Category: MP Market Reviews

Posted by BM on January 24, 2022

“This is the one thing I can never understand. To refer to a personal taste of mine, I’m going to buy hamburgers for the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up, we weep. For most people, it’s the same way with everything in life they will be buying–except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.” – Warren Buffett

Another negative week for stock markets to begin the New Year. Canadian markets have been spared much of the carnage south of the border with tech heavy indexes now down double digits year to date. Canadian tech company Shopify (SHOP-T) however followed suit with the US tech drawdown and is now down 36% since January 1. If you are an investor now in these high-tech stocks, then you are betting that growth will continue. We trimmed our ‘expensive’ positions in some of our Magic Pants Wealth-Builder portfolios over the past year and more recently. Waiting to buy some cheap ‘hamburgers’ soon.

Looking to get paid no matter what the markets do in the short run is one of the reasons we switched to dividend growth investing years ago. When markets start reacting to all the negative narratives out there, we take comfort in the income our portfolios produce and wait for buying opportunities to increase our income even further. When prices drop, yields rise which means we get more income for our money. Having a watchlist ready is key to taking advantage of market downturns. Fortunately, we have the Magic Pants list (The List) to monitor for buying opportunities.  

Performance of ‘The List’

The best performers last week on ‘The List’ were Intact Financial (IFC-T) up 2.3%; Brookfield Infrastructure Partners (BIP-N) up 1.5%; Algonquin Power & Utilities (AQN-T) up 1.3%.

Magna (MGA-N) was the worst performer this week, down -12.1%.

‘The List’ was down this week -2.0% with a -2.9% YTD price return loss (capital) and an average of 4.7% dividend increase (income).

Dividend Increases

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

Earnings Releases

There were no earnings releases announced from companies on ‘The List’ this past week.

Canadian National Railway (CNR.TO) is scheduled to report this week on Tuesday, January 25, 2022

Metro Inc. (MRU.TO) is scheduled to report this week on Tuesday, January 25, 2022

Recent News

CN Rail Price Target Increased to $168 at Raymond James ahead of earnings

11:38 AM EST, 01/21/2022 (MT Newswires) — Raymond James raised its price target on Canadian National Railway Ltd. (CNR.TO, CNI) to $168 from $158 on Friday.

Analyst Steve Hansen maintained a Market Perform rating on shares of the Class I railway ahead of its fourth quarter results.

Hansen said CN is expected to see more healthy and normal traffic growth in 2023, and an increased effort on internal cost control.

“In the more immediate term, however, we continue to see traffic growth as challenged, with 4Q21 & 1H22 still grappling with lingering weather-related issues (floods & frost), a drought-afflicted Canadian harvest, and broader supply-chain congestion affecting key categories such as Intermodal & Auto,” the analyst said in a note to clients.

“Against this volatile backdrop, with leadership issues still unresolved, we view CN’s share price as reasonably valued at current levels,” Hansen said.

Metro Price Target Raised to $68 at ATB Ahead of Earnings Results

11:21 AM EST, 01/20/2022 (MT Newswires) — ATB Capital Markets raised its price target on Metro Inc. (MRU.TO) to $68 from $65.

Analyst Kenric Tyghe maintained a Sector Perform rating on shares of the Montreal-based food retailer ahead of its fiscal first quarter result on January 25.

“While our estimates for the quarter are unchanged ahead of the results, we have made (modest) positive revisions to both upcoming quarters through FY2022 and FY2023, reflecting both higher (for longer) than initially expected food inflation (concentrated in fresh) and the traction of company specific supply chain and store initiatives,” Tyghe said in a note to clients.

“The pace of food from stores inflation (Food CPI) not only accelerated further in December for a print of 5.7% (and 4.8% for the calendar quarter), but the supply shocks and pressures driving the elevated levels of food inflation are not yet easing,” the analyst said.

Posted by BM on January 17, 2022

Q4 Earnings season is upon us. Companies start to report next week. Earnings should exceed expectations once again, but most investors feel that the near-term future will be far less bright. The markets tend to be forward looking so maybe some of the pessimism early in 2022 is starting to show. We will be cautious with what we buy as dividend growth investors but always have the comfort of our rising cash flow as market valuations revert to the mean.  

Performance of ‘The List’

The best performers last week on ‘The List’ were Enghouse Systems Limited (ENGH-T) up 4.6%; Magna (MGA-N) up 4.1%; Royal Bank (RY-T) up 3.9%.

TFI International (TFII-T) was the worst performer again this week, down -6.8% and -13.5% YTD.

‘The List’ was basically flat this week down .1% with a .9% YTD price return loss (capital) and an average of 4.7% dividend increase (income).

Dividend Increases

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

Earnings Releases

There were no earnings releases announced from companies on ‘The List’ this past week.

Recent News

Magna International Says Adding More Than 120 Engineers from Boston-Based Optimus Ride

Magna (MG.TO, MGA-N), one of the world’s largest suppliers in the automotive space and a mobility technology company, on Tuesday said it has added more than 120 employees of Optimus Ride, a provider of autonomous vehicle and mobility solutions located in Boston, to enhance Magna’s capabilities in the field of advanced driver assistance systems (ADAS).

According to news reports, Magna entered into an agreement with Optimus Ride to hire the engineers and to acquire its self-driving vehicle technology and intellectual property rights. Terms were not published but media reports said Magna had sent over 140 “engineering-related” job offers and more than 120 accepted them.

“Growing our engineering bench strength in sensing hardware and software helps accelerate our path forward in a rapidly growing ADAS market,” said John O’Hara, President of Magna Electronics, in a statement.

The contributions expected from the Optimus Ride employees will be valuable as Magna builds on its strengths and position as a global ADAS provider with comprehensive capabilities, the company added.

The team remains in Boston’s Seaport district, establishing a Boston-based engineering center and presence for Magna.

“As advancements in autonomy continue, we saw an opportunity to bring in additional expertise to support current programs as well as future customer needs. We are happy to welcome the Optimus Ride employees to the Magna family,” added O’Hara

Posted by BM on January 10, 2022

Attached is our new list for 2022. Two of our dividend growers did not grow their dividend in 2021 (BNS-T and EQB-T) so they have been removed from this year’s list. Replacing them are Loblaws (L-T) and Stantec Inc. (STN-T).

We were hesitant to remove Bank of Nova Scotia and Equitable Bank from ‘The List’ (due to pandemic restrictions placed on them by Canada’s banking regulator which were out of their control) but the recorded dividends in 2020 were the same as in 2021. We wanted to be consistent with one of the criteria (> ten years of consecutive dividend growth) we came up with to assemble ‘The List’ so they were removed.

Performance of ‘The List’

The best performers last week on ‘The List’ were Magna (MGA-N) up 4.9%; Royal Bank (RY-T) up 3.6%; Enbridge (ENB-T) up 3.5%

TFI International (TFII-T) was the worst performer, down -7.3%.

‘The List’ was down 1.1% this past week with a -1.1% YTD price return gain (capital) and an average of 4.7% dividend increase (income) in 2022 already.

Dividend Increases

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

Earnings Releases

There were no earnings releases announced from companies on ‘The List’ this past week.

Recent News

CCL Industries Acquires McGavigan Holdings for CCL Design

CCL Industries Inc. (CCL-B-T), a world leader in specialty label, security and packaging solutions for global corporations, government institutions, small businesses and consumers, announced today it has acquired privately owned McGavigan Holdings Ltd. (“McGavigan”), a leading supplier of ‘in mould’ decorated components for automotive interiors.

McGavigan supports its global automotive customer base from a long-established manufacturing plant in the U.K. and a recently completed, wholly owned greenfield facility in China, where a significant majority of its operations are based. Capabilities include state-of-the-art clean rooms with technical screen printing, high precision forming, injection moulding and automation technologies.

For the calendar year 2021, consolidated sales and adjusted EBITDA are estimated to be $55.7 million and $14.6 million, respectively. The purchase price consideration, net of cash acquired, and debt assumed, is approximately $105.5 million.

Geoffrey T. Martin, President and Chief Executive Officer of CCL Industries Inc., commented, “We have known McGavigan and its key people for many years, and are very pleased to welcome the team to CCL where they will continue to focus on innovative specialty product designs for automotive interiors. This acquisition significantly expands our presence in the automotive sector in China and brings important new product and technology platforms to our CCL Design global network, headed by Derek Cumming, Group Vice President.”

Posted by BM on January 3, 2022

Our new list for 2022 will be published the week of January 10, 2022.

Performance of ‘The List’

The best performers this week on ‘The List’ were Brookfield Infrastructure Partners (BIP-T) up 3.5%; Waste Connections Inc. (WCN-T) up 3.1%; Franco Nevada (FNV-T) up 2.1%

TC Energy Corp. (TRP-T) was the worst performer, down -2.7%.

‘The List’ as a whole was up .8% this past week with a 19.8% YTD price return gain (capital) and an average of 7.8% dividend increase (income) in 2021.

Dividend Increases

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

Earnings Releases

There were no earnings releases announced from companies on ‘The List’ this past week.

Recent News

The last trading week of the year was a slow one in Canada and there wasn’t a lot of earth-shattering news on the financial front. As this was the first year we published ‘The List’ on our blog, we have lots to summarize. Once we recheck all the numbers I will publish last year’s version of ‘The List’ one more time this week with comments.

Although most investors would have been happy with a 20% return plus dividends, the intent of ‘The List’ was not to be a portfolio to copy exactly with equal weightings in each stock. It is more of a real-time illustration of dividend growth investing in action. We have found it a lot easier to coach our process when we are using real dividend growth companies as examples.

In 2022 we will be launching the subscription service for our Magic Pants Wealth-Builder Portfolio (CDN) where we will be using real money and inviting the blog reader to follow along and build their own portfolios as we do an even deeper dive into our process. The process has generated excellent income growth and capital returns for the last decade, and we would like to share with you how we did it. More details to come.

Posted by BM on December 27, 2021

The Canadian stock market continued its strong performance this past week keeping pace with its peers to the south. With the new year in sight, stay tuned for our year-end summaries of companies on ‘The List’ and whether there will be any changes to ‘The List’ for 2022.

Our new list will be published in the first week of 2022.

Performance of ‘The List’

The best performers this week on ‘The List’ were Alimentation Couche-Tard (ATD-T) up 9.1% on the back of another acquisition; Enghouse Systems Limited (ENGH-T) up 8.1% after it was obviously in oversold territory following last week’s earnings news; and TFI International (TFII-T) up 3.4% as it continues to soar in 2021.

Canadian National Railway (CNR-T) was the worst performer, down -4.5% after the setback in their CEO search.

‘The List’ as a whole was up 2% this past week with a 19.0% YTD price return gain (capital) and an average of 8.2% dividend increase (income) in 2021.

Dividend Increases

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

Earnings Releases

There were no earnings releases announced from companies on ‘The List’ this past week.

Recent News

ALIMENTATION COUCHE-TARD ANNOUNCES THE ACQUISITION OF 19 SITES AND 2 NON-OPERATING PROPERTIES FROM PIC QUIK

Alimentation Couche-Tard (ATD-T) announced an agreement with Pic Quik under which Couche-Tard has acquired 19 convenience stores and 2 non-operating properties across the state of New Mexico. The assets are owned and operated by Pic Quik, a successful Company originally founded in 1958. The acquisition closed on December 17, 2021.

“We are very pleased to welcome the Pic Quik locations and team to our Circle K family in New Mexico,” said Alex Miller, Couche-Tard’s Executive Vice President, Operations, North America, and Global Commercial Optimization. “With this acquisition, we will be able to build on our strong network in the state and grow our mission of making our customers’ lives a little easier every day.

ATD-T has been in acquisition mode lately after acquiring 17 sites last week from Slidell Oil Company.

CCL INDUSTRIES ACQUIRES BRAZIL’S FOREVER BLUE FOR C$19.1 MILLION

CCL Industries (CCL-B-T) on Monday said it agreed to acquire Brazil-based Forever Blue Investimentos e Participacoes for C$19.1 million

The company said the company “is a leader in labels and tags for the retail and apparel industry strategically located at the heart of Brazil’s textile industry” with 2021 sales forecast to be C$17.6 million.

This too is CCL-B-T’s second acquisition in as many weeks.

JIM VENA WITHDRAWS AS CANDIDATE FOR CANADIAN NATIONAL CEO ROLE

Canadian National Railway (CNR-T) said on Monday Jim Vena, who was backed by a group of investors to lead the country’s largest railway operator, had pulled out of the running to serve as its new chief.

The former Union Pacific executive was pitched for the top job by TCI Fund Management, which is Canadian National’s second-largest shareholder with a 5% stake.

“Vena looked to us like an ideal candidate considering his contribution to Union Pacific’s solid OR (operating ratio) progress since implementing PSR (precision scheduled railroading) in 2018,” Morningstar analyst Matthew Young said.

“There’s a good chance he would have helped reinvigorate CN’s operating strategy, and we suspect shareholders would have welcomed his leadership.”

Posted by BM on December 20, 2021

Each week we will comment on some of the significant events from the past week for companies on ‘The List’ and update the numbers.

All the major North American indexes including the TSX were down this week but ‘The List’ managed to hold its ground and tick a little bit higher. The good part about dividend growth investing is that down markets allow us to purchase more income from our quality companies at better prices. Having ‘The List’ as a starting point in our process makes our portfolio building effort that much easier.

Posted by BM on December 13, 2021

Each week we will comment on some of the significant events from the past week for companies on ‘The List’ and update the numbers.

Dividend Increases

Enbridge Inc. (ENB.TO) on Tuesday 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. 15, 2022.

This represents a dividend increase of 3%, marking the 26th straight year of dividend growth.

Earnings Releases

Dollarama Inc. (DOL.TO) on Wednesday reported sales for Q3 2022 increased by 5.5% to $1.12 billion, compared with $1.06 billion last year, and beating a Capital IQ average forecast of $1.11 billion. The increase is due to the growth in the number of stores over the past 12 months, from 1,333 to 1,397 stores on Oct 31, 2021, and to an increase in comparable store sales driven by strong Halloween sales.

Net earnings were $183.4 million, or $0.61 per diluted share, beating a forecast of $0.57. Dollarama had reported net earnings of $161.9 million, or $0.52 per diluted share, for the prior year period.

FY 2022 Guidance:

Dollarama also said that due to the ongoing uncertainty related to COVID-19, guidance for Fiscal 2022 remains limited to the following key metrics:

Net new store openings: 60 to 70

Capital expenditures: $160 million to $170 million.

Performance of ‘The List’

The best performers this week on ‘The List’ were Alimentation Couche-Tard (ATD-T) up 5.2%, Dollarama (DOL-T) up 4.3% and TFI International (TFII-T) up 3.9%.

Enghouse Systems Limited (ENGH-T) was the worst performer, down -4.5%.

‘The List’ was up 1% this past week with a 16.6% YTD price return.

Recent news from companies on ‘The List’

Alimentation Couche-Tard’s (ATD-T) Outstanding Shares to be of a Single Class.

“The sun will set this week on the special voting rights held by the four founders of Alimentation Couche-Tard Inc. ATD-B-T leaving the Canadian convenience store giant more exposed to investor pressure than ever before. Its fate will be closely watched by both critics and defenders of dual class share structures.

Laval, Que.-based Couche-Tard is one of Canada’s biggest companies, with a current market capitalization of $50.6 billion. It’s controlled by executive chairman Alain Bouchard and three other founders through a special class of stock that gives them 10 votes for every share they own. A so-called sunset clause – put in place in 1995 when the founders were in their 30s and 40s – says those super-voting rights will end when the youngest of them turns 65 or dies.”

After their special rights expire, that stake, in combination with the support of friendly shareholders such as the Caisse de dépôt et placement du Québec, will still give them “almost a blockage type of group if there’s something we don’t like,” Mr. Bouchard has said.”

Source: The Globe and Mail

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.

Posted by BM on December 06, 2021

Each week we will comment on some of the significant events from the past week for companies on ‘The List’ and update the numbers.

This past week was when the big Banks on ‘The List’ reported their Q4 earnings. No surprise, we saw Bank of Nova Scotia, Royal Bank and Toronto Dominion Bank all announce double-digit dividend increases and stock buy backs for next year. Since the banking regulator lifted pandemic related restrictions back on November 4, we were waiting to see how much the increases would be and the Banks delivered.

TFI International announced another acquisition when they purchased D&D Sexton. TFII-T has been our best Year-to-Date performer on ‘The List’, up over 100% since the beginning of the year.

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.