its dividend per share for 50 consecutive years, the longest track record of annual dividend increases of any publicly traded Canadian company.

Annual 2021 Financial Results (Comments from Brian Shkrobot, EVP and CFO)

2021 was another great year for Canadian Utilities Limited. We achieved adjusted earnings growth of $586 million or $2.17 per share for 2021. This is $51 million and $0.21 per share higher than 2020. While our businesses overall performed very well in 2021, this growth in year-over-year earnings was primarily driven by the performance of our LUMA Energy business and continued strong performance from ATCO Gas Australia throughout the full 2021 year.
As we’ve messaged in our last few conference calls, we’ve been awaiting the final approvals from both the AUC and the Canadian Energy Regulator on our acquisition of the Pioneer Pipeline and the subsequent transfer of a 30-kilometre segment to Nova Gas Transmission Limited (NGTL). I am happy to report that as of January 2022 we have now received all outstanding approvals related to this transaction
Switching to our Alberta distribution utilities, we continue to gain additional clarity on the 2023 cost of service rebasing year that will follow the second performance-based regulation term that concludes in 2022. While there’s still additional work to be done and filings to be processed by the regulator, early decisions support the expectation of a fair and prospective regulatory framework for our distribution utilities in 2023. Notably, the AUC has agreed to a hybrid approach to the forecasting of 2023 costs which will see applied for costs compared to an average of 2018 to 2020 actual costs. We expect to have these decisions on these application for both our Alberta distribution utilities in the third quarter of 2022.
In 2021, we invested $1.3 billion in our business with $1.1 billion of this being invested in our core utilities. This ongoing utility investment ensures a continued generation of stable earnings and reliable cash flows from our utility businesses and drives rate base growth. When compared to 2020 capital investment, this represents an increase of $221 million. The largest share of this increase is associated with our Pioneer Pipeline acquisition.
Collectively, projects initiated in 2021 represent a significant step forward for our energy transition strategy. As our solar and renewable natural gas developments are completed in late 2022, we will start to see the earnings and cash flows benefited by the bite-sized and rapidly executable nature of these initiatives.

If you like a safe 5% yield, then companies don’t get much better than CU-T. Their most recent dividend increase put them in an elite class of dividend growers (50-year streak). They are the only Canadian company to achieve such a milestone. The problem with CU-T is that there is very little growth to their dividend so companies with an average starting yield (2.5-3.5%) and high single digit growth, easily catch up within a decade. Be careful when you chase high yielding stocks thinking they will provide you with a growing income in retirement. Of the twenty-seven companies on ‘The List’ only six have a lower yield now, after a decade, than CU-T and all of them had much higher total returns.

Stantec (STN-T)

“In addition to achieving record earnings this year, several important strategic milestones attained in 2021 position us for accelerated value creation in 2022 and beyond,” said Gord Johnston, President and CEO. “The acquisition of Cardno, along with the five other acquisitions we made in 2021, expand our presence in key business lines such as environmental services and the energy transition, and key geographies like the United States and Australia that are poised for strong growth. Looking forward, we see a strong multi-year cycle ahead for the industry which will support expansion of our record 2021 Adjusted EBITDA margin and earnings.”

The company published these highlights:

Q4 2021 Financial Results

Net revenue, on a constant currency basis, increased 8.7% or $75.0 million, driven by acquisition growth of 6.7% and organic growth of 2.0%; including the effects of foreign exchange, net revenue increased $54.5 million. Without the impact of TMEP, organic growth would have been 4.2%, reflecting strong growth achieved in Canada and Global, and organic growth across most business lines with the exception of Infrastructure which stayed consistent with the prior period.
Project margin increased 11.3%, or $51.6 million, and increased as a percentage of net revenue from 52.8% to 55.3%, primarily from higher net revenue, a shift in project mix, and strong project execution.
Adjusted EBITDA from continuing operations increased 2.6% or $3.6 million to $142.1 million, representing 15.5% of net revenue compared with $138.5 million or 16.1% of net revenue in the prior period. The increase in project margin was partly offset by higher administrative and marketing expenses, most notably a $13.4 million increase in share-based compensation expense (146 basis points as a percentage of net revenue) reflecting the revaluation of incentive plans due to an increase in Stantec’s share price. As well, 2020 included the recovery of certain claim costs.
Net income from continuing operations increased 11.4%, or $1.7 million, to $16.6 million, net income from continuing operations as a percentage of net revenue increased from 1.7% to 1.8%, and diluted EPS increased by 15.4%, or $0.02, to $0.15. Strong project margin, lower non-cash net lease asset and related property and equipment impairments and adjustments for onerous contract costs from the continued execution of the 2023 Real Estate Strategy, and non-cash fair value gains on equity investments contributed to a higher net income, partly offset by lower utilization in the US and higher amortization of intangible assets and acquisition and integration costs related to recent acquisitions.
Adjusted net income decreased 4.8%, or $3.2 million, to $63.8 million, representing 7.0% of net revenue, and adjusted diluted EPS decreased 5.0%, or $0.03, to $0.57. Q4 2020 adjusted net income benefited from the favorable recovery of claim costs and resolution of certain tax matters.

Full-Year 2021 Financial Highlights

Full-year net revenue was $3.6 billion, a 2.6% increase on a constant currency basis compared with the prior year, driven by acquisition growth of 3.9%, partly offset by a slight organic retraction. Excluding the impact of the descoped Trans Mountain Expansion Project (“TMEP”), organic growth was 0.3% driven by strong performances in Canada and Global and offset by a slower US recovery. Fluctuations in foreign currencies resulted in negative foreign exchange impacts of 3.9%.
The Canadian dollar strengthened considerably relative to the US dollar during the year, with the average exchange rate shifting to $1.25 in 2021 from $1.34 in 2020. This reduced 2021 net revenues by $130.7 million. Stantec further estimates that the impact to adjusted EBITDA, adjusted net income, and adjusted diluted EPS was approximately $16.6 million, $6.5 million, and $0.06 per share, respectively.
Project margin increased $32.8 million or 1.7% to $2.0 billion and increased as a percentage of net revenue from 52.4% to 54.0%, as a result of strong project execution in all geographies and businesses and shifts in project mix.
Adjusted EBITDA from continuing operations was $573.8 million, approximating amounts generated in 2020 and increasing as a percentage of net revenue by 10 basis points to a record 15.8% from 15.7%. The increase in project margin was partly offset by higher administrative and marketing expenses, most notably a $30.3 million increase in share-based compensation expense (83 basis points as a percentage of net revenue) reflecting the revaluation of incentive plans due to an increase in Stantec’s share price.
The 2023 Real Estate Strategy contributed more than $0.18 per share in cost savings to net income ($0.15 per share savings to adjusted net income). On a pre-IFRS 16 basis, the cumulative impact from this initiative is estimated to have increased 2021 adjusted EBITDA margin by more than 100 basis points. As further progress was made on the Real Estate Strategy in 2021, additional leased spaces were identified to vacate and sub-let, and expectations for sub-let opportunities were adjusted to reflect current market conditions and outlook. This led to a $24.8 million non-cash net impairment of lease assets and related property and equipment and $12.5 million in onerous contract costs being recorded. Stantec is on track to achieve a 30% reduction in its real estate footprint relative to its 2019 baseline and expects to deliver a further $0.20 to $0.25 contribution to earnings per share by the end of 2023.
Net income from continuing operations increased 26.1%, or $41.6 million, to $200.7 million; net income margin from continuing operations increased 1.2% from 4.3% to 5.5%, and diluted EPS increased 26.8%, or $0.38, to $1.80. Factors contributing to higher net income include project margin growth, lower interest and depreciation, unrealized fair value gains from equity investments, the combined effects of the 2023 Real Estate Strategy, and a lower effective tax rate partially offset by increased acquisition and integration costs.
Adjusted net income from continuing operations increased 8.4%, or $21.0 million, to $269.9 million, representing 7.4% of net revenue, an improvement of 60 basis points, and adjusted diluted EPS increased 9.0%, or $0.20, to $2.42.
Contract backlog stands at a record $5.1 billion—a 17.3% increase from December 31, 2020—representing approximately 13 months of work (11 months of work in 2020). Year over year, backlog grew 11.9% through acquisitions and 6.7% organically, with organic growth in all geographies. Of particular note, US backlog achieved 10.2% organic growth, with US Environmental Services recording over 50% organic growth. Further, Environmental Services backlog across all Stantec stands at over $1 billion, a new high-water mark for this business operating unit.
Net debt to adjusted EBITDA was 1.8x at December 31, 2021 —within the guideline range of 1.0x to 2.0x. The ratio increased as a result of additions to net debt from acquisitions made in the fourth quarter.
Operating cash flows from continuing operations decreased 34.1% from $602.6 million to $397.0 million; this was mainly due to decreased cash receipts from clients, negative foreign exchange impacts, and increased payments paid to suppliers.
Days sales outstanding (“DSO”) was 75 days at December 31, 2021 and 2020, well below the expectation of 80 days.
In 2021, 939,482 common shares were repurchased for an aggregated price of $50.7 million under the normal course issuer bid which was renewed on November 9, 2021, to allow for the repurchase of up to an additional 5,559,312 common shares.
On February 23, 2022, Stantec’s Board of Directors declared a dividend of $0.18 per share, payable on April 18, 2022, to shareholders of record on March 31, 2022, representing an 9.1% increase on an annual basis.

Outlook

Targets for 2022 are based on the assumption of a continued gradual global recovery but may not be valid should any of our key geographies experience a severe worsening of the pandemic.

Net revenue is expected to increase 18% to 22% in 2022, and organic net revenue growth is expected to be in the mid to high single digits, weighted to the second half of the year. Organic growth in the US is expected to be in the high single digits, driven by growing momentum as evidenced by Stantec’s record-high US backlog and project opportunities arising from the $1.2 trillion infrastructure stimulus bill. After a year of robust organic growth in Canada in 2021, high levels of activity are expected to be maintained, driving 2022 organic growth in the low single digits. Organic growth in Global is expected to achieve high single to low double-digit growth propelled by strong economic growth, continued demand, and stimulus in infrastructure sectors.

Project margin as a percent of net revenues is expected to be relatively consistent in 2022 compared to 2021. Adjusted EBITDA margin is anticipated to be in the range of 15.3% to 16.3%, reflecting investments in internal resources to support growth and the commercialization of new innovations and technologies, and increased discretionary spending (albeit not to pre-pandemic levels). Adjusted EBITDA margin in Q1 2022 will likely be at or below the low end of this range because of the additional effects of regular seasonal factors in the northern hemisphere and the protracted ramp-up of US activities and major projects awarded in Q4 2021. The higher end of the range is expected to be reached by the second half of 2022 driven by high organic net revenue growth and increased utilization in the US operations.

Adjusted net income is expected to continue to benefit from the 2023 Real Estate Strategy, which remains on track to achieve a 30% reduction in real-estate footprint compared with a 2019 baseline and a cumulative $0.35 to $0.40 per share by the end of 2023. With $0.15 recognized in 2021, the remaining $0.20 to $0.25 per share is expected to be generated approximately evenly between 2022 and 2023. For 2022, this, in conjunction with continued benefits from tax planning strategies, is expected to drive an adjusted net income margin of 7.5% or greater as a percent of net revenue. As a result, adjusted diluted EPS is expected to grow 22% to 26% in comparison to 2021.

Stantec is a new addition to ‘The List’ in 2022 as they just recently met our criteria of ten consecutive years of dividend growth. Stantec had a great year in 2021 and it looks like 2022 is shaping up to be another one. Stantec’s fundamentals are in line with what we look for in our quality dividend growers. Their dividend growth and price growth are above average, and they tend to align over time. Purchasing STN-T at a sensible price however has been the challenge recently. The YTD pull back in the price of STN-T seems more to do with last years over valuation than a reflection of the operations of the business going forward.

Loblaws (L-T)

The company published these highlights:

Q4 2021 Financial Results

Revenue was $12,757 million. This represented an increase of $349 million, or 2.8% when compared to the fourth quarter of 2020.
Retail segment sales were $12,486 million. This represented an increase of $321 million, or 2.6% when compared to the fourth quarter of 2020.
- Food Retail (Loblaw) same-stores sales increased by 1.1%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by 7.9%, with pharmacy same-store sales growth of 10.2% and front store same-store sales growth of 6.1%.
The two year sales Compound Average Growth Rate (“CAGR”) was 4.8% and 5.5% for Food Retail and Drug Retail, respectively.
The Company’s e-commerce sales decreased by 8.4% (2020 – increased 158%) due to the lapping of high e-commerce sales in the fourth quarter of 2020.
COVID-19 related costs were approximately $8 million (2020 – approximately $42 million).
Retail segment adjusted gross profit percentage was 30.9%. This represented an increase of 150 basis points compared to the fourth quarter of 2020.
Operating income was $705 million. This represented an increase of $70 million, or 11.0% when compared to the fourth quarter of 2020.
Adjusted EBITDA was $1,324 million. This represented an increase of $78 million, or 6.3% when compared to the fourth quarter of 2020.
Net earnings available to common shareholders of the Company were $744 million. This represented an increase of $434 million, or 140.0% when compared to the fourth quarter of 2020. Diluted net earnings per common share were $2.20. This represented an increase of $1.32, or 150.0% when compared to the fourth quarter of 2020.
- Net loss attributable to non-controlling interests was $28 million in the fourth quarter of 2021 and represents the share of earnings that relates to the Company’s Food Retail franchisees. Franchisee earnings are impacted by the timing of when profit sharing with franchisees is agreed and finalized under the terms of the agreements. On a full year basis, net earnings attributable to non-controlling interests of $101 million increased by $26 million when compared to 2020, reflecting an improvement in franchisee earnings.
- During the quarter, the Company recorded a recovery of $301 million related to the Supreme Court of Canada’s decision on the Glenhuron Bank Limited (“Glenhuron”) tax matter, of which $173 million is recorded as interest income and $128 million is recorded as income tax recovery. In addition, net interest of $16 million, before tax, was recorded in respect of interest income earned on expected cash tax refunds. This recovery is expected to be received in 2022 and will increase the Company’s cash and cash equivalents balance.
Adjusted net earnings available to common shareholders of the Company were $515 million. This represented an increase of $119 million, or 30.1% when compared to the fourth quarter of 2020.
Adjusted diluted net earnings per common share were $1.52. This represented an increase of $0.40, or 35.7% when compared to the fourth quarter of 2020. The two year adjusted diluted net earnings per common share CAGR was 30.0%.
- The two year adjusted diluted net earnings per common share CAGR was positively impacted by lower fixed asset impairment in 2021 when compared to 2019. The impact on the CAGR was 7.3%.
The Company repurchased, for cancellation, 2.0 million common shares at a cost of $200 million and 15.6 million common shares at a cost of $1,200 million on a year-to-date basis.
The Company invested $381 million in capital expenditures and generated $460 million of Retail Segment free cash flow.

2021 SELECT ANNUAL HIGHLIGHTS

On a comparable 52-week basis, the Company:

Delivered Food Retail same-store sales growth of 0.3% and Drug Retail same-store sales growth of 5.0%.
Delivered adjusted net earnings available to common shareholders of the Company of $1,911 million. When compared to 2020, this represented an increase of 30.5%.
Delivered adjusted diluted net earnings per common share of $5.59. When compared to 2020, this represented an increase of 36.7%.

In 2021, the Company:

Invested approximately $1,103 million in capital expenditures, net of proceeds from property disposals.
Returned capital to shareholders by allocating a significant portion of the Company’s Retail segment free cash flow of approximately $2,004 million to share repurchases. In 2021, the Company repurchased, for cancellation, 15.6 million common shares at a cost of $1,200 million.
The Company’s e-commerce sales were $3.1 billion and grew by 13.9% when compared to the prior year.

Outlook

Loblaws will continue to execute on retail excellence in its core grocery, pharmacy and apparel businesses while advancing its growth initiatives in 2022. In the third year of the pandemic, the Company’s businesses remain well placed to service the everyday needs of Canadians. However, the Company cannot predict the precise impacts of COVID-19 and the current industry volatility on its 2022 financial results. Loblaw anticipates that in the first half of 2022 sales will benefit from the continued impact of the pandemic and elevated industry-wide inflation. As economies reopen and the Company starts to lap elevated 2021 inflationary prices and COVID-related pharmacy services, year on year revenue growth will be more challenged.

The Company expects:

its Retail business to grow earnings faster than sales;
Earnings per Common Share growth in the low double digits, with higher growth in the first half of the year;
to invest approximately $1.4 billion in capital expenditures, net of proceeds from property disposals, reflecting incremental store and distribution network investments; and
to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Loblaws did well during the pandemic and is projecting double-digit growth in the first half of 2022. L-T was one of the first dividend growth stocks we bought back in 2012 in our Magic Pants Wealth-Builder (CDN) Portfolio but it went through a period of low dividend growth, so we ended up selling it for better ideas. Low yield and low growth companies do not meet our standard even if they grow their dividend. Returning capital to shareholders, by growing dividends at a higher than average rate and buying back shares has this quality dividend grower back on our radar.

CCL Industries (CCL-B-T)

Geoffrey T. Martin, President and Chief Executive Officer, commented, “2021 marked our second consecutive year of delivering record results in the midst of a global pandemic as strong growth in sales and adjusted basic earnings per share generated solid free cash flow. This speaks to the resiliency and diversity of our end markets plus the focus and dedication of our amazing people. These results come as the Company faces supply chain disruptions and inflationary issues the likes of which we have rarely seen in our long history.”

The company published these highlights:

Q4 2021 Financial Results

Per Class B share: $0.81 adjusted basic earnings down 3.6%; $0.80 basic earnings down 1.2%; currency translation negative $0.04
Sales increased 10.2% on 12.8% organic growth, 1.8% acquisition growth partially offset by 4.4% negative currency translation
0% operating margin down 180 bps on inflation challenges

Full Year 2021

Per Class B share: $3.37 adjusted basic earnings, up 9.4%; $3.33 basic earnings up 12.5%; currency translation negative $0.15
Sales increased 9.4% on 11.8% organic growth, 2% acquisition growth partially offset by 4.4% negative currency translation
Operating income increased 8.2%, with a 15.5% operating margin down 20 bps
Consolidated leverage ratio improved to 1.06 for 2021; annual dividend increased 14.3% effective March 17, 2022

Outlook

H122 will be a pass-through period of numerous inflation drivers, some supply availability issues, comps should ease as year unfolds
Avery should continue to improve, augmented by acquisitions
Checkpoint needs to execute price increases to recover inflation in MAS business, expect strength in ALS to continue on RFID growth
CCL Design chip shortage issues to continue, especially in Automotive, acquisitions a significant offset
CCL HPC, Food & Beverage and Healthcare & Specialty units all dealing with inflation
Banknote demand difficult to predict at CCL Secure
Resin markets declining in the U.S, Innovia must navigate energy & freight inflation plus the Eco Float start up in Europe

CCL Industries seems to have been impacted by the effects of inflation with their earnings up a bit but not at the rate as in prior years. The recent dividend increase of 14.3% is not something to ignore as it shows a lot of confidence by management in the operations outlook of the business (the safest dividend is the one just hiked). Share price weakness in 2022 has brought this 20-year dividend grower closer to the ‘sensible price’ range we look for.

Royal Bank (RY-T)

“RBC’s firstquarter performance reflects the significant momentum we continue to build while facing change and uncertainty in the current operating environment. This is a testament to our scale, diversified business model, and strategic investments in technology, talent and innovation to create differentiated value for our clients and shareholders. While the Omicron variant has created headwinds to the global economic recovery over the past quarter, RBC employees remained unwavering in their commitment to supporting our clients and communities. I’m proud of how they continue to make a difference in the lives of those we serve. Looking forward, we remain focused on our Purpose-led approach to delivering the advice, products and services our clients need in a changing world, while also accelerating our commitments to enable a sustainable and inclusive future.” Dave McKay, RBC President and CEO

The company published these highlights:

Q1 2022 Financial Results

Royal Bank was one the first of the big five banks to report their Q1 2022 earnings and they were good. RY-T continues to roll along as does their share price in 2022. Although RY-T has seen about a 40% increase in their share price during the pandemic, it still isn’t that far outside of its historical valuation corridor. With a starting yield of 3.5% and average dividend growth over the last decade in the 7.5% range. Buying this quality company at a ‘sensible price’ should yield you 11% plus returns (D + G +/- change in P/E).

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 (2022)
Last updated by BM on February 25, 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	4.8%	$14.26	-0.6%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.9%	$51.21	-1.7%	$0.44	18.1%	12
BCE-T	Bell Canada	5.5%	$67.15	1.9%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.7%	$58.95	-3.5%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.6%	$59.28	-12.6%	$0.96	14.3%	20
CNR-T	Canadian National Railway	1.9%	$158.24	2.2%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.8%	$185.27	1.1%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	5.0%	$35.24	-3.7%	$1.78	1.0%	50
DOL-T	Dollarama Inc.	0.3%	$65.28	2.9%	$0.20	1.7%	11
EMA-T	Emera	4.5%	$59.26	-5.3%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.4%	$54.08	9.2%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.5%	$41.37	-9.8%	$0.64	4.1%	15
FNV-N	Franco Nevada	0.9%	$147.13	8.1%	$1.28	10.3%	14
FTS-T	Fortis	3.7%	$58.15	-3.9%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$182.45	11.4%	$4.00	17.6%	17
L-T	Loblaws	1.4%	$100.95	-1.7%	$1.46	6.6%	10
MGA-N	Magna	2.4%	$76.14	-6.7%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$67.26	0.3%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.4%	$140.37	2.6%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	1.8%	$39.88	-2.0%	$0.72	0.0%	17
STN-T	Stantec Inc.	1.1%	$63.82	-9.1%	$0.71	6.8%	10
TD-T	TD Bank	3.4%	$104.68	5.4%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$131.32	-6.3%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.4%	$106.82	-6.0%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.4%	$66.68	11.6%	$3.57	4.4%	21
T-T	Telus	4.0%	$32.34	8.7%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$124.01	-7.5%	$0.92	8.9%	12
Averages		2.7%		-0.6%		8.2%	18

MP Market Review – February 18, 2022

Posted by BM on February 21, 2022

“If you have premium high-compound growth non-cyclicals, it is not really necessary to get out if the stock price goes high. If far to high, obviously you can trim a bit and pay some tax, but be sure your gains have been real, not inflation mirages. Personally, I normally just hold and take a few down drafts, counting on the next bull market to take me up again.” Page 104, The Investment Zoo, Stephen Jarislowsky

“Not exactly consoling as we gaze at Wednesday morning’s report from Statistics Canada that inflation jumped to 5.1 per cent in January. That’s a 30-year high, and higher than economists had expected.” Globe & Mail.

I read three articles in the Globe & Mail this week related to rising inflation and what to do about it. They recommend holding dividend growth stocks and gold as a hedge. We aren’t that worried about inflation as our dividend growers are quality companies and our income is growing at a faster rate than inflation. ‘The List’ is already up 7.4% (dividend growth) in 2022 and not all companies have increased their dividends yet.

To sum it all up, we are looking for two things, companies that are effective as an inflation hedge in the presence of inflation, but also their performance as an asset in the absence of it.

Performance of ‘The List’

‘The List’ was down a bit this week with a negative 0.6% YTD price return (capital) and an average of 7.4% in dividend growth (income) added so far for fiscal 2022.

The best performers last week on ‘The List’ were Canadian Tire Corp. (CTC-A-T) up 5.6%; Franco Nevada (FNV-N) up 4.0%; Canadian National Railway (CNR-T) up 2.5%.

Alimentation Couche-Tard Inc. (ATD-T) was the worst performer this week, down -7.4%.

One company on ‘The List’ announced a dividend increase and four companies announced their Q4 and Full Year 2021 earnings reports.

Recent News

Despite this week’s ugly inflation report from Statistics Canada, It’s not all bad news. The earnings reports from companies on ‘The List’ continue to be quite good with most surpassing Analyst expectations. This week, Waste Connections and Canadian Tire beat earnings. Canadian Tire saw the most improvement in 2021 with EPS growth up over 45% and Waste Management gave optimistic double-digit earnings guidance for this year. Emera and TC Energy missed earnings by a penny, with TC Energy raising their dividend to .90 cents per share.

I’ll go over all of our earnings reports in a moment. I’ll also preview four more earnings reports for next week.

Here are a few of the companies on ‘The List’ due to report earnings this week:

Canadian Utilities Limited (CU-T) is scheduled to report earnings after hours Wednesday Feb. 23

Stantec (STN-T) is scheduled to report earnings after hours Wednesday Feb. 23

Loblaws (L-T) is scheduled to report earnings before the market opens Thursday Feb. 24

CCL Industries (CCL-B-T) is scheduled to report earnings after hours Thursday Feb. 24

Dividend Increases

There was one company on ‘The List’ that announced a dividend increase this past week.

TC Energy (IFC-T) on Tuesday said it increased its 2022 quarterly dividend from $0.87 to $.90 per share, payable April 29, 2022 to shareholders of record on Mar. 31, 2022.

This represents a dividend increase of 3.45%, marking the 22^nd consecutive year of dividend growth for this ‘utility like’ pipeline company.

Earnings Releases

We had four earnings reports from companies on ‘The List’ this past week. Let’s start with Emera.

Emera (EMA-T)

The company published these highlights:

Q4 2021 Financial Results

Q4 2021 reported net income was $324 million, or $1.24 per common share, compared with net income of $273 million, or $1.09 per common share, in Q4 2020.
Q4 2021 adjusted net income was $168 million, or $0.64 per common share, compared with $188 million, or $0.75 per common share, in Q4 2020.

Annual 2021 Financial Results

2021 reported net income was $510 million or $1.98 per common share, compared with a net income of $938 million or $3.78 per common share in 2020. 2021 reported net income included a $213 million after-tax MTM loss primarily at Emera Energy.
2021 adjusted net income was $723 million or $2.81 per common share, compared with $665 million or $2.68 per common share in 2020.
Growth in annual adjusted net income was driven by higher earnings contribution from EES, PGS and Nova Scotia Power (“NSPI”), lower corporate costs, realized gains on foreign exchange hedges and the 2020 revaluation of deferred taxes due to a reduction in the Nova Scotia corporate income tax rate. The increase was partially offset by the impact of a stronger CAD, the TGH award received in Q4 2020, the 2020 recognition of a corporate income tax recovery at Barbados Light and Power Company (“BLPC”), and lower earnings due to the sale of Emera Maine in Q1 2020.
Strengthening of the CAD decreased net income by $10 million ($0.04 per share) and decreased adjusted net income1 by $1 million in Q4 2021 compared to Q4 2020. The strengthening of the CAD decreased net income by $17 million ($0.07 per share) and adjusted net income by $28 million ($0.11 per share) for the year ended December 31, 2021, compared to the same period in 2020.
Decreased quarterly adjusted net income was largely due to the TECO Guatemala Holdings (“TGH”) award received in Q4 2020. Excluding the impact of the award, growth in quarterly net income was driven by higher earnings primarily at Peoples Gas System (“PGS”) lower corporate costs, partially offset by lower contributions from Tampa Electric.

Outlook

Emera’s capital investment plan is $8.4 billion over the 2022-to-2024 period (including a $240 million equity investment in the LIL in 2022), with an additional $1 billion of potential capital investments over the same period. This results in a forecasted rate base growth of approximately 7 per cent to 8 per cent through 2024. The capital investment plan continues to include significant investments across the portfolio in renewable and cleaner generation, reliability and integrity investments, infrastructure modernization and customer-focused technologies.

Emera’s capital investment plan is being funded primarily through internally generated cash flows and debt raised at the operating company level. Equity requirements in support of our capital investment plan are expected to be funded through the dividend reinvestment plan, the issuance of preferred equity and the issuance of common equity through our at-the-market program. Maintaining investment-grade credit ratings is a priority of management.

Emera has provided annual dividend growth guidance of four to five per cent through to 2024.

“We are pleased with the performance of our business in 2021, as we delivered solid financial results and achieved important regulatory outcomes, while continuing to deliver the critical energy needs of our customers during the ongoing COVID-19 pandemic,” said Scott Balfour, President and CEO of Emera Inc. “This progress highlights the strength of our business and strategy that continues to drive value and growth through investments in cleaner energy, infrastructure renewal and service reliability, all at a balanced pace to ensure affordability for our customers.”

With a current yield of 4.55% and dividend growth projected to be in the 4-5% range, EMA-T has generated solid growing income for 15 years now. Purchasing this popular income stock at a sensible price requires patience.

TC Energy (TRP-T) is one of the top performers on ‘The List’ in 2022.

“Our $100 billion diversified portfolio of high-quality, long-life energy infrastructure assets continued to perform extremely well in 2021 as evidenced by our strong financial results…”

The company published these highlights in their Q4 earnings report:

Fourth quarter 2021 financial results

Net income attributable to common shares of $1.1 billion or $1.14 per common share ◦ Segmented earnings of $1.9 billion
Net cash provided by operations of $1.8 billion
Comparable earnings of $1.0 billion or $1.06 per common share
Comparable EBITDA of $2.4 billion
Comparable funds generated from operations of $2.1 billion

For the year ended December 31, 2021

Net income attributable to common shares of $1.8 billion or $1.87 per common share
Segmented earnings of $4.1 billion
Net cash provided by operations of $6.9 billion
Comparable earnings of $4.2 billion or $4.27 per common share
Comparable EBITDA of $9.4 billion
Comparable funds generated from operations of $7.4 billion

Corporate

Common share dividend: Our Board of Directors declared a quarterly dividend of $0.90 per common share for the quarter ending March 31, 2022. The quarterly amount is equivalent to $3.60 per common share on an annualized basis, an increase of 3.45 per cent.

Recent management changes: Bevin Wirzba’s role has expanded to Executive Vice-President, Strategy and Corporate Development and Group Executive, Canadian Natural Gas and Liquids Pipelines following the news that Tracy Robinson, former Executive Vice-President and President, Canadian Natural Gas Pipelines and President, Coastal GasLink has decided to pursue a significant leadership role with another organization. Bevin will be supported by Greg Grant, President, Canadian Natural Gas Pipelines and Richard Prior, President, Liquids Pipelines.

RBC Capital Markets thinks that the recent uptick in share price is due to money rotating into TRP-T and out of Utilities due to interest rate fears. TRP-T noted that with 95% of its business being contracted and/or regulated, only about 20% of its operating costs are exposed to near-term inflation. As a result, inflation should not be a material risk to earnings, according to RBC.

We agree, this pipeline company’s fundamentals look more like a company in the utility sector than an energy one. Nice dividend increase announcement as well; Twenty-two years and counting!

Waste Connections (WCN-N)

“… with a step-up in capital expenditures and over $1 billion in acquisition outlays in 2021, positions us for continued double digit growth in 2022, while preserving the balance sheet strength and flexibility to capitalize on another potential above average year of acquisition activity.”

Fourth Quarter Highlights

Strong price-led organic growth and acquisition activity, along with continuing underlying margin expansion, drives Q4 results above expectations and provides higher entry point into 2022
Revenue of $1.624 billion, net income(a) of $166.3 million, and adjusted EBITDA(b) of $495.4 million, or 30.5% of revenue
Net income and adjusted net income(b) of $0.64 and $0.83 per share, respectively

Full Year 2021 Highlights

Revenue of $6.151 billion, up 13.0%
Net income of $618.0 million, or $2.36 per share, and adjusted net income(b) of $846.6 million, or $3.23 per share, up 22.3%
Adjusted EBITDA(b) of $1.919 billion, up 15.5%, and adjusted EBITDA margin of 31.2%, up 70 basis points
Net cash provided by operating activities of $1.698 billion, up 20.6%
Adjusted free cash flow(b) of $1.010 billion, up 19.9% on capital expenditures of $744.3 million, up 24.7%
Completes acquisitions with approximately $400 million of total annualized revenue in 2021

Expectations for 2022

Strong pricing and acquisition growth to drive double digit percentage increases in revenue and adjusted free cash flow, along with continuing underlying margin expansion
Revenue of approximately $6.875 billion, up 11.8%, excluding additional acquisitions
Net income of approximately $846 million and adjusted EBITDA of approximately $2.145 billion, or about 31.2% of revenue
Net cash provided by operating activities of approximately $2.000 billion
Adjusted free cash flow of approximately $1.150 billion, up 13.9%, on capital expenditures up 14.2% to approximately $850 million, including $100 million for new landfill gas and resource recovery facilities
Increasing return of capital to shareholders, including opportunistic share repurchases

“2021’s results are a reflection of how a culture of commitment and accountability to all stakeholders enabled us to excel in a challenging operating environment, overcome inflationary pressures and supply chain issues, execute our growth strategy, expand margins, support employee health and welfare, and position the Company well for 2022 and beyond. The year ended on a high note, as strong solid waste organic growth and acquisition activity, along with continuing underlying margin expansion, drove Q4 financial results once again above expectations. We are also extremely pleased with our results for the full year, as adjusted EBITDA margin expanded 70 basis points. Moreover, we delivered 20% growth in adjusted free cash flow to $1.010 billion, in spite of capital expenditures up 25%, as we continued to reinvest in and grow our business,” said Worthing F. Jackman, President and Chief Executive Officer.

“Acquisition activity accelerated in the fourth quarter, resulting in approximately $400 million in acquired annualized revenues in 2021 and setting up acquisition contribution approaching 6% in 2022, including transactions completed year to date. Along with solid waste pricing growth of about 6.5%, this already positions us for double-digit percentage growth in revenue, adjusted EBITDA(b) and adjusted free cash flow in 2022. Additional acquisitions expected to be completed during the year, improvement in commodity-driven revenues and E&P waste activity, or moderation of inflationary trends would provide incremental benefit.”

Mr. Jackman continued, “The strength and consistency of our results reflect the durability of our market model and the benefits of an intentional culture focused on employees and value creation. Proactive pricing, along with a step-up in capital expenditures and over $1 billion in acquisition outlays in 2021, positions us for continued double digit growth in 2022, while preserving the balance sheet strength and flexibility to capitalize on another potential above average year of acquisition activity, invest in sustainability-focused growth projects and increase return of capital to shareholders.”

WCN-N was one of the top performers on ‘The List’ in 2021 but its stock has come under pressure in 2022 if for no other reason than overvaluation. With an ‘analyst beating’ earnings report and positive management guidance for 2022, there is a lot to like about WCN-N.

A further market downturn could finally present an opportunity to build a position in this quality waste management dividend grower, at a sensible price.

Canadian Tire Corp. (CTC-A-T)

“Our exceptional results in the fourth quarter capped off an outstanding year for CTC-A-T in which we delivered record EPS and remarkable sales growth for the second consecutive year.”

Fourth Quarter Highlights

Q4 2021 marked the second consecutive year of outstanding comparable sales growth, with consolidated comparable sales, excluding Petroleum, up 11.3%, driven by strong performances across all banners
Canadian Tire Retail (CTR) comparable sales grew 9.8% vs 2020, with SportChek and Mark’s up 15.9% and 15.0%, respectively
Consolidated revenue, excluding Petroleum, was up 2.8%, despite strong comparatives and an extra week in the fourth quarter last year
Owned Brands represented 40% of sales across the banners, with Canvas and Noma leading the impressive growth
eCommerce sales reached approximately $500 million, with eCommerce penetration rate for retail banners at 9.5%, nearly double pre-pandemic levels
EPS performance reflected strong retail segment performance
- Diluted EPS of $8.34 was up 4.6% compared to Q4 2020; normalized diluted EPS2 of $8.42 was up slightly on the fourth quarter of 2020
- Retail segment Income before income taxes (IBT) increased $60.2 million, driven by exceptional sales performance and improved gross margins
- A $52.6 million decrease in Financial Services IBT was mainly driven by increased receivables allowance and credit card acquisition costs
More than 770,000 members joined the Triangle program in the fourth quarter, up 23%
- A more digitally-and mobile-engaged age segment (30-49 years old) represented 41% of new members
- Acquisition of new credit card members was up 36% vs Q4 2020
- Triangle members shopping cross-banner was at 41%, up more than 92bps

Full Year Highlights

2021 marked a second consecutive year of significant growth in sales (including exceptional growth in eCommerce) and revenue, which drove remarkable growth in earnings

Consolidated comparable sales, excluding Petroleum were up 8.2% over prior year and up 18.3% vs 2019
eCommerce sales were up 29.9% vs 2020 to more than $2 billion in sales
Retail sales, excluding Petroleum, were up 6.7% vs 2020 and 18.5% vs 2019
Retail revenue, excluding Petroleum, was up 8.8% vs 2020 and 17.9% vs 2019

Full-year diluted EPS reached a record level, up 49.3% to $18.38; normalized diluted EPS was $18.91, up 45.5%

Outstanding returns on invested capital translated into an increase in Retail ROIC, from 10.8% at the end of 2020 to 13.6% at the end of 2021
Retail segment IBT was up 59.2%, driven by exceptional sales performance and improved gross margins
Higher gross margin for the year, primarily attributable to lower net impairment losses, was the main driver of a 32.1% increase in Financial Services IBT

The Triangle program attracted 2.4 million new members and ended the year with 11 million Triangle members, including 2.2 million active credit cardholders

“Our exceptional results in the fourth quarter capped off an outstanding year for CTC-A-T in which we delivered record EPS and remarkable sales growth for the second consecutive year. Our fourth quarter comparable sales increase of 11% in 2021 reflects the continued strength and relevance of our unique multi-category assortment and the success of our strengthened omni-channel capabilities. We welcomed 2.4 million new Triangle Rewards members in 2021, many of whom joined through SportChek and Mark’s and subsequently shopped at Canadian Tire for the first time. Our growth in membership, including more than 380,000 new Triangle credit card holders acquired by Canadian Tire Bank, demonstrates the value of our assets and our ability to meet our customers’ needs, however they choose to shop us,” said Greg Hicks, President and CEO, Canadian Tire Corporation.

A good earnings report from CTC-A-T. We like the fact that they found growth in new revenue streams during the pandemic.

“eCommerce sales reached approximately $500 million, with eCommerce penetration rate for retail banners at 9.5%, nearly double pre-pandemic levels.”

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 February 18, 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%	$13.92	-3.0%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.9%	$49.66	-4.7%	$0.44	18.1%	12
BCE-T	Bell Canada	5.5%	$66.72	1.2%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.6%	$59.76	-2.2%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.3%	$62.89	-7.2%	$0.84	0.0%	20
CNR-T	Canadian National Railway	1.8%	$159.13	2.7%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.7%	$192.39	5.0%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	5.0%	$34.98	-4.5%	$1.76	0.0%	50
DOL-T	Dollarama Inc.	0.3%	$64.29	1.4%	$0.20	1.7%	11
EMA-T	Emera	4.5%	$58.80	-6.1%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.5%	$52.55	6.1%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.6%	$40.62	-11.4%	$0.64	4.1%	15
FNV-N	Franco Nevada	0.9%	$147.77	8.6%	$1.28	10.3%	14
FTS-T	Fortis	3.7%	$57.76	-4.5%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$183.61	12.1%	$4.00	17.6%	17
L-T	Loblaws	1.5%	$98.17	-4.4%	$1.46	6.6%	10
MGA-N	Magna	2.3%	$77.42	-5.1%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$66.93	-0.2%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.4%	$141.05	3.1%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	1.8%	$40.55	-0.3%	$0.72	0.0%	17
STN-T	Stantec Inc.	1.0%	$65.55	-6.6%	$0.66	0.0%	10
TD-T	TD Bank	3.4%	$106.23	6.9%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$130.44	-7.0%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.4%	$107.93	-5.1%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.3%	$66.81	11.9%	$3.57	4.4%	21
T-T	Telus	4.1%	$32.13	8.0%	$1.31	4.4%	18
WCN-N	Waste Connections	0.8%	$121.00	-9.7%	$0.92	8.9%	12
Averages		2.7%		-0.6%		7.4%	18

MP Market Review – February 11, 2022

Posted by BM on February 14, 2022

“We can beat a bear. 1. Hold through a bear with quality companies: patient retention. 2. Realize that our portfolio of well selected income companies will keep growing (its cash flow) as prices fall. 3. Don’t fret when the price bends a bit. Eventually, with fine firms, CAGR on dividends and price will approach each other. 4. Gradually, we become less dependent on price as a metric, in any case. 5. We knew the bear was coming and winnowed our chaff (weak companies and investment errors).”

-Tom Connolly

The earnings reports for stocks on ‘The List’ this past week were mixed. IFC-T, TFII-T, TIH-T and MGA-N came in well above estimates while T-T, FTS-T and ENB-T were close but slightly missed. IFC-T, TIH-T, ENB-T and MGA-N all raised their dividends.

I’ll go over all our earnings reports in a moment. But first, let’s look at this week’s inflation report coming out of the USA. For January, headline inflation increased by 0.65%.. Over the past year, inflation is up by 7.53%. We are slightly lower in Canada but not by much. That’s the highest year-over-year rate in the United States since February 1982 (that’s 40 years)!

To put this rate of inflation into context, that means that if you have a $1 million portfolio, inflation eats up $75,300 every year.

As dividend growth investors we have built-in inflation protection on our income. The dividend growth from stocks on ‘The List’ is already up 7.3% in 2022 and still growing.

Performance of ‘The List’

The best performers last week on ‘The List’ were TFI International (TFI-T) up 8.7%; Toromont Industries (TIH-T) up 6.5%; Franco Nevada (FNV-N) up 6.0%.

Magna International (MGA-N) was the worst performer this week, down -4.9%.

‘The List’ was down a bit this week with a positive 0.6% YTD price return (capital) and an average of 7.3% in dividend growth (income) added so far for fiscal 2022.

Dividend Increases

There were four companies on ‘The List’ that announced dividend increases this past week and one honorable mention from last year’s list.

Intact Financial (IFC-T) on Tuesday said it increased its 2022 quarterly dividend from $0.91 to $1.00 per share, payable March 31, 2022, to shareholders of record on Mar. 15, 2022.

This represents a dividend increase of 10%, marking the 17th straight year of dividend growth for this growing property and casualty insurance company. This was the second 10% increase in the last three months for IFC-T. IFC-T is another example of a financial company making up for the government-imposed restrictions on raising dividends in 2021.

Toromont Industries (TIH-T) on Wednesday said it increased its 2022 quarterly dividend from $0.35 to $0.39 per share, payable April 4, 2022, to shareholders of record on Mar. 9, 2022.

This represents a dividend increase of 11.4%, marking the 33rd straight year of dividend growth for this Canadian industrial company.

Magna International (MGA-N) on Friday said it increased its 2022 quarterly dividend from $0.43 to $0.45 per share, payable March 11, 2022, to shareholders of record on Feb. 24, 2022.

This represents a dividend increase of 4.7%, marking the 13th straight year of dividend growth for this Canadian auto parts company.

Enbridge (ENB-N) on Friday said it increased its 2022 quarterly dividend from $0.835 to $0.86 per share, payable March 1, 2022, to shareholders of record on Feb. 14, 2022.

This represents a dividend increase of 3%, marking the 27th straight year of dividend growth for this Canadian midstream energy company.

Equitable Group Inc. (EQB-T) on Friday said it increased its 2022 quarterly dividend from $0.185 to $0.28 per share, payable March 31, 2022, to shareholders of record on Mar. 14, 2022.

EQB-T was a good dividend grower from last year’s list but was removed because it did not raise its dividend in 2021 due to government-imposed restrictions. The company has more than made up for last year’s shortfall with this increase on top of a stellar Q4 earnings report. This represents a dividend increase of 51.4%, for this Canadian bank.

Earnings Releases

We had seven earnings reports from companies on ‘The List’ this past week. Let’s start with Intact Financial.

Intact Financial (IFC-T)

The company published these highlights:

Net operating income per share of $3.78 in Q4-2021 and $12.41 for the full year increased 19% and 25%, respectively, driven by robust underwriting and distribution income, and meaningful accretion from RSA
EPS growth of 51% in the quarter and 72% in 2021 reflected strong operating results and investment gains
Operating DPW1 grew 75% in the quarter and 45% in 2021, mainly due to RSA, with healthy organic growth in commercial lines
Operating combined ratio of 87.8% in Q4-2021 as strong underlying performance outweighed elevated catastrophe losses
OROE of 17.8% and ROE of 17.0%, with BVPS growth of 40% to $82.34
Quarterly dividend increased by 10% to $1.00 per common share and initiating share buyback program

Charles Brindamour, Chief Executive Officer, said that IFC-T had a milestone year in 2021 and we would have to agree. The stock was up 5% last week and over 25% in the last year.

TFI International (TFII-T) was one of the top performers on ‘The List’ in 2021 but its stock price had been under a lot of pressure starting out in 2022.

The company published these highlights in their Q4 earnings report:

Fourth quarter diluted EPS of $1.52 up from $0.91 in Q4 2020, while adjusted diluted EPS1 of $1.57 increased from $0.98
Fourth quarter operating income of $215.0 million increased from $117.1 million in Q4 2020
Fourth quarter net cash from operating activities of $190.3 million increased from $164.9 million in Q4 2020
Full-year diluted EPS of $6.97 up from $3.03 in 2020, while adjusted diluted EPS1 of $5.23 increased from $3.30

Alain Bédard, Chairman, President and Chief Executive Officer called the acquisition of UPS Ground Freight transformational and said that they enter 2022 stronger than ever,

The market must have liked what they read as TFII-T was back on top of ‘The List’ again with an 8.7% jump in it’s share price last week.

Toromont Industries Ltd. (TIH-T)

The company published these Q4 and full year 2021 highlights:

Revenues in the fourth quarter were $956.0 million, down 4% from the similar period last year. Equipment Group revenues were down 3% on changes in timing of deliveries, inclusive of delays as a result of supply chain disruptions. Revenues at CIMCO were 7% lower on timing of construction projects within the Canadian industrial segment and reduced recreational activity due to pandemic restrictions.
Revenues increased 12% to $3.9 billion for the year compared to 2020, on improved activity in end markets, reflective of the partial recovery from pandemic restrictions and shutdowns. Deliveries from healthy opening order backlogs(1) and on strong demand in the year generally, drove equipment and packages revenues 18% higher, while product support and rental revenues increased 5% and 8% respectively.
Operating income increased 17% in the fourth quarter reflecting higher gross margins on strong demand, improved rental fleet utilization, favourable sales mix, cost containment and operational efficiency.
Operating income increased 28% in 2021, reflecting the higher revenues and higher overall gross margins. Revenue growth exceeded growth in expenses, reflecting continued efforts to focus on cost management and improved efficiencies. Operating income margin increased 150 basis points (“bps”) to 12.2%, compared to 10.7% in 2020.
Net earnings for the fourth quarter were $105.6 million up 19% and basic EPS (earnings per share) was $1.28, also up 19% from the fourth quarter of 2020.
For the year, net earnings were $332.7 million, up 31% from 2020, with basic EPS up 30% to $4.03, reflective of the higher activity levels and positive operating leverage.

Included in the earnings report was this statement by management:

“Considering the Company’s strong financial position and long-term outlook, the Board of Directors today increased the quarterly dividend by 11.4% to 39 cents per share. Toromont has paid dividends every year since 1968 and this is the 33rd consecutive year of dividend increases.”

I always pay attention when I am reading earnings reports to hear what management is saying about their dividend policy. It seems management at TIH-T is confident that their impressive dividend growth streak will continue. A recent dividend increase is one of the strongest signals that management can send about their confidence in the business going forward.

Telus (T-T)

The company published these highlights:

Industry-leading fourth quarter total Mobile and Fixed customer growth of 272,000, our best fourth quarter on record and an increase of 19,000 over last year, driven by robust customer demand for our superior bundled offerings and leading customer loyalty results.
Total mobile net additions of 193,000, including 112,000 Mobile Phone net additions, an increase of 25,000 over the prior year, and 81,000 Connected Devices.
Robust wireline net additions of 79,000, our best fourth quarter wireline customer growth on record, including 40,000 Internet customer additions, powered by leading broadband customer experiences over our superior PureFibre network.
Consolidated Revenue, Net Income, and Adjusted EBITDA grew 20 per cent, 145 per cent, and 7.6 per cent, respectively, excluding the recognized gain on sale of financial solutions business, Revenue and Net Income up 10 per cent and 16 per cent, respectively.
Strong annual performance in line with guidance, driven by consistent operational execution, leading product offerings, and client service excellence, bolstered by continued strong operating momentum in TELUS International, TELUS Health and TELUS Agriculture.
Full year consolidated Operating Revenue, Net Income, and Adjusted EBITDA up 9.8 percent, 35 per cent, and 6.4 per cent, respectively, alongside record 960,000 net customer additions
Targeting 2022 Operating Revenue and Adjusted EBITDA to both increase by 8 to 10 per cent, and Free Cash Flow of $1.0 billion to $1.2 billion

Later in the earnings report I noticed this statement:

“..since 2004, we have returned $21 billion to shareholders, including $15.7 billion in dividends and $5.2 billion in share repurchases, representing over $15 per share. We look forward to updating our dividend growth program for the next three-year period commencing in 2023 at our upcoming AGM in May.”

We will learn in May what dividend growth will look like for the next three years. Knowing that dividends are part of the companies DNA gives us comfort as an investor.

Fortis Inc. (FTS-T)

The company published these highlights in their earnings report:

Reported annual net earnings of $1,231 million, or $2.61 per common share in 2021
Adjusted annual net earnings of $1,219 million, or $2.59 per common share
Deployed capital expenditures of $3.6 billion in 2021 with $600 million invested in cleaner energy infrastructure
Achieved 20% reduction in Scope 1 emissions through 2021, supporting 75% emissions reduction target by 2035

Fortis expects long-term growth in rate base will support earnings and dividend growth. Fortis is targeting average annual dividend growth of approximately 6% through 2025.

With a 3.5% yield and 6% dividend growth we can expect to earn an annual return close to 10% on this quality dividend grower over time. Provided we buy it at a sensible price.

Enbridge Inc. (ENB-T

The company published these highlights:

Full year GAAP earnings of $5.8 billion or $2.87 per common share, compared with GAAP earnings of $3.0 billion or $1.48 per common share in 2020
Adjusted earnings* of $5.6 billion or $2.74 per common share*, compared with $4.9 billion or $2.42 per common share* in 2020
Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA)* of $14.0 billion, compared with $13.3 billion in 2020
Cash provided by operating activities of $9.3 billion, compared with $9.8 billion in 2020
Distributable cash flow (DCF)* of $10.0 billion or $4.96 per common share*, compared with $9.4 billion or $4.67 per common share* in 2020
Reaffirmed 2022 full year guidance range for EBITDA of $15.0 billion to $15.6 billion and DCF per share of $5.20 to $5.50
Increased the 2022 quarterly dividend by 3% to $0.86 ($3.44 annually) per share reflecting the 27th consecutive annual increase
Placed approximately $10 billion of capital projects into service in 2021, which is expected to generate significant EBITDA growth in 2022
Advanced the current $10 billion secured growth program, which supports the Company’s 5 to 7% DCF per share growth through 2024
Successfully closed the previously announced US$3.0 billion acquisition of Moda Midstream Operating LLC including the Ingleside Energy Center
Announced US$0.4 billion Texas Eastern Phase II Modernization program to upgrade and electrify aging compressors increasing safety and reliability and lowering emissions
Announced US$0.1 billion Appalachia to Market Phase II system expansion, expanding natural gas supply into the U.S. Northeast to meet growing local demand
Executed pipeline transportation precedent agreement with Texas LNG Brownsville LLC for a US$0.4 billion expansion of the Valley Crossing Pipeline to supply its LNG export terminal
Entered into a Memorandum of Understanding with Lehigh Cement and announced Letters of Intent with local Indigenous Nations to develop the Open Access Wabamun Carbon Hub
Advanced ESG priorities by executing on emissions reduction pathways and increasing the diversity of Enbridge’s leadership and Board of Directors
Announced additional measures to further align the business with our net-zero emissions goals
Completed the previously announced $1.1 billion sale of Enbridge’s interest in Noverco Inc. (Noverco), providing for additional financial flexibility
Announced the approval by the Toronto Stock Exchange (TSX) of Enbridge’s normal course issuer bid (NCIB) of up to $1.5 billion
Issued $750 million of 60-year hybrid debt in the Canadian debt markets with proceeds to be used to redeem the $750 million Enbridge Inc. Preferred Shares – Series 17

ENB-T’s share price seems to be benefitting from higher energy prices in 2022. Dividend growth has slowed considerably so we continue to monitor this company closely.

Magna International (MGA-N)

Fourth Quarter 2021 Highlights:

Sales of $9.1 billion decreased 14%, compared to a 17% decrease in global light vehicle production
Diluted earnings per share and Adjusted diluted earnings per share of $1.54 and $1.30, respectively, compared to $2.45 and $2.83 last year
Returned $378 million to shareholders through share repurchases and dividends
Raised quarterly cash dividend by 5% to $0.45 per share

Full Year 2021 Highlights:

Sales of $36.2 billion increased 11%, compared to global vehicle production which increased 4%
Diluted earnings per share and Adjusted diluted earnings per share of $5.00 and $5.13, respectively, compared to $2.52 and $3.95 last year
Returned over $1 billion to shareholders through share repurchases and dividends

Although Magna beat estimates, year over year comparables were down for many categories. There isn’t a lot in this report to like about MGA-N in the short-term outside of the dividend increase. Things will probably get a little worse before they get better. Keep an eye out for a good buying opportunity in this quality dividend grower in 2022.

Recent News

Here are a few of the companies on ‘The List’ due to report earnings this week:

Emera Inc. (EMA-T) is scheduled to report earnings Monday Feb. 14

TC Energy (TRP-T) is scheduled to report earnings Tuesday Feb. 15

Waste Connections (WCN-T) is scheduled to report earnings after hours Wednesday Feb. 16

Canadian Tire (CTC-T) is scheduled to report earnings Thursday Feb. 17

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 February 14, 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%	$13.98	-2.6%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$53.65	3.0%	$0.44	18.1%	12
BCE-T	Bell Canada	5.5%	$66.66	1.1%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.5%	$61.35	0.4%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.3%	$64.00	-5.6%	$0.84	0.0%	20
CNR-T	Canadian National Railway	1.9%	$155.21	0.2%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.9%	$182.13	-0.6%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	5.0%	$35.24	-3.7%	$1.76	0.0%	50
DOL-T	Dollarama Inc.	0.3%	$64.60	1.9%	$0.20	1.7%	11
EMA-T	Emera	4.5%	$58.81	-6.0%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.2%	$55.56	12.2%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.5%	$41.52	-9.5%	$0.64	4.1%	15
FNV-N	Franco Nevada	0.9%	$142.03	4.4%	$1.28	10.3%	14
FTS-T	Fortis	3.6%	$59.03	-2.4%	$2.14	4.4%	48
IFC-T	Intact Financial	2.2%	$183.70	12.2%	$4.00	17.6%	17
L-T	Loblaws	1.4%	$101.51	-1.2%	$1.46	6.6%	10
MGA-N	Magna	2.4%	$75.71	-7.2%	$1.80	4.7%	12
MRU-T	Metro	1.6%	$67.80	1.1%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.3%	$146.25	6.9%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	1.7%	$41.37	1.7%	$0.72	0.0%	17
STN-T	Stantec Inc.	1.0%	$67.84	-3.3%	$0.66	0.0%	10
TD-T	TD Bank	3.3%	$107.81	8.5%	$3.56	12.7%	11
TFII-T	TFI International	1.0%	$136.46	-2.7%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$114.42	0.6%	$1.52	15.2%	32
TRP-T	TC Energy Corp.	5.2%	$66.89	12.0%	$3.48	1.8%	21
T-T	Telus	4.1%	$31.57	6.1%	$1.31	4.4%	18
WCN-N	Waste Connections	0.8%	$120.64	-10.0%	$0.92	8.9%	12
Averages		2.7%		0.6%		7.3%	18

MP Market Review – February 4, 2022

Posted by BM on February 7, 2022

“A dividend is a dictate of management. A capital gain is a whim of the market.”

We have already seen some of our top performing dividend growers of 2021 on ‘The List’ give back some of their capital gains from last year. This is normal, as the ‘excitement factor’ (P/E expansion) begins to retract as prices fall.

Always remember Jack Bogle’s expected return formula:

Future Market Returns = Dividend Yield + Earnings Growth +/- Change in P/E Ratio

Right now, we are seeing a negative change in P/E. Thankfully, dividend growth investors have dividend yield and earnings growth to fall back on during bear markets and we only purchase when the price is sensible, so we already have a built-in margin of safety. We use bear markets to buy more of our quality dividend growers on sale.

Performance of ‘The List’

The best performers last week on ‘The List’ were Alimentation Couche-Tard Inc. (ATD-T) up 7.3%; TD Bank (TD-T) up 5.4%; TFI International (TFII-T) up 4.5%.

Enghouse Systems Limited (ENGH-T) was the worst performer this week, down -1.9%.

‘The List’ was up this week 1.9% with a 0.0% YTD price return (capital) and an average of 6.4% in dividend increases (income) reported so far for fiscal 2022.

Dividend Increases

There were two companies on ‘The List’ that announced dividend increases this past week.

Brookfield Infrastructure Partners (BIP-N) on Wednesday said it increased its 2022 quarterly dividend from $0.51 to $0.54 per share, payable March 31, 2022, to shareholders of record on Feb. 28, 2022.

This represents a dividend increase of 5.9%, marking the 15th straight year of dividend growth for this global infrastructure company that owns and operates quality, long-life assets.

Bell Canada (BCE-T) on Tuesday said it increased its 2022 quarterly dividend from $0.875 to $0.92 per share, payable April 15, 2022, to shareholders of record on Mar. 15, 2022.

This represents a dividend increase of 5.1%, marking the 14th straight year of dividend growth for this quality Canadian telco.

Earnings Releases

There were two earnings releases announced from companies on ‘The List’ this past week.

Brookfield Infrastructure Partners Q4 FFO, Earnings Miss, Revenue Rise, Increases Dividend

07:44 AM EST, 02/02/2022 (MT Newswires) — Brookfield Infrastructure Partners (BIP) (BIP.TO) reported Q4 funds from operations of $0.97 per unit, up from $0.86 a year earlier.

Analysts polled by Capital IQ forecast $0.93.

Revenue for the December quarter was $3.25 billion, up from $2.53 billion a year earlier. A single analyst surveyed by Capital IQ forecast $1.94 billion.

“2021 was a remarkable year for Brookfield Infrastructure, highlighted by our strong organic growth, capital recycling accomplishments, and the deployment of significant capital into new investments and other growth initiatives,” said Sam Pollock, Chief Executive Officer of Brookfield Infrastructure. “We begin this year with a strong liquidity position and half of our 2022 deployment target already secured.”

BCE Reports Q4 Adjusted EPS Beat of $0.76, Announces 5.1% Dividend Hike, Guidance

MONTRÉAL, February 3, 2022 – BCE Inc. (TSX, NYSE: BCE) today reported results for the fourth quarter (Q4) and full-year 2021, provided financial guidance for 2022 and announced a 5.1%, or $0.18 per share, increase in the BCE annual common share dividend to $3.68.

“At Bell, we have been singularly focused on our purpose to advance how Canadians connect with each other and the world, and our strong execution and operational discipline to deliver on this purpose is paying off. Bell’s solid performance in Q4 and throughout 2021 reflect the steady demand for fast, reliable and innovative services to keep residents and businesses connected, informed and productive with net new mobile phone and mobile connected device, retail Internet and IPTV subscriber additions of 225,533 in Q4, and our best annual retail residential net subscriber performance in 10 years,” said Mirko Bibic, President and CEO of BCE Inc. and Bell Canada.

“A key part of our strategy has been to champion the customer experience. I’m proud of the gains we made this past year, leading the industry in reducing customer complaints, and enhancing our digital tools and self-serve apps so that our customers have a choice in how they interact with us. It’s clear that our historic network capital expenditure acceleration program to connect more Canadians faster and continue delivering on our purpose is the right path forward as Canada builds back from the impacts of COVID-19. We surpassed our 2021 network expansion targets reaching 1 million households with Wireless Home Internet one year ahead of schedule. We expanded our direct fibre footprint to communities across the country, and our 5G network now covers over 70% of the Canadian population.

As we look ahead to 2022, we plan to reach up to 900,000 more homes and businesses with direct fibre connections and expand the reach of our 5G network to meet our growing customer needs. And in every interaction, we will continue to build on the gains we made in making it easier for our customers to do business with us and keep them at the centre of everything we do.”

Guidance:

The table below provides our 2022 financial guidance targets. These ranges are based on our current outlook for 2022 taking into account the impact of COVID-19 on our 2021 consolidated financial results.

	2021 Results	2022 Guidance
Revenue Growth	2.5%	1% - 5%
Adjusted EBITDA growth	3.0%	2% - 5%
Capital intensity	20.6%	21%
Adjusted EPS growth	5.6%	2% - 7%
Free cash flow growth	(10.5%)	2% - 10%
Annualized common dividend per share	$3.50	$3.68

For the full-year 2022, we expect growth in adjusted EBITDA, a reduction in contributions to post-employment benefit plans and payments under other post-employment benefit plans, and lower cash income taxes, will drive higher free cash flow.

Recent News

A busy week coming up for companies on ‘The List’. Earnings reports give us a look ‘under the hood’ of our quality dividend growers and provide us with lots of tidbits of information to help in our purchase decisions. Paying attention to the fine print helps us understand the business better and how they will continue to grow earnings post COVID. Of the companies due to report this week, many have already announced dividend increases for 2022 or will be doing so in Q3 (historically). Any increase would be a welcome surprise.

Here are a few of the companies on ‘The List’ due to report earnings this week:

TFI International (TFII-T) is scheduled to report earnings after hours Monday Feb. 07

Intact Financial Corporation (IFC-T) is scheduled to report earnings Wednesday Feb. 09

Toromont Industries Ltd. (TIH-T) is scheduled to report earnings after hours Wednesday Feb. 09

Telus (T-T) is scheduled to report earnings Thursday Feb. 10

Fortis Inc. (FTS-T) is scheduled to report earnings Friday Feb. 11

Enbridge Inc. (ENB-T) is scheduled to report earnings Friday Feb. 11

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 February 7, 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%	$14.04	-2.2%	$0.68	2.3%	11
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$53.38	2.5%	$0.44	18.1%	12
BCE-T	Bell Canada	5.4%	$67.93	3.1%	$3.68	5.1%	13
BIP-N	Brookfield Infrastructure Partners	3.6%	$60.17	-1.5%	$2.16	5.9%	14
CCL-B-T	CCL Industries	1.3%	$64.50	-4.9%	$0.84	0.0%	20
CNR-T	Canadian National Railway	1.9%	$156.04	0.7%	$2.93	19.1%	26
CTC-A-T	Canadian Tire	2.8%	$185.30	1.2%	$5.20	10.6%	11
CU-T	Canadian Utilities Limited	4.9%	$35.86	-2.0%	$1.76	0.0%	50
DOL-T	Dollarama Inc.	0.3%	$66.90	5.5%	$0.20	1.7%	11
EMA-T	Emera	4.4%	$59.78	-4.5%	$2.65	2.9%	15
ENB-T	Enbridge Inc.	6.3%	$54.72	10.5%	$3.44	3.0%	26
ENGH-T	Enghouse Systems Limited	1.5%	$42.20	-8.0%	$0.64	4.1%	15
FNV-N	Franco Nevada	1.0%	$133.97	-1.6%	$1.28	10.3%	14
FTS-T	Fortis	3.6%	$59.75	-1.2%	$2.14	4.4%	48
IFC-T	Intact Financial	2.1%	$175.13	7.0%	$3.64	7.1%	17
L-T	Loblaws	1.4%	$101.30	-1.4%	$1.46	6.6%	10
MGA-N	Magna	2.2%	$79.58	-2.5%	$1.72	0.0%	12
MRU-T	Metro	1.6%	$68.03	1.5%	$1.10	10.0%	27
RY-T	Royal Bank of Canada	3.3%	$146.87	7.3%	$4.80	11.1%	11
SJ-T	Stella-Jones Inc.	1.8%	$40.71	0.1%	$0.72	0.0%	17
STN-T	Stantec Inc.	1.0%	$67.13	-4.4%	$0.66	0.0%	10
TD-T	TD Bank	3.4%	$105.62	6.3%	$3.56	12.7%	11
TFII-T	TFI International	1.1%	$125.49	-10.5%	$1.36	17.4%	11
TIH-T	Toromont Industries	1.3%	$107.43	-5.5%	$1.40	6.1%	32
TRP-T	TC Energy Corp.	5.4%	$64.53	8.0%	$3.48	1.8%	21
T-T	Telus	4.2%	$30.82	3.6%	$1.31	4.4%	18
WCN-N	Waste Connections	0.7%	$123.02	-8.2%	$0.92	8.9%	12
Averages		2.7%		0.0%		6.4%	18

MP Market Review – January 28, 2022

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

Category: MP Market Reviews

MP Market Review – April 1, 2022

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MP Market Review – February 25, 2022

MP Market Review – February 18, 2022

MP Market Review – February 11, 2022

MP Market Review – February 4, 2022

MP Market Review – January 28, 2022

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