Category: MP Market Reviews

MP Market Review – December 29, 2023

Last updated by BM on January 1, 2024

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a 2023 price return of +5.8% (capital). Dividends increased by +8.7% in 2023, highlighting the growth in the dividend (income).
Last week, there were no dividend announcements from companies on ‘The List’.
Last week, there were no earnings reports from companies on ‘The List’.
No companies on ‘The List’ are due to report earnings this week.

The List (2023)

The Magic Pants List includes 27 Canadian dividend growth stocks. Each has raised their dividend annually for the last ten years (or longer) and has a market cap of over a billion dollars. Based on these criteria, companies on ‘The List’ are added or removed annually, on January 1. Prices and dividends are updated weekly.

While ‘The List’ does not function as a portfolio on its own, it serves as an excellent initial reference for individuals looking to diversify their investments and achieve higher returns in the Canadian stock market. Through our newsletter, readers gain a deeper understanding of how to implement and benefit from our Canadian dividend growth investing strategy.

If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service. Subscribers gain access to buy/sell alerts and exclusive content available only to subscribers.

Performance of ‘The List’

Last week, ‘The List’ was up with a 2023 price return of +5.8% (capital). Dividends increased by +8.7% in 2023, highlighting the dividend (income) growth over the last calendar year.

The best performers last week on ‘The List’ were TFI International (TFII-N), up +2.77%; Metro (MRU-T), up +1.96%; and Stantec Inc. (STN-T), up +1.82%.

TC Energy Corp. (TRP-T) was the worst performer last week, down -2.36%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.0%	$6.32	-6.1%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$76.76	27.6%	$0.60	26.8%	13
BCE-T	Bell Canada	7.4%	$52.17	-13.4%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$31.49	0.5%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$59.59	2.7%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$166.55	2.3%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$140.72	-4.0%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.6%	$31.89	-13.7%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$95.49	19.6%	$0.27	23.8%	12
EMA-T	Emera	5.5%	$50.30	-4.4%	$2.79	4.0%	16
ENB-T	Enbridge Inc.	7.4%	$47.70	-10.6%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.4%	$35.10	-1.7%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.2%	$110.81	-19.8%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.51	-1.5%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$203.86	4.1%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$128.28	6.6%	$1.74	10.3%	11
MGA-N	Magna	3.1%	$59.08	2.7%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$68.59	-9.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$134.00	4.7%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$77.12	55.5%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.7%	$106.38	62.8%	$0.77	8.5%	11
TD-T	TD Bank	4.5%	$85.62	-2.3%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$135.98	35.8%	$1.45	25.0%	12
TIH-T	Toromont Industries	1.5%	$116.10	18.8%	$1.72	10.3%	33
TRP-T	TC Energy Corp.	7.2%	$51.76	-2.9%	$3.72	3.3%	22
T-T	Telus Corp.	6.1%	$23.58	-10.4%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$149.27	13.3%	$1.05	10.5%	13
Averages		3.4%		5.8%		8.7%	19

Six Canadian stocks on ‘The List’ declare earnings and dividends in US dollars and are inter-listed on a US exchange in US dollars. The simplest way to display dividend and price metrics for these stocks is to show their US exchange symbols along with their US dividends and price. The stocks I am referring to have a -N at the end of their symbols. You can still buy their Canadian counterparts (-T), but your dividends will be converted into CDN dollars and will fluctuate based on the exchange rate.

DGI Clipboard

“If you look for companies that can raise their dividends year after year without milking operations, you will automatically be lead to high quality stocks.”

– Edmund Faltermayer, Fortune magazine, October 1990

Our watchlist of the top Canadian dividend growth stocks for 2024

The year 2023 is now in the past. Last week, I presented the criteria for constructing our watchlist:

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

Here is ‘The List’ for 2024:

We have removed Algonquin Power & Utilities (AQN-N) from ‘The List’ as it reduced its dividend in 2023 and no longer qualifies. In its place, we have added two new companies: Manulife Financial (MFC-T) and Thomson Reuters (TRI-N) for 2024.

Manulife Financial recently met our minimum criteria of 10 consecutive years of dividend growth, transforming itself from a high-yield, slow-growth life insurance company to one with a high-growth global wealth and asset management business. Manulife boasts a ten-year dividend growth streak, starting with a yield of 5.0% and a 10-year annualized dividend growth rate of approximately 10%. Over the past decade, it has proven to be an above-average income generator, with a historical growth yield (yield on cost) of 7% on a purchase made ten years ago. Holding onto strong dividend growers for the long term can indeed surpass average historical market returns with dividends alone.

Thomson Reuters was previously on ‘The List’ but exhibited more characteristics of a ‘growth-only’ stock due to its sluggish dividend growth. However, the company has recently accelerated its dividend growth rate at a double-digit pace, prompting us to reinstate it on ‘The List.’ We are also optimistic about the company’s significant investments in artificial intelligence in its product offerings and acquisitions. Thomson Reuters holds a thirty-year dividend growth streak, starting with a yield of 1.3%, and a 5-year annualized dividend growth rate of approximately 5.3%. It has delivered above-average total returns (15.7% CAGR) over the past decade, challenging the notion that market-beating returns are impossible with a dividend growth investing strategy.

Under our set criteria, companies on ‘The List’ are reviewed annually on January 1, leading to additions or removals. Weekly updates ensure that prices and dividends remain current. ‘The List’ for 2024 comprises 28 companies strategically diversified across nine sectors within the Canadian economy.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

After a long period of low rates, the time has come for older investors to be even more prudent (Globe & Mail)

https://www.theglobeandmail.com/investing/investment-ideas/article-after-a-long-period-of-low-rates-the-time-has-come-for-older-investors/

This former portfolio manager with four decades of experience had this familiar advice for older investors:

“In order to protect their nest eggs when there is less time to bounce back from losses, older investors should decrease their equity exposure and increase the income portion, particularly in their bond weightings.”

How often have we encountered the recommendation to shift our portfolios towards a 60/40 split between equities and bonds as retirement approaches? The reality is that over time, losses in bonds tend to surpass those in any stock market correction.

I think my mentor, Tom Connolly, said it best:

“If you are new to dividend growth investing and hold a few bonds, I’d keep them for a while…until the dividend income starts to grow…until you realize what’s going on. Once your growth yield (yield on cost) gets close to the yield on your bonds, you’ll know what to do.”

First Quantum Comments on Developments in Panama (Franco Nevada Corporation Royalty Stream)

https://www.first-quantum.com/English/announcements/announcements-details/2023/First-Quantum-Provides-Update-on-Cobre-Panama/default.aspx

In a surprise ruling on November 28, 2023, the Supreme Court of Panama has ruled that the agreement (Law 406) between the government and the mines owner, First Quantum Minerals, was unconstitutional and the agreement is void. As of now, there will be a transition process for the closure of the Cobre Panama mine.

Franco-Nevada management has stated that in the event of a prolonged dispute, the mine operators would likely opt for arbitration to settle the matter. This is precisely what transpired.

First Quantum Minerals has formally notified the government of its intent to commence arbitration to uphold its rights under international law as per the Canada-Panama Free Trade Agreement. Additionally, First Quantum has initiated arbitration proceedings before the International Court of Arbitration to safeguard its rights under the 2023 concession agreement, endorsed by the Government of Panama earlier this year. The arbitration agreement specifies Miami, Florida, as the venue for arbitration. Historically, international arbitrators have tended to rule in favor of mining companies in similar disputes.

Although the past month has been frustrating for investors, the current stock price of Franco-Nevada now reflects the complete write-off of the Cobre Panama royalty stream. We believe this reaction is overdone, and the decision will likely be reversed for several reasons.

Next year’s elections (May 2024) will significantly influence the resolution. The mine contributes approximately 5% to the country’s GDP and supports at least 40,000 jobs. The new government is unlikely to overlook this critical political and revenue source. Additionally, this is not the first occurrence of such a situation. In 2017, the agreement between the mine and its owner was declared unconstitutional, and the decision was subsequently reversed.

We will keep our subscribers informed of any new developments.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ had dividend announcements last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No earnings reports from companies on ‘The List’ this week

Last week, there were no earnings reports from companies on ‘The List’.

MP Market Review – December 22, 2023

Last updated by BM on December 25, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +5.1% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).
Last week, there were no dividend announcements from companies on ‘The List’.
Last week, there were no earnings reports from companies on ‘The List’.
No companies on ‘The List’ are due to report earnings this week.

The List (2023)

Performance of ‘The List’

Last week, ‘The List’ was up with a YTD price return of +5.1% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were TFI International (TFII-N), up +11.43%; Loblaws (L-T), up +6.31%; and Brookfield Infrastructure Partners (BIP-N), up +5.21%.

Telus Corp. (T-T) was the worst performer last week, down -2.80%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	7.9%	$6.44	-4.3%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$76.76	27.6%	$0.60	26.6%	13
BCE-T	Bell Canada	7.5%	$51.41	-14.6%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$31.68	1.1%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$59.70	2.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$165.67	1.7%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$139.97	-4.5%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.48	-14.8%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$94.19	17.9%	$0.27	23.8%	12
EMA-T	Emera	5.7%	$49.43	-6.1%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.4%	$47.82	-10.3%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.4%	$35.51	-0.6%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.2%	$111.24	-19.5%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$53.96	-2.5%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$200.23	2.3%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$126.06	4.8%	$1.74	13.2%	11
MGA-N	Magna	3.1%	$59.03	2.6%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$67.27	-10.9%	$1.21	12.0%	28
RY-T	Royal Bank of Canada	4.0%	$133.67	4.4%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$75.93	53.1%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.7%	$104.48	59.9%	$0.77	8.5%	11
TD-T	TD Bank	4.5%	$85.12	-2.9%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$132.32	32.1%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$115.63	18.3%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.0%	$53.01	-0.5%	$3.69	3.4%	22
T-T	Telus Corp.	6.1%	$23.29	-11.5%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$147.33	11.9%	$1.05	10.5%	13
Averages		3.4%		5.1%		9.1%	19

DGI Clipboard

“Success in investing begins with a watchlist – the carefully chosen stocks that have the potential to transform your financial future.”

– Anonymous

Making ‘The List’ and checking it twice

Many of the most important concepts I learned about running a business came from two of my mentors, Bill Gates and Warren Buffett. Both Gates and Buffett believe that focus, concentration on key goals, and the ability to say “no” to distractions are crucial elements in achieving success in their respective fields.

Creating a focused watchlist helps me stay invested and reduces distractions compared to following the entire market. It simplifies updating key metrics regularly and gaining a deeper understanding of selected companies. Starting the year with a watchlist of Canadian dividend growth stocks, I monitor their performance over twelve months to identify potential investment candidates, although I may not invest in all of them.

To begin our selection, we start with a review of the listed companies on The Toronto Stock Exchange (TSX). The TSX is one of the world’s largest stock exchanges and the third largest in North America. It is home to over 1500 companies across all sectors of the Canadian economy.

‘The List’ criteria are simple:

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

By screening for the first two criteria, ten years of consecutive dividend growth and a market cap of one billion dollars or more, we winnow our candidates down to only 57 companies (less than 4% of the companies on the TSX).

We delve into the last two criteria, diversification, and cyclicality, aiming for our list to represent the Canadian economy and serve as a coaching tool for our DGI strategy. Many Canadian investors are overly concentrated in a few sectors or tend to chase trends, resulting in diminished returns during economic shifts. Applying these criteria enables us to compare companies within a sector using quality indicators, resulting in approximately 30 companies on ‘The List’ (2% of TSX-listed companies).

One of the first things I learned about dividend growth investing (DGI) is that it is a risk-reduction strategy. By its nature, DGI forces investors into higher-quality names. After all, for a company’s management to commit to a dividend payout policy, the company needs to generate cash to pay the dividends. As it turns out, high-quality companies are more likely to be profitable and generate cash to pay dividends consistently.

Not all stocks on ‘The List’ will enter our MP Wealth-Builder Model Portfolio (CDN), but the majority will. Clearly defining your goals and objectives makes ‘The List’ an excellent starting point for any DGI journey.

I prefer keeping ‘The List’ under 30 companies for easier monitoring of quality dividend growers. Last year, it comprised 27 stocks. I rarely remove any the next year unless they don’t meet our initial criteria or undergo a significant business model change. For instance, Algonquin Power & Utilities Corp. (AQN-N) cut its dividend last year. As a result, (AQN-N) will be removed from the list in 2024, and at least one new stock will be added.

Although the markets can be volatile and price growth uncertain in the short term, the same is not true about dividend growth. Dividend growth is highly predictable. Since I have been creating a public watchlist, the average dividend growth of the companies on ‘The List’ has far exceeded inflation. This growing and inflation-protected income is one of the more magical things about a dividend growth investing strategy.

Next week, I will unveil ‘The List’ for 2024.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

Dividend portfolios: the gift that keeps on giving (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-dividend-portfolios-the-gift-that-keeps-on-giving/

“Opening Christmas presents is a treat for children, but these days I’d rather have my stocking stuffed with dividends and kept well away from the fire. After all, dividends can pay for a comfortable retirement and many happy holidays.”

All of the dividend portfolios the author tracks have outperformed the index over the long term.

Tiff Macklem isn’t ready to bring the same holiday cheer that Jay Powell is (Globe & Mail)

https://www.theglobeandmail.com/business/commentary/article-tiff-macklem-isnt-ready-to-bring-the-same-holiday-cheer-that-jay/

“It’s still too early to consider cutting our policy rate,” he said. “Until we see evidence that we are clearly on a path back to two-per-cent inflation, I expect Governing Council will continue to debate whether monetary policy is restrictive enough, and how long it needs to remain restrictive to restore price stability.”

According to the author, Canada’s declining productivity gives Mr. Macklem less wiggle room than Cousin Jay south of the border and less likely to let his policy guard down anytime soon.

Canadian logistics firm TFI International to buy Daseke in $1.1-billion deal, including debt (Globe & Mail)

https://www.theglobeandmail.com/business/article-canadian-logistics-firm-tfi-international-to-buy-daseke-in-11-billion/

“The combined company’s truckload segment is expected to generate about $3.6 billion in annual total revenue on a pro forma basis and would become one of the largest truckload businesses in Canada, TFI said.”

TFI International has been an excellent total return performer. Growing through strategic acquisitions and integrating them well has been how this quality dividend grower continues to outperform its peers.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ had dividend announcements last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No earnings reports from companies on ‘The List’ this week

Last week, there were no earnings reports from companies on ‘The List’.

MP Market Review – December 15, 2023

Last updated by BM on December 18, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down with a YTD price return of +3.0% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).
Last week, there were no dividend announcements from companies on ‘The List’.
Last week, there were two earnings reports from companies on ‘The List’.
No companies on ‘The List’ are due to report earnings this week.

The List (2023)

Performance of ‘The List’

Last week, ‘The List’ was down with a YTD price return of +3.0% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were Brookfield Infrastructure Partners (BIP-N), up +6.92%; Algonquin Power & Utilities (AQN-N), up +6.59%; and Waste Connections (WCN-N), up +5.12%.

Dollarama Inc. (DOL-T) was the worst performer last week, down -9.68%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	7.8%	$6.47	-3.9%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$76.76	27.6%	$0.60	26.6%	13
BCE-T	Bell Canada	7.5%	$51.78	-14.0%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$30.11	-3.9%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$58.73	1.2%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$161.01	-1.1%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$141.56	-3.4%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.70	-14.2%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$90.00	12.7%	$0.27	23.8%	12
EMA-T	Emera	5.7%	$49.56	-5.8%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.5%	$47.36	-11.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.4%	$34.68	-2.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.2%	$111.11	-19.6%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.89	-0.8%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$200.24	2.3%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$118.58	-1.5%	$1.74	13.2%	11
MGA-N	Magna	3.2%	$56.66	-1.5%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$65.53	-13.2%	$1.21	12.0%	28
RY-T	Royal Bank of Canada	4.1%	$131.39	2.6%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.3%	$72.78	46.8%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$101.95	56.1%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$83.52	-4.7%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$118.75	18.6%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$113.55	16.2%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.1%	$52.00	-2.4%	$3.69	3.4%	22
T-T	Telus Corp.	6.0%	$23.96	-9.0%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$145.41	10.4%	$1.05	10.5%	13
Averages		3.4%		3.0%		9.1%	19

DGI Clipboard

“The dividend is such an important factor in the success of many stocks, that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 to 20 years in a row.”

Peter Lynch, Beating the Street p. 49

Spend income not capital

Renowned investor and author Peter Lynch advocated for dividend growth companies, demonstrating in a chart how an investor could annually withdraw 7% in an all-stock portfolio without depleting their funds. The chart highlights the flexibility in retirement funding choices.

For years, financial planners have promoted the ‘4% Rule’ in retirement planning. Switching to a 60/40 mix of bonds and stocks and withdrawing 4% of your hard-earned capital increases the likelihood of outliving your money. For many, this necessitates significant savings during their working years and some sleepless nights in retirement as their income stops growing and they rely more and more on capital performance.

Lynch grasped how dividends drive portfolio performance, and his ‘Stay in Stocks’ strategy emphasizes this belief. Many financial planners overlook that dividend companies are safer and continue to grow their dividends in retirement, making them more attractive than other stocks or fixed income as a source of growing income.

Nevertheless, a study on withdrawal strategies, that encapsulated seventy-one “rolling” twenty-year periods, concluded that there is still a chance of your portfolio balance falling to zero along the way. Lynch’s returns and strategy were based on averages, and as we know, that can sometimes backfire, as evidenced in this study, occurring 15% of the time.

By incorporating one change, the study’s author found that he could increase the success of Lynch’s ‘Stay in Stocks’ strategy to 100%. This change, termed the ‘90% Balance Rule,’ stipulates that if, after the income withdrawal is taken at the end of each year, the portfolio balance falls below 90% of the original starting amount, the annual withdrawal is reduced by 50%. In subsequent years, the portfolio balance is monitored for a rise back above 90% of the original starting amount, at which point a 7% income withdrawal can be reinstated.

Applying the ‘90% Balance Rule’ over all 20-year periods of the test sample resulted in 96% of finishing portfolio balances ending above the initial starting level with no portfolio failures. Another notable observation was that a high majority (82%) of the twenty-year periods required none or only one reduction in the withdrawal rate.

The author recommends that investors may want to take additional steps to compensate for a period of lower income derived from reduced withdrawal rates, such as building a ‘safe money’ bucket or having access to other sources of backup income.

While sustaining oneself solely on dividend income, without capital withdrawals, is achievable for some, for the majority, a DGI plan that combines both income and capital withdrawals while preserving the original capital, and incorporating the ‘90% Balance Rule,’ may be more realistic.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

U.S. Federal Reserve keeps key interest rate unchanged, foresees three cuts next year (Globe & Mail)

https://www.theglobeandmail.com/business/international-business/us-business/article-us-federal-reserve-may-shed-light-on-prospects-for-rate-cuts-in-2024/

On Wednesday, the Federal Reserve maintained steady rates and hinted at potential interest rate cuts next year. However, on Friday, there was a market pullback. The stock market’s volatility is evident – investors oscillate between optimism and pessimism. It’s crucial to avoid being swayed by these fluctuations and instead concentrate on the fundamentals of quality companies. Focus on earnings, dividends, and outlooks for a more accurate signal of the market’s direction.

Everyone knows stock market predictions are awful. So why make them and should investors care? (Globe & Mail)

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-everyone-knows-stock-market-predictions-are-awful-so-why-make-them-and/

“I looked at 10 different firms’ one-year forecasts for the S&P 500 over the past 10 years and found that every single one of them missed the mark by more than 10 percentage points per year, on average.”

Expect many inaccurate short-term stock market prediction articles. Favor a long-term investment strategy aligned with historical success for goal achievement.

Dollarama profit jumps 31.4% as shoppers continue to look to discount retailers for inflation relief (Globe & Mail)

https://www.theglobeandmail.com/business/article-dollarama-profit-jumps-314-as-shoppers-continue-to-look-to-discount/

Dollarama’s recent earnings report had positive aspects, yet the stock declined nearly 10% last week. Analysts view the company as fully valued after a remarkable performance. If the pullback is excessive, investors could find an opportunity to purchase shares in this reputable retailer at a reasonable price.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ had dividend announcements last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No earnings reports from companies on ‘The List’ this week

Last week, there were two earnings reports from companies on ‘The List’.

Dollarama Inc. (DOL-T) released its third-quarter fiscal 2024 results before markets opened on Wednesday, December 13, 2023.

“Sustained consumer demand for our broad range of affordable everyday products and strong execution in the third quarter of Fiscal 2024 drove double-digit same store sales growth for a sixth consecutive quarter as well as over 31% earnings per share growth. Our financial and operational performance year-to-date reflects the strength and relevance of our value proposition and business model in a challenging macro-economic context.”

– Neil Rossy, President and Chief Executive Officer

Highlights:

1% increase in comparable store sales
0% growth in EBITDA to $478.8 million, or 32.4% of sales
Diluted net earnings per common share up 31.4% to $0.92
Fiscal 2024 guidance for comparable store sales growth increased to between 11.0% to 12.0%

Outlook:

Based on our performance fiscal year-to-date and assuming continued positive customer response to our product offering, value proposition and in-store merchandising in the fourth quarter of Fiscal 2024, the Corporation has increased its full-year comparable store sales guidance to a range of 11.0% to 12.0%. All other guidance ranges and underlying assumptions remain unchanged.

Source: (DOL-T) Q2-2024 Quarterly Report

Enghouse Systems Limited (ENGH-T) released its fourth-quarter and fiscal 2023 results after markets closed on Thursday, December 14, 2023.

“In fiscal 2023 we achieved a significant milestone by expanding our revenue, increasing our cash reserves and also deploying $55.2 million on acquisitions. We are pleased to announce record annual SaaS and Maintenance services revenue of $297.6 million, an increase of $39.4 million or 15.2% compared to the prior year. SaaS and maintenance services are an important strategic source of revenue characterized by their predictable and recurring nature. They now represent 65.6% of total revenues for the year compared to 60.4% in the prior year.”

– Stephen J. Sadler, Chairman and Chief Executive Officer

Highlights:

Revenue increased 13.9% to $123.1 million.
Recurring revenue, which includes SaaS and maintenance services, grew 35.0% to $87.2 million.
Operating profits improved from $33.1 to $35.7 million, while achieving a 30.8% EBITDA margin.

Outlook:

With cash reserves of $240.4 million and no external debt, we continue to actively pursue opportunities to strategically deploy our cash reserves on acquisitions and return cash to our shareholders in the form of dividends.

Source: (ENGH-T) Q4-2023 Quarterly Report

MP Market Review – December 08, 2023

Last updated by BM on December 11, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +3.7% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).
Last week, there were no dividend announcements from companies on ‘The List’.
Last week, there were no earnings reports from companies on ‘The List’.
Two companies on ‘The List’ are due to report earnings this week.

The List (2023)

The Magic Pants List includes 27 Canadian dividend growth stocks. Each have raised their dividend annually for the last ten years (or longer) and have a market cap of over a billion dollars. Based on these criteria, companies on ‘The List’ are added or removed annually, on January 1. Prices and dividends are updated weekly.

Performance of ‘The List’

Last week, ‘The List’ was up with a YTD price return of +3.7% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were Loblaws (L-T), up +4.96%; CCL Industries (CCL-B-T), up +3.56%; and Stantec Inc. (STN-T), up +3.08%.

TFI International (TFII-N) was the worst performer last week, down -5.27%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.3%	$6.07	-9.8%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$76.76	27.6%	$0.60	26.6%	13
BCE-T	Bell Canada	7.0%	$55.20	-8.4%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$28.16	-10.1%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$59.61	2.7%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$160.06	-1.7%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.8%	$144.53	-1.4%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.58	-14.5%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$99.65	24.8%	$0.27	23.8%	12
EMA-T	Emera	5.7%	$49.10	-6.7%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.5%	$47.46	-11.0%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$33.63	-5.8%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.3%	$108.49	-21.5%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.1%	$55.33	0.0%	$2.29	5.3%	49
IFC-T	Intact Financial	2.1%	$210.25	7.4%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$124.05	3.1%	$1.74	13.2%	11
MGA-N	Magna	3.4%	$54.92	-4.5%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$68.48	-9.3%	$1.21	12.0%	28
RY-T	Royal Bank of Canada	4.3%	$125.24	-2.2%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$79.53	60.4%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.7%	$105.03	60.8%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.01	-7.6%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$115.30	15.2%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$113.60	16.3%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.1%	$51.65	-3.1%	$3.69	3.4%	22
T-T	Telus Corp.	5.7%	$25.06	-4.8%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$138.33	5.0%	$1.05	10.5%	13
Averages		3.4%		3.7%		9.1%	19

DGI Clipboard

“You are never going to be successful with every single investment. But if you can consistently keep the odds in your favor over time, you can become the casino and not the guy blowing his paycheck drinking watered-down cocktails at The Flamingo.”

– Daryl Jones, HEDGEYE

Be the casino not the gambler

In a standard game of blackjack played with a single deck and employing basic strategy, the house edge typically hovers around 0.5%. This implies that, on average, the casino maintains a slight advantage over the player. However, variations such as multiple decks, rule adjustments, and player decisions can significantly sway the odds in favour of the casino.

For many investors, navigating the stock market may feel akin to sitting at a blackjack table, especially for those seeking short-term capital gains.

Dividend growth investors take a more disciplined approach. They follow a fundamental strategy and adopt a longer-term investing horizon, distinguishing them from other investors. They can afford to patiently await the fruition of their strategy while enjoying the growth of their income.

History has shown that the longer the holding period, with all equities, the more likelihood of a positive return. The chart highlights one of the major differences between how the industry pros invest (Wall Street/Bay Street) and investors with a longer-term investing horizon.

In reviewing our trades (timestamps) over the past six years of our dividend growth investing journey, we see this scenario play out.

The data in our historical DGI timestamp chart can be summarized further by dividing the number of trades with positive returns by the number of trades made for each year. The results support our research into why dividend growth investing is one of the best ways to build wealth. First, a rising dividend income stream will eventually lead to rising stock prices—secondly, the longer the holding period the more significant and more predictable the returns.

Year 1 2023: 86% (12/14) # of positive price returns are volatile.

Year 2 2022: 30% (3/10)

Year 3 2021: 59% (10/17) # of positive price returns stabilizing.

Year 4 2020: 71% (10/14)

Year 5 2019: 100% (3/3) # of positive price returns are highly predictable.

Year 6 2018: 94% (15/16)

Like the casino example, we are able to tilt the odds in our favour with DGI, and by extending our investment time horizon (rule adjustment), we enhance the odds of a positive outcome even further.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

Bank of Canada holds key interest rate steady but warns ready to hike again (Globe & Mail)

https://www.theglobeandmail.com/business/article-bank-of-canada-interest-rate-december/

“Governing council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed.”

With many homeowners now facing higher mortgage renewal rates and a slowing economy, the probability of a recession taking hold in 2024 seems more likely. Whether it will be a ‘soft landing’ or not remains to be seen.

Profits in Canadian grocery sector set to exceed record in 2023, expert says (Globe & Mail)

https://www.theglobeandmail.com/business/article-profits-in-canadian-grocery-sector-set-to-exceed-record-in-2023-expert/

“New research by the centre found that food retailers are now earning more than twice as much profit as they did pre-pandemic.”

After our recent purchase of Metro Inc. (MRU-T) in our model portfolio, this headline appears to be good news. The problem is that the ‘tax the rich’ crowd in Ottawa are zeroing in on the industry for short-term political gain.

Eric La Fleche, president and CEO of Metro Inc. is scheduled to present during the first half of the committee meeting today.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ had dividend announcements last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Two earnings reports from companies on ‘The List’ this week

Dollarama Inc. (DOL-T) will release its third-quarter fiscal 2024 results on Wednesday, December 13, 2023, before markets open.

Enghouse Systems Limited (ENGH-T) will release its fourth-quarter and fiscal 2023 results on Thursday, December 14, 2023, after markets close.

Last week, no earnings reports from companies on ‘The List’.

MP Market Review – December 01, 2023

Last updated by BM on December 04, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +3.4% (capital). Dividends have increased by +9.0% YTD, highlighting the growth in the dividend (income).
Last week, four dividend announcements from companies on ‘The List’.
Last week, three earnings reports from companies on ‘The List’.
No companies on ‘The List’ are due to report earnings this week.

The List (2023)

Performance of ‘The List’

Last week, ‘The List’ was up with a YTD price return of +3.4% (capital). Dividends have increased by +9.0% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were Stantec Inc. (STN-T), up +6.64%; Algonquin Power & Utilities (AQN-N), up +4.81%; and Waste Connections (WCN-N), up +4.74%.

Franco Nevada (FNV-N) was the worst performer last week, down -3.74%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.0%	$6.32	-6.1%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$76.93	27.9%	$0.60	26.6%	13
BCE-T	Bell Canada	7.1%	$54.39	-9.7%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$27.75	-11.4%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$57.56	-0.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$160.23	-1.6%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.8%	$142.86	-2.5%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.8%	$30.82	-16.6%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$99.42	24.5%	$0.27	23.8%	12
EMA-T	Emera	5.8%	$48.37	-8.1%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.5%	$47.47	-11.0%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$34.33	-3.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.2%	$113.16	-18.1%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.84	-0.9%	$2.29	5.3%	49
IFC-T	Intact Financial	2.1%	$210.80	7.7%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$118.19	-1.8%	$1.74	13.2%	11
MGA-N	Magna	3.3%	$55.68	-3.2%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$68.32	-9.5%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.3%	$122.94	-4.0%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$78.30	57.9%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$101.89	56.0%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.91	-6.6%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$121.72	21.6%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$113.05	15.7%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.2%	$51.06	-4.2%	$3.69	3.4%	22
T-T	Telus Corp.	5.7%	$24.98	-5.1%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$139.63	6.0%	$1.05	10.5%	13
Averages		3.4%		3.4%		9.0%	19

DGI Clipboard

“It is far better to buy a great business at a fair price than a fair business at a great price”

– Warren Buffett

Less is better: quality not quantity for safely building wealth.

It is no coincidence that our dividend growth investing strategy incorporates identifying individual ‘quality’ companies as the first step in our process. Study after study backs our strategy that the best way to have long-term investment success is to select a few individual quality stocks and hold for the growing income. Buying quantity (think ETF) does not reduce risk, it only lowers your returns. Risk is in the price we pay not in how many stocks we own.

Understanding this key difference in what we do and what others don’t, is the key to our long-term success.

Although we don’t have a formal quality rating system, we identify quality individual companies by looking for indicators that have shown themselves to be highly predictive of long-term success. Stocks with strong business models and steady financial results over time are the ones we eventually invest in. We also value the independent research from services that sell information for a living (Value Line, S&P Credit Ratings). For more information on all our quality indicators read our post ‘Finding Quality Dividend Growth Stocks’ which was recently updated.

Because of our focus on quality, you will see us sometimes open a position in a company when it reaches a sensible price as opposed to one that has a great price.

There were a few significant events this past week which we will touch on in this issue. First the passing of Charlie Munger, Buffets right hand man. Secondly, bank earnings were released. Finally, an update on the Cobre Panama mine where the Panamanian court ruled that Law 406 was unconstitutional. Franco Nevada (FNV-T), a core stock on ‘The List’ and in our model portfolio, has a significant royalty stream coming from this mine.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

What Charlie Munger taught Warren Buffett about investing, and life

https://www.theglobeandmail.com/business/commentary/article-what-charlie-munger-taught-warren-buffett-about-investing-and-life/

Charlie Munger is often credited with advising Warren Buffet on the value of investing in quality companies at reasonable prices. Buffett had previously made a reputation of investing in companies that were severely undervalued (great price).

Good advice by Mr. Munger on the importance of knowing who you are.

“And the most important person you must understand is: you. Because if you don’t see the world as it really is, and yourself as you really are, then barring the happenstance of good luck, your life is likely to be marked by disappointment and failure.”

Article takeaway: Lifelong learning and lifelong companionship, to the degree we can attain them, pay dividends — tangibly and intangibly.

Banks brace for tough economic times in 2024 (Globe & Mail)

https://www.theglobeandmail.com/business/article-banks-brace-for-tough-economic-times-in-2024/

“The country’s largest lenders posted mixed fourth-quarter financial results this week. As uncertainty looms over just how far the economy could tumble next year, bank earnings point to lower profits and an uptick in sour loans.”

Depending on which earnings report you read, Canada’s banks are either modestly optimistic or very cautious in their predictions. One thing for sure, the economy is slowing and per capital GDP is decreasing.

Franco-Nevada Maintained at Outperform at BMO as it Sees Lengthy Cobre Panama Shutdown; Price Target cut to C$200.00

11:23 AM EST, 12/04/2023 (MT Newswires) — BMO Capital Markets on Monday reiterated its Franco-Nevada (FNV.TO, FNV) while cutting its price target to C$200.00 from C$214.00 as it expects a lengthy shutdown for First Quantum Minerals (FM.TO) Cobre Panama project amid an uncertain political outlook for the project. Franco-Nevada has a significant royalty interest in the project.

“We have pushed our assumed restart for Cobre Panama to October 1, 2024 (from January 1, 2024 previously) based on our evolving understanding of the circumstances in country … Our Franco-Nevada estimates are also impacted by the mine closure due to its stream on Cobre Panama. With our updated closure assumption, our Franco-Nevada one-year target has fallen to C$200/share (from C$214); we maintain our Outperform rating,” analyst Jackie Przybylowski wrote.

Trying to speculate on when the mine will re-open is not what we do. The mine is too important to the country and its global reputation to stay shut down for long. Franco-Nevada is a quality company and will survive these short-term headwinds.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

Four companies on ‘The List’ had dividend announcements last week.

Alimentation Couche-Tard Inc. (ATD-T) on Tuesday said it increased its 2023 quarterly dividend from $0.14 to $0.175 per share, payable December 21, 2023, to shareholders of record on December 07, 2023.

This represents a dividend increase of +25.0%, marking the 14th straight year of dividend growth for this global leader in both convenience store and road transportation fuel retail.

Enbridge Inc. (ENB-T) on Wednesday said it increased its 2024 quarterly dividend from $0.8875 to $0.915 per share, payable March 1, 2024, to shareholders of record on February 15, 2024.

This represents a dividend increase of +3.1%, marking the 28th straight year of dividend growth for this pipeline company.

Royal Bank of Canada (RY-T) on Thursday said it increased its 2024 quarterly dividend from $1.35 to $1.38 per share, payable February 23, 2024, to shareholders of record on January 25, 2024.

This represents a dividend increase of +2.0%, marking the 13th straight year of dividend growth for this quality Canadian bank.

TD Bank (TD-T) on Thursday said it increased its 2024 quarterly dividend from $0.96 to $1.02 per share, payable January 31, 2024, to shareholders of record on January 10, 2024.

This represents a dividend increase of +6.3%, marking the 13th straight year of dividend growth for this quality Canadian bank.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

No earnings reports from companies on ‘The List’ this week

Last week, three earnings reports from companies on ‘The List’.

Alimentation Couche-Tard Inc. (ATD-T) released its second-quarter fiscal 2024 results on Tuesday, November 28, 2023, after markets closed.

“We are pleased to announce a solid second quarter with good progress across most of our key metrics, although we did see softening in same store sales in the U.S., driven by weakness in the cigarette category and cycled against a robust second quarter, up 5.6%, last year. In an environment with continued inflation and high interest rates, we remain committed to offering compelling value and ease. We have substantially expanded the rollout of our Inner Circle membership program, which is now in seven U.S. business units covering close to 3,000 locations with over 2.7 million fully enrolled, providing meaningful convenience and fuel rewards to our most valuable customers. As America’s Thirst Stop, we are focused on the growth of our beverage category by offering great assortment, innovation and value in both packaged and dispensed beverages at affordable price points. We also continue to be pleased with the performance of our fuel business, in terms of both volumes and margins, as we continue to bring traffic to our sites through reoccurring promotional Fuel Days.”

– Brian Hannasch, President and Chief Executive Officer

Highlights:

Net earnings were $819.2 million, or $0.85 per diluted share for the second quarter of fiscal 2024 compared with $810.4 million, or $0.79 per diluted share for the second quarter of fiscal 2023. Adjusted net earnings were approximately $792.0 million compared with $838.0 million for the second quarter of fiscal 2023. Adjusted diluted net earnings per share were $0.82, unchanged compared with the corresponding quarter of last year.
Total merchandise and service revenues of $4.1 billion, an increase of 1.0%. Same-store merchandise revenues decreased by 0.1% in the United States, by 0.2% in Europe and other regions, and increased by 1.6% in Canada.
Same-store road transportation fuel volumes decreased by 1.5% in the United States, by 0.9% in Europe and other regions, and increased by 3.0% in Canada.
Growth of expenses for the second quarter of fiscal 2024 was 2.5% while normalized growth of expenses was 1.5%, remaining below the average inflation observed throughout the Corporation’s network.
Subsequent to the end of the quarter, the Corporation closed the acquisition of 112 company-owned and operated convenience retail and fuel sites in the United States.
During its November 28, 2023 meeting, the Board of Directors approved an increase in the quarterly dividend of CA 3.5¢ per share, bringing it to CA 17.5¢ per share, an increase of 25.0%.

Outlook:

“Following the announcement of our 10 For The Win five-year strategy, we are excited by the recent developments in the growth of our network. In the beginning of November, we closed on the acquisition of 112 MAPCO sites, accelerating our development in key markets in Alabama, Georgia, Kentucky, Mississippi and Tennessee and adding approximately 1,300 team members to the Alimentation Couche-Tard Family. We also recently received an important decision by the European Commission allowing us to move closer to an end of calendar year completion of our game-changing acquisition of TotalEnergies in four new European countries. On the organic front, we are making progress on our stated goal of building 500 stores over the next five years, having already finished more than 40 new stores this fiscal year with considerably more in the pipeline that are either currently under or starting construction in the upcoming months,” concluded Brian Hannasch.

Source: (ATD-T) Q2-2024 Quarterly Review

Royal Bank of Canada (RY-T) released its fourth-quarter and fiscal 2023 results on Thursday, November 30, 2023, before markets opened.

“In a year defined by uncertainty, RBC served as a stabilizing force for our clients, communities, colleagues and shareholders. Our overall performance in 2023 exemplifies our standing as an all-weather bank. Our strong balance sheet, prudent risk management and diversified business model continue to underpin our ability to deliver differentiated client experiences and advice across all our businesses. As we enter 2024, RBC will work to provide the best client value as efficiently as possible, sharpening our focus to ensure our people and investments are aligned to build the bank of the future. Across RBC, our employees remain steadfast in their commitment to helping clients and communities adapt and thrive in a changing world.”

– Dave McKay, President and Chief Executive Officer

Highlights:

Net income and diluted EPS of $4.1 billion and $2.90, respectively, were both up 6% from a year ago. Adjusted net income and adjusted diluted EPS of $4.0 billion and $2.78, respectively, were up 1% and flat compared to the prior year, respectively.
Results this quarter reflected higher provisions for credit losses, with a PCL on loans ratio of 34 bps. Results benefitted from lower taxes reflecting a favourable shift in earnings mix and the impact of the specified item relating to certain deferred tax adjustments of $578 million.
Pre-provision, pre-tax earnings of $4.8 billion were down 9% from a year ago, due to lower revenue in Wealth Management, largely reflecting the impact of impairment losses with respect to our interest in an associated company, as well as lower revenue in Global Markets. Results were also impacted by higher expenses, reflecting higher staff-related costs including severance, higher professional fees, ongoing technology investments and other items, such as legal provisions in U.S. Wealth Management. These factors were partially offset by higher net interest income driven by higher spreads and strong volume growth in Canadian Banking, higher revenue in Corporate & Investment Banking, and higher fee-based revenue in Wealth Management.
Compared to last quarter, net income was up $259 million or 7% reflecting higher results in Corporate Support, Insurance and Capital Markets, partially offset by lower results in Wealth Management and Personal & Commercial Banking. Adjusted net income13 was down 1% over the same period.

Outlook:

Economic and market review and outlook GDP growth is slowing across most advanced economies as headwinds from higher interest rates continue to have a lagged impact. Unemployment rates remain low across most economies. However, they have begun to marginally increase in Canada and the United Kingdom (U.K.). The U.S. economy has remained resilient with strong GDP growth and a low unemployment rate. However, credit conditions continue to tighten, the number of job openings are signaling a decline in hiring demand and the excess of household savings accumulated during the pandemic has shrunk. U.S. GDP growth is expected to slow late in calendar 2023 with mild recessions expected in the first half of calendar 2024. Canadian GDP is expected to decline over the second half of calendar 2023 and grow slowly in early calendar 2024. Inflation is still high but has been slowing in most advanced economies. Interest rates have increased to levels that most central banks view as sufficient to slow economic growth and reduce inflationary pressures over time. We expect central banks will not increase policy interest rates further and expect a shift to reductions in interest rates from the Federal Reserve (Fed) and Bank of Canada (BoC) in the next calendar year. However, interest rates are expected to remain significantly higher than pre-pandemic levels.

Source: (RY-T) Q4-2023 Quarterly Review

TD Bank (TD-T) released its fourth-quarter and fiscal 2023 results on Thursday, November 30, 2023, before markets opened.

“TD delivered strong revenue growth this quarter, reflecting positive underlying business momentum and the benefits of our diversified business model. In a complex operating environment, we continued to adapt, invest in new capabilities and take important steps to deliver efficiencies and drive growth across the Bank.”

– Bharat Masrani, Group President and CEO

Highlights:

FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter last year:

Reported diluted earnings per share were $1.49, compared with $3.62.
Adjusted diluted earnings per share were $1.83, compared with $2.18.
Reported net income was $2,886 million, compared with $6,671 million.
Adjusted net income was $3,505 million, compared with $4,065 million.

FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:

Reported diluted earnings per share were $5.60, compared with $9.47.
Adjusted diluted earnings per share were $7.99, compared with $8.36.
Reported net income was $10,782 million, compared with $17,429 million.
Adjusted net income was $15,143 million, compared with $15,425 million.

Outlook:

The global economy remains on track to slow in calendar 2023 and 2024, but to a lesser extent than anticipated in the previous quarter. Inflation has generally continued to cool across the G-7, and more central banks have taken a pause on interest rate hikes. Central bankers will remain vigilant on inflation and further rate hikes cannot be ruled out, but most are fine-tuning interest rate adjustments at this stage. The lagged impact of cumulative interest rate hikes is expected to be the primary influence dampening economic growth and returning inflation closer to the target ranges of the various regions by the end of calendar 2024.

TD Economics continues to believe there is a chance the federal funds rate may rise a further quarter point from its current range of 5.25-5.50% early in calendar 2024. The economic environment remains fluid. If the central bank sees evidence of further cooling in the labor market and is increasingly confident that inflation is headed towards its 2% target, it could opt to hold rates steady. Given the steep rise in interest rates over the past year, the trend towards tighter U.S. credit and financial conditions, and the likelihood of rolling periods of financial stress related to risk factors, the probability of a recession stateside remains elevated.

Source: (TD-T) Q4-2023 Quarterly Review

MP Market Review – November 24, 2023

Last updated by BM on November 27, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down slightly with a YTD price return of +2.5% (capital). Dividends have increased by +8.8% YTD, highlighting the growth in the dividend (income).
Last week, no dividend announcements from companies on ‘The List’.
Last week, no earnings reports from companies on ‘The List’.
Three companies on ‘The List’ are due to report earnings this week.

The List (2023)

Performance of ‘The List’

Last week, ‘The List’ was down slightly with a YTD price return of +2.5% (capital). Dividends have increased by +8.8% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were TFI International (TFII-N), up +3.76%; Enghouse Systems Limited (ENGH-T), up +2.53%; and Intact Financial (IFC-T), up +1.48%.

Canadian Tire (CTC-A-T) was the worst performer last week, down -5.86%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.4%	$6.03	-10.4%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.7%	$79.20	31.7%	$0.56	19.1%	13
BCE-T	Bell Canada	7.2%	$53.76	-10.7%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$27.19	-13.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$57.80	-0.4%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$157.24	-3.5%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$139.60	-4.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.8%	$30.72	-16.8%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$98.25	23.0%	$0.27	23.8%	12
EMA-T	Emera	5.8%	$48.20	-8.4%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.6%	$46.57	-12.7%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$34.44	-3.6%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.2%	$117.56	-14.9%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.1%	$55.73	0.7%	$2.29	5.3%	49
IFC-T	Intact Financial	2.1%	$212.14	8.4%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$121.67	1.1%	$1.74	13.2%	11
MGA-N	Magna	3.4%	$54.75	-4.8%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$69.74	-7.6%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.5%	$118.96	-7.1%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$79.46	60.3%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$95.55	46.3%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$83.35	-4.9%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$117.39	17.2%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$112.93	15.6%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.3%	$50.60	-5.1%	$3.69	3.4%	22
T-T	Telus Corp.	5.9%	$24.06	-8.6%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$133.31	1.2%	$1.05	10.5%	13
Averages		3.4%		2.5%		8.8%	19

DGI Clipboard

“Time in the market is more important than timing the market.”

Market Timing

Source: FMRco, January 2019

We likely all know someone who entered an investment right before it surged and exited just before a decline. However, finding individuals claiming consistent success in this practice is exceptionally challenging, if not impossible.

As the image above depicts, attempting to time the market is statistically unfavorable. On the contrary, an investor employing a buy-and-hold strategy, even with the most unfortunate timing in history, would still surpass the average investor by a substantial margin.

Consider a hypothetical investor who invested $50,000 in the S&P 500 at the market peak just before each of the four worst bear markets in the last 50 years:

Investment 1: $50,000 in December 1972 (before a 48% crash)

Investment 2: $50,000 in August 1987 (before a 34% crash)

Investment 3: $50,000 in December 1999 (before a 49% crash)

Investment 4: $50,000 in October 2007 (before a 52% crash)

Despite the dismal timing of these purchases, the investor refrained from panic selling and automatically reinvested dividends. By May 2019, their initial $200,000 investment had grown to $3,894,503. A commendable nest egg, considering the unfavorable timing of the investments.

Source: https://www.moneycrashers.com/reasons-shouldnt-time-market/

We tend to get similar results with our dividend growth investing strategy. Below is a chart we do each year with the companies on ‘The List’ to help us stay disciplined when it comes to market timing. Regardless of valuation or current market trends, purchasing an equal amount of every company on ‘The List’ on January 1, 2013, would have produced annualized returns of 12.4%.

10YR_CAGR-The List-01-01-2023

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

Cobre Panama Additional Operations Update and Revised Franco Nevada Guidance

https://s201.q4cdn.com/345177888/files/doc_news/2023/Nov/20/cobre-panama-operations-update-vf-2023-11-20.pdf

We continue to monitor the developments in a story that is impacting one of the companies on ‘The List.’

Franco-Nevada (FNV-N) holds a substantial royalty stream with First Quantum, the owner of the Cobre Panama mine. The recent uncertainty surrounding the constitutionality of the agreement between First Quantum and the government of Panama has exerted downward pressure on Franco-Nevada’s stock price.

In response to this, the company (FNV-T) has deemed the challenge to Law 406 significant enough to warrant a reissuing of guidance for this fiscal year. Currently, the Cobre Panama royalty stream constitutes approximately 21% of Franco-Nevada’s revenue. The stock is likely to face further declines if a swift resolution is not reached. Presently, the Supreme Court of Panama is in session, working towards resolving the issue.

On a positive note, Franco-Nevada and First Quantum have a crucial factor working in their favor. Cobre Panama, with its 4,000 employees, contributes around 5% to the national GDP. This economic impact may play a role in the resolution of the dispute. However, the stock’s fate hinges on the outcome of the Supreme Court deliberations.

BREAKING NEWS: Panama’s top court rules First Quantum’s mining contract is unconstitutional

https://www.theglobeandmail.com/business/article-panamas-top-court-rules-first-quantums-mining-contract-is/

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ announced a dividend increase last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Three earnings reports from companies on ‘The List’ this week

Alimentation Couche-Tard Inc. (ATD-T) will release its second-quarter fiscal 2024 results on Tuesday, November 28, 2023, after markets close.

Royal Bank of Canada (RY-T) will release its fourth-quarter and fiscal 2023 results on Thursday, November 30, 2023, before markets open.

TD Bank (TD-T) will release its fourth-quarter and fiscal 2023 results on Thursday, November 30, 2023, before markets open.

Last week, no earnings reports from companies on ‘The List’.

MP Market Review – November 17, 2023

Last updated by BM on November 20, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +3.2% (capital). Dividends have increased by +8.8% YTD, highlighting the growth in the dividend (income).
Last week, no dividend announcements from companies on ‘The List’.
Last week, two earnings reports from companies on ‘The List’.
No companies on ‘The List’ are due to report earnings this week.

The List (2023)

Last updated by BM on November 17, 2023

The Magic Pants List contains 27 Canadian dividend growth stocks. ‘The List’ contains Canadian companies that have raised their dividend yearly for at least the last ten years and have a market cap of over a billion dollars. Below is each stock’s symbol, name, current yield, current price, price return year-to-date, current dividend, dividend growth year-to-date and current dividend growth streak. Companies on ‘The List’ are added or subtracted once a year, on January 1. After that, ‘The List’ is set for the next twelve months. Prices and dividends are updated weekly.

While ‘The List’ does not function as a portfolio on its own, it serves as an excellent initial reference for individuals looking to diversify their investments and achieve higher returns in the Canadian stock market. Through our blog, we provide weekly updates on ‘The List’ and offer valuable perspectives along with real-life examples of our dividend growth investing (DGI) strategy in action. This aids readers in gaining a deeper understanding of how to implement and benefit from this investment approach.

If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service. Subscribers gain access to buy/sell alerts for our MP Wealth-Builder Model Portfolio (CDN) and exclusive content available only to subscribers.

Performance of ‘The List’

Last week, ‘The List’ was up with a YTD price return of +3.2% (capital). Dividends have increased by +8.8% YTD, highlighting the growth in the dividend (income).

The best performers last week on ‘The List’ were CCL Industries (CCL-B-T), up +8.01%; Brookfield Infrastructure Partners (BIP-N), up +7.17%; and Magna (MGA-N), up +6.48%.

Metro (MRU-T) was the worst performer last week, down -5.86%.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.5%	$5.97	-11.3%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.7%	$78.24	30.1%	$0.56	19.1%	13
BCE-T	Bell Canada	7.1%	$54.19	-10.0%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$27.36	-12.6%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$58.28	0.4%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$158.14	-2.9%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.7%	$147.82	0.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.28	-15.3%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$98.57	23.4%	$0.27	23.8%	12
EMA-T	Emera	5.7%	$49.09	-6.7%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.7%	$46.22	-13.3%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$33.59	-5.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.1%	$120.42	-12.8%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.0%	$56.46	2.0%	$2.29	5.3%	49
IFC-T	Intact Financial	2.1%	$209.04	6.8%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$121.76	1.2%	$1.74	13.2%	11
MGA-N	Magna	3.3%	$56.03	-2.6%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$70.16	-7.0%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.4%	$120.49	-5.9%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.1%	$81.82	65.0%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$96.44	47.6%	$0.77	8.5%	11
TD-T	TD Bank	4.5%	$84.78	-3.3%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$113.14	13.0%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$113.73	16.4%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.3%	$50.34	-5.6%	$3.69	3.4%	22
T-T	Telus Corp.	5.9%	$24.22	-8.0%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$134.84	2.4%	$1.05	10.5%	13
Averages		3.4%		3.2%		8.8%	19

Note: When the dividend and share price currency match, the calculation is straightforward. But it’s not so simple when the dividend is declared in one currency, and the share price is quoted in another. Dividing the former by the latter would produce a meaningless result because it’s a case of apples and oranges. To calculate the yield properly, you must express the dividend and share price in the same currency.

DGI Clipboard

“Compare the compound annual growth rate (CAGR) of a firm’s dividend with its price after a few years. They should be similar: if not, do not buy, or if you own it, winnow it.”

– Tom Connolly (the founder of dividendgrowth.ca)

Dividend Growth and Price Growth Alignment

Many of our good dividend growers on ‘The List’ follow this pattern.

Similar to real estate investing, stocks that generate long-term income for their owners tend to become more valuable. The primary source of income for stock investors is often through dividend payments. Beyond short-term market cycles, the value of dividend growth investing (DGI) stocks is closely tied to the income they generate for their owners.

As dividends increase, so does the stock price. Don’t be overly concerned about price volatility if the dividend is growing. Hold onto the investment for the increasing income and the potential for future price gains. Recognize that the capital is growing in tandem with income, eventually.

This is where portfolio control comes into play. Many investors view the stock market as an enigmatic force, feeling subject to the whims of market returns. However, by linking the value of your stocks to the income they produce and focusing on building that income, you’re likely to witness price appreciation as well.

Building a portfolio consisting of stocks that have historically followed this pattern—consistently growing their dividends at a predetermined rate—enables dividend growth investors to predict future returns more reliably.

As a bonus, a growing yield not only provides added income but also enhances the security of our underlying investment.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

Don’t throw out Brookfield Infrastructure with the market bath water (Globe & Mail)

https://www.theglobeandmail.com/investing/education/article-dont-throw-out-brookfield-infrastructure-with-the-market-bath-water/

“As unpleasant as that’s been, there’s nothing inherently wrong with Brookfield Infrastructure’s businesses. The chief problem is rising interest rates.”

Brookfield Infrastructure saw a nice bounce back in its stock price last week and seems to have some life after the optimistic outlook from management in its Q3 earnings report, earlier in the month.

Investors in thematic funds hurt returns by trading too frequently: Morningstar

https://www.theglobeandmail.com/investing/investment-ideas/article-investors-in-thematic-funds-hurt-returns-by-trading-too-frequently/

“Most investors would achieve better investment outcomes by adopting a more patient buy-and-hold approach,” said the analysts.

One of the things I like about our dividend growth investing strategy is our passive approach to investing. If the company, we have on our list does not reach a ‘sensible price’ we don’t buy. If it doesn’t get severely overvalued, we don’t sell. Most of the time we do nothing and collect our growing income. Frequent trading does not bode well for the average investor over the long term.

To receive breaking news about companies on ‘The List’, follow us on Twitter @MagicPants_DGI.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

No companies on ‘The List’ announced a dividend increase last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Earnings growth and dividend growth tend to go hand in hand, so this information can tell us a lot about the future dividend growth of our quality companies. Monitoring our dividend growers periodically is part of the process, and reading the quarterly earnings releases is a good place to start.

No earnings reports from companies on ‘The List’ this week

Last week, two earnings reports from companies on ‘The List’.

Loblaw Companies Limited (L-T) released its third-quarter fiscal 2023 results on Wednesday, November 15, 2023, before markets opened.

“Our stores are delivering more value, including deeper discounts on essentials, and customers are responding positively. We remain focused on doing what we can to fight inflation and deliver lower prices for Canadians, while continuing to invest for the future.”

– Galen G. Weston, Chairman

Highlights:

Revenue was $18,265 million, an increase of $877 million, or 5.0%.
Retail segment sales were $17,982 million, an increase of $852 million, or 5.0%.
- Food Retail (Loblaw) same-stores sales increased by 4.5%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by 4.6%, with front store same-store sales growth of 1.8% and pharmacy same-store sales growth of 7.4%.
E-commerce sales increased by 13.6%.
Operating income was $1,065 million, an increase of $74 million, or 7.5%.
Adjusted EBITDA was $1,926 million, an increase of $80 million, or 4.3%.
Retail segment adjusted gross profit percentage was 30.6%, a decrease of 20 basis points.
Net earnings available to common shareholders of the Company were $621 million, an increase of $65 million or 11.7%. Diluted net earnings per common share were $1.95, an increase of $0.26, or 15.4%.
Adjusted net earnings available to common shareholders of the Company were $719 million, an increase of $56 million, or 8.4%.
Adjusted diluted net earnings per common share were $2.26, an increase of $0.25 or 12.4%.
Repurchased for cancellation 2.9 million common shares at a cost of $341 million and invested $676 million in capital expenditures, net of proceeds from property disposals. Free cash flow used in the Retail segment was $663 million.

Outlook:

Loblaw will continue to execute on retail excellence while advancing its growth initiatives in 2023. The Company’s businesses remain well placed to service the everyday needs of Canadians. However, the Company cannot predict the precise impacts of global economic uncertainties, including the inflationary environment, on its 2023 financial results.

For the full-year 2023, the Company continues to expect:

its Retail business to grow earnings faster than sales;
adjusted net earnings per common share growth in the low double digits;
to increase investments in our store network and distribution centres by investing a net amount of $1.6 billion in capital expenditures, which reflects gross capital investments of approximately $2.1 billion offset by approximately $500 million of proceeds from real estate dispositions; and
to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Source: (L-T) Q3-2023 Quarterly Review

Metro Inc. (MRU-T) released its fourth-quarter fiscal 2023 results on Wednesday, November 15, 2023, before markets opened.

“We are pleased with our fourth quarter results which were achieved in a challenging operating environment that included a 5-week strike at 27 Metro stores in Ontario. For the first time in our history, sales for the year exceeded $20 billion and net earnings reached $1 billion. Our sales momentum remains strong, driven by our discount banners and pharmacy. Food inflation declined steadily during the quarter and our teams continue to deliver the best value possible to our customers every day. We reached a key milestone in our supply chain modernization program with the start-up of our new state-of-the-art automated distribution center for fresh and frozen products north of Montreal. This facility will improve service to our stores and fuel our long-term growth.”

– Eric La Fleche, President and Chief Executive Officer

Highlights:

53-week fiscal year versus 52 weeks in 2022
Sales of $20,724.6 million, up 9.7%
Net earnings of $1,018.8 million, up 19.9%, and adjusted net earnings of $1,006.6 million, up 9.2%
Fully diluted net earnings per share of $4.35, up 23.9%, and adjusted fully diluted net earnings per share of $4.30, up 12.6%

Outlook:

As we begin our new fiscal year, we are ramping up our new state-of-the-art, automated distribution center north of Montreal and the expansion of our Montreal produce facility as planned. We are also preparing for the launch of the final phase of our automated fresh facility in Toronto next spring. While these investments position us well for continued long-term profitable growth, we are facing significant headwinds in Fiscal 2024 as we incur some temporary duplication of costs and learning curve inefficiencies, as well as higher depreciation and lower capitalized interest. We will not fully absorb these additional expenses and we are currently forecasting operating income before depreciation and amortization and impairments of assets, net of reversals to grow by less than 2% in Fiscal 2024 versus the level reported in Fiscal 2023, and adjusted net earnings per share to be flat to down $0.10 in Fiscal 2024 versus the level reported in Fiscal 2023. We expect to resume our profit growth post Fiscal 2024 and are maintaining our publicly disclosed annual growth target of between 8% and 10% for net earnings per share over the medium and long term.

Source: (MRU-T) Q4-2023 Quarterly Review

MP Market Review – November 10, 2023

Last updated by BM on November 13, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up over last week with a YTD price return of +1.4% (capital). Dividend growth remained the same and is now at +8.8% YTD, highlighting income growth this year.
Last week, one dividend increase from companies on ‘The List’.
Last week, nine earnings reports from companies on ‘The List’.
Two companies on ‘The List’ are due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Identifying companies whose dividend growth aligns closely with price growth can considerably enhance the predictability of future returns. Dividend growth investors know that the dividend drives the price in a predictable way, not the other way around. Fortis Inc. (FTS-T) is another company on ‘The List’ that aligns very closely with this dividend growth vs price growth pattern we like to see.

Introduction

“You have a pair of pants. In the left pocket, you have $100. You take $1 out of the left pocket and put it in the right pocket. You now have $101. There is no diminution of dollars in your left pocket. That is one magic pair of pants.”

This ‘magic pants’ analogy was from a Seeking Alpha article on dividend investing I read about a decade ago and was one of the catalysts for me to take a closer look at this type of investing and see if it truly was magical.

After conducting additional research, I have shifted towards utilizing a dividend growth investing (DGI) strategy as my primary investment approach. While I maintain portfolios consisting of high-quality dividend growers from both the United States and Canada, I have opted to concentrate on Canadian (CDN) dividend growth companies in this blog. This is due to several reasons, including a smaller pool of DGI companies to track, a lack of coverage for the DGI strategy by the North American investment media, and a tendency for those who do cover DGI to narrowly focus on only a handful of sectors (Energy and Financials).

While ‘The List’ is not a portfolio in itself, it serves as an excellent initial reference for individuals seeking to diversify their investments and attain higher returns in the Canadian stock market. Through our blog, we provide weekly updates on ‘The List’ and offer valuable perspectives and real-life examples of the dividend growth investing strategy in practice. This helps readers gain a deeper understanding of how to implement and benefit from this investment approach.

DGI Clipboard

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Dividends send signals

Our list of high-quality dividend stocks is currently in the process of revealing upcoming dividend increases for the next year. While the past couple of years have presented challenges for capital returns, the steady growth of dividends remains a reassuring trend. As we analyze ‘The List,’ it becomes evident that dividends are conveying valuable signals that can inform our decision-making when it comes to purchases.

In his 2006 article, ‘Go for Dividends’, author Steve Hanke says it best:

“The positive, intuitive idea is that companies adjust dividend payouts to signal prospects. Corporate insiders have better information about potential sales growth, margins and free cash flows than investors do. Dividends are simply an efficient way for insiders to convey this valuable information to the market. A rise in dividends signals better prospects, and a decrease signals that a company expects trouble. An increase in dividends signals that corporate insiders believe the company will have enough cash flow to sustain operations and complete investment plans. And, of course, make good on their dividend commitments.”

It’s important to consider the size of the dividend increase. If a company announces a smaller increase than in the previous year, it may suggest impending short-term challenges. This could either reflect prudent management or serve as a signal that all is not well.

Here are a couple of recent dividend announcements as examples:

Waste Connections (WCN-N) on Wednesday, October 25^th, said it increased its 2023 quarterly dividend from $0.255 to $0.285 per share, payable November 28, 2023, to shareholders of record on November 8, 2023.

This represents a dividend increase of +11.8%, marking the 14th straight year of dividend growth for this quality solid waste and recycling services company.

(WCN-N) raised its dividend by +10.5% in the past year, maintaining a five-year average increase of +13.7%. The announced increase for next year (+11.8%) aligns with its historical average, suggesting that management is expressing confidence in the company’s outlook.

Canadian Tire (CTC-A-T) on Thursday, November 9, said it increased its 2024 quarterly dividend from $1.725 to $1.750 per share, payable March 01, 2024, to shareholders of record on January 31, 2024.

This represents a dividend increase of +1.45%, marking the 13th straight year of dividend growth for this quality retailer.

On the flip side, (CTC-A-T) raised its dividend by +17.9% in the past year, maintaining a five-year average increase of +15.8%. The modest increase for next year (+1.45%) suggests that management is expressing heightened caution about their prospects in 2024. Nonetheless, their commitment to sustaining their dividend streak remains evident.

In both cases, you see a commitment to not only paying a dividend but growing that dividend. Not all companies on ‘The List’ consistently raise their dividends by the same rate each year so pay attention to the signals!

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

Are there any dividend growth stocks that haven’t been pounded this year? (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-are-there-any-dividend-growth-stocks-that-havent-been-pounded-this/

I couldn’t help but leave a comment for the author.

When you mention dividend growth you should not put so much attention on initial yield. This is where you make your mistake. There are several good Canadian dividend growth stocks that have performed well this year if you do not start your ‘screen’ with such a high initial yield. After all, it is the dividend growth that drives the price growth not the starting yield. Stella Jones (SJ); Stantec (STN); Alimentation Couche-Tard Inc. (ATD); Dollarama Inc. (DOL) all have capital returns over 20% YTD. Magically, the average dividend growth of this list is 17% YTD as well.

To receive breaking news about companies on ‘The List’, follow us on Twitter @MagicPants_DGI.

The List (2023)

Last updated by BM on November 10, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	9.0%	$5.61	-16.6%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.7%	$78.65	30.8%	$0.56	19.1%	13
BCE-T	Bell Canada	7.3%	$53.12	-11.8%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$25.53	-18.5%	$1.44	6.3%	15
CCL-B-T	CCL Industries	2.0%	$53.96	-7.0%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$154.14	-5.4%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$140.31	-4.3%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.8%	$30.71	-16.9%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$98.87	23.8%	$0.27	23.8%	12
EMA-T	Emera	5.9%	$48.08	-8.6%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.7%	$46.10	-13.6%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$34.07	-4.6%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.1%	$119.40	-13.6%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.1%	$55.70	0.7%	$2.29	5.3%	49
IFC-T	Intact Financial	2.1%	$206.37	5.4%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$121.31	0.8%	$1.74	13.2%	11
MGA-N	Magna	3.5%	$52.62	-8.5%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$74.53	-1.3%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.6%	$116.78	-8.8%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.1%	$83.03	67.5%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$94.66	44.9%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.96	-6.5%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$111.59	11.4%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$112.99	15.6%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.5%	$49.49	-7.1%	$3.69	3.4%	22
T-T	Telus Corp.	6.0%	$23.79	-9.6%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$130.54	-0.9%	$1.05	10.5%	13
Averages		3.5%		1.4%		8.8%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up over last week with a YTD price return of +1.4% (capital). Dividend growth remained the same and is at +8.8% YTD, highlighting growth in income.

The best performers last week on ‘The List’ were Stella-Jones Inc. (SJ-T), up +11.32%; Stantec Inc. (STN-T), up +8.72%; and Intact Financial (IFC-T), up +3.79%.

Brookfield Infrastructure Partners (BIP-N) was the worst performer last week, down -5.58%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

One company on ‘The List’ announced a dividend increase last week.

Canadian Tire (CTC-A-T) on Thursday said it increased its 2024 quarterly dividend from $1.725 to $1.750 per share, payable March 01, 2024, to shareholders of record on January 31, 2024.

This represents a dividend increase of +1.45%, marking the 13th straight year of dividend growth for this quality retailer.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Two earnings reports from companies on ‘The List’ this week

Loblaw Companies Limited (L-T) will release its third-quarter fiscal 2023 results on Wednesday, November 15, 2023, before markets open.

Metro Inc. (MRU-T) will release its fourth-quarter fiscal 2023 results on Wednesday, November 15, 2023, before markets open.

Last week, nine earnings reports from companies on ‘The List’.

Stella-Jones Inc. (SJ-T) released its third-quarter fiscal 2023 results on Tuesday, November 07, 2023, before markets opened.

“In Q3, Stella-Jones made notable progress in its growth trajectory, delivering not only another quarter of strong sales growth, but record increase in profitability.”

– Eric Vachon, President and Chief Executive Officer

Highlights:

Sales of $949 million, up 13%
17% organic sales growth in infrastructure-related businesses
EBITDA of $193 million, or a margin of 20.3%, up from 14.1% in Q3 2022
Net income of $110 million, or $1.91 per share, up 79% from EPS in Q3 2022
Acquired utility pole manufacturing business of Baldwin Pole and Piling (“Baldwin”)
Normal Course Issuer Bid announced for 2023-2024

Outlook:

Source: (SJ-T) Q3-2023 Quarterly Review

Intact Financial (IFC-T) released its third-quarter fiscal 2023 results on Tuesday, November 07, 2023, after markets closed.

“Our teams remain hard at work getting customers back on track after several months of elevated severe weather activity. It is in precisely these moments that we can best demonstrate our purpose – to help people, businesses and society be resilient in bad times. We have a long track record of successfully navigating volatility in catastrophe losses. The third quarter was no different, as we delivered an operating ROE of 12.2%, and our balance sheet remained strong with $2.8 billion of total capital margin. I am pleased to see continued organic growth momentum, in the context of strong underlying underwriting performance and an acceleration in the UK&I segment’s path to outperformance.”

– Charles Brindamour, Chief Executive Officer

Highlights:

Net operating income per share of $2.10 despite elevated catastrophe losses, driven by solid underlying performance in all geographies and 50% growth in net investment income
Undiscounted combined ratio of 98.3% (93.5% discounted) included 8 points of catastrophe losses in excess of expectations, while inflation moderated as expected in personal auto, and results remained strong across commercial lines
Operating DPW growth of 6% led by good momentum in personal lines, and continued rate action across all business segments
Strong balance sheet with $2.8 billion of total capital margin1 and BVPS increasing 1% sequentially, reflecting EPS of $0.83 and an equity issuance for the acquisition of Direct Line Insurance Group plc’s brokered commercial lines operations
Accelerated our strategy by materially increasing our presence in the outperforming UK commercial lines business, while a strategic review of UK personal lines is underway

Outlook:

Over the next twelve months, we expect hard insurance market conditions to continue in most lines of business, driven by inflation and natural disasters.
In Canada, both personal property and auto premiums are expected to grow by high single-digits in response to higher severity.
In commercial and specialty lines across all geographies, we expect hard market conditions to continue in most lines of business, with high single-digit premium growth on average.
Given the rise in interest rates, we expect pre-tax investment yield for the industry to continue increasing as portfolios roll over.

Source: (IFC-T) Q3-2023 Quarterly Review

TC Energy (TRP-T) released its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, before markets opened.

“During the third quarter, we made monumental progress on Coastal GasLink and have achieved mechanical completion ahead of our year-end target. The team’s exceptional safety and construction execution on this challenging project means that we have reached 100 per cent pipeline installation, including the successful hydrotesting of the full 670 km pipeline length. The project remains on track with the approximately $14.5 billion cost estimate. We are also delivering on our 2023 strategic priorities, including strengthening the balance sheet with the recent receipt of $5.3 billion of asset sale proceeds that will be utilized for debt repayment and funding, along with maximizing the value of our assets with the announced intention to spin off our Liquids Pipelines business. Our focus on safety and the reliability of our assets continues to deliver strong year-over-year growth, and we remain on track to deliver a record year for 2023 comparable EBITDA despite macroeconomic headwinds.”

– François Poirier, President and Chief Executive Officer

Highlights:

Delivered approximately seven per cent comparable EBITDA growth of $2.6 billion in third quarter 2023 compared to $2.5 billion in third quarter 2022. Segmented earnings were $0.6 billion in third quarter 2023 compared to $1.8 billion in third quarter 2022, largely due to the after-tax impairment charge of $1,179 million for the three months ended September 30, 2023 related to TC Energy’s equity investment in Coastal GasLink Pipeline Limited Partnership (Coastal GasLink LP)
Third quarter 2023 results were underpinned by solid utilization and reliability across our assets. While our Natural Gas Pipelines business does not carry material volumetric or price risk, strong utilization rates demonstrate the demand for our services and the longer-term criticality of our assets
- NGTL System receipts averaged 14.0 Bcf/d, up 0.5 Bcf/d from third quarter 2022
- NGTL System daily receipts reached 14.6 Bcf on August 6, 2023, the highest single day average on the pipeline
- S. Natural Gas Pipelines LNG deliveries averaged 3.1 Bcf/d, up 1.4 per cent from third quarter 2022
- S. Natural Gas Pipelines business achieved a new record of deliveries to power generators of 5.2 Bcf on July 28, 2023
- Gas Transmission Northwest (GTN) system achieved an all-time delivery record of 2.96 Bcf on July 25, 2023
- Keystone Pipeline System achieved 93.7 per cent operational reliability year-to-date
- Successfully completed two open seasons on Marketlink, supporting the sustained demand for Canadian crude on the Keystone Pipeline and Marketlink systems
- Alberta cogeneration power plant fleet achieved approximately 98 per cent peak price availability
- Bruce Power achieved 94 per cent availability and successfully completed the Unit 6 Major Component Replacement (MCR) within budget and ahead of schedule
Third quarter 2023 financial results:
- Net losses attributable to common shares of $0.2 billion or $0.19 per common share compared to net income of $0.8 billion or $0.84 per common share in third quarter 2022. Comparable earnings of $1.0 billion or $1.00 per common share compared to $1.1 billion or $1.07 per common share in 2022
- Comparable EBITDA of $2.6 billion compared to $2.5 billion in 2022 and segmented earnings of $0.6 billion compared to $1.8 billion in 2022
Reflecting strong year-to-date operational and financial performance, we now expect 2023 comparable EBITDA to be at the upper end of the five to seven per cent outlook compared to 2022, while 2023 comparable earnings per common share is expected to be generally consistent with 2022
Year to date, we have placed approximately $5 billion of projects into service on our natural gas and liquids pipeline systems, as well as the Bruce Power Unit 6 MCR which was declared commercially operational on September 14, 2023
Placed the lateral section of the Villa de Reyes (VdR) pipeline in commercial service
Placed substantially all assets of the NGTL System/Foothills West Path Delivery Program into service on November 1, 2023
On October 4, 2023, we successfully completed the sale of a 40 per cent non-controlling equity interest in Columbia Gas Transmission, LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia Gulf) systems to Global Infrastructure Partners (GIP) for total cash proceeds of $5.3 billion (US$3.9 billion), which were directed towards reducing leverage
Coastal GasLink has achieved mechanical completion, ahead of its year-end target and the project remains on track with the cost estimate of approximately $14.5 billion
The Southeast Gateway Pipeline project continues to progress to our US$4.5 billion cost estimate and schedule. Land rights and rights of way negotiations have closed and all critical permits for onshore construction have been received. We are advancing construction of on-shore facilities and landfalls. Offshore engineering is complete and offshore installation expected to commence prior to the end of 2023
Approved the Bison XPress expansion project on Northern Border and Bison systems that will replace and upgrade certain facilities and provide production egress from the Bakken basin to a delivery point at the Cheyenne Hub
GTN XPress project received FERC approval to expand the GTN system that will provide for the transport of incremental contracted export capacity facilitated by the NGTL System/Foothills West Path Delivery Program
John E. Lowe will be appointed as TC Energy’s Board Chair, effective January 1, 2024
Progressing proposed Liquids Pipelines spinoff with the announcement of the Board Chair and company name, South Bow Corporation
Declared a quarterly dividend of $0.93 per common share for the quarter ending December 31, 2023.

Outlook:

Reflecting strong year-to-date operational and financial performance, we now expect 2023 comparable EBITDA to be at the upper end of the five to seven per cent outlook compared to 2022 and 2023 comparable earnings per share to be generally consistent with 2022. Total capital expenditures for 2023 are now expected to be approximately $12.0 billion to $12.5 billion. While the estimated capital costs associated with our major projects remains consistent, the increase from the range as outlined in our 2022 Annual Report is primarily related to shifts in timing for some of our growth projects and maintenance capital expenditures in our natural gas pipelines businesses, as well as the foreign exchange impact of a stronger U.S. dollar. We continue to work on cost mitigation strategies and assess developments in our construction projects and market conditions for changes to our overall capital program. To date, we have placed approximately $5 billion of assets into service on budget, further supporting comparable EBITDA growth. Beyond 2024, we remain committed to limiting annual sanctioned net capital expenditures to $6 billion to $7 billion. At this level, we believe we can continue to grow our business at a commensurate rate with our dividend growth outlook of three to five per cent, while also providing the optionality to further reduce leverage and/or return incremental capital to shareholders. TC Energy’s Board of Directors declared a quarterly dividend of $0.93 per common share for the quarter ending December 31, 2023, equating to $3.72 on an annualized basis.

Source: (TRP-T) Q3-2023 Quarterly Review

CCL Industries (CCL-B-T) released its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, after markets closed.

“The Company posted another solid quarter despite soft demand from customer destocking initiatives, the impact of inflation and higher interest rates on consumers plus the geopolitical uncertainties unfolding around the world. Excluding an $11.9 million gain on the sale of excess real estate recorded at Checkpoint in the 2022 third quarter, I am pleased to report all Segments reported operating income gains compared to the prior year period. Consolidated, the Company posted $0.95 basic and adjusted basic earning per Class B share for the third quarter of 2023, equal to the record prior year period.”

– Geoffrey T. Martin, President and Chief Executive Officer

Highlights:

CCL

Sales increased 6.4% to $1.1 billion, on 3.6% organic decline, offset by 4.0% acquisition contribution and 6.0% positive impact from foreign currency translation
Regional organic sales growth: almost flat in the Americas, mid-single digit decline in Europe and double digit decline in Asia Pacific
Operating income $169.7 million, increased 5.9%, 15.9% operating margin down 10 bps
Label joint ventures added $0.03 earnings per Class B share

Avery

Sales increased 4.9% to $269.5 million, on 0.7% organic decline, offset by 1.2% acquisition contribution and 4.4% positive impact from foreign currency translation
Operating income $50.7 million, up 13.4%, 18.8% operating margin , up 140 bps

Checkpoint

Sales increased 7.2% to $210.1 million, on organic growth of 4.1% and 3.1% positive impact from foreign currency translation
Operating income $28.8 million, down 17.9%, 13.7% operating margin , down 420 bps. Excluding the $11.9 million gain on sale of excess real estate in China in 2022, operating income up 24.1%

Innovia

Sales declined 28.4% to $146.3 million with 34.4% organic decline partially offset by 6.0% positive impact from foreign currency translation
Operating income $6.9 million, up 1.5%, 4.7% operating margin, up 140 bps

Outlook:

Core CCL business units’ expect similar conditions to Q3 for the coming quarter
CCL Design expected to return to profit growth as we lap the change in demand in the electronics industry
CCL Secure should post modest progress
Avery results expected to be stable, horticulture moves into busy production season
Checkpoint faces tough comps compared to a strong end to 2022, RFID continues to grow
Innovia expected to outperform weak Q422, perhaps significantly if the label materials industry volume recovery gains traction
FX tailwind to continue at current exchange rates

Source: (CCL-B-T) Q3-2023 Quarterly Review

Franco Nevada (FNV-N) released its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, after markets closed.

“Our core precious metal assets anchored the quarter, resulting in increased revenue and earnings over the prior year period. We are looking forward to added precious metal contributions from a number of new mines in 2024 and, in particular, from the Tocantinzinho stream where G Mining Ventures is progressing construction on time and budget. Franco-Nevada is debt-free and is growing its cash balances.”

– Paul Brink, Chief Executive Officer

Highlights:

In Q3 2023, we earned $309.5 million in revenue, up 1.7% from Q3 2022. We benefited from an increase in GEOs from our Precious Metal assets as well as higher gold prices. This more than offset the decrease in revenue from our Diversified assets, which reflect lower oil and gas prices when compared to the relative highs of the prior year quarter.
Precious Metal revenue accounted for 77.8% of our revenue (64.5% gold, 10.2% silver, 3.1% PGM). Revenue was sourced 88.0% from the Americas (28.7% South America, 28.4% Central America & Mexico, 15.9% U.S. and 15.0% Canada).

Outlook:

The Panamanian National Assembly approved the revised Cobre Panama concession agreement in October 2023. In response to protests that followed the approval, the Government proposed but did not proceed with a popular consultation on the revised concession contract. The Panamanian Supreme Court is, however, considering a number of lawsuits challenging the constitutionality of the law pertaining to the contract. Production at the Cobre Panama mine has not been impacted and we, along with the operator, First Quantum, are closely monitoring the unfolding situation.

Source: (FNV-N) Q3-2023 Quarterly Review

Canadian Tire (CTC-A-T) released its third-quarter fiscal 2023 results on Thursday, November 09, 2023, before markets opened.

“Against softening consumer demand, our Q3 results show the continued resilience, relevance, and underlying strength of our business as we leveraged loyalty and prioritized essential categories within our multi-category assortment. We remain focused on driving value for our customers as we head into the important fourth quarter.”

– Greg Hicks, President and Chief Executive Officer

Highlights:

Consolidated comparable sales1 down 1.6% as consumers continue to shift to essentials
Increase in Retail Gross margin rate as higher CTR product margin offset promotional intensity at other banners
Normalized diluted Earnings Per Share1 (“EPS”) was $2.96; Diluted EPS was $(1.19)
Annualized dividend increased from $6.90 to $7.00 per share; intention to repurchase up to an additional $200.0 million Class A Non-Voting Shares during 2024

Outlook:

“In a more challenging economic environment, we are accelerating efficiency initiatives, prioritizing investments within our Better Connected strategy, and actively managing our resource allocation,” added Hicks.

Source: (CTC-A-T) Q3-2023 Quarterly Review

Stantec (STN-T) released its third-quarter fiscal 2023 results on Thursday, November 09, 2023, after markets closed.

“I am extremely pleased with our third quarter results as we continued to deliver exceptional growth in revenue and earnings through excellent operational performance. As a result of our outperformance this quarter, our strong year-to-date results, and the continued favorable market demand, we are increasing our guidance for 2023 once more. Our backlog is at a near-record high level and market demand continues to be robust, bolstering our optimism for ongoing strong growth in 2024 and beyond. We are confident that our diverse business model and engaged workforce ideally position Stantec to continue delivering industry-leading results.”

– Gord Johnston, President and Chief Executive Officer

Highlights:

Net revenue of $1.3 billion, an increase of 13.5% over Q3 2022
Adjusted EBITDA margin¹of 18.3%, up 160 basis points over Q3 2022
Adjusted diluted EPS¹of $1.14, up 32.6% over Q3 2022
Backlog of $6.4 billion, up 7.6% since December 31, 2022

Outlook:

Source: (STN-T) Q3-2023 Quarterly Review

Emera Inc. (EMA-T) released its third-quarter fiscal 2023 results on Friday, November 10, 2023, before markets opened.

“Continued strong operational performance across Emera is helping to offset the headwinds of higher interest costs, and we continue to see solid growth throughout our business. Our $8.9 billion 3-year capital plan underpins this growth as we continue to invest to deliver upon our customer’s demand for cleaner, reliable and cost-effective energy.”

– Scott Balfour, President and Chief Executive Officer

Highlights:

Quarterly adjusted EPS was $0.75 compared to $0.76 in Q3 2022. Quarterly reported net income per common share decreased $0.26 to $0.37 in Q3 2023 compared to $0.63 in Q3 2022 due to higher mark-to-market (“MTM”) losses.
Year-to-date, adjusted EPS increased $0.06 or 3% to $2.33 compared to $2.27 in 2022. Year-to-date reported EPS was $2.53 compared to $1.75 in 2022, primarily due to year-over-year differences in MTM impacts.
Operating cash flow before changes in working capital increased 125% to $1.8 billion compared to $806 million in 2022 due to solid operating performance and the recovery of fuel and storm costs in 2023 that were under-recovered in 2022.
2024-2026 capital plan of $8.9 billion predominately focused on reliability, customer growth and cleaner energy investments is driving approximately 7% annualized rate base growth.
Approximately 75% of our capital plan to be invested in Florida.
The Florida Public Service Commission approved new rates for Peoples Gas Systems, Inc. (“PGS”) which will provide additional annual revenues of $107M USD starting in 2024. This outcome from the PGS rate case application positions us to advance important investments to support the growth of that business for the benefit of customers.

Outlook:

There have been no material changes in Emera’s business overview and outlook from the Company’s 2022 annual MD&A. Emera’s year-to-date results have been impacted by macroeconomic conditions, specifically higher interest rates as well as other impacts of inflation. These macroeconomic conditions are likely to continue for the near term.

Source: (EMA-T) Q3-2023 Quarterly Review

Algonquin Power & Utilities (AQN-N) released its third-quarter fiscal 2023 results on Friday, November 10, 2023, before markets opened.

“We have launched the sale process for our portfolio of high-quality renewable assets and extensive development pipeline, and we remain focused on appropriate valuation. Having now served as Interim CEO for three months and met with various stakeholders, I believe the Company’s two businesses have untapped potential and bright futures ahead. With regards to the quarter, we continued to see constructive growth from rate cases and new development projects year over year. However, we also saw those efforts partially offset by unfavourable weather and higher interest rates. On balance, our Adjusted Net Earnings¹ grew at a healthy pace for the quarter.”

– Chris Huskilson, Interim Chief Executive Officer

Highlights:

Adjusted EBITDA of $281.3 million, an increase of 2%;
Adjusted Net Earnings of $79.3 million, an increase of 8%; and
Adjusted Net Earnings¹per common share of $0.11, no change, in each case on a year-over-year basis.

Outlook:

YTD results challenged by unfavourable weather
2023 Adjusted Net EPS expected to be at or below lower end of 2023 guidance
Remain focused on renewables sales process

Source: (AQN-N) Q3-2023 Quarterly Review

MP Market Review – November 03, 2023

Last updated by BM on November 06, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was up with a YTD price return of +0.8% (capital). Dividend growth remained the same and is now at +8.8% YTD, highlighting income growth this year.
Last week, one dividend increase from companies on ‘The List’.
Last week, six earnings reports from companies on ‘The List’.
Nine companies on ‘The List’ are due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Clipboard

“Think of stocks as being chickens, and dividends as being the eggs that those stocks provide.”

-(Jim Garland, 2013, P.4, ‘Memo to the Darcy Family: To Thine Own Self Be True’)

Egg Farming in a Chicken Farming World

One of my greatest joys as a father was sharing Aesop’s fables with my kids when they were younger. The simple yet timeless moral lessons from these stories served as a foundation for conveying important values to my children in an enjoyable and educational manner.

From time to time, I come across stories that, like Aesop’s fables, convey essential investment principles. These principles have stood the test of time but are often overshadowed by the next ‘bright shiny object’ out there.

The story of the two farmers told by Jim Garland in his 2013 paper, ‘Memo to the Darcy Family: To Thine Own Self Be True’, is one such story.

“Imagine two farms and two farmers. One farmer raises chickens and sells them to grocery stores. We’ll call him a chicken farmer. The other farmer keeps hens in a henhouse and feeds the eggs to his rather large family. The second one is an egg farmer.

The first person, the chicken farmer, is vitally interested in the market value of chickens. The second one, the egg farmer, is vitally interested in the number of eggs that his hens can lay, and in the health of the hens, but he doesn’t care at all about the market value of his hens.

For the chicken farmer, risk means the probability of a decline in the price of chickens. On the other hand, the egg farmer could care less about market values. His risks are foxes, viruses, and other such threats to the well-being of his hens.

Think of stocks as being chickens, and dividends as being the eggs that those stocks provide. Total return investors are chicken farmer investors, because total return investors worry about the market value of their “chickens” – of their stocks. On the other hand endowment investors are egg farmer investors. All that endowment investors worry about is the current and future quantities of their “eggs” – of their dividends.”

The moral of the story: As dividend growth investors who purchase quality companies, we share a resemblance with egg farmers in that our primary concern is the present and future quantities of our growing dividends, not the volatility in the price.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

First Quantum faces ‘shocker’ in Panama as president calls referendum on Cobre Panama contract (Globe & Mail)

https://www.theglobeandmail.com/business/article-first-quantum-faces-uncertainty-as-panamanian-president-calls/

The Panamanian government swiftly reversed its decision just one week after implementing a new law that would have allowed First Quantum to pay higher taxes to the government in exchange for keeping the mine operational. It now appears that a referendum may be necessary to officially enact this agreement into law.

Franco Nevada (FNV-T) holds a significant royalty stake with First Quantum in their Panama mine, and this surprising turn of events had a noticeable impact on the company’s share price last week. According to reports from Panama, it seems that resolving this situation may take some time.

Coastal GasLink completes B.C. pipeline installation after five years (Globe & Mail)

https://www.theglobeandmail.com/business/article-coastal-gaslink-completes-bc-pipeline-installation-after-five-years/

“Now that the pipeline has reached this milestone, it will soon enter the testing phase required before it can begin transporting natural gas to LNG Canada’s liquefied natural gas export terminal, which is still under construction in Kitimat, on the West Coast.

The terminal will be the first facility in Canada capable of loading natural gas in liquid form onto tankers for shipping abroad. It and the pipeline are critical to the industry’s hopes of supplying Asian markets with Canadian fuel.”

Coastal GasLink is operated by TC Energy Corp. (TRP-T), which currently owns 35 per cent of the project. This is good news for TC Energy who have run into several obstacles along the way in building this pipeline.

To receive breaking news about companies on ‘The List’, follow us on Twitter @MagicPants_DGI.

The List (2023)

Last updated by BM on November 03, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.8%	$5.75	-14.6%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.7%	$76.80	27.7%	$0.56	19.1%	13
BCE-T	Bell Canada	7.1%	$54.52	-9.5%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$27.04	-13.7%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$55.57	-4.3%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$151.77	-6.8%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.8%	$144.81	-1.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.29	-15.3%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$95.96	20.2%	$0.27	23.8%	12
EMA-T	Emera	5.8%	$48.48	-7.9%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.7%	$46.26	-13.3%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.5%	$34.17	-4.3%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.1%	$124.69	-9.7%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.0%	$56.85	2.7%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$198.84	1.6%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$119.57	-0.6%	$1.74	13.2%	11
MGA-N	Magna	3.4%	$53.51	-7.0%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$73.33	-2.8%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.6%	$116.05	-9.4%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.2%	$74.59	50.4%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$87.07	33.3%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$80.98	-7.6%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$114.02	13.9%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$110.05	12.6%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.4%	$49.92	-6.3%	$3.69	3.4%	22
T-T	Telus Corp.	5.9%	$24.25	-7.9%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$133.23	1.2%	$1.05	10.5%	13
Averages		3.5%		0.8%		8.8%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was up with a YTD price return of +0.8% (capital). Dividend growth remained the same and is now at +8.8% YTD, highlighting income growth this year.

The best performers last week on ‘The List’ were Brookfield Infrastructure Partners (BIP-N), up +26.41%; Algonquin Power & Utilities (AQN-N), up +14.31%; and Magna (MGA-N), up +12.30%.

Franco Nevada (FNV-N) was the worst performer last week, down -9.30%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

One company on ‘The List’ announced a dividend increase last week.

Telus (T-T) on Friday said it increased its 2024 quarterly dividend from $0.3636 to $0.3761 per share, payable January 02, 2024, to shareholders of record on December 11, 2023.

This represents a dividend increase of +3.40%, marking the 20th straight year of dividend growth for this quality telco.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Nine earnings reports from companies on ‘The List’ this week

Stella-Jones Inc. (SJ-T) will release its third-quarter fiscal 2023 results on Tuesday, November 07, 2023, before markets open.

Intact Financial (IFC-T) will release its third-quarter fiscal 2023 results on Tuesday, November 07, 2023, after markets close.

TC Energy (TRP-T) will release its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, before markets open.

CCL Industries (CCL-B-T) will release its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, after markets close.

Franco Nevada (FNV-N) will release its third-quarter fiscal 2023 results on Wednesday, November 08, 2023, after markets close.

Canadian Tire (CTC-A-T) will release its third-quarter fiscal 2023 results on Thursday, November 09, 2023, before markets open.

Stantec (STN-T) will release its third-quarter fiscal 2023 results on Thursday, November 09, 2023, after markets close.

Emera Inc. (EMA-T) will release its third-quarter fiscal 2023 results on Friday, November 10, 2023, before markets open.

Algonquin Power & Utilities (AQN-N) will release its third-quarter fiscal 2023 results on Friday, November 10, 2023, before markets open.

Last week, six earnings reports from companies on ‘The List’.

Toromont Industries (TIH-T) released its third-quarter fiscal 2023 results on Monday, October 30, 2023, after markets closed.

“We are pleased with the operating and financial performance through the first nine months of the year. The Equipment Group executed well, delivering against the opening order backlog in line with customer schedules and improvement in inventory flow, coupled with good growth in rental and product support activity, as well as a continued focus on expense control. CIMCO revenue and bottom line improved in the quarter on good execution and higher product support activity. Across the organization, we continue to navigate through uncertain economic conditions and remain committed to our operating disciplines, driving our after-market strategies and delivering customer solutions.”

– Michael S. McMillan, President and Chief Executive Officer

Highlights:

Revenue increased $87.5 million or 8% in the third quarter compared to the similar period last year, with higher revenues in both groups. Equipment Group was up 7% in the quarter on higher equipment sales (up 7%), product support revenues (up 7%) and rental activity (up 11%). CIMCO revenue increased 15%, with progress on package sales (up 2%) and strong product support growth (up 29%).
Revenue increased $408.5 million (14%) to $3.4 billion for the year-to-date period. Revenue increased in both groups, with the Equipment Group up 13% and CIMCO up 17% year-to-date, on similar trends as noted for the quarter.
Operating income increased 17% in the quarter reflecting the higher revenue and gross margins, along with the lower relative expense ratio. Operating income as a percentage of sales increased to 16.4% from 15.3% in the prior year.
Operating income increased 22% in the year-to-date period, and was 14.7% of revenue compared to 13.7% in the similar period last year, reflecting similar trends as noted for the quarter
Net earnings from continuing operations increased $25.1 million or 21% in the quarter versus a year ago to $145.6 million or $1.77 EPS (basic) and $1.76 EPS (fully diluted).
For the year-to-date period, net earnings from continuing operations increased $83.2 million or 29% to $375.1 million, or $4.56 EPS (basic) and $4.52 EPS (fully diluted).
Bookings for the third quarter decreased 5% compared to last year and increased 5% on a year-to-date basis. The Equipment Group reported lower bookings during the quarter (down 10%), after a strong start to the year and given the uncertain economic conditions. CIMCO reported increased bookings (up 18%) on good demand for our products and services. Year-to-date both groups reported increased bookings, with the Equipment Group up 4% and CIMCO up 17%.
Backlog was $1.2 billion as at September 30, 2023, compared to $1.4 billion as at September 30, 2022, reflecting good order intake, progress on construction and delivery schedules as well as some improvement in equipment flow through the supply chain.

Outlook:

We are mindful of the uncertain economic environment and continue to monitor key metrics and supply‑dynamics,” continued Mr. McMillan. “We have seen some softening in demand for equipment in construction markets after a period of strong growth. We will continue to follow our disciplined approach, working our operational model while delivering results for our customers, suppliers and employees. While focused on managing discretionary spend, we continue to recruit technicians, to support our critical after-market service strategies and value‑added product offering over the long term.

Source: (TIH-T) Q3-2023 Quarterly Review

Brookfield Infrastructure Partners (BIP-N) released its third-quarter fiscal 2023 results on Wednesday, November 1, 2023, before markets opened.

“We had strong financial results and delivered on all of our strategic initiatives to date in 2023. We have demonstrated our ability to use our size, scale and diversification to continue recycling capital at good valuations, while investing at higher returns on our new investments.”

– Sam Pollock, CEO

Highlights:

Brookfield Infrastructure reported net income of $104 million for the three-month period ended September 30, 2023 compared to $113 million in the prior year. Current year results benefited from the contribution associated with recently completed acquisitions and organic growth across our base business. These positive impacts were partially offset by higher borrowing costs associated with the financing of growth initiatives and lower gains on currency and commodity contracts than in the same period last year.
Funds from operations (FFO) in the quarter was $560 million, a 7% increase compared with the same period last year. Results benefited from strong base business performance reflecting higher tariffs and the commissioning of approximately $1 billion of capital projects in the past 12 months. Our financial results do not reflect the benefit of new investments this year and we are conversely impacted by nearly $2 billion of asset sales that primarily closed in the second quarter of 2023. The fourth quarter will fully reflect the contributions of our new investments, which closed right before, or subsequent to, September 30.

Outlook:

The market backdrop has created a strong environment for capital deployment, with returns on new investments expected to be well in excess of our 12-15% target. Our 2023 deployment is expected to provide us with some of the best risk-adjusted returns we have seen in the last decade.

Source: (BIP-N) Q3-2023 Quarterly Review

Bell Canada (BCE-T) released its third-quarter fiscal 2023 results on Thursday, November 2, 2023, before markets opened.

“The Bell team has demonstrated continued operational excellence, delivering results that place us in a solid position as we look ahead to the end of the year.”

– Mirko Bibic, President and CEO

Highlights:

1% consolidated adjusted EBITDA growth delivered 0.9 percentage-point increase in adjusted EBITDA margin2 to 43.9% — best quarterly result since Q2 2022
Net earnings of $707 million down 8.3% with net earnings attributable to common shareholders of $640 million, down 10.5% or $0.70 per common share; adjusted net earnings of $741 million yielded adjusted EPS1 of $0.81, down 8.0% reflecting higher interest expense, increased depreciation and amortization and higher income taxes
Cash flows from operating activities down 1.8% to $1,961 million; stronger Q3 free cash flow growth trajectory as profiled in 2023 quarterly budget, increasing 17.4% to $754 million on strong adjusted EBITDA flow-through and lower capital expenditures
Strong wireless performance with 231,212 total mobile phone and connected device net subscriber activations3 — second-best ever quarterly result; 3.9% wireless service revenue growth as blended average revenue per user remains essentially stable in a competitive market
Record quarter for fibre Internet net activations of 104,159, up 7.9%, driving total retail Internet net activations of 79,327 and 6.1% residential Internet revenue growth; on track to achieve 85% planned broadband buildout target by year end
Bell Media adjusted EBITDA up 11.5% on lower operating costs and restructuring initiatives as total revenue declined 1.3% due to ongoing advertising recession; digital revenue5 up 26% as digital platforms and advertising technology drive digital advertising market share growth
Reconfirming all 2023 financial guidance targets

Outlook:

Source: (BCE-T) Q3-2023 Quarterly Review

Telus (T-T) released its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets opened.

“For the third quarter, our TELUS team once again demonstrated execution strength in our TTech business segment, characterized by the potent combination of leading customer growth, complemented by strong operational and financial results, alongside improving EBITDA growth and margin expansion in our DLCX segment.”

– Darren Entwistle, President and CEO

Highlights:

Total telecom customer growth of 406,000, up 59,000 over last year, an all-time quarterly record, driven by strong customer demand for our leading portfolio of bundled services across Mobility and Fixed
Mobile Phone net additions of 160,000, our best third quarter on record, and a record setting quarter for Connected Device net additions of 179,000
Robust third quarter Fixed customer net additions of 67,000, including 37,000 internet customer additions, powered by leading customer loyalty in combination with TELUS’ PureFibre network
Consolidated Operating Revenue and Adjusted EBITDA growth of 7.2 per cent and 5.5 per cent, respectively, and Free Cash Flow growth of 7.3 per cent; Net Income lower by 75 per cent on higher efficiency-related restructuring and other costs, higher depreciation, amortization and financing costs; Adjusted Net Income down 21 per cent
Quarterly dividend increased to $0.3761, up 7.1 per cent over the same period last year, representing a dividend yield of approximately 6.5 per cent
Reconfirming our 2023 Consolidated Financial Targets

Outlook:

Source: (T-T) Q3-2023 Quarterly Review

Enbridge Inc. (ENB-T) released its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets opened.

“Despite ongoing market volatility, Enbridge’s four businesses delivered another solid quarter of financial performance. We saw high utilization across our systems delivering reliable, affordable, and sustainable energy for our customers while upholding industry leading safety standards. We’re tracking to plan and expect to achieve our 2023 EBITDA and DCF per share guidance for the 18th consecutive year.”

– Greg Ebel, President and CEO

Highlights:

Third quarter GAAP earnings of $0.5 billion or $0.26 per common share, compared with GAAP earnings of $1.3 billion or $0.63 per common share in 2022
Adjusted earnings of $1.3 billion or $0.62 per common share, compared with $1.4 billion or $0.67 per common share in 2022
Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA) of $3.9 billion, an increase of 3%, compared with $3.8 billion in 2022
Cash provided by operating activities of $3.1 billion, compared with $2.1 billion in 2022
Distributable cash flow (DCF) of $2.6 billion, an increase of $0.1 billion, compared with $2.5 billion in 2022
Reaffirmed 2023 full year financial guidance for EBITDA and DCF inclusive of the recent share offering dilution
Enbridge entered into definitive agreements (the “Acquisitions”) with Dominion Energy, Inc. (“Dominion”) to acquire The East Ohio Gas Company, Questar Gas Company and its related Wexpro companies, and Public Service Company of North Carolina, Incorporated for an aggregate purchase price of US$14 billion (CDN$19 billion)
Enbridge has filed applications for all key federal and state required regulatory approvals to complete the pending Acquisitions and approximately 75% of the financing for the aggregate purchase price has been secured
Signed an agreement to increase ownership in Hohe See Offshore Wind Farm and Albatros Offshore Wind Farm by a further 24.45%, bringing Enbridge’s interest to 49.89%, for €625 million (including €358 million of assumed debt)
Signed a definitive agreement to acquire seven operating landfill-to-renewable natural gas (RNG) assets located in Texas and Arkansas for US$1.2 billion with staggered consideration
Upsized and relaunched the Flanagan South Pipeline (FSP) binding open season for US Gulf Coast delivery service
Closed the acquisition of Aitken Creek Gas Storage on November 1
Debt-to-EBITDA expected to exit the year below the target range of 4.5x to 5.0x reflecting substantial equity pre-funding prior to closing the Acquisitions

Outlook:

The Company reaffirms its 2023 financial guidance for EBITDA and DCF. Results for the first nine months of 2023 are in line with the Company’s expectations and the Company anticipates that its businesses will continue to experience strong capacity utilization and operating performance through the balance of the year with normal course seasonality. Strong operational performance in the first nine months of the year is expected to be offset by higher financing costs, due to increased interest rates, pre-funding of the U.S. gas utilities acquisitions and a lower toll on the Mainline.

Source: (ENB-T) Q3-2023 Quarterly Review

Magna (MGA-N) released its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets opened.

“We continue to execute across all segments of our business through a combination of launching new programs, working to offset inflationary pressures, reducing expenses, and optimizing our cost structure. Our raised Outlook reflects our relentless focus on delivering short- and long-term margin expansion and increased returns on investment.”

– Swamy Kotagiri, Magna’s Chief Executive Officer

Highlights:

Sales increased 15% to $10.7 billion, compared to a global light vehicle production increase of 4%
Diluted earnings per share were $1.37
Adjusted diluted earnings per share increased 33% to $1.46
Raised Outlook for Adjusted EBIT Margin and Adjusted Net Income attributable to Magna, including UAW strike impact

Outlook:

Source: (MGA-N) Q3-2023 Quarterly Review

MP Market Review – October 27, 2023

Last updated by BM on October 30, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down with a YTD price return of -5.0% (capital). Dividend growth was up and is now at +8.8% YTD, highlighting growth in income over the past year.
Last week, two dividend increases from companies on ‘The List’.
Last week, five earnings reports from companies on ‘The List’.
Five companies on ‘The List’ are due to report earnings this week.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service, which grants you access to the MP Wealth-Builder Model Portfolio (CDN) and exclusive subscriber-only content. Learn More

Introduction

DGI Clipboard

“Dividend growth investing is a long-term strategy that takes the fear out of bear markets. It’s about the income, not the fluctuations.”

– Charles Schwab

Accelerate Your Wealth-Building in Bear Markets!

Many stocks, especially those offering increasing dividends, have experienced declines due to fear and uncertainty, leading to attractive discounts and higher dividend yields. In our opinion, individuals seeking to enhance their passive income through dividends should seize the opportunity presented by this bear market to expedite their wealth-building.

Upon closer examination of ‘The List,’ it becomes evident that the average dividend yield has risen from 3.2% at the beginning of the year to 3.7% now. A higher initial yield enables us to acquire more income from our investment, allowing us to reach our income goals more rapidly.

Last week, we discussed the significance of compounding income and how to measure it. We emphasized our preference for a 7% growth yield after ten years as our benchmark. Let’s explore the impact of the starting yield on achieving this goal.

For instance, a stock with an initial yield of 3% and an annualized dividend growth of 9% will take ten years to attain a growth yield of 7%. However, if we increase our starting yield to 4% while maintaining the same 9% dividend growth rate, we will only need seven years to reach our desired 7% growth yield.

Growth Yield is calculated by dividing the current annualized dividend by the original cost basis of the stock.

The starting yield can make a significant difference. Reducing the investment horizon from ten to seven years accelerates our wealth-building process.

If you have not yet joined as a paid subscriber of the blog to receive DGI Alerts on the activity and content related to our model portfolio, it’s not too late. Click Here.

Recent News

The (really) long-term benefits of dividend reinvestment (Globe & Mail)

https://www.theglobeandmail.com/investing/education/article-the-really-long-term-benefits-of-dividend-reinvestment/

DGI Truth #4: Dividend re-investment will supercharge your returns

Amazing results from the purchase of 1000 shares in Royal Bank 40 years ago! In this case, the buy and hold strategy netted an annualized return of 8.7%. Reinvest dividends and your annualized return jumps to over 13.0%. Dividend re-investment accelerates your wealth-building.

Analysts remain bullish on Brookfield Infrastructure Partners. But there’s a catch (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-analysts-remain-bullish-on-brookfield-infrastructure-partners-but/

“With the business continuing to perform well, we are of the view investors are being presented with an outstanding buying opportunity here,” Frederic Bastien, an analyst at Raymond James, said in a Oct. 17 note.

When a stock falls this far this fast we usually put the brakes on and try to figure out why. It will be interesting to hear what management has to say in their upcoming Q3 earnings report.

The List (2023)

Last updated by BM on October 27, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	10.1%	$5.03	-25.3%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$72.86	21.2%	$0.56	19.1%	13
BCE-T	Bell Canada	7.6%	$50.83	-15.6%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$21.39	-31.7%	$1.44	6.3%	15
CCL-B-T	CCL Industries	2.0%	$53.89	-7.2%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.2%	$145.05	-10.9%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	5.1%	$136.08	-7.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	6.2%	$29.05	-21.4%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$94.15	17.9%	$0.27	23.8%	12
EMA-T	Emera	6.1%	$45.93	-12.7%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	8.1%	$43.57	-18.3%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.7%	$31.86	-10.8%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$137.47	-0.5%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.99	-0.6%	$2.29	5.3%	49
IFC-T	Intact Financial	2.3%	$189.34	-3.3%	$4.40	10.0%	18
L-T	Loblaws	1.6%	$110.61	-8.1%	$1.74	13.2%	11
MGA-N	Magna	3.9%	$47.65	-17.2%	$1.84	2.2%	13
MRU-T	Metro	1.8%	$68.74	-8.9%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.9%	$108.47	-15.3%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.3%	$71.67	44.6%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$83.16	27.3%	$0.77	8.5%	11
TD-T	TD Bank	5.0%	$76.16	-13.1%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$107.53	7.4%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$102.71	5.1%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.9%	$46.95	-11.9%	$3.69	3.4%	22
T-T	Telus Corp.	6.5%	$22.01	-16.4%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$128.04	-2.8%	$1.05	10.5%	13
Averages		3.7%		-5.0%		8.8%	19

Performance of ‘The List’

Feel free to click on this link, ‘The List’ for a sortable version from our website.

Last week, ‘The List’ was down with a YTD price return of -5.0% (capital). Dividend growth was up and is now at +8.8% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Emera (EMA-T), up +3.68%; Fortis Inc. (FTS-T), up +2.71%; and TC Energy Corp. (TRP-T), up +0.95%.

TFI International (TFII-N) was the worst performer last week, down -9.30%.

Dividend Increases

“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”

– Arnold Bernhard (the founder of Value Line)

“As a dividend increase is a positive sign of a company’s financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”

– Tom Connolly (the founder of dividendgrowth.ca)

Two companies on ‘The List’ announced a dividend increase last week.

TFI International (TFII-N)) on Monday said it increased its 2024 quarterly dividend from $0.35 to $0.40 per share, payable January 13, 2024, to shareholders of record on December 29, 2023.

This represents a dividend increase of +14.0%, marking the 13th straight year of dividend growth for this quality transportation and logistics company.

Waste Connections (WCN-N) on Wednesday said it increased its 2023 quarterly dividend from $0.255 to $0.285 per share, payable November 28, 2023, to shareholders of record on November 8, 2023.

This represents a dividend increase of +11.8%, marking the 14th straight year of dividend growth for this quality solid waste and recycling services company.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.

The updated earnings calendar can be found here.

Five earnings reports from companies on ‘The List’ this week

Toromont Industries (TIH-T) will release its third-quarter fiscal 2023 results on Monday, October 30, 2023, after markets close.

Bell Canada (BCE-T) will release its third-quarter fiscal 2023 results on Thursday, November 2, 2023, before markets open.

Telus (T-T) will release its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets open.

Enbridge Inc. (ENB-T) will release its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets open.

Magna (MGA-N) will release its third-quarter fiscal 2023 results on Friday, November 3, 2023, before markets open.

Last week, five earnings reports from companies on ‘The List’.

TFI International (TFII-N) released its third-quarter fiscal 2023 results on Monday, October 23, 2023, after markets closed.

“We executed well during this stretch of weaker demand as our team was able to quickly adapt to changing market conditions while further streamlining operations. As a result, we were able to post solid results including close to $280 million of net cash from operating activities. Looking ahead, we’re well positioned to capitalize on the eventual pick-up in demand given our efficient platform, our team’s focus on profitability and cash flow, and our solid financial foundation, which further benefitted from our post-quarter, half billion dollar private placement. It’s this foundation that allows us to strategically allocate capital including eleven acquisitions this year, along with our share repurchases and our Board’s recently approved dividend increase.”

– Alain Bedard, President and Chief Executive Officer

Highlights:

Third quarter operating income of $200.6 million compares to $318.4 million the same quarter last year, reflecting reduced freight volumes and non-recurring costs, including the prior year divestiture of CFI and the related gain, $5.6 million and $75.7 million, respectively, $5.5 million of IT systems and related transition expenses in U.S. LTL, a $4.7 million expense for the MTM of director share units, and $2.9 million unfavorable currency translation impact1 relative to the same period last year.
Third quarter net income of $133.3 million compared to $245.2 million in Q3 2022, while adjusted net income1 of $136.0 million compared to $181.2 million as a result of the items described above.
Third quarter diluted earnings per share (diluted “EPS”) of $1.54 compared to $2.72 in Q3 2022, while adjusted diluted EPS1 of $1.57 compared to $2.01.
Third quarter net cash from operating activities of $278.7 million compares to $337.8 million in Q3 2022 and free cash flow1 of $198.3 million compares to $292.1 million in Q3 2022.
The Board of Directors approved a $0.40 quarterly dividend, an increase of 14%.

Outlook:

We are reaffirming our 2023 EPS guidance provided in July of a range of $6 to $6.50. We’re also maintaining our full-year free cash flow outlook at $700 million to $800 million, including CapEx of $200 million to $225 million. In addition, we have already exceeded a combined total of $500 million this year of capital deployed in M&A and share repurchase given our very strong financial position.

Source: (TFII-N) Q3-2023 Quarterly Review

Canadian National Railway (CNR-T) released its third-quarter fiscal 2023 results on Tuesday, October 24, 2023, after markets closed.

“Our ‘Make the Plan, Run the Plan, Sell the Plan’ approach continued to perform well, delivering strong customer service despite weak consumer demand as well as external challenges. As volumes continue to improve, we are well positioned to deliver incremental operating leverage. We remain confident in our ability to accelerate sustainable, profitable growth in 2024 through 2026.”

– Tracy Robinson, President and Chief Executive Officer

Highlights:

Revenues of C$3,987 million for the third quarter of 2023, a decrease of C$526 million, or 12%, and C$12,357 million for the first nine months of 2023, a decrease of C$208 million, or 2%.
Operating income of C$1,517 million for the third quarter of 2023, a decrease of C$415 million, or 21% and C$4,779 million for the first nine months of 2023, a decrease of C$149 million, or 3%.
Operating ratio, defined as operating expenses as a percentage of revenues, of 62.0% for the third quarter of 2023, an increase of 4.8-points and 61.3% for the first nine months of 2023, an increase 0.5-points or an increase of 0.7- points on an adjusted basis.
Diluted earnings per share (EPS) of C$1.69 for the third quarter of 2023, a decrease of 21% and C$5.27 for the first nine months of 2023, a decrease of 1% or a decrease of 2% on an adjusted basis.
Free cash flow was C$581 million for the third quarter of 2023, a decrease of C$775 million, or 57% and C$2,274 million for the first nine months of 2023, a decrease of C$650 million, or 22%.

Outlook:

CN continues to expect flat to slightly negative year-over-year growth in adjusted diluted EPS in 2023. CN reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of 10%-15% over the 2024-2026 period driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy.

Source: (CNR-T) Q2-2023 Quarterly Review

Waste Connections (WCN-N) released its third-quarter fiscal 2023 results on Wednesday, October 25, 2023, after markets closed.

“We are extremely pleased by the durability of our financial and operating results in the quarter, with momentum for continued outsized margin expansion. Solid operational execution enabled us to deliver adjusted EBITDA^(b) margin of 32.5% in the third quarter, as expected, up 140 basis points sequentially and up 120 basis points year over year, in spite of over $15 million in unforeseen headwinds. During the quarter, we overcame elevated levels of risk-related expenses and other lagging effects of higher employee turnover in prior periods, as well as site-specific incremental operating expenses at one of our landfills in California. The expected Q4 and ongoing expanding impacts from that evolving landfill situation are currently being evaluated, along with a recent shorter-term development at a landfill in Texas, and as such weren’t anticipated in the full year outlook we provided in August. We expect to get more clarity going forward but currently estimate the range of outcomes in Q4 to include impacts of up to $20 million to revenue, adjusted EBITDA and adjusted free cash flow.”

– Ronald J. Mittelstaedt, President and Chief Executive Officer

Highlights:

Revenue of $2.065 billion, up 9.8% year over year
Net income of $229.0 million, and adjusted EBITDA of $671.2 million, up 14.1% year over year
Adjusted EBITDA margin of 32.5% of revenue, up 120 basis points year over year and up 140 basis points sequentially from Q2 – Net income of $0.89 per share, and adjusted net income of $1.17 per share
Year to date net cash provided by operating activities of $1.571 billion and adjusted free cash flow of $969.3 million
Acquisition activity expected to continue through year-end, with an estimated rollover contribution in 2024 of almost 2% from approximately $250 million in annualized revenues signed or closed to date in 2023

Outlook:

We remain encouraged by the pace of improvement in employee retention, which, along with our differentiated strategy and execution, should provide for above average underlying margin expansion in solid waste collection, transfer and disposal in 2024. On that basis, we should be positioned for high single-digit adjusted EBITDA growth in 2024 on expected mid to high single-digit revenue growth, including approximately $150 million of revenue carryover from acquisitions signed or closed year to date, with upside potential from additional acquisition activity and any further improvement in commodity related activity

Source: (WCN-N) Q3-2023 Quarterly Review

Canadian Utilities Limited (CU-T) released its third-quarter fiscal 2023 results on Thursday, October 26, 2023, before markets opened.

“As you know, we concluded a successful second cycle performance based regulation in our Alberta distribution utilities in 2022. 2023 is a single cost of service rebasing year and in 2024 we will start the third cycle of performance based regulation with final rebased rates.

Performance-based regulation facilitates affordability, which is important to the long term sustainability of the business, as the savings and efficiencies generated in the second PBR cycle are returned to customers through the rebasing process. As expected the impact of our Alberta distribution utilities rebasing resulted in lower year-over-year earnings in the third quarter. On its own, this rebasing contributed to a year-over-year decline in earnings of approximately $70 [ph] million. This is a significant impact to 2023 earnings.”

– Brian Shkrobot, Executive Vice President and Chief Financial Officer

Highlights:

Canadian Utilities Limited (Canadian Utilities or the Company) today announced third quarter 2023 adjusted earnings of $87 million ($0.32 per share), $33 million ($0.13 per share) lower compared to $120 million ($0.45 per share) in the third quarter of 2022.
Announced a partnership agreement between the Chiniki and Goodstoney First Nations for the Deerfoot and Barlow Solar power projects, the largest solar installation in an urban centre in Western Canada. Under the terms of the agreement, the Chiniki and Goodstoney First Nations have become the majority
Entered into a 12.5-year virtual power purchase agreement with Lafarge, an industry leader in sustainable building solutions, in September 2023. Under the terms of the agreement, Lafarge’s Exshaw cement plant will notionally purchase 100 per cent of the solar power generated from the 38.5-MW Empress solar project. wners with a 51 per cent ownership stake in the facilities.
Received the Alberta Utilities Commission (AUC) decisions with respect to the parameters of the third generation of performance-based regulation (PBR3) and the future Generic Cost of Capital parameters, on October 4, 2023 and October 9, 2023, respectively. We will begin to operate under these new frameworks in 2024. The receipt of both of these critical regulatory decisions in advance of the respective operating years reinforces the strides we’ve seen in reducing regulatory lag.
In October 2023, the South Australian Government announced an Early Contractor Involvement (ECI) agreement with ATCO Australia and our joint venture partner BOC Linde for the South Australian Hydrogen Jobs Plan project, a 250-MW Hydrogen production facility, a 200-MW Hydrogen-fuelled electricity generation facility and a Hydrogen storage facility. Activities under this agreement include developing a contract offer price, and negotiation of engineering, procurement, construction and O&M contracts for delivery and operations of the project. The ECI phase of the project is due for completion in the second quarter of 2024.
Appointed John Ivulich to Chief Executive Officer & Country Chair of ATCO Australia, our regulated gas utility and non-regulated renewables, power, and clean fuels businesses in Australia, effective October 1, 2023.
Incurred $330 million in capital expenditures in the third quarter of 2023, of which 88 per cent was invested in ATCO Energy Systems and 12 per cent mainly in ATCO EnPower.

Source: (CU-T) Q3-2023 Quarterly Review

Fortis Inc. (FTS-T) released its third-quarter fiscal 2023 results on Friday, October 27, 2023, before markets opened.

“The fundamentals of our North American regulated energy delivery businesses remain resilient despite volatility in the macroenvironment in which we operate. We have delivered strong results for the third quarter, driven by the continued execution of our annual capital plan and the completion of key regulatory proceedings in Arizona and British Columbia.”

– David Hutchens, President and Chief Executive Officer

Highlights:

Third quarter net earnings of $394 million or $0.81 per common share, up from $326 million or $0.68 per common share in 2022
Adjusted net earnings per common share of $0.84, up from $0.71 in the third quarter of 2022
Released 2024-2028 capital plan of $25 billion, representing 6.3% average annualized rate base growth
Capital expenditures of $3.0 billion through September; $4.3 billion annual capital plan on track
Key regulatory decisions received in Western Canada and Arizona

Outlook:

Fortis continues to enhance shareholder value through the execution of its capital plan, the balance and strength of its diversified portfolio of regulated utility businesses, and growth opportunities within and proximate to its service territories. While energy price volatility, global supply chain constraints, increasing interest rates and inflation represent potential concerns, the Corporation does not expect these factors to have a material impact on its operations or financial results in 2023.

The Corporation’s $25 billion five-year capital plan is expected to increase midyear rate base from $36.8 billion in 2023 to $49.4 billion by 2028, translating into a five-year compound annual growth rate of 6.3%7 .

Beyond the five-year capital plan, additional opportunities to expand and extend growth include: further expansion of the electric transmission grid in the U.S. to facilitate the interconnection of cleaner energy, including infrastructure investments associated with the Inflation Reduction Act of 2022 and the MISO LRTP; climate adaptation and grid resiliency investments; renewable gas solutions and liquefied natural gas infrastructure in British Columbia; and the acceleration of cleaner energy infrastructure investments across our jurisdictions.

Fortis expects its long-term growth in rate base will drive earnings that support dividend growth guidance of 4-6% annually through 2028.

Source: (FTS-T) Q3-2023 Quarterly Review

Category: MP Market Reviews

MP Market Review – December 29, 2023

MP Market Review – December 22, 2023

MP Market Review – December 15, 2023

MP Market Review – December 08, 2023

MP Market Review – December 01, 2023

MP Market Review – November 24, 2023

MP Market Review – November 17, 2023

MP Market Review – November 10, 2023

MP Market Review – November 03, 2023

MP Market Review – October 27, 2023

Follow Us

Talk To Us