Category: MP Market Reviews

Intro

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

Timely Ten (Canadian version)

There was little change month over month in our Timely Ten (CDN), as the broader market traded largely sideways and limited the number of attractive buying opportunities.

Waste Connections and Enbridge Inc. swapped places this month, with Enbridge now back in the tenth spot. It is one we will continue to watch closely, particularly following the announcement of another dividend increase earlier this month. Rising dividends, paired with an improving valuation, are precisely what put a stock back on our radar.

Further down the list sits TD Bank. After another strong quarter and an impressive full-year performance, the shares have continued to climb, pushing TD to number eighteen. It is worth remembering that as recently as January this year, TD ranked seventh on our Timely Ten. This is dividend yield theory at work.

As always, patience remains a core part of our process. We are disciplined about deploying hard-earned capital and will act decisively when valuation meets our criteria. That said, the Canadian market appears increasingly frothy heading into year-end, which makes selectivity and restraint more important than ever.

Timely Ten (United States version)

There was modest movement in our Timely Ten (USA) this month, as money flows continue to rotate away from richly valued AI stocks and back toward companies with durable fundamentals and cash-flow strength.

UnitedHealth Group and Domino’s Pizza are both showing early signs of turning the corner after ranking near the top of the list last month. While each has only slipped a few positions, even small moves matter.

The most intriguing name this month is Zoetis, which now sits at number one. After nearly two years of steady declines, the stock appears to be attempting to form a bottom. Two years is a long time for any quality business to slide, which raises an important question: is this simply valuation normalization, or is there a deeper structural issue at play? We are revisiting the thesis carefully before year-end to determine whether our conviction remains intact, as it did when we first initiated a position in early 2024.

Another stock moving back onto our radar is Amgen. The yield has just crossed above its ten-year average, lifting the shares to number ten this month from fifteen last month.

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

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

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

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

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

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

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

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

Intro

Each year around this time, I set a reminder to revisit one of the most overlooked advantages of dividend growth investing: taxes. We spend most of the year talking about quality companies, rising income, valuation, and long-term compounding. But the tax treatment of eligible Canadian dividends is a major part of why this strategy works so well, and it deserves attention.

In Canada, eligible dividends are among the most tax-efficient forms of income. Federal and provincial dividend tax credits offset the corporate taxes already paid, preventing double taxation and putting more money back into your pocket.

How much more?

For example, based on the 2025 tax tables from TaxTips.ca, earning $70,000 in eligible Canadian dividends can save more than $12,000 in taxes compared to earning the same amount from salary, interest, or GIC income ($12,762 vs. $750). That extra money can be reinvested, spent, or allowed to compound year after year, which significantly accelerates long-term wealth building.

The two tables below show provincial tax rates at four different before-tax income levels, with Ontario (my home province) highlighted. The difference is remarkable. Investors who focus on high-quality Canadian dividend-paying companies keep far more of their income than those who earn the same amount from employment or fixed-income sources.

Intro

I recently published the quarterly performance summaries for both of our model portfolios. Each one continues to do exactly what it was built to do: produce a steadily rising stream of dividends from high-quality businesses.

Intro

I came across a chart in the article referenced in our “DGI News” section below that illustrates something we can all relate to: the erosion of purchasing power as seen through Canadian home prices. While home prices have surged dramatically in dollar terms, their value in forms of money with longer histories, like gold and silver, has barely changed in more than four decades.

Intro

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

Timely Ten (CDN)

goeasy Ltd. climbed to the number three spot in this month’s Timely Ten after a sharp 25% pullback following its Q3 2025 earnings release. Investors clearly were not impressed, but the decline has pushed the stock into more attractive valuation territory.

Magna moved in the opposite direction, slipping to number eight from number five last month. The market responded favourably to its Q3 results.

Our two recent Canadian model portfolio additions, Metro Inc. (MRU-T) and Waste Connections (WCN-N), went in opposite directions with Metro Inc. moving down the list on price strength and Waste Connections cracking the Timely Ten on weakness.

Among this month’s Timely Ten, goeasy Ltd. stands out as the most compelling opportunity. A starting yield above 4.5 percent, a 25 percent dividend increase in 2025, and a payout ratio of under 40 percent all indicate a company that warrants further research from dividend growth investors.

Intro

With roughly half of The List reporting earnings last week, it’s a good time to revisit why earnings matter so much in our dividend growth investing strategy and how they ultimately drive the income and long-term returns we are building toward.

The Significance of Earnings in Dividend Growth Investing

When it comes to dividend growth investing, earnings are the engine that drives everything. They determine not only how much a company can pay shareholders today, but also how much it can sustainably grow those payments in the future. Benjamin Graham, the father of value investing, put it best when he said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” What it weighs, of course, is earnings power, the ability of a business to generate consistent, growing profits.

For dividend growth investors, that principle sits at the core of every decision we make. Our strategy is built on identifying high-quality companies that can reliably grow earnings over time. Why? Because earnings growth funds dividend growth, and dividend growth fuels long-term total returns. In fact, over the long run, the two are almost always aligned. When a company’s earnings compound steadily, its dividends tend to follow a similar upward path.

Earnings: The Foundation of Dividend Safety

A company that earns more each year can afford to raise its dividend without jeopardizing its balance sheet. When earnings stagnate or decline, the payout ratio, the percentage of profits paid out as dividends, begins to creep higher, and that is when risk enters the picture. The most sustainable dividend growth stories are those backed by stable, predictable earnings streams.

That is why our process emphasizes quality first. We look for businesses with durable competitive advantages, recurring revenues, and management teams that allocate capital wisely. These companies tend to produce consistent earnings regardless of economic cycles. Think of regulated utilities, consumer staples, or railways, sectors where steady demand supports steady profits. When earnings are predictable, dividend growth becomes predictable too.

The Power of Compounding Earnings

Earnings growth does not just support dividends; it multiplies value. Over time, compounding earnings translate into higher share prices, creating the classic “double double” effect of dividend growth investing: rising income and rising capital value.

John Bogle, another investing legend, famously summarized expected market returns as:

Future Returns = Dividend Yield + Earnings Growth (Dividend Growth) ± Change in Valuation.

That middle term, earnings growth, is what really moves the needle over decades. Even if valuations fluctuate, companies that consistently grow earnings at 8 to 10 percent annually tend to deliver similar total returns over the long run. Dividend growth often mirrors that same pace, since management teams typically aim to keep payout ratios steady as profits increase.

Why We Focus on Earnings Trends

In our model portfolios, we spend less time predicting next quarter’s numbers and more time studying long-term earnings trajectories. We look for a track record of at least ten years of growth, the accuracy of analyst forecasts, and how management has performed against those expectations. These trends tell us far more about the reliability of future dividends than any headline or market forecast.

When we find companies that pair consistent earnings growth with sensible valuations, we are willing to be patient owners. As earnings compound, dividends follow, and so does total shareholder wealth.

Intro

DGI Scorecard Review

In the final newsletter of each month, we feature both our Canadian and American watchlists in the DGI Scorecard section below. A quick glance at the averages at the bottom of each list shows that year-to-date price returns are not spectacular, especially when compared to high-flying AI stocks, gold miners, or tech-heavy indexes. But this should not discourage you.

Remember, these are equally weighted watchlists, not portfolios. They are designed to track high-quality dividend growth companies, not chase short-term trends. More importantly, the year-to-date dividend growth performance of both watchlists continues to impress, averaging over 7% again this year. That is the real story.

For dividend growth investors, the ultimate goal is to own enough high-quality companies that the income your portfolio produces covers your living expenses. At that point, your dividends effectively become your paycheque in retirement, and the best part is that you can look forward to a raise every year as those companies continue to increase their payouts, no matter what the stock market is doing.

While our strategy emphasizes steady income growth, we never lose sight of capital appreciation. The beauty of compounding is that it often works quietly in the background, gaining momentum over time. Its full impact is rarely visible in the short term but becomes increasingly powerful as dividends are reinvested and earnings grow. Patience is essential during these early phases, as compounding tends to reward consistency rather than speed.

We will take a closer look at how this dynamic is unfolding inside our model portfolios when we release our quarterly performance updates later in November.

Intro

Your Guide to the Magic Pants Dividend Growth Newsletter

Last week, we introduced “The Retirement Plan You Can Write on a Napkin.” We also pointed out that although our dividend growth investing (DGI) strategy is simple to understand, it is not easy. That is why this newsletter exists: to keep you focused through the noise and emotions that come with disciplined long-term investing.

Each issue is designed to help you stay grounded week to week and calm over the long haul. Here’s what to look for:

1. The Opening Snapshot

We begin with a clear headline and a quick snapshot of key DGI metrics:

• Year-to-date dividend and price growth from The List
• Dividend announcements
• Earnings updates

Think of it as your fast weekly briefing.

2. The DGI Clipboard: Where the Coaching Happens

This is the heart of the newsletter. Each week I dig into an investing topic, connect it to our DGI strategy, and share supporting quotes or charts.

It is called the Clipboard because this is where the real coaching happens, just like drawing up plays behind the bench in a hockey game.

3. The DGI Scorecard: Tracking Our Watchlist

Here we track the performance of The List, highlight the week’s top and bottom performers. On the final week of each month, we also share a similar scorecard for The List-USA, giving you a clear view of trends on both sides of the border.

Key metrics to watch:

• Starting yield
• Dividend growth (YTD)
• Price change (YTD)

If price runs ahead of yield plus dividend growth, valuations may be getting stretched. If it lags, opportunities may be emerging.

Reminder: The List is a teaching tool, not a portfolio.

4. DGI News: Cutting Through the Noise

Each week I select a few relevant headlines, share the links, and add a quick take. This saves you time and keeps you informed on what the financial media is saying and the markets are doing.

5. DGI Updates: Company Earnings and Dividend Moves

We finish with updates from companies on The List:

• Dividend announcements
• Quarterly earnings recaps
• Links to full earnings reports

For paid subscribers, this section provides additional research for those wanting to understand the companies we follow a bit better.

Intro

One of the best parts of having a growing subscriber base is the conversations it creates. When people reach out, I get to hear what’s on their minds, their goals, their questions, and their fears.

Our Timely Ten article last week drew nearly 1,000 views. That tells me our dividend growth investing (DGI) strategy is connecting with many of you.

At the same time, I’ve noticed a familiar theme that always surfaces in markets like this. Some investors are feeling the pressure of “missing out” on the surge in tech and gold stocks and the index performance that comes with it.

That feeling is completely normal. Even the most disciplined long-term investors can find it difficult to stay the course when momentum runs hot. Add in calls from advisors touting short-term ETF performance, and the temptation to chase returns becomes very real.

For those who’ve followed my work for a while, you know my investing journey spans more than forty years. I’ve felt this same pull many times. But what has kept me grounded is a clear, repeatable plan. As I wrote years ago in my original “About” page when I began sharing and coaching this process:

“Many investors believe the best strategy is to chase maximum total return and then sell shares to fund their lifestyle. I tried that approach. It’s harder than it looks.

While you can create your own “dividends” by selling shares, it forces constant buying and selling. Over time, those transactions lead to timing errors, emotional decisions, and costly mistakes.

ETFs didn’t solve it either. They hold too many underperformers, which makes it mathematically impossible to beat the index they track. Over diversification may smooth the ride a little, but it doesn’t protect against losses.

My research eventually led me to dividend growth investing. Instead of selling assets, you collect and grow your income. Dividend growth investors focus on quality, ignore short-term price swings, and let rising dividends do the heavy lifting.

When your income grows steadily, your capital usually follows. That’s the power of cash flow over guesswork.”

Fast forward to today, I’ve taken this timeless concept and layered in some ideas of my own. I like to call it our DGI Napkin Plan, a simple idea with the power to change the way you think about retirement.

Here it is: Focus on high-quality dividend growth companies, buy them at sensible valuations, aim for an average 3% starting yield with at least 7% annual dividend growth, and hold. Initial yield plus dividend growth becomes your estimated capital growth rate.

The math is simple, but compounding turns simple into powerful. Here’s how it looks, starting with $100,000 or $1,000,000 of investment savings.

Intro

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

Timely Ten (CDN)

There was little movement at the top of the Canadian list this month. We already own four of the top five names, so patience, not aggression, is the order of the day.

The biggest change came from goeasy Ltd., which dropped on the release of a short report on September 16. We took the opportunity to add to our position in the model portfolio. (You can read our full thesis in the weekend article.)

Enbridge Inc. also moved higher on price weakness and now sits at the tenth spot.

In the lower half of the list, both Waste Connections and Metro Inc. trended upward. We added to our position sizes in both companies. Detailed write-ups will be published over the next two weeks.

Timely Ten (USA)

The standout mover this month was Air Products and Chemicals, climbing from number thirteen to number eight. The company is facing some near-term challenges, but with 44 consecutive years of dividend growth, we are not counting it out. More research is underway.

On the flip side, NextEra Energy jumped 16% in price and fell from number eight to number thirteen on the list. Our patience in building this position in 2023 appears to be paying off.

We are also watching Automatic Data Processing closely. It has climbed from number nineteen to number seventeen in just 30 days and is approaching an attractive valuation zone. As a Dividend King with 50 consecutive years of increases and a history of double-digit annualized returns, it is firmly on our radar to add to the portfolio.

Each month, the Timely Ten lists surface real, actionable ideas. Some require more research, while others are ready to act on today. This disciplined framework keeps us focused on quality and valuation, not market noise.

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

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

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

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

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

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

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