Category: MP Market Reviews

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

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.

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

MP Market Review – October 20, 2023

Last updated by BM on October 23, 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 -3.4% (capital). Dividend growth is at +8.6% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no 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 Thoughts

“Dividend growth is the hidden magic in plain sight. We hold because after ten years, our yield is at least 5%, on average 7% and often about 10%.”

-Tom Connolly

Growth Yield (formerly known as Yield on Cost)

When you’re dealing with investments, the first thing you should do is decide on a clear goal. After that, you need to check how you’re doing to make sure you’re getting closer to your goal. Many investors usually look at how much money they’ve made each year and compare it to a benchmark. As dividend growth investors we focus on our income and need only one metric to measure how we are doing, and it is called “Yield on Cost” or YOC. It’s a way to see how much money you’re getting from your investment compared to how much you originally spent on it.

Some argue that the only yield that truly matters is the current one. Yield on Cost has faced criticism for not reflecting the current stock yield. While we agree in principle that YOC may not be the best metric for valuing a company at its present state, we still find it highly valuable for assessing the quality of the companies we invest in and for tracking their historical and projected performance over time.

We appreciate the perspective shared by Tom Connolly (dividendgrowth.ca) in addressing YOC and the concerns associated with it in this quote from his blog:

“Some people who do not ‘believe’ in YOC argue that what happened ten or 15 years ago is not always a good indicator of the future. That’s true. I’m not saying that YOC is a good indicator of the future. However, if the dividend has grown since purchase, YOC is a good indicator the company is doing well. If a company has a ‘culture’ of increasing its dividend the pattern could easily continue. If folks are not using YOC to measure because it is rooted in the past, how do they measure their returns? Do they not use a past-connected number also? Growing yield is the essence of what the dividend growth strategy is about. Growing yield drives returns. If the yield does not grow, essentially, you have a bond.”

Chuck Carnevale, another mentor, proposes rebranding the YOC metric as growth yield—a term we also find more attractive. This terminology not only emphasizes the initial yield but also underscores the compounding growth of that yield. A straightforward name change could potentially alleviate the reservations of YOC critics, shifting the focus away from the purchase cost and towards the evolving yield, aligning more closely with our approach.

A helpful tool to demonstrate the power of growth yield is a quick test we like to do called the “7% in 10 years” test. If in ten years, our growth yield, without the reinvestment of dividends, is projected to grow to 7% then it is likely that the company has the right mix of initial yield and dividend growth we look for and a candidate for further research.

One of the reasons we use 7% as our numerical goal is that equities have historically provided ~ 7% returns over the last 100 years. To generate a return within a decade equal to the stock market’s historical total return from just the dividend alone demonstrates once again the compounding power of dividend growth investing.

So, how can an investment made today generate a 7% return solely from dividends ten years from now? The answer lies in the growth of the dividend!

Here is a chart we use to determine quickly if the starting yield and dividend growth will get us to our goal.

The table illustrates the combinations of initial yields (across the top) and annual growth rates (down the left side) required to achieve a 7% income return from dividends alone. When two values intersect, the table indicates the number of years it takes to reach a 7% growth yield. If the number of years is 10 or fewer, the combination is feasible, and these cells are shaded.

For instance, a 3% initial yield, growing at a rate of 9% per year, reaches a 7% growth yield in 10 years. The same result can be obtained with a 4% initial yield growing at 6% annually. Both combinations are viable.

It’s important to note that the 7×10 table focuses exclusively on income and does not take into account the impact of price increases. Additionally, it does not consider the compounding effect of reinvesting dividends, which would reduce the time required to achieve the displayed growth yield increase. The table solely reflects the growth in yield on cost resulting from the dividend’s own growth.

In our approach to constructing the Magic Pants Wealth-Builder Model Portfolio (CDN), we aim to build a concentrated portfolio of quality companies across various sectors and industries. This includes a mix of higher yield, slower growth stocks, and lower yield, higher growth stocks. We then assess their shorter-term growth potential to determine if they are likely to maintain this trajectory.

Beyond delivering strong total returns over time, one of the greatest advantages of the growth yield metric is its ability to help investors ignore the short-term price volatility often observed in the stock market. When investors concentrate on constructing a reliable income-producing plan for their retirement, they are less likely to be swayed by the fluctuations in price of the stock market.

For dividend growth investors whose objective is to invest in securities that provide increasing income over time, the most suitable metric to gauge their success in achieving this objective is growth yield (formerly known as YOC).

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

If we’re talking taxes, dividend stocks crush GICs (Globe & Mail)

https://www.theglobeandmail.com/investing/investment-ideas/article-if-were-talking-taxes-dividend-stocks-crush-gics/

“Someone with an income of $150,000 would have a marginal tax rate of 18.9 to 32 per cent on eligible dividends, and 38 to 47.5 per cent on interest income.”

DGI Truth #5: Dividend growth investing is a tax-efficient strategy

With higher interest rates, many investors are turning to high-interest savings accounts (HISAs) and guaranteed investment certificates (GICs) as a form of risk-free investment. However, it’s essential to be aware that quality dividend growth companies also provide income in the form of dividends, which can offer yields similar to those found in HISAs and GICs. What many people discover too late is how much of their supposedly risk-free money is actually subject to taxation.

It’s worth noting that your first $53,000 of dividend income may be tax-free. Are you aware of any other types of income that are taxed at 0% on the first $53K? It’s always advisable to consult with an accountant regarding your personal tax planning.

Beating the stock market isn’t easy. Many Canadian investors act like it is (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-is-the-stock-market-easy-to-beat/

“The shift to passive investing has been driven, in part, by the relatively disappointing and inconsistent performance record of active managers,” Sean Freer, director of global equity indices at S&P Dow Jones Indices, wrote in a recent report.

Investors who are disappointed in their advisors are now flocking to index investing. What a shame! The financial community needs to do a better job. Next time you meet with your financial advisor, ask them what they would recommend if you wanted to preserve your hard-earned capital and have it provide you with a growing income after you retire. It would be interesting to see what they come back with.

The List (2023)

Last updated by BM on October 20, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	10.1%	$5.02	-25.4%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$73.49	22.2%	$0.56	19.1%	13
BCE-T	Bell Canada	7.6%	$50.68	-15.9%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$23.22	-25.9%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$55.49	-4.4%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.2%	$145.93	-10.4%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	5.0%	$137.08	-6.5%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	6.3%	$28.63	-22.5%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$94.11	17.8%	$0.27	23.8%	12
EMA-T	Emera	6.4%	$44.30	-15.8%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	8.1%	$43.63	-18.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.7%	$31.74	-11.1%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$138.93	0.6%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.3%	$53.54	-3.3%	$2.29	5.3%	49
IFC-T	Intact Financial	2.3%	$194.71	-0.5%	$4.40	10.0%	18
L-T	Loblaws	1.6%	$111.52	-7.3%	$1.74	13.2%	11
MGA-N	Magna	3.6%	$50.92	-11.5%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$70.13	-7.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.8%	$111.01	-13.3%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.3%	$72.69	46.6%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$84.22	28.9%	$0.77	8.5%	11
TD-T	TD Bank	4.9%	$78.71	-10.2%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$118.55	18.4%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$104.50	6.9%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.9%	$46.51	-12.7%	$3.69	3.4%	22
T-T	Telus Corp.	6.5%	$22.12	-16.0%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$136.45	3.6%	$1.02	7.4%	13
Averages		3.7%		-3.4%		8.6%	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 -3.4% (capital). Dividend growth is now at +8.6% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Stella-Jones Inc. (SJ-T), up +6.26%; Enghouse Systems Limited (ENGH-T), up +1.54%; and Franco Nevada (FNV-T), up +0.02%.

Algonquin Power & Utilities (AQN-N) was the worst performer last week, down -12.54%.

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)

Last week, no dividend increases from companies on ‘The List’.

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

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

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

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

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

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

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

MP Market Review – October 13, 2023

Last updated by BM on October 16, 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 -1.1% (capital). Dividend growth is at +8.6% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no earnings reports from companies on ‘The List’.
No 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 Thoughts

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

– Warren Buffett

Quality vs Value

While we are always hunting for attractive investment opportunities, we must remember that the pursuit of bargains shouldn’t overshadow the importance of quality. This is a snapshot of ‘The List’ as of Friday, October 13, 2023, sorted by valuation according to the dividend yield theory (valuation measure).

At present, half of ‘The List’ is deemed undervalued based on dividend yield theory. However, a different perspective emerges when we sort this list using some of our ‘quality indicators’ like Value Line Safety and Financial ratings, S&P Rating, and Dividend Growth Streak.

As Warren Buffett rightly advises, any investment strategy should prioritize acquiring companies positioned near the top of this list – those considered ‘wonderful companies’ – when they are reasonably priced. This approach, rather than focusing solely on valuation, promises a more favorable outcome.

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

BMO strategist reiterates importance of a dividend growth portfolio in current environment (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-bmo-strategist-reiterates-importance-of-a-dividend-growth-portfolio-in/

“BMO chief investment strategist Brian Belski reiterated his belief that dividend growth is the correct strategy for income-oriented investors.”

The author discusses the limitations of ‘yield-focused strategies’ in this article. For many investors, the key distinction lies in separating high-yield dividend investing from investing in quality dividend growth companies that consistently increase their cash flow each year. It is not the initial high yield that wins; rather, it is the combination of yield plus growth over time.

I would argue that dividend growth investing is important in any environment but then again, I am a little biased.

The carnage in dividend-land is an epic buying opportunity, if you have time to wait (Globe & Mail)

https://www.theglobeandmail.com/investing/personal-finance/carrick-on-money/article-the-carnage-in-dividend-land-is-an-epic-buying-opportunity-if-you-have/

“Prices will rise, yields will come down. Investors who bought dividend stocks when they were beaten down will be rewarded in three ways:

Potential price rebounds: Some blue-chip dividend stocks have fallen so hard lately that their share prices are down or flat over the past five years.
Dividend growth: Bond interest is locked in, but many dividend stocks have a history of annual dividend increases.
Tax: In a non-registered account, the dividend tax credit means you pay less tax on dividends from a corporation than you do on bond interest.”

I’m pleased to see a growing number of articles about dividend growth investing in the financial media. When traditional index and growth-focused approaches no longer deliver the desired results, you can always rely on the time-tested strategy of dividend growth investing.

The List (2023)

Last updated by BM on October 13, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.8%	$5.74	-14.7%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$74.40	23.7%	$0.56	19.1%	13
BCE-T	Bell Canada	7.5%	$51.66	-14.2%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$25.98	-17.7%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$55.98	-3.6%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$147.15	-9.7%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.9%	$140.85	-3.9%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	6.1%	$29.46	-20.2%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$95.31	19.3%	$0.27	23.8%	12
EMA-T	Emera	6.0%	$46.72	-11.2%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	7.9%	$44.70	-16.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.7%	$31.26	-12.5%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$138.90	0.5%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.41	-1.7%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$199.95	2.1%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$113.80	-5.4%	$1.74	13.2%	11
MGA-N	Magna	3.5%	$52.21	-9.2%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$71.62	-5.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.7%	$114.54	-10.5%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.3%	$68.41	38.0%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$88.71	35.8%	$0.77	8.5%	11
TD-T	TD Bank	4.8%	$80.35	-8.3%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$121.29	21.1%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$110.00	12.6%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.7%	$47.90	-10.1%	$3.69	3.4%	22
T-T	Telus Corp.	6.3%	$22.82	-13.3%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$138.41	5.1%	$1.02	7.4%	13
Averages		3.6%		-1.1%		8.6%	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 -1.1% (capital). Dividend growth is now at +8.6% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Stella-Jones Inc. (SJ-T), up +5.80%; Franco Nevada (FNV-N), up +5.11%; and TC Energy Corp. (TRP-T), up +4.75%.

Brookfield Infrastructure Partners (BIP-N) was the worst performer again last week, down -7.31%.

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)

Last week, no dividend increases from companies on ‘The List’.

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, no companies on ‘The List’ reported earnings.

MP Market Review – October 06, 2023

Last updated by BM on October 09, 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 -0.9% (capital). Dividend growth remained the same at +8.5% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no earnings reports from companies on ‘The List’.
No 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 Thoughts

“Stock returns always add up to the sum of the current dividend yield, plus dividends/earnings per share growth, plus or minus any change in the valuation”.

– Charles Ellis

‘Higher for longer’

Rising interest rates can have a detrimental impact on stocks for two primary reasons. Firstly, interest expenses play a crucial role in a company’s income statement. If the cost of borrowing money increases, companies tend to borrow less and face higher expenses when refinancing existing debt. Secondly, higher yields present more attractive alternatives for investors’ capital, creating stronger competition for their investments.

With recent data still indicating an overheated economy (inflation accelerating), Central Banks may find themselves with no choice but to raise interest rates further or, at the very least, maintain their current trajectory.

Let’s delve deeper into the implications of the increasingly prevalent “higher for longer” narrative within the investment media. Capital-intensive business models, such as pipelines, telecommunications companies (Telcos), Real Estate Investment Trusts (REITs), and utilities, could experience adverse effects if interest rates remain elevated for an extended period. Even the most defensively positioned sector among them, utilities, is not immune to these impacts.

Utility companies are often considered defensive stocks for several reasons:

Steady Demand: Utility services, such as electricity, natural gas, water, and telecommunications, are necessities for both individuals and businesses. Regardless of economic conditions, people continue to use these services. This steady demand provides a reliable source of revenue for utility companies.

Stable Cash Flows: Utility companies typically have a regulated business model. Regulatory bodies often set the rates these companies can charge for their services, which can provide a degree of predictability and stability to their cash flows. This regulation helps ensure that utility companies can cover their operating costs and debt obligations even during economic downturns.

Income Generation: Many investors, especially those seeking income or dividends, are attracted to utility stocks because they tend to offer relatively high dividend yields. Utility companies often distribute a significant portion of their profits to shareholders in the form of dividends. This income can be especially appealing during periods of economic uncertainty when other investment options may offer lower yields or more risk.

Low Price Elasticity: The demand for utility services is relatively price inelastic, meaning that changes in the price of these services do not significantly impact demand. People continue to use electricity, gas, and water even if prices increase moderately. This price inelasticity can help protect utility companies from severe revenue declines during economic downturns.

Defensive Nature: Utility stocks are often considered “defensive” in the sense that they tend to be less sensitive to economic cycles. When the economy is performing poorly, investors may flock to defensive stocks like utilities as a way to preserve capital and maintain income.

Hedging Against Market Volatility: Utility stocks can act as a hedge against market volatility. During periods of stock market turbulence, investors may seek refuge in assets that are less affected by market fluctuations. Utility stocks, with their stable cash flows and dividends, can provide a level of stability to a diversified investment portfolio.

Regulated Monopolies: In many cases, utility companies operate as regulated monopolies in specific regions. This means they have limited competition, allowing them to maintain more consistent pricing power and profitability.

With characteristics like these, it’s no surprise that utility companies appear on ‘The List’ and have consistently delivered increasing income and capital appreciation to dividend growth investors for decades. Recent stock market data, however, paints a different picture of their defensive nature.

High interest rates, particularly the current narrative of “higher for longer” interest rates, have had a negative impact on utility companies, for the reasons explained earlier. To succeed, we must identify the highest quality utility companies and increase our holdings when they are oversold and trading at a discount to their fair value (sensible price). High interest rates are not sustainable over the long term and our good dividend growers will eventually rebound. In the short term there will still be yield and growth in a market sell-off.

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 stocks may be sinking, but my cash flow keeps growing (Globe & Mail)

https://www.theglobeandmail.com/investing/education/article-dividend-stocks-may-be-sinking-but-my-cash-flow-keeps-growing/

“For the first several years, the model portfolio chugged along nicely. Companies raised their dividends regularly, and their share prices moved steadily higher, too.”

DGI Truth #2: A rising dividend income stream will eventually lead to rising stock prices.

I have been following Mr. Heinzl’s articles for several years now and have commented on the reasons why his ‘Yield Hog Dividend Growth Portfolio’ has underperformed our portfolios in the past. While he includes some of our quality companies, he also incorporates REITs and ETFs for diversification. With rising interest rates, he is finally feeling the impact of his decision to include cyclical and lower-quality companies in his portfolio.

“But the benefits of rising dividends are more than financial. When your investment income is growing steadily, it’s easier to accept market volatility and sliding stock prices as normal parts of investing without panicking and doing something rash.”

Although the author seems to grasp many of our dividend growth investing principles, a greater emphasis on quality would have helped avoid many of his ‘surprises’ over the years.

A tough year for dividend stocks puts lots of big names on sale (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-a-tough-year-for-dividend-stocks-puts-lots-of-big-names-on-sale/

“But dividend stocks have a couple of advantages when it comes to inflation, Mr. Bushell said. The first is the potential for dividend increases. And the second is that many businesses can pass on some inflation through pricing power.”

DGI Truth #3: Dividend growth investors enjoy inflation-protected income.

Amidst the ongoing discussions regarding the potential for interest rates to remain ‘higher for longer,’ investors seeking greater yields may consider Guaranteed Investment Certificates (GICs) or High-Interest Savings Accounts as more secure options for their funds. However, what they often fail to recognize is that even within these seemingly risk-free investments, their cash remains susceptible to the erosive impact of inflation, resulting in a negative real rate of return. To put it simply, their purchasing power may dwindle over time, despite the appearance of security in their investments.

While we cannot completely shield our capital from price volatility in the short term, we can minimize the impact of inflation on our purchasing power through our income (rising dividends). Thus far, our dividend increases have consistently outpaced the rate of inflation.

The List (2023)

Last updated by BM on October 06, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.8%	$5.77	-14.3%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$71.87	19.5%	$0.56	19.1%	13
BCE-T	Bell Canada	7.6%	$51.02	-15.3%	$3.87	5.2%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$28.03	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$56.26	-3.1%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.2%	$146.35	-10.1%	$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	6.1%	$29.42	-20.4%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$94.15	17.9%	$0.27	23.8%	12
EMA-T	Emera	5.9%	$47.39	-9.9%	$2.82	5.0%	16
ENB-T	Enbridge Inc.	8.2%	$43.47	-18.5%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.7%	$31.07	-13.0%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$132.15	-4.3%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.3%	$53.45	-3.4%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$199.09	1.7%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$116.46	-3.2%	$1.74	10.3%	11
MGA-N	Magna	3.4%	$54.18	-5.8%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$71.51	-5.3%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.6%	$114.90	-10.3%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.4%	$64.66	30.4%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$89.88	37.6%	$0.77	8.5%	11
TD-T	TD Bank	4.8%	$79.80	-9.0%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$124.78	24.6%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$110.49	13.1%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	8.1%	$45.73	-14.2%	$3.69	3.4%	22
T-T	Telus Corp.	6.3%	$22.55	-14.3%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$135.96	3.2%	$1.02	7.4%	13
Averages		3.6%		-0.9%		8.5%	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 -0.9% (capital). Dividend growth remained the same at +8.5% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Alimentation Couche-Tard Inc. (ATD-T), up +4.19%; Enghouse Systems Limited (ENGH-T), up +3.64%; and Fortis Inc. (FTS-T), up +3.61%.

Brookfield Infrastructure Partners (BIP-N) was the worst performer last week, down -4.66%.

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)

Last week, no dividend increases from companies on ‘The List’.

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, no companies on ‘The List’ reported earnings.

MP Market Review – September 29, 2023

Last updated by BM on October 02, 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 -0.8% (capital). Dividend growth remained the same at +8.5% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, no earnings report from companies on ‘The List’.
No 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 Thoughts

“If you are not going to sell a stock, what happens to its price is a matter of indifference. For true long-term investors – that small group of people like Warren Buffett who can shut their eyes to short-term fluctuations and have no doubt that what goes down will come back up – volatility represents opportunity rather than risk.”

– Peter L. Bernstein, Against the Gods, page 261

One of my mentors, Tom Connolly, published a report back in 2018 that I revisit and review when the market experiences a significant downturn with no clear end in sight. I believe now is a good time to share some of his insights with our readers.

Why dividend growth investors do not worry in a market sell off.

What really matters is the rising future stream of dividends and retained earnings. Eventually, there will also be a commensurate rise in the capital value of the stock.
In a market sell-off, it’s the excitement factor/transient return (p/e) that drops. Dividends, intrinsic values, retained earnings actually continue to grow in a bear market. This is the ultimate solid foundation under our dividend growth strategy.
“In violent market sell-offs even solid names get treated as ‘lemons’, initially”. M. El-Erain. Take advantage of this shoddy thinking.
Shut your eyes to short term fluctuations: we do not buy to sell. The market is a mind game. Be disciplined. Hold for the cash flow. Think very long term.
Volatility is not risk!
Yield on Cost – If market gyrations bother you, study the yield on the original price of stocks you purchased years ago. Such data is relaxing.
Market price can be volatile: intrinsic value and dividends do not fluctuate much.
We own companies that have increased dividends each year for years. Quality!
Study year-over-year dividend data for a decade. Market bleeps are hardly there.
Charles Ellis – “Stock returns always add up to the sum of the current dividend yield, plus dividends/earnings per share growth, plus or minus any change in the valuation”. There will still be yield and growth in a market sell-off. p.130
Peter L. Bernstein – “If you are not going to sell a stock, what happens to its price is a matter of indifference. For true long-term investors – that small group of people like Warren Buffett who can shut their eyes to short-term fluctuations and have no doubt that what goes down will come back up – volatility represents opportunity rather than risk.” Peter L. Bernstein, Against the Gods, page 261
James Montier – “In the long-run, the return is almost exclusively driven by dividends”
Steven Jarislowsky – “If you have premium high compound growth noncyclicals, it is not really necessary to get out if the stock price goes too high. If far too high, obviously you can trim a bit and pay some tax, but be sure your gains have been real, not inflation mirages. Personally, I normally just hold and take a few down drafts, counting on the next bull market to take me up again.”
Dimson, Marsh and Staunton “the vast majority of long-term real returns are derived from equity income”.
Ben Graham – “Basically, price fluctuations have only one significant meaning for the true investor. They provide an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.” Intelligent Investor C-8
Warren Buffett – Feb 24, 2018 “undistributed earnings…will, over time. Translate into commensurate capital gains. Quality. Always and only quality companies.
Jack Bogle – “the stock market is a giant distraction from the business of investing”

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-paying stocks will be far more important than in the past (Globe & Mail)

https://www.theglobeandmail.com/investing/investment-ideas/article-dividend-paying-stocks-will-be-far-more-important-than-in-the-past/

A few of my favourite quotes from the article:

“A US$10,000 investment in 1960 in the S&P 500 would be worth more than US$4-million now, with more than 80 per cent of that gain from dividends (assuming reinvestment) and 20 per cent from capital gains.”

“Dividend stocks are attractive, but not all are the same. The most attractive firms are in good businesses with great management that can consistently increase dividends.”

“There is no point in buying stocks that pay dividends if you are going to give up a portion of your cash flows by paying large fees to active managers, most of whom, if you believe the empirical evidence, do not add any value over the long run.”

Build your own dividend growth portfolio with quality companies that have a track record of dividend growth by subscribing today. We will show you how!

I’m buying Fortis while this dividend growth darling is still cheap (Globe & Mail)

https://www.theglobeandmail.com/investing/education/article-im-buying-fortis-while-this-dividend-growth-darling-is-still-cheap/

“… when it comes to investing, there is one thing that’s virtually certain: Shareholders of Fortis Inc. will get a dividend increase every year.”

Utility stocks, such as Fortis Inc., tend to be sensitive to changes in interest rates. When interest rates are low, the dividend offered by these stocks becomes more attractive to investors. Currently, investors are finding higher rates in alternative investments, which is putting pressure on the stock price. Like the author’s perspective, we also anticipate a buying opportunity for this high-quality dividend growth stock in the near future.

The List (2023)

Last updated by BM on September 29, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	8.6%	$5.92	-12.0%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$68.98	14.7%	$0.56	19.1%	13
BCE-T	Bell Canada	7.4%	$51.85	-13.9%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$29.40	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$57.01	-1.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$147.09	-9.7%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.7%	$146.05	-0.4%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	6.3%	$28.70	-22.3%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$93.58	17.2%	$0.27	23.8%	12
EMA-T	Emera	5.8%	$47.42	-9.9%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.9%	$45.05	-15.5%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.8%	$29.98	-16.0%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$133.49	-3.4%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.4%	$51.59	-6.8%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$198.02	1.1%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$115.40	-4.1%	$1.74	10.3%	11
MGA-N	Magna	3.4%	$53.61	-6.8%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$70.54	-6.5%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.5%	$118.70	-7.3%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.4%	$65.32	31.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$88.13	34.9%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.83	-6.7%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$128.41	28.2%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$110.62	13.2%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.9%	$46.71	-12.4%	$3.69	3.4%	22
T-T	Telus Corp.	6.4%	$22.18	-15.7%	$1.43	7.4%	19
WCN-N	Waste Connections	0.8%	$134.30	2.0%	$1.02	7.4%	13
Averages		3.6%		-0.8%		8.5%	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 -0.8% (capital). Dividend growth remained the same at +8.5% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Loblaws (L-T), up +2.08%; Stella-Jones Inc. (SJ-T), up +1.57%; and Enghouse Systems Limited (ENGH-T), up +0.64%.

Algonquin Power & Utilities (AQN-N) was the worst performer last week, down -13.83%.

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)

Last week, no dividend increases from companies on ‘The List’.

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, no companies on ‘The List’ reported earnings.

MP Market Review – September 22, 2023

Last updated by BM on September 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 +1.3% (capital). Dividend growth was up based on two dividend announcements and is now at +8.5% YTD, highlighting growth in income over the past year.
Last week, two dividend increases from companies on ‘The List’.
Last week, no earnings report from a company on ‘The List’.
No 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 Thoughts

“When CAPE is high, it tells you that the market is expensive, and future returns are likely to be lower. When it’s low, it tells you the market is cheap, and future returns are likely to be higher.”

– Charles Ellis, Winning the Loser’s Game: Timeless Strategies for Successful Investing

Today, we look at another one of our valuation metrics, the cyclically adjusted price-to-earnings ratio (CAPE ratio).

CAPE ratio, also known as the Shiller P/E ratio, is a widely used valuation metric in finance that aims to provide a more accurate and stable measure of a stock or market’s price relative to its earnings over an extended period. Developed by Nobel laureate Robert Shiller, this ratio has gained prominence for its ability to account for the cyclicality of economic and earnings cycles, offering investors a more comprehensive view of the market’s valuation.

Traditional price-to-earnings (P/E) ratios focus on a company’s or market’s current earnings in relation to its current stock price. While these ratios are simple to calculate and provide a snapshot of valuation, they can be highly susceptible to short-term fluctuations in earnings caused by economic cycles.

Investors and analysts use the CAPE ratio to assess whether a market or individual stocks are overvalued or undervalued. Historically, CAPE ratios have shown a strong correlation with long-term stock market returns. When the CAPE ratio is high, suggesting that stocks are expensive relative to their long-term earnings potential, subsequent market returns tend to be lower. Conversely, when the CAPE ratio is low, suggesting that stocks are cheap relative to their long-term earnings potential, subsequent market returns tend to be higher.

It’s important to note that the CAPE ratio, like any financial metric, has its limitations. It can’t predict short-term market movements, and it doesn’t account for changes in accounting standards or the unique circumstances of individual companies. Additionally, some critics argue that it may not be as relevant in today’s rapidly changing economic landscape.

In our process of discovering a ‘sensible price’, we typically look for stocks with a CAPE under 20. We calculate the CAPE by taking the average of the last ten years of a company’s earnings and dividing it by the current price. While it has its limitations, it remains a valuable tool for investors seeking to gauge the relative attractiveness of stocks and markets over the long term.

Here is ‘The List’ sorted by CAPE as of last Friday. The companies above the line meet our CAPE criteria:

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

FORTIS INC. ANNOUNCES NEW $25 BILLION FIVE YEAR CAPITAL OUTLOOK AND 4.4% INCREASE IN FOURTH QUARTER DIVIDEND MARKING 50 YEARS OF DIVIDEND INCREASES

https://www.fortisinc.com/news-and-media/details/fortis-inc-announces-new-25-billion-five-year-capital-outlook-and-4-4-increase-in-fourth-quarter-dividend-marking-50-years-of-dividend-increases

“Our Board of Directors declared a fourth quarter dividend representing a 4.4% increase that will mark 50 years of consecutive increases in dividends paid,” said David Hutchens, President and CEO, Fortis Inc.

“This makes Fortis one of only two companies listed on the Toronto Stock Exchange to reach this significant milestone.”

“Our sustainable regulated growth strategy is focused on delivering cleaner energy that remains affordable and reliable for our customers while supporting annual dividend growth of 4-6% through 2028,” said Mr. Hutchens.

For me, discovering how many companies in Canada with ten years of consecutive dividend growth or more was a revelation on my journey to uncover the secret of wealth-building (DGI). To find those that have been doing it for five decades and counting is truly magical!

The List (2023)

Last updated by BM on September 22, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	7.4%	$6.87	2.1%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$70.73	17.6%	$0.56	19.1%	13
BCE-T	Bell Canada	7.1%	$53.74	-10.8%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$30.71	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.9%	$57.08	-1.7%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$148.52	-8.8%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.7%	$147.76	0.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.9%	$30.22	-18.2%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$93.61	17.2%	$0.27	23.8%	12
EMA-T	Emera	5.5%	$50.58	-3.9%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.6%	$46.54	-12.7%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.8%	$29.79	-16.6%	$0.85	18.2%	16
FNV-N	Franco Nevada	1.0%	$140.68	1.8%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.2%	$54.36	-1.8%	$2.29	5.3%	49
IFC-T	Intact Financial	2.2%	$199.81	2.1%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$113.05	-6.1%	$1.74	10.3%	11
MGA-N	Magna	3.5%	$53.33	-7.3%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$71.86	-4.8%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.4%	$120.19	-6.1%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.4%	$64.31	29.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$88.59	35.6%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.76	-6.7%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$130.56	30.4%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$111.14	13.7%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.5%	$49.06	-8.0%	$3.69	3.4%	22
T-T	Telus Corp.	6.2%	$22.90	-13.0%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$137.57	4.4%	$1.02	7.4%	13
Averages		3.4%		1.3%		8.5%	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 +1.3% (capital). Dividend growth was up on two dividend announcements and is now at +8.5% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Intact Financial (IFC-T), down -0.04%; TFI International (TFII-N), down -0.43%; and Toromont Industries (TIH-T), down –1.13%.

Magna (MGA-N) was the worst performer last week, down -6.81%.

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)

Last week, two dividend increases from companies on ‘The List’.

Emera Inc. (EMA-T) on Wednesday said it increased its 2023 quarterly dividend from $0..69 to $0.7175 per share, payable November 15, 2023, to shareholders of record on October 31, 2023.

This represents a dividend increase of +4.0%, marking the 17th straight year of dividend growth for this quality, regulated gas and electric utility.

Fortis Inc. (FTS-T) on Thursday said it increased its 2023 quarterly dividend from $0.565 to $0.59 per share, payable December 1, 2023, to shareholders of record on November 17, 2023.

This represents a dividend increase of +4.4%, marking the 50th straight year of dividend growth for this quality, regulated gas and electric utility.

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, no companies on ‘The List’ reported earnings.

MP Market Review – September 15, 2023

Last updated by BM on September 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 up with a YTD price return of +4.0% (capital). Dividend growth remained the same and is now at +8.4% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, one earnings report from a company on ‘The List’.
No 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 Thoughts

“Investing without understanding valuation is like sailing without a map. You may get lucky, but you’re more likely to get lost.”

-Chuck Carnevale, Creator of the FASTgraphs Research Tools

Last week, we discussed the ‘Dividend Yield Theory’ as a valuation metric to assist us in determining whether our high-quality dividend growth stocks are reasonably priced. This week, we’ll delve into the concept of a company’s ‘valuation corridor’ to guide our entry and exit points.

Analyzing a company’s historical fundamentals provides valuable insights into how the business has been valued over an extended period. Many of the stocks we invest in exhibit a ‘narrow valuation corridor,’ meaning their stock prices tend to follow a path that seldom deviates from their historical trading range. Examining a company’s metrics like P/E (Price to Adjusted Operating Earnings), EBITDA (Price to Earnings Before Interest Taxes and Amortization), OCF (Price to Operating Cash Flow), and Sales (Price to Sales) ranges offers significant insights into how the company has traditionally been valued.

Making a purchase when the stock is at the lower end of this range or selling when it’s at the higher end has proven effective in managing our entry and exit points, ultimately boosting returns.

To visualize a company’s historical valuation, we utilize the Fundamental Analyzer Software Tool (FASTgraphs). Our aim is to see the stock trading within its typical ‘valuation corridor’ based on a ten-to-twelve-year timeline. This approach provides a clearer understanding of how the stock performed during various economic cycles.

We use one of our quality dividend growers on ‘The List’, Canadian National Railway (CNR-T) to demonstrate:

The ‘Black Line’ represents the price of Canadian National Railway over the past decade, while the ‘Blue Line’ indicates the Normal P/E Ratio it trades at over the same time frame. Notably, there exists a clear correlation between price and P/E for this high-quality dividend growth stock, which we refer to as our ‘valuation corridor.’ Historically, buying when the price falls below the Normal P/E Ratio (20.59) has proven to be an opportune moment to invest, and selling when the price line significantly surpasses this threshold has been a favorable time to divest.

The green dots on the graph mark our purchase points for CNR-T, while the solitary red dot represents the single instance when we decided to sell. While we typically maintain our positions in quality dividend growers exhibiting strong fundamentals, we’ve recently discovered that our returns can be further enhanced by selling when these stocks become significantly overvalued. A detailed explanation of our approach is available in our MP Wealth-Builder Model Portfolio (CDN) Business Plan, accessible to all our subscribers.

Chuck Carnevale’s guidance, akin to a map, has consistently steered us in the right direction on multiple occasions.

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

How TFI International rose from a small Quebec trucker to a North American giant (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-how-tfi-international-rose-from-a-small-quebec-trucker-to-a-north/

“We have many great companies in Canada, some of which few people know about.

One that falls into the under-the-radar category is TFI International Inc. (TFII-T). Based in St. Laurent, a suburb of Montreal, it’s a transportation and logistics giant, whose network spans more than 80 North American cities. It has more than 90 operating companies under its banner and employs some 24,000 people.”

When I first ventured into dividend growth investing, I was pleasantly surprised by some of the companies that made it onto ‘The List’. While I was already familiar with TFI International due to my involvement with one of my operating companies, it had never appeared in the financial news. I quickly learned to appreciate the importance of analyzing cash flow when evaluating the quality of dividend growers. We initially purchased TFI International at $54 in 2020, and within just three years, our investment tripled in value! This remarkable performance led us to include it in our MP Wealth-Builder Model Portfolio (CDN) today.

What Canadians don’t understand about our economic situation – which is a lot – can hurt us (Globe & Mail)

https://www.theglobeandmail.com/business/commentary/article-what-canadians-dont-understand-about-our-economic-situation-which-is-a/

This article provides valuable insights into how many Canadians perceive the state of the economy. The author convincingly argues that a lack of deep understanding about the intricate economic forces at play in today’s world is a cause for concern. This knowledge gap compounds the challenges we face in our current economic climate, which includes issues like carbon taxes, government spending, interest rates and inflation.

The List (2023)

Last updated by BM on September 15, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	7.0%	$7.20	7.0%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$73.39	22.0%	$0.56	19.1%	13
BCE-T	Bell Canada	6.9%	$55.15	-8.4%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$32.72	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.8%	$57.81	-0.4%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$157.48	-3.3%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.4%	$155.29	5.9%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.7%	$31.53	-14.6%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$95.63	19.7%	$0.27	23.8%	12
EMA-T	Emera	5.3%	$51.83	-1.5%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.5%	$47.60	-10.7%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.7%	$31.13	-12.8%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$143.87	4.1%	$1.36	6.3%	15
FTS-T	Fortis Inc.	4.0%	$56.50	2.1%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$199.89	2.1%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$115.37	-4.1%	$1.74	10.3%	11
MGA-N	Magna	3.2%	$57.23	-0.5%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$72.78	-3.6%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.3%	$124.12	-3.1%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.4%	$65.12	31.3%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.8%	$90.20	38.1%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$84.10	-4.1%	$3.84	7.9%	12
TFII-N	TFI International	1.1%	$131.12	30.9%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$112.41	15.0%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	7.3%	$50.68	-4.9%	$3.69	3.4%	22
T-T	Telus Corp.	6.1%	$23.27	-11.6%	$1.43	7.4%	19
WCN-N	Waste Connections	0.7%	$141.79	7.7%	$1.02	7.4%	13
Averages		3.3%		4.0%		8.4%	19

Performance of ‘The List’

Last week, ‘The List’ was up with a YTD price return of +4.0% (capital). Dividend growth remained the same and is now at +8.4% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Dollarama Inc. (DOL-T), up +9.22%; Canadian National Railway (CNR-T), up +7.02%; and Fortis Inc. (FTS-T), up +5.86%.

Loblaws (L-T) was the worst performer last week, down -2.34%.

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)

Last week, no dividend increases from companies on ‘The List’.

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, one company on ‘The List’ reported earnings.

Dollarama Inc. (ATD-T) released its second-quarter fiscal 2024 results on Wednesday, September 13, 2023, before markets opened.

“Once again this quarter, we delivered excellent operational and financial results, including notable growth in comparable store sales, EBITDA and earnings per share. Our performance year to date for this fiscal year reflects our differentiated ability to provide compelling value across our broad product mix and a consistent shopping experience. Dollarama continues to deliver unparalleled value to a growing number of consumers seeking affordable everyday products at low price points, and we expect this strong demand to persist through the second half of the year in the current macro-economic context.”

– Neil Rossy, President and CEO

Highlights:

5% increase in comparable store sales
8% growth in EBITDA to $457.2 million, or 31.4% of sales which represents an improvement of 1.0% compared to the same period last year
3% increase in diluted net earnings per share
Fiscal 2024 guidance range for comparable store sales growth increased to between 10.0% to 11.0%

Outlook:

Source: (DOL-T) Q2-2024 Earnings Results

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