Category: MP Market Reviews

MP Market Review – June 9, 2023

Last updated by BM on June 12, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down slightly with a YTD price return of +4.2% (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 companies on ‘The List’.
One company on ‘The List’ is 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

“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 Thoughts

“Inflation may have become the oldest form of government finance. It may also have been the oldest form of political confidence game used by leaders to exact tribute from constituents, older even than taxes, and inflation has kept those honoured places in human affairs to this day…For at least four thousand years of recorded history, man has known inflation.”

– Jens O. Parsson, Dying of Money

With inflation still in the news after another interest rate hike last week from the Bank of Canada, I thought it timely to revisit how above average inflation rates impact retirees.

You’ve probably come across the 4% Rule and the Age Rule when it comes to retirement planning. Let’s take a closer look at each of these rules.

The 4% Rule suggests withdrawing or spending down 4% of your assets each year. For example, if you have a $1,000,000 portfolio, you would withdraw $40,000 annually, which should ideally sustain you for 25 years of retirement. However, it’s important to note that the 4% Rule primarily works in a prolonged bull market characterized by consistent stock price growth. During an extended bear market, where stock prices decline, relying on withdrawals can significantly impact your portfolio and jeopardize your retirement savings.

The Age Rule determines the allocation of a person’s portfolio between stocks and bonds. It suggests subtracting your current age from 100 to determine the percentage of your portfolio that should be invested in stocks. For instance, if you retire at age 65, subtracting 65 from 100 gives you 35%, which should be allocated to equities, while the remaining 65% is invested in bonds and cash. As you age, the equity portion of your portfolio decreases, aiming for more stability. By age 80, it would decline to 20%.

In an inflationary environment, relying solely on a bond and cash portfolio may not sustain you throughout retirement unless you possess considerable wealth. Bonds typically do not increase their yield over the bond’s lifespan. If you purchased a Treasury bond ten years ago with a 2% yield, it would still pay you the same 2% when it matures. However, the purchasing power of that yield would be lower due to inflation. The goods and services you could have obtained with that bond ten years ago would cost more today, eroding its value.

Considering that neither rule functions optimally in a bear market or endures high inflation, retirees face a challenging dilemma. So, what can retirees do in such circumstances?

A better solution, I believe, is to own high-quality, dividend-growth stocks. In my opinion, they are the best inflation hedge that I know of that can help you keep pace with inflation and build your wealth. Predicting what my dividends will be at the end of the year has proven much more reliable than what the value of my portfolio will be. In the end, I know that eventually, my dividend growth will drive my capital growth, and I have a high probability of never running out of money in my retirement.

Here are two posts that discuss dividend growth investing and a withdrawal strategy in more depth.

The Stay-in-Stocks DGI Strategy

The 90% Balance Rule

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

Recent News

Bank of Canada hikes rate as it seeks to cool resilient economy (Globe & Mail)

https://www.theglobeandmail.com/canada/article-morning-update-bank-of-canada-hikes-rate-as-it-seeks-to-cool-resilient/

“The Bank of Canada was forced to make a U-turn after Governor Tiff Macklem announced a “conditional pause” to interest-rate increases earlier this year when the central bank believed that borrowing costs were high enough to cool the economy and bring down inflation.”

Not a good sign! Makes you wonder if these guys really know what they are doing.

Happy bull-market days are here again – sort of (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-happy-bull-market-days-are-here-again-sort-of/

“Oops. Rather than slowing, the economy continued to roar ahead in the first quarter. In April, inflation ticked higher, not lower. The Bank of Canada was forced to acknowledge in a statement on Wednesday that “concerns have increased” that inflation could “get stuck materially above the 2-per-cent target.” So it decided to make a U-turn and start raising interest rates again.”

Be careful what you glean from the financial news. This article correctly states that nobody really knows which way the economy is headed but if you stopped reading at the headline you may have missed the message from the article.

We continue to take advantage of the sensible prices a downward market provides by continuing to build our model portfolio and enjoy the rising income from our dividends. In case you missed it, the author did give a shout out to dividend stocks near the end of the article but as usual fails to differentiate between dividend growth stocks and dividend stocks.

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

The List (2023)

Last updated by BM on June 9, 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.

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.65	28.5%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.9%	$64.58	7.4%	$0.56	19.1%	13
BCE-T	Bell Canada	6.2%	$61.37	1.9%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$36.93	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.7%	$63.01	8.5%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.1%	$152.41	-6.4%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.1%	$167.46	14.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	5.0%	$36.12	-2.2%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$83.03	4.0%	$0.27	23.8%	12
EMA-T	Emera	5.0%	$55.33	5.2%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.0%	$50.62	-5.1%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.3%	$36.81	3.1%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$145.81	5.5%	$1.36	6.3%	15
FTS-T	Fortis	3.9%	$57.42	3.8%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$198.29	1.3%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$116.46	-3.2%	$1.74	10.3%	11
MGA-N	Magna	3.5%	$53.24	-7.4%	$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	4.3%	$123.89	-3.2%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.4%	$63.79	28.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.42	24.6%	$0.77	8.5%	11
TD-T	TD Bank	4.9%	$79.12	-9.8%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$105.00	4.9%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$105.31	7.8%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.7%	$55.25	3.7%	$3.69	3.4%	22
T-T	Telus	5.6%	$25.30	-3.9%	$1.43	7.3%	19
WCN-N	Waste Connections	0.8%	$135.83	3.1%	$1.02	7.4%	13
Averages		3.2%		4.2%		8.4%	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.

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 slightly with a YTD price return of +4.2% (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 Magna (MGA-N), up +4.03%; Stella-Jones Inc. (SJ-T), up +3.99%; and Algonquin Power & Utilities (AQN-N), up +1.41%.

TFI International (TFII-N) was the worst performer last week, down -4.93%.

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.

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.

One earnings report from companies on ‘The List’ this week

Enghouse Systems Limited (ENGH-T) will release its second-quarter fiscal 2023 results on Monday, June 12, 2023, after markets close.

Last week, one earnings report from companies on ‘The List’.

Dollarama Inc. (DOL-T) released its first-quarter fiscal 2024 results on Wednesday, June 7, 2023, before markets opened.

“Canadians from all walks of life continue to respond positively to our compelling value proposition and affordable product mix. In the context of persistent inflationary pressure, we delivered a 17% increase in comparable store sales in the first quarter of Fiscal 2024. The first quarter also marked the opening of our 1,500th Dollarama store, a significant milestone as we pursue our target of 2,000 stores across Canada by 2031.”

– Neil Rossy, President and Chief Executive Officer

Highlights:

1% increase in comparable store sales
1% growth in EBITDA to $366.3 million, representing 28.3% of sales
6% increase in diluted net earnings per share
Publication of comprehensive annual 2023 ESG Report in alignment with SASB standards and TCFD recommendations

Outlook:

These guidance ranges are based on several assumptions, including the following:

The number of signed offers to lease and store pipeline for the next nine months and the absence of delays outside of our control on construction activities
No material increases in occupancy costs in the short to medium term
Continued positive customer response to our product offering, value proposition and in-store merchandising
Approximately three months of visibility on open orders and product margins
The active management of product margins, including through pricing strategies and refreshing some of the product offering
The continued stabilisation of our supply chain and logistics environment
The inclusion of the Corporation’s share of net earnings of its equity-accounted investment
The entering into of foreign exchange forward contracts to hedge the majority of forecasted purchases of merchandise in U.S. dollars against fluctuations of the Canadian dollar against the U.S. dollar
The continued execution of in-store productivity initiatives and the realization of cost savings and benefits aimed at improving operating expense
The absence of a significant shift in labour, economic and geopolitical conditions or material changes in the retail competitive environment
No significant changes in the capital budget for Fiscal 2024 for new store openings, maintenance capital expenditures, and transformational capital expenditures, the latter being mainly related to information technology projects and which budget excludes the purchase price for the previously announced property acquisition
The successful execution of our business strategy
The absence of pandemic-related restrictions impacting consumer shopping patterns or incremental direct costs related to health and safety measures
The absence of unusually adverse weather, especially in peak seasons around major holidays and celebrations

Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the cautionary statement on forward-looking statements.

Source: (DOL-T) Q1-2024 Earnings Release

MP Market Review – June 2, 2023

Last updated by BM on June 5, 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 slightly with a YTD price return of +5.1% (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, no earnings reports from companies on ‘The List’.
One company on ‘The List’ is 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

“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.”

-Benjamin Graham, Intelligent Investor C-8

Attempting to consistently time the market is an impossible feat. No individual can honestly claim to have succeeded in this task. Moreover, not only is timing the market unachievable, but it can also lead to poor investment returns.

Maintaining confidence and staying invested can be challenging. During market corrections and recessions, there are often significant upswings that set new records. Since timing the market is famously difficult, panicked investors are prone to selling when their emotions are put to the test, often at the market’s bottom. While they may find solace in holding cash, missing out on the market’s subsequent best days during periods of volatility can have a detrimental impact on long-term savings.

As dividend growth investors we prefer to stay invested with only our positions sizes changing when our good dividend growers get a little pricey.

In the chart below, we look at the growth of $10k in the S&P 500 starting January 1, 1980, and the impact of missing out on the market’s best days.

We were fortunate that we listened to Graham’s advice. Forgetting about the stock market and paying attention to the dividend returns and operating results of our quality dividend growers has allowed us to outperform many other strategies.

If you have not yet joined as a 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

Rise of the tech giants exposes the problem of index distortions (Financial Times)

https://www.ft.com/content/e0176208-fa3e-453c-8a9d-0bca61af9cdf?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content

“Mega market cap stocks are eating their indices, distorting their usefulness in some cases as market gauges for investors.”

This causes problems for investors who hold ETFs based on some of the more popular indices like the S&P 500 and Nasdaq. These indices are now dominated by only a few companies which makes them very different from their original forms.

By assembling your own dividend growth portfolio, you can control the mix of quality companies and their position sizes.

Telecom stocks may be down, but that doesn’t mean investors should disconnect (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-telecom-stocks-bce-telus-rogers/

“The Canadian wireless landscape has historically seen relatively disciplined behaviour from industry participants. However, we have seen periods of elevated competition and we believe that we are heading into another of these phases.”

We often see articles like this which cause price pullbacks in the quality dividend growers we follow. Like the author, we see “rising competitive pressures may be more of a gift than a threat.” The author correctly points out that high telecom yields often act as a price floor for the stock price. Once a certain yield is reached the investing community tends to jump in and the price reverts. This is dividend yield theory in action.

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

The List (2023)

Last updated by BM on June 2, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.53	26.7%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.67	12.5%	$0.56	19.1%	13
BCE-T	Bell Canada	6.2%	$61.38	1.9%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$36.78	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.7%	$63.18	8.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$157.98	-3.0%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.1%	$168.29	14.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.9%	$36.55	-1.1%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$83.48	4.5%	$0.27	23.8%	12
EMA-T	Emera	4.9%	$56.55	7.5%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.1%	$50.26	-5.8%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$37.66	5.5%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$147.52	6.8%	$1.36	6.3%	15
FTS-T	Fortis	3.9%	$57.64	4.2%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$200.85	2.6%	$4.40	10.0%	18
L-T	Loblaws	1.5%	$118.49	-1.5%	$1.74	10.3%	11
MGA-N	Magna	3.6%	$51.18	-11.0%	$1.84	2.2%	13
MRU-T	Metro	1.7%	$71.92	-4.7%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.3%	$124.06	-3.1%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.5%	$61.34	23.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.36	24.5%	$0.77	8.5%	11
TD-T	TD Bank	4.9%	$78.89	-10.0%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$110.45	10.3%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$108.32	10.9%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.7%	$55.23	3.6%	$3.69	3.4%	22
T-T	Telus	5.6%	$25.73	-2.2%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$139.49	5.9%	$1.02	7.4%	13
Averages		3.2%		5.1%		8.4%	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 slightly with a YTD price return of +5.1% (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 Stantec Inc. (STN-T), up +2.95%; Enbridge Inc. (ENB-T), up +2.89%; and Algonquin Power & Utilities (AQN-N), up +2.77%.

CCL Industries (CCL-B-T) was the worst performer last week, down -3.70%.

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.

One earnings report from companies on ‘The List’ this week

Dollarama Inc. (DOL-T) will release its first-quarter fiscal 2024 results on Wednesday, June 7, 2023, before markets open.

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

MP Market Review – May 26, 2023

Last updated by BM on May 29, 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 +4.8% (capital). Dividend growth remained the same and is now at +8.4% YTD, highlighting growth in income over the past year.
Last week, one dividend increase 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.
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

“The idea of excessive diversification is madness. Wide diversification, which necessarily includes investments in mediocre businesses, only guarantees ordinary returns.”

– Charlie Munger

“Diversification does not guarantee against loss, only against losing everything all at once”

– Peter L. Bernstein’s Against the Gods: The Remarkable Story of Risk

Over the weekend, we read another article on diversifying your portfolio.

Diversifying your portfolio – how much is too much? (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-gordon-pape-diversifying-your-portfolio-how-much-is-too-much/

The author comments on what a lot of people do, which is over-diversify (diworsification). Depending on your wealth advisor, the recommendations can cover a wide range of options which they believe manage your “risk” efficiently. After all, who can predict what the stock market will do?

Modern Portfolio Theory/Efficient Market Hypothesis is what most wealth managers believe in today, which requires a lot of companies in your portfolio to help manage “risk”. It’s important to note that this approach doesn’t eliminate “risk”; instead, it only ensures “ordinary returns”.

For years, proponents of dividend growth investing have taken advantage of this theory, advocating for a focused portfolio comprised of select high-quality stocks that offer consistent dividend growth. Instead of emphasizing diversification, they view “risk” as the price they pay for their quality dividend growers.

The returns in the stock market are not haphazard; we understand that dividend growth plays a pivotal role in driving price appreciation. Surprisingly, many wealth managers disregard dividends entirely and fail to recognize their significant impact on stock prices.

For those new to do-it-yourself investing, you have a choice to make.

If you have not yet joined as a 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

Stella-Jones updates its financial objectives (Stella-Jones Investor Presentation)

https://magicpants.ca/wp-content/uploads/2023/05/Stella-Jones-Investor-Day-Press-Release_May-2023.pdf

“Following a record year in 2022, coupled with our outstanding start to 2023, we are excited to share updated financial objectives that reflect Stella-Jones’ performance and growth potential,” said Eric Vachon, President and Chief Executive Officer of Stella-Jones. “In light of our favourable position to meet or exceed our original financial targets, we are raising our 2025 sales target to almost 20% above 2022 sales and the 2023–2025 EBITDA margin goal to 16%, primarily driven by the accelerating demand for our higher margin utility poles business.”

When companies increase their outlook by 20% it always gets our attention. Stella Jones is one of those ‘under the radar’ types of dividend growth stocks that we follow on ‘The List’. We had an opportunity last year to establish a position for our model portfolio but missed out. With our focus on accumulating ‘Core’ category stocks in our first year, we may have let a good ‘Non-Core’ company get away (for now).

Stella-Jones (SJ-T) has an established track record of generating consistent and strong cashflows which provides flexibility to deliver significant value to shareholders. With a dividend increase earlier this year, their dividend streak is now at 19 years and counting.

‘Slow and steady’ wins the race for Canadian banks, Veritas report argues (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-bank-earnings-veritas-report/

“In their report, entitled “The Tortoise and the Hare,” they argue that “slow and steady” wins the race in Canadian banking. They conclude that the banks that generated the best risk-adjusted returns over the past decade were the “tortoises” that focused on Canadian banking rather than the “hares” that raced out to pursue international diversification.”

Their logic is based upon the safety of the Canadian banking system compared to international banks.

“Since 1840, Canada has not experienced a bank crisis,” it notes. Over the same period, the United States has suffered 12 major banking crises. Meanwhile, Latin America has ricocheted among “bouts of political uncertainty, financial crisis, bank failures and currency devaluation.”

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

The List (2023)

Last updated by BM on May 26, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	6.1%	$8.30	23.3%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.39	12.1%	$0.56	19.1%	13
BCE-T	Bell Canada	6.2%	$61.87	2.7%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$36.28	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$65.61	13.0%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$155.16	-4.7%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.1%	$168.90	15.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.9%	$36.32	-1.7%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$83.74	4.9%	$0.27	23.8%	12
EMA-T	Emera	4.9%	$56.38	7.1%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.3%	$48.85	-8.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$38.42	7.6%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$145.72	5.5%	$1.36	6.3%	15
FTS-T	Fortis	3.9%	$57.46	3.8%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$202.59	3.5%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$120.85	0.4%	$1.74	10.3%	11
MGA-N	Magna	3.6%	$51.55	-10.4%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$73.51	-2.6%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.3%	$123.08	-3.9%	$5.34	7.7%	12
SJ-T	Stella-Jones Inc.	1.5%	$60.08	21.2%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$79.03	21.0%	$0.77	8.5%	11
TD-T	TD Bank	4.9%	$78.26	-10.7%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$108.71	8.6%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$107.15	9.7%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.8%	$54.11	1.5%	$3.69	3.4%	22
T-T	Telus	5.4%	$26.34	0.1%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$138.45	5.1%	$1.02	7.4%	13
Averages		3.2%		4.8%		8.4%	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 +4.8% (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 Enghouse Systems Limited (ENGH-T), up +2.56%; Alimentation Couche-Tard Inc. (ATD-T), up +2.09%; and TFI International (TFII-N), down -0.28%.

CCL Industries (CCL-B-T) was the worst performer last week, down -7.17%.

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, one dividend increase from companies on ‘The List’.

Royal Bank (RY-T) on Thursday said it increased its 2023 quarterly dividend for the second time this year, from $1.32 to $1.35 per share, payable August 24, 2023, to shareholders of record on July 26, 2023.

This represents a dividend increase of +2.27%, marking the 13th straight year of dividend growth for this quality financial institution.

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

Canada’s big Banks reported their fiscal Q2 earnings last week kicking off the next earnings season.

Royal Bank of Canada (RY-T) released its second-quarter fiscal 2023 results on Thursday, May 25, 2023, before markets opened.

“As our second quarter results demonstrate, RBC will never compromise on doing right by our clients and delivering sustainable, long-term value to them, our communities and shareholders. Our focused growth strategy, prudent risk and capital management, and diversified business mix exemplify our strength and stability amidst a complex macro environment. As we continue to realize the benefits of our strategic investments in technology and our incredible talent, we are confident in our ability to slow expense growth and drive greater efficiencies while supporting our clients’ needs.”

– Dave McKay, RBC President and Chief Executive Officer

Highlights:

Adjusted net income and adjusted EPS of $3.8 billion and $2.65 were down 13% and 11% from the prior year, respectively.
Results this quarter reflected higher provisions for credit losses, with a PCL on loans ratio of 30 bps, mainly attributable to provisions taken on performing loans in the current quarter, largely driven by unfavourable changes in our credit quality and macroeconomic outlook, as compared to releases in the prior year which reflected reduced uncertainty from the COVID-19 pandemic. The current quarter also reflected higher provisions on impaired loans.
Pre-provision, pre-tax earnings of $5 billion were up $54 million or 1% from a year ago, mainly reflecting higher net interest income driven by higher interest rates and strong loan growth in Canadian Banking and Wealth Management. Higher Corporate & Investment Banking revenue in Capital Markets also contributed to the increase. These factors were partially offset by higher expenses, mainly due to higher staff-related costs, including from headcount growth, as well as stock-based compensation. Higher professional fees (including technology investments) and higher discretionary costs to support strong client-driven growth also contributed to higher expenses.
Our balance sheet strength coupled with a robust capital position, with a CET1 ratio of 13.7%, supported solid volume growth and $1.8 billion in common share dividends. We have a strong average LCR of 135%. We also continue to operate with a prudent ACL ratio, which included $173 million of provisions taken on performing loans in the current quarter.

Outlook:

Unemployment rates remain at historically low levels in Canada, the U.S., the Euro area and the U.K. However, the number of job openings in Canada and the U.S. has begun to slow and wage growth has shown signs of moderating. Inflation pressures have also eased across most advanced global economies. Household expenditure overall has been supported by resilient spending on services. However, the lagged impacts of central bank interest rate increases over the last year are expected to slow inflation and consumer demand further. The risk to financial markets resulting from raising interest rates aggressively has heightened after stresses emerged in the U.S. regional banking sector. Geopolitical uncertainty remains high with the ongoing war in Ukraine. With economic growth expected to slow, and mild recessions expected in the U.S. and Canada in the calendar year ahead, we expect most advanced economy central banks are currently at or approaching the end of their current cycle of rate increases.

Canada

Canadian GDP is expected to have risen 2.5% in the first calendar quarter of 2023, following no growth in the final calendar quarter of 2022. Consumer spending continued to rise in the first calendar quarter of 2023 but is expected to slow as the lagged impact of Bank of Canada (BoC) interest rate increases over the last calendar year gradually flow through to household borrowing costs. We continue to expect a mild recession with modest GDP declines over the second and third calendar quarters of 2023. Inflation pressures have continued to moderate after peaking in the summer of 2022. The year over-year rate of growth in the consumer price index (CPI) slowed to 4.4% in April 2023 from 6.3% in December 2022, partly reflecting easing global supply chain pressures and lower energy prices. Commodity prices have reversed initial increases following the start of the conflict between Russia and Ukraine in 2022. The breadth of price pressures has narrowed, with a smaller share of products and services impacted by abnormally high price growth. The unemployment rate was 5.0% in April 2023, holding for a fifth straight month at just above the multi-decade low rate of 4.9% in the summer of 2022. Labour shortages are still widespread but less intense according to the BoC’s 2023 Business Outlook Survey conducted for the first calendar quarter. The BoC announced a conditional pause in interest rate increases in January 2023. The overnight rate is expected to remain at the current 4.5% level through calendar 2023.

U.S.

U.S. GDP grew by 1.1% in the first calendar quarter of 2023 following a 2.6% increase in the final calendar quarter of 2022. While household spending has so far been resilient, Federal Reserve (Fed) interest rate increases over the last calendar year and in calendar 2023 continue to raise debt payments with a lag and reduce household purchasing power. We expect a mild recession with GDP declining over the second and third calendar quarters of 2023. The unemployment rate remains very low at 3.4% as of April 2023, however the number of job openings is declining as labour demand begins to slow. Year-over-year growth in the CPI slowed to 4.9% in April 2023 from 6.5% in December 2022, largely as a result of easing global supply chain disruptions and lower commodity prices. The breadth of inflation pressures has been narrowing across products but is still wide, and price growth for domestically produced services has been slower to ease. Inflation is expected to slow further as consumer demand declines, and concerns among monetary policy setters on the risks to financial markets from raising interest rates aggressively have increased after stresses emerged in the U.S. regional banking sector. We expect the Fed will pause interest rate increases after the last 25 basis point increase to the federal funds target range in May.

Europe

Euro area GDP in the first calendar quarter of 2023 grew modestly by 0.1% following no growth in the final calendar quarter of 2022. GDP growth is expected to remain slow over the remainder of the calendar year. Unemployment rates remain very low across countries in the Euro area but are expected to rise modestly through the rest of calendar 2023. Year-over-year consumer price growth has slowed, due largely to lower global commodity prices. Despite rising concerns surrounding financial sector stability, we anticipate the European Central Bank will raise the deposit rate to 3.75% by the end of calendar 2023. U.K. GDP increased by 0.1% in the first calendar quarter of 2023 following a 0.1% increase in the final calendar quarter of 2022. Recent inflation trends have been stronger than previously expected, with year-over-year growth in the CPI at 10.1% in March 2023. The Bank of England increased the Bank Rate to 4.5% in May 2023. We expect no further interest rate increases before the end of calendar 2023.

Source: (RY-T) Q2-2023 Report to Shareholders

TD Bank (TD-T) released its second-quarter fiscal 2023 results on Thursday, May 25, 2023, before markets opened.

“TD’s retail businesses in both Canada and the United States continued to show strong revenue and earnings growth this quarter, with robust customer originations and loan volumes. Investments in differentiated wealth and insurance products and the close of the Cowen acquisition expanded our offerings and strengthened the competitive advantages of these businesses.”

– President and Chief Executive Officer, Bharat Masrani

Highlights:

SECOND QUARTER FINANCIAL HIGHLIGHTS, compared with the second quarter last year:

Reported diluted earnings per share were $1.72, compared with $2.07.
Adjusted diluted earnings per share were $1.94, compared with $2.02.
Reported net income was $3,351 million, compared with $3,811 million.
Adjusted net income was $3,752 million, compared with $3,714 million.

Outlook:

The global economy is forecast to slow in calendar 2023, but to a lesser degree than previously expected. A dramatic pull-back in energy prices has provided some economic relief in Europe and the sudden end of zero-COVID policies in China has provided an earlier lift to its economic prospects. While concerns about the global economy have eased, the risk of recession remains elevated. In North America, central banks have raised policy rates dramatically over the past year. The impact of this sizeable increase is expected to be the primary influence dampening economic growth in 2023 and into 2024. The recent U.S. bank failures have tightened credit conditions, which are likely to exert an increasing drag on economic activity in the months ahead although the full effects remain uncertain.

The U.S. economy expanded by 1.1% annualized in the first calendar quarter of 2023. Underlying domestic demand accelerated to 3.2%, due to a sharp rebound in consumer spending on motor vehicles and parts, but a sharp drawdown in inventories weighed on headline economic growth. A cooler economy was evident in softness in business investment, which expanded by only 0.7% and a continued downturn in housing activity which weighed on growth.

As of April, the job market was still tight with the unemployment rate at 3.4%, the lowest in over 50 years. However, there are signs that demand for workers is cooling, hiring trends are slowing, job openings have declined and claims for jobless benefits have been trending higher. Inflation has started to dissipate, but underlying services price pressures have been more persistent, and well above the U.S. Federal Reserve’s 2% target. TD Economics expects domestic spending to slow significantly over the second half of 2023, leading unemployment to rise gradually, and an eventual cooling in services inflation.

The Federal Reserve has signalled that after having raised interest rates by 500 basis points (bps) this tightening cycle, it is now in wait and see mode. TD Economics expects the federal funds rate will remain at its current range of 5.00-5.25% through the end of calendar 2023, before the Federal Reserve embarks on a series of interest rate cuts next year. If a further cooling in the labour market does not materialize, further interest rate increases in the coming months may be required. Given the steep rise in interest rates over the past year, the trend towards tighter U.S. credit conditions and the likelihood of rolling periods of financial stress related to the debt ceiling negotiations and/or other risk factors, the probability of a recession stateside remains elevated.

The Canadian economy is likely to have recorded a solid rate of expansion in the first calendar quarter of 2023, reflecting a rebound from the soft fourth calendar quarter of 2022. Despite the financial impact of rising interest costs on highly indebted households, consumer spending has remained resilient amid strong job market conditions, excess savings and increased government supports. Housing has turned in a mixed performance, as homebuilding activity has slowed while resale activity has shown signs of stabilization in recent months.

Canadian inflation has moderated, although the labour market remains quite strong with the unemployment rate at 5.0% in April 2023, near a cyclical low. TD Economics expects the aggregate spending of households and businesses to stagnate in the coming quarters, leading to weaker job market conditions and higher unemployment. Given the tepid growth backdrop and uncertainty surrounding the impact of past interest rate hikes on highly indebted Canadian households, the risk of recession also remains elevated in Canada.

The Bank of Canada left the overnight interest rate unchanged in April, at 4.50%. It signalled an intention to leave interest rates at their current level, provided the economy and inflation continue to slow in line with its outlook. The Canadian dollar is expected to hover around the 70-75 U.S. cent range in calendar 2023.

Source: (TD-T) Q2-2023 Report to Shareholders

MP Market Review – May 19, 2023

Last updated by BM on May 22, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down slightly with a YTD price return of +7.0% (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, no 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

Introduction

DGI Thoughts

“Your money is like a bar of soap – the more you handle it, the less you’ll have.”

– Eugene Fama, Famous Economist

At the end of April, we completed our first fiscal year managing our MP Wealth-Builder Model Portfolio (CDN) according to our Business Plan. Here are the quality companies we purchased during the year and their dividends and prices as of April 30, 2023. The portfolio is off to a good start as we purchased a number of quality companies at sensible prices.

Here are a few notable points to consider when reviewing the transactions. Firstly, it is worth mentioning that we successfully attained our targeted average initial yield of 3% and annualized total return of 10%, as projected in our Business Plan. This accomplishment is particularly noteworthy considering that numerous ETFs and Mutual Funds experienced negative total returns during the same time period. Secondly, take note of the three trades we executed for Franco Nevada. Each time the price experienced a significant decline, we capitalized on the opportunity to increase our holdings. Ultimately, all three trades have proven to be fruitful. Our confidence in the process empowered us to buy more as the price declined. Lastly, it is important to observe the frequency of our trading activities. Despite not engaging in active trading, we have managed to achieve success. Our bar of soap hasn’t been handled much with only fourteen trades over the past twelve months!

If you have not yet joined as a 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

Searching for the sweet spot of yield and dividend growth (Gobe & Mail)

https://www.theglobeandmail.com/investing/education/article-searching-for-the-sweet-spot-of-yield-and-dividend-growth/

The author talks about how to estimate returns for dividend growth stocks.

“Specifically, the equation holds that a stock’s annual return should equal the current dividend yield plus the dividend growth rate. For example, a stock that yields 6 per cent, and whose dividend grows at 4 per cent annually, should theoretically return 10 per cent annually, assuming all dividends are reinvested in additional shares.”

The problem with this simplistic equation is that it does not take into consideration the ‘quality’ of the dividend growth stock or its current valuation. We use several quality indicators to screen for our investment candidates not just yield and growth. When it comes to valuation, we also want to be sure we are only buying at a sensible price as we have found that this affects future returns the most.

John Bogle, the founder of the Vanguard Group, has an alternative methodology for estimating future returns. What we like about Bogle’s formula is that it backtests well and seems to align with the dividend growth stocks we invest in.

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

Bogle calls the first two components, Yield + Growth, investment aspects of the investment return and the last component, +/- Change in P/E Ratio, the speculative return – what people will pay for a dollar’s worth of earnings.

To learn more about Bogle’s formula, see our article, ‘Estimating Future Returns’.

Cash is king. Here’s why we should resist its allure (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-cash-investing-recession-risks/

Although the last year has been difficult for many investors, dividend growth investors that follow our process have thrived. The reason is that we don’t invest in just any stocks. We invest in quality dividend growth companies that continue to grow their cash flow and only buy when they are sensibly priced. Down markets make for excellent entry points for companies on ‘The List’. Knowing these subtle differences is crucial.

The author of this article discusses that in some cases holding cash is fine but holding it too long and you risk losing out on gains elsewhere. This is where the difficulty for most investors comes in. How do you know when it’s too long? We have never been able to figure that out, either. Hence, we remain invested in our portfolio of high-quality dividend growers across all market conditions. The growing dividends they provide compensate us for our patience, and when the economy rebounds, we reap the benefits, regardless of the timing.

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

The List (2023)

Last updated by BM on May 19, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	6.0%	$8.46	25.7%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$66.01	9.8%	$0.56	19.1%	13
BCE-T	Bell Canada	6.0%	$63.43	5.3%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$37.07	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.5%	$70.68	21.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$161.39	-0.9%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.1%	$169.53	15.6%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.7%	$38.02	2.9%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$84.51	5.8%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.00	8.3%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	7.1%	$50.07	-6.1%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.3%	$37.46	4.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$153.08	10.8%	$1.36	6.3%	15
FTS-T	Fortis	3.9%	$58.65	6.0%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$203.60	4.0%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$122.98	2.2%	$1.74	10.3%	11
MGA-N	Magna	3.5%	$52.73	-8.3%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$75.20	-0.4%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.2%	$127.19	-0.7%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.5%	$61.53	24.1%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$79.43	21.6%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$82.27	-6.2%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$109.01	8.9%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$112.70	15.3%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.8%	$54.36	2.0%	$3.69	3.4%	22
T-T	Telus	5.2%	$27.38	4.0%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$140.30	6.5%	$1.02	7.4%	13
Averages		3.1%		7.0%		8.4%	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 slightly with a YTD price return of +7.0% (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 Toromont Industries (TIH-T), up +6.66%; Enghouse Systems Limited (ENGH-T), up +6.06%; and Stella-Jones Inc. (SJ-T), up +5.04%.

Fortis (FTS-T) was the worst performer last week, down -4.71%.

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. Q2 2023 earnings season begins this week as we hear from the Banks.

The updated earnings calendar can be found here.

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

Canada’s big Banks report their fiscal Q2 earnings this week.

Royal Bank of Canada (RY-T) will release its second-quarter fiscal 2023 results on Thursday, May 25, 2023, before markets open.

TD Bank (TD-T) will release its second-quarter fiscal 2023 results on Thursday, May 25, 2023, before markets open.

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

MP Market Review – May 12, 2023

Last updated by BM on May 15, 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 flat with a YTD price return of +7.3% (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, seven 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

“Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”

– Warren Buffett

Q1 2023 earnings season for companies on ‘The List’ is now behind us. Check out the earnings calendar results at the bottom of ‘The List’ page.

Next week we will send all Subscribers the yearly review of our MP Wealth-Builder Model Portfolio (CDN). Despite negative results from the benchmarks we track, the portfolio generated positive income and capital returns in its inaugural year (May 1, 2022-April 30, 2023).

Here is a glimpse at some of our best purchases from 2022:

We are making good progress towards achieving the income goals set out in our business plan, which serves as a comprehensive roadmap for our model portfolio. If you haven’t joined us as a Subscriber yet and haven’t been receiving our timely DGI Alerts, informing you about the purchase of our reliable dividend-growing stocks and the reasons behind them, what are you waiting for?

If our strategy and approach to dividend growth can safeguard your investment capital while generating increasing income and capital growth in the current economic climate, there’s a strong likelihood that it can do so in virtually any market. Don’t miss out on this opportunity.

If you have not yet joined as a 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

Canadian Tire results show consumer shift from discretionary purchases (Globe & Mail)

https://www.theglobeandmail.com/business/article-canadian-tire-results-show-consumer-shift-from-discretionary-purchases/

Canadian Tire has been under consideration for some time, but we have not yet identified the ideal opportunity to invest. The company’s performance in the last quarter was particularly challenging, with a mild winter and a fire incident at one of their distribution centers. As the economy experiences a slowdown, consumers have become more cautious in their spending habits. As a result, we are waiting for either a positive shift in the economy or a significant margin of safety before deciding to initiate a position in Canadian Tire.

With utilities recovering from a 2022 beating, this is my go-to stock (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-gordon-pape-with-utilities-recovering-from-a-2022-beating-this-is-my/

The stock covered in this article has been paying a growing dividend for almost 50 years! You rarely hear about it when markets are roaring, but it continues to provide market beating returns decade after decade when purchased at a sensible price. One of the original four dividend growers I bought way back in 2012 in the mid $30 dollar range.

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

The List (2023)

Last updated by BM on May 12, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.61	27.9%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$66.68	10.9%	$0.56	19.1%	13
BCE-T	Bell Canada	6.0%	$64.17	6.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.85	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$68.01	17.2%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$163.41	0.3%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.1%	$168.28	14.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.5%	$39.47	6.8%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$84.46	5.8%	$0.27	23.8%	12
EMA-T	Emera	4.7%	$58.99	12.1%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.8%	$52.11	-2.3%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.4%	$35.32	-1.1%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$156.72	13.4%	$1.36	6.3%	15
FTS-T	Fortis	3.7%	$61.55	11.2%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$199.57	1.9%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$123.45	2.6%	$1.74	10.3%	11
MGA-N	Magna	3.5%	$52.56	-8.6%	$1.84	2.2%	13
MRU-T	Metro	1.5%	$78.56	4.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.1%	$129.89	1.5%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.6%	$58.58	18.2%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$78.91	20.8%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$82.33	-6.1%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$107.00	6.9%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$105.66	8.1%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$55.94	5.0%	$3.69	3.4%	22
T-T	Telus	5.2%	$27.74	5.4%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$143.89	9.2%	$1.02	7.4%	13
Averages		3.1%		7.3%		8.4%	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 flat with a YTD price return of +7.3% (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 Stella-Jones Inc. (SJ-T), up +7.74%; CCL Industries (CCL-B-T), up +6.18%; and Waste Connections (WCN-N), up +2.18%.

Canadian Tire (CTC-A-T) was the worst performer last week, down -3.65%.

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. Q1 2023 earnings season is now over!

The updated earnings calendar can be found here.

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

Last week, seven earnings report from companies on ‘The List’.

Stella-Jones Inc. (SJ-T) released its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, before markets opened.

“The Company had an excellent start to the year, propelled by the momentum of our growth in 2022. Our record results in Q1 featured strong sales, higher EBITDA and margin, and were marked by an out-performance of our utility poles product category, which saw a 29% organic sales increase. Our first quarter results also reflected steady sales growth in railway ties, aligned with our expectations for this product category, and an anticipated pullback in residential lumber sales compared to 2022.

Stella-Jones’ performance in the first quarter further evidenced our ongoing proactivity in securing fibre supply and increasing pole production capacity, and our financial strength to support growth. We are executing on our plan to grow our infrastructure-related businesses, and deliver on our commitment to return capital to shareholders. As we continue to invest in our business and seek expansion opportunities, we are fulfilling or exceeding the objectives laid out in our 3-year plan and I am proud of our business for continuously delivering such a high standard of service to our customers.”

– President and Chief Executive Officer, Eric Vachon

Highlights:

Sales of $710 million for the first quarter
Strong 18% organic sales growth in infrastructure-related businesses
Record EBITDA of $120 million, or a margin(1) of 16.9%, up from 13.5% in Q1 2022
Net income of $60 million, or $1.03 per share, up 41% from EPS in Q1 2022

Outlook:

The Company continues to be favourably positioned to meet or exceed the financial objectives set for 2024, as summarized in the table below. Driven by the out-performance of utility poles, sales in 2024 are now expected to exceed the target range. By 2024, utility poles sales are projected to grow at a compound annual rate of 20% from 2022 and the Company’s EBITDA margin is expected to exceed the 15% target by approximately 100 basis points.

Source: (SJ-T) Q1-2023 News Release

CCL Industries (CCL-B-T) released its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets closed.

“I am pleased to report first quarter results ahead of internal expectations. The CCL Segment and Checkpoint both posted organic sales growth and solid improvements in profitability while Avery had an outstanding quarter. Innovia results improved sequentially compared to the fourth quarter of 2022 but were below prior year first quarter. This all summed to a 10.6% increase in adjusted basic earnings to $0.94 per Class B share(3) , compared to the first quarter of 2022.”

– President and Chief Executive Officer, Geoffrey T. Martin

Highlights:

Per Class B share: $0.94 adjusted basic earnings up 10.6%; $0.94 basic earnings up 11.9%; currency translation positive $0.05 per share
Sales increased 8.6% on 1.4% organic growth, 3.0% acquisitions and 4.2% positive currency translation
Operating income improved 12.7%, with a 15.6% operating margin up 60 bps

Outlook:

Core CCL business units’ outlook stable overall
CCL Design: expect some recovery in Q2 as China has a full quarter
CCL Secure will be below Q2 22
Avery back to school season started very early Q2 22, will not repeat in 2023…..so tough comps for Q2, easier for Q3
Checkpoint: apparel market conditions unlikely to improve much until H2 23, MAS outlook stable with easier comps
Innovia volume continues to be impacted by weak label materials industry demand, inflationary pressures and inventory cost squeeze both easing
Modest FX tailwind

Source: (CCL-B-T) Q1-2023 News Release

Intact Financial (IFC-T) released its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets closed.

“The business delivered another strong quarter, with a mid-teens operating ROE and solid results in all geographies. Since closing the RSA acquisition, we have been active in improving performance and de-risking the transaction. The UK&I segment is now well along the path to outperformance, and we expect it to reach a low-90s combined ratio by the end of 2024, a year ahead of schedule. I remain confident in the outlook for Intact as a whole, and our strong balance sheet positions us to capture opportunities as they arise.”

– Chief Executive Officer, Charles Brindamour

Highlights:

Operating DPW growth of 4% in Q1-2023 despite the exit of UK personal lines motor, mainly reflecting rate actions in supportive market conditions
Combined ratio of 87.4% (91.9% undiscounted), reflected solid underwriting performance in all geographies
Net operating income per share up 4% to $3.06 on premium growth, higher investment yields and increased distribution income
EPS decreased to $2.06, due in part to non-recurring UK personal lines motor exit expenses, while ROE was 15.4%
BVPS decreased 6% from Q4-2022 to $77.72, largely reflecting the UK pension de-risking actions
Balance sheet remained strong with a total capital margin of $2.8 billion, and debt-to-total capital ratio on track to return towards 20% by year end 2023

Outlook:

Over the next twelve months, we expect firm-to-hard insurance market conditions to continue in most lines of business, driven by inflation, natural disasters, and a hard reinsurance market.
In Canada, we expect firm market conditions to continue in personal property. Personal auto premiums are expected to grow by mid-to-high single-digits in response to inflation and evolving driving patterns.
In commercial and specialty lines across all geographies, we continue to expect hard market conditions in most lines of business.
In the UK&I, the personal property market has begun to firm but further rate increases are required to deal with inflationary pressures, natural disasters and a hard reinsurance market.

Source: (IFC-T) Q1-2023 News Release

Stantec (STN-T) released its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets closed.

“Our first quarter results reflect the strong market positioning of our business as we continue to build on favorable macro themes and momentum coming out of last year. 2023 is shaping up to be another very strong year for Stantec and we are well positioned to deliver on our outlook for the year.”

– President and Chief Executive Officer, Gord Johnston

Highlights:

Net revenue of $1.2 billion, an increase of 17.0% over Q1 2022
Adjusted diluted EPS1 of $0.73, up 19.7% over Q1 2022
Backlog of $6.2 billion, up 5.6% since December 31, 2022 and 14.8% over Q1 2022
Full year guidance for 2023 reaffirmed

Outlook:

We reaffirm our guidance provided in the Outlook section of our 2022 Annual Report (incorporated here by reference). Our annual targets were based on the assumption of continued public sector spending in alignment with announced programs and acts, and only modest transitory recessions in key geographies.

We expect that net revenue growth will increase 7% to 11%, with net revenue organic growth in the mid- to highsingle digits. Organic growth in the US is expected to be in the high single digits to low double digits, driven by momentum from our record-high US backlog and project opportunities arising from announced programs and acts. In Canada, we expect to maintain high levels of activity, moderating to organic growth in the low single digits. Organic growth in Global is expected to achieve mid- to high-single digits, driven by continued high levels of activity in our UK Water business and demand and stimulus in environmental services and infrastructure sectors.

We expect to deliver on our annual targets on adjusted EBITDA and adjusted net income margins and growth in adjusted diluted EPS through our continued discipline in the management of administration and marketing costs, investments in the commercialization of new innovations and technologies, and implementation of our 2023 Real Estate Strategy.

While our Q1 2023 net revenue and adjusted diluted EPS growth exceeded our target annual ranges, our expectations for the full year remain unchanged. Further, our adjusted EBITDA and adjusted net income margins for Q1 2023 are below our targeted annual ranges due to the typical slowdown in the first quarter related to winter weather conditions and holiday schedules. We remain confident we will achieve our annual targets by the end of the fiscal year.

Source: (STN-T) Q1-2023 News Release

Canadian Tire (CTC-A-T) released its first-quarter fiscal 2023 results on Thursday, May 11, 2023, before markets opened.

“Our Q1 financial results were impacted by a number of factors. Our Retail segment was impacted by the fire at our A.J. Billes distribution centre, as well as unseasonably mild winter weather and a slow start to spring in several regions of Canada. The Financial Services business historically makes a significant contribution to Canadian Tire Corporation’s performance in the first quarter, and this quarter was no different. The strength of our teams and our diligent focus on our Better Connected strategy leaves us confident in our ability to deliver long term returns for shareholders and value to our customers.”

– President and Chief Executive Officer, Greg Hicks

Highlights:

Revenue was $3,707.2 million compared to $3,837.4 million in the same period last year; excluding the change in accounting estimate, Revenue (excluding Petroleum) decreased 4.9%. Financial Services segment revenue growth partially offset the Retail segment decline, mainly due to the anticipated lower revenue at Canadian Tire Retail.
Consolidated income before income taxes was $66.6 million, a decrease of $228.3 million compared to the prior year, due in part to costs of $67.7 million relating to the distribution centre fire. Normalized income before income taxes was $134.3 million.
Diluted EPS was $0.13 compared to $3.03 in the prior year; Normalized diluted EPS was $1.00, down $2.06, or down $2.72 excluding the $0.66 favourable impact of the change in accounting estimate2, mainly attributable to a decline in earnings in the Retail segment.

Outlook:

The $3.4 billion of strategic investments, announced in conjunction with the strategy, will create better customer experiences and deeper customer connections. These investments are being allocated to:

Enhancing the omnichannel customer experience by better connecting digital and physical channels and rolling out a new “Concept Connect” to Canadian Tire stores;
Strengthening supply chain fulfillment infrastructure and automation; and
Modernizing IT infrastructure and driving efficiency in how CTC operates.

In conjunction with the announcement of its strategic plan, CTC also established the following financial aspirations for fiscal years 2022 to 2025:

4+ percent annual average comparable sales growth over the four-year period;
Diluted EPS of $26.00+ by 2025; and
Retail Return on Invested Capital (“ROIC”) of approximately 15+ percent by 2025.

Source: (CTC-A-T) Q1-2023 News Release

Algonquin Power & Utilities (AQN-N) drelease its first-quarter fiscal 2023 results on Thursday, May 11, 2023, before markets opened.

“In the first quarter of 2023, we achieved operational milestones in line with our targets. In our regulated business, we achieved an increased operating profit reflecting planned execution and constructive rate case outcomes. In our renewables business, we advanced our project pipeline and achieved overall financial performance consistent with our expectations.”

– President, Arun Banskota

Highlights:

Termination of Acquisition of Kentucky Power Company on April 17, 2023.
Adjusted EBITDA of $341.0 million, an increase of 3%;
Adjusted Net Earnings of $119.9 million, a decrease of 15%; and
Adjusted Net Earnings per common share of $0.17, a decrease of 19%, in each case on a year-over-year basis.

Outlook:

Reiterate Estimated 2023 Adjusted Net Earnings Per Common Share

The Company reiterates its previously-disclosed estimate of Adjusted Net Earnings per common share for the 2023 fiscal year within a range of $0.55-$0.61.

Organic Capital Investment Expectations Maintained

With the Kentucky Power Transaction Termination, the Company expects to spend approximately $1 billion on capital investment opportunities in the 2023 fiscal year. Of this amount, approximately $700 million is expected to be spent by the Regulated Services Group and approximately $300 million is expected to be spent by the Renewable Energy Group.

Remain Focused on Optimizing Balance Sheet

The Company remains committed to a BBB credit rating and does not expect any new equity financings through 2024.

Source: (AQN-N) Q1-2023 News Release

Emera Inc. (EMA-T) released its first-quarter fiscal 2023 results on Friday, May 12, 2023, before markets opened.

“We are off to a solid start in 2023, continuing our track record of delivering for customers and providing predictable, reliable earnings growth for our shareholders. Across Emera, our teams are executing on a $3 billion capital plan in support of our strategy, focused on a responsible and balanced energy transition for our customers.”

– President and Chief Executive Officer, Scott Balfour

Highlights:

Quarterly adjusted earnings per share (“EPS”) of $0.99 increased $0.07 or 8% compared to $0.92 in Q1 2022 resulting from higher marketing and trading margin at Emera Energy Services (“EES”) and higher earnings at New Mexico Gas Company (“NMGC”). This was partially offset by lower contributions from Tampa Electric Company (“TEC”) and Nova Scotia Power and higher interest expense throughout the business.
Quarterly reported net income increased by $198 million to $560 million compared to $362 million in Q1 2022 and quarterly reported EPS increased by $0.69 to $2.07 from $1.38 in Q1 2022 primarily due to higher mark-to-market (“MTM”) gains at EES.
The commissioning of the Labrador Island Link (“LIL”) in April was another important step in a transformative energy project that has already delivered more than one million megawatt hours of hydro energy over the Maritime Link and will continue to deliver clean, reliable energy to Nova Scotians for years to come.

Outlook:

There have been no material changes in Emera’s business overview and outlook from the Company’s 2022 annual MD&A.

Source: (EMA-T) Q1-2023 News Release

MP Market Review – May 05, 2023

Last updated by BM on May 08, 2023

Summary

This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
Last week, ‘The List’ was down slightly with a YTD price return of +7.3% (capital). Dividend growth increased and is now at +8.4% YTD, highlighting growth in income over the past year.
Last week, two dividend increases from companies on ‘The List’.
Last week, eight earnings reports from companies on ‘The List’.
Seven 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

“I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

– Warren Buffett

After reading the article in the ‘News’ section centered around the 2023 Projection Assumption Guidelines published by the Financial Planning Canada Standards Council, I couldn’t help but take a look at the ten-year historical returns of the individual companies that make up ‘The List’.

10YR_GROWTH YIELD-01-01-2023

Not only did almost all of the companies on ‘The List’ outperform the total return ‘standards’ (4.7% annually over the long term) communicated to their customers by financial planners but many of the companies on ‘The List’ outperformed these standard returns from dividends alone (Growth Yield).

One of the ‘quality’ indicators we use when evaluating which companies on ‘The List’ to build our portfolios with is ‘Growth Yield’. Growth Yield helps us determine our return from dividends alone at some point in the future on an investment made today.

Growth yield refers to the yield on cost of a stock, which takes into account the current annualized dividend payments in relation to the original cost basis of the investment. We like the term growth yield better as it proves that growth (a key part of our strategy) has indeed happened and highlights the yield you are now making on dividends alone. The magic of growth yield is typically lost in all statements and conversations about investing. Knowing the subtle difference between a good yield and a growing yield is fundamental in what we do.

According to our experience, creating a stock portfolio with an average estimated growth yield and historical growth yield of greater than 7% after ten years has proven to be a reliable indicator of quality.

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

Recent News

TD, First Horizon terminate US$13.4-billion takeover deal (Globe & Mail)

https://www.theglobeandmail.com/business/article-td-first-horizon-terminate-merger/

In our post ‘Toronto-Dominion Bank: Time To Supercharge Your Dividend Growth Investing (DGI) Returns’, a few weeks back, we mentioned this was one of the possible outcomes in our investment thesis section of the article. The share price has responded favorably to the news.

If this doesn’t get you to pay attention to your investing fees, nothing will (Globe & Mail)

https://www.theglobeandmail.com/investing/investment-ideas/article-if-this-doesnt-get-you-to-pay-attention-to-your-investing-fees-nothing/

“The brain trust for financial planning standards in Canada thinks a 50-50 balanced portfolio of stocks and bonds will make an average 4.7 per cent annually over the long term.”

Aren’t you glad we do things differently as dividend growth investors. Our dividend income return (Growth Yield) alone easily outperforms the ‘brain trust’ after only a few short years.

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

The List (2023)

Last updated by BM on May 05, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.7%	$8.83	31.2%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.21	11.8%	$0.56	19.1%	13
BCE-T	Bell Canada	5.9%	$64.44	7.0%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.54	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.7%	$64.05	10.3%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$163.07	0.1%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	4.0%	$174.65	19.1%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.6%	$39.32	6.4%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$82.96	3.9%	$0.27	23.8%	12
EMA-T	Emera	4.7%	$58.76	11.7%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.6%	$53.43	0.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.3%	$36.18	1.3%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$159.01	15.1%	$1.36	6.3%	15
FTS-T	Fortis	3.7%	$60.84	9.9%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$199.87	2.1%	$4.40	10.0%	18
L-T	Loblaws	1.4%	$122.34	1.7%	$1.74	10.3%	11
MGA-N	Magna	3.4%	$53.98	-6.2%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$77.00	2.0%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$131.08	2.4%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$54.37	9.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.60	24.9%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$83.30	-5.0%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$106.20	6.1%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$104.83	7.3%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$55.94	5.0%	$3.69	3.4%	22
T-T	Telus	5.1%	$28.13	6.9%	$1.43	7.3%	19
WCN-N	Waste Connections	0.7%	$140.82	6.9%	$1.02	7.4%	13
Averages		3.1%		7.3%		8.4%	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 slightly with a YTD price return of +7.3% (capital). Dividend growth increased and is now at +8.4% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Franco Nevada (FNV-N), up +4.76%; Algonquin Power & Utilities (AQN-N), up +3.64%; and Magna (MGA-N), up +3.49%.

Toromont Industries (TIH-T) was the worst performer last week, down -4.25%.

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’.

Loblaws (L-T) on Wednesday said it increased its 2023 quarterly dividend from $.405 to $.446 per share, payable July 1, 2023, to shareholders of record on June 14, 2023.

This represents a dividend increase of +10.0%, marking the 12th straight year of dividend growth for this quality grocer.

Telus (T-T) on Thursday said it increased its 2023 quarterly dividend from $.3511 to $.3636 per share, payable July 4, 2023, to shareholders of record on June 09, 2023.

This represents a dividend increase of +3.6%, 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.

Seven companies on ‘The List’ ares due to report earnings this week.

Q1 earnings season wraps up this week with seven companies on ‘The List’ due to report earnings.

Stella-Jones Inc. (SJ-T) will release its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, before markets open.

CCL Industries (CCL-B-T) will release its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets close.

Intact Financial (IFC-T) will release its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets close.

Stantec (STN-T) will release its first-quarter fiscal 2023 results on Wednesday, May 10, 2023, after markets close.

Canadian Tire (CTC-A-T) will release its first-quarter fiscal 2023 results on Thursday, May 11, 2023, before markets open.

Algonquin Power & Utilities (AQN-N) will release its first-quarter fiscal 2023 results on Thursday, May 11, 2023, before markets open.

Emera Inc. (EMA-T) will release its first-quarter fiscal 2023 results on Friday, May 12, 2023, before markets open.

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

Franco Nevada (FNV-N) released its first-quarter fiscal 2023 results on Tuesday, May 2, 2023, after markets closed.

“Our diversified portfolio continues to generate strong cash flows and high margins. The first quarter was impacted by production disruptions at Cobre Panama and Antapaccay as well as lower energy prices. Stronger precious metal deliveries are anticipated in Q2 with both assets having returned to normal operations. “Cobre Panama’s CP 100 Expansion is on-track for year-end and we look forward to initial contributions from Magino, Séguéla and Salares Norte during the year”, commented Paul Brink, CEO. Franco-Nevada is debt-free, is growing its cash balances and has a strong pipeline of growth opportunities.

– Chief Executive Officer, Paul Brink

Highlights:

No debt and $2.2 billion in available capital as at March 31, 2023
Generated $209.8 million in operating cash flow during the quarter
16 consecutive dividend increases. Quarterly dividend of $0.34/share

Source: (FNV-N) Q1-2023 News Release

Loblaws (L-T) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“In the face of ongoing inflation, we are working hard to deliver the value and choice Canadians are looking for. I’m pleased that customers are responding positively to the breadth of our offerings including our diverse store formats, market leading prices, private label brands, and loyalty offers.”

– Chairman and Chief Executive Officer, Galen Weston

Highlights:

Revenue was $12,995 million, an increase of $733 million, or 6.0%.
Retail segment sales were $12,735 million, an increase of $690 million, or 5.7%.
- Food Retail (Loblaw) same-stores sales increased by 3.1%, including the negative impact of 1.1% related to the timing of New Year’s Day.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by 7.4%, with front store same-store sales growth of 10.3% and pharmacy same-store sales growth of 4.7%.
E-commerce sales decreased by 1.1%, lapping elevated online sales due to lockdowns last year.
Operating income was $769 million, an increase of $31 million, or 4.2%.
Adjusted EBITDA(2) was $1,448 million, an increase of $105 million, or 7.8%.
Retail segment adjusted gross profit percentage(2) was 31.3%, an increase of 20 basis points.
Net earnings available to common shareholders of the Company were $418 million, a decrease of $19 million or 4.3%. Diluted net earnings per common share were $1.29, a decrease of $0.01, or 0.8%. The decrease was primarily driven by a prior year gain related to a favourable Court ruling.
Adjusted net earnings available to common shareholders of the Company (2) were $505 million, an increase of $46 million, or 10.0%.
Adjusted diluted net earnings per common share(2) were $1.55, an increase of $0.19 or 14.0%.
Repurchased for cancellation 3.3 million common shares at a cost of $383 million and invested $208 million in capital expenditures, net of proceeds from property disposals. Free cash flow(2) used in the Retail segment was $81 million.
Twelfth consecutive annual increase to the quarterly common share dividend from $0.405 per common share to $0.446 per common share, an increase of 10%.
The Company just announced the release of its 2022 Environmental, Social and Governance (“ESG”) Report.

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) Q1-2023 Quarterly Review

Fortis (FTS-T) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“Our strong first quarter results reflect the diversified nature of our business and the continued delivery of our low-risk capital plan. With capital expenditures of $1.0 billion in the quarter, we are on track to invest $4.3 billion in our systems this year.

Our funding plan remains intact, and the sale of the Aitken Creek Natural Gas Storage Facility further strengthens our balance sheet and supports financing of our regulated utility investments. We remain confident in our growth strategy as we continue to provide value to shareholders while executing on the transition to a cleaner energy future and delivering safe, reliable and affordable service to our customers.”

– President and Chief Executive Officer, David Hutchens

Highlights:

First quarter net earnings of $437 million, or $0.90 per common share, up from $350 million, or $0.74 per common share in 2022
Adjusted net earnings per common share of $0.91, up from $0.78 in the first quarter of 2022
Capital expenditures of $1.0 billion in the first quarter; $4.3 billion annual capital plan on track
Significant regulatory applications at Tucson Electric Power and FortisBC continue to progress
Announced the sale of the Corporation’s ownership interest in the Aitken Creek Natural Gas Storage Facility in British Columbia

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 and persistent inflation are issues of potential concern that continue to evolve, the Corporation does not currently expect there to be a material impact on its operations or financial results in 2023.

Fortis is executing on the transition to a cleaner energy future and is on track to achieve its corporate-wide targets to reduce greenhouse gas emissions (“GHG”) by 50% by 2030 and 75% by 2035. Upon achieving these targets, 99% of the Corporation’s assets will support energy delivery and renewable, carbon-free generation. The Corporation’s additional 2050 net-zero direct GHG emissions target reinforces Fortis’ commitment to further decarbonize over the long-term, while preserving customer reliability and affordability.

The Corporation’s $22.3 billion five-year capital plan is expected to increase midyear rate base from $34.1 billion in 2022 to $46.1 billion by 2027, translating into a five-year compound annual growth rate of 6.2%.

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 2027.

Source: (FTS-T) Q1-2023 Quarterly Review

Brookfield Infrastructure Partners (BIP-N) released its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets opened.

“We are pleased to report a strong start to 2023 for Brookfield Infrastructure, with future growth secured from several successful capital deployment initiatives. Our diversified portfolio of high-quality infrastructure assets are well positioned to deliver resilient results during all market conditions.”

– Chief Executive Officer, Sam Pollock

Highlights:

FFO of $554 million or $0.72 per unit in the first quarter represents an increase of 12% over the prior year – Organic growth of 9% captures elevated inflation, volume growth across our transport segment, and earnings associated with capital commissioned over the last 12 months – Incremental contribution from our asset rotation program including the privatization of HomeServe on January 4, 2023
Distribution of $0.3825 per unit represents an increase of 6% compared to the prior year
Payout ratio for the quarter of 68% falls within our long-term 60-70% target range
Net income benefited from the contributions associated with recent acquisitions and organic growth across our base business, offset by mark-tomarket losses on commodity contracts and one-time transaction costs associated with the acquisition of HomeServe and the European telecom tower portfolio, which are expensed on acquisition
Total assets increased compared to December 31, 2022 as a result of the acquisition of HomeServe and the European telecom tower portfolio, organic growth initiatives, and the impact of foreign exchange

Outlook:

We believe that the long-term positive outlook for the infrastructure sector, in conjunction with our full cycle investment strategy, will allow us to continue to create significant value for our investors. Our strategy is grounded in a deep understanding of the infrastructure sector and the various market forces that drive it. We have made significant progress during the quarter, adding valuable pieces to our long-term growth plans, with two important investments: the agreement to acquire Data4 and the planned Triton privatization. Both investments are expected to generate strong cash flow for our unitholders. We also believe that our ability to look through near-term headlines and overreactions to invest in high quality businesses that have long-term growth potential will differentiate us during this current market cycle.

Our priorities for the balance of the year will be the integration of our recently secured investments and the execution of our current capital recycling program. We are also focused on continuing to deliver excellent financial results, which are expected to benefit from the full run-rate contribution of our new Heartland Petrochemical Complex, commissioning of new projects from our capital backlog and the closing of the Data4 and Triton acquisitions.

Source: (BIP-N) Q1-2023 Quarterly Review

Bell Canada (BCE-T) released its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets opened.

“Bell has delivered a solid start to the year with results that were on plan and that reflect our consistently strong execution.

Overall, our performance in wireless and Internet helped to drive strong 3.5% consolidated revenue growth, offsetting the impacts of an advertising slowdown within our Bell Media segment. Our mobile phone postpaid net subscriber activations were up 26.5%, with 5.4% higher wireless service revenue. We also added nearly 48,000 new FTTH customers in Q1, up 24% over last year, with consumer Internet revenue up 10%.

In line with our broadband network buildout plan, we invested close to $1.1 billion in capital expenditures in Q1 and remain on pace to expand our fibre footprint by 650,000 locations and cover 85% of the population with our 5G service by the end of 2023. While we’re currently experiencing an uncertain economic environment amid headwinds, inflationary cost pressures and regulatory uncertainty, we remain committed to our corporate purpose to advance how 2/17 Canadians connect with each other and the world. As we look ahead to the remainder of 2023, we are confident in our ability to continue delivering results with consistent, strong execution.”

– President and Chief Executive Officer, Mirko Bibic

Highlights:

BCE operating revenue increased 3.5% over Q1 2022 to $6,054 million. This was the result of 0.9% higher service revenue of $5,222 million and a 23.6% increase in product revenue to $832 million, driven by growth at Bell Communication and Technology Services (Bell CTS), partly offset by a year-over-year decline at Bell Media.
Net earnings decreased 15.6% to $788 million and net earnings attributable to common shareholders totalled $725 million, or $0.79 per share, down 17.3% and 17.7% respectively. The year-over-year declines were due to increased interest expense, higher depreciation and amortization expense, lower adjusted EBITDA, higher severance, acquisition and other costs and higher asset impairment charges related to office spaces we ceased using as part of our real estate optimization strategy due to Bell’s hybrid work policy. These factors were partly offset by lower income taxes and higher other income which included gains from the sale of land related to our real estate optimization strategy. Adjusted net earnings were down 4.8% to $772 million, resulting in a 4.5% decrease in adjusted EPS to $0.85.
Adjusted EBITDA was down 1.8% to $2,538 million, reflecting a 36.5% decrease at Bell Media, partly offset by a 1.3% increase at Bell CTS. BCE’s consolidated adjusted EBITDA margin13 declined 2.3 percentage points to 41.9% from 44.2% in Q1 2022, due to lower year-over-year media revenue attributable mainly to a favourable one-time retroactive adjustment to subscriber revenue in Q1 2022 related to a contract with a Canadian TV distributor, higher low-margin product sales, as well as operating cost pressures related to inflation, strategic initiatives, higher TV content costs and the normalization of our cost structure to pre-COVID levels.
BCE capital expenditures were $1,086 million, up 13.2% from $959 million last year, corresponding to a capital intensity 14 of 17.9%, compared to 16.4% in Q1 2022. The year over-year increase in capital spending was due mainly to significant ongoing investment in expanding Bell’s pure fibre network, including connecting more homes and businesses to Bell Internet services.
BCE cash flows from operating activities were $1,247 million, down 27.3% from Q1 2022, reflecting lower cash from working capital attributable to the timing of supplier payments, higher interest paid, increased cash taxes due mainly to the timing of instalment payments and lower adjusted EBITDA, partly offset by lower contributions to post-employment benefit plans.
Free cash flow decreased 88.1% to $85 million from $716 million in Q1 2022, due to lower cash flows from operating activities excluding acquisition and other costs paid, and higher capital expenditures.

Outlook:

Source: (BCE-T) Q1-2023 Quarterly Review

Telus (T-T) released its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets opened.

“In the first quarter, our TELUS team once again demonstrated our hallmark execution excellence, characterized by the potent combination of leading customer growth and strong financial results. Our robust performance is underpinned by our globally leading broadband networks and customer-centric culture, which enabled our strongest first quarter on record, with total customer net additions of 163,000, up 10 per cent, year-over-year. This included strong mobile phone net additions of 47,000, our best first quarter result since 2010; healthy connected device net additions of 58,000; and record first quarter total fixed net additions of 58,000, inclusive of reaching our one millionth security subscriber. Our leading customer growth is reflective of our consistent, industry-best client loyalty across our mobile and fixed product lines.”

– President and Chief Executive Officer, Darren Entwistle

Highlights:

Total Mobile and Fixed customer growth of 163,000, up 15,000 over last year, and our strongest first quarter on record, driven by strong demand for our leading portfolio across Mobility and Fixed services
Strong Mobile Phone net additions of 47,000, our best first quarter since 2010, and robust Connected Device net additions of 58,000; industry-leading postpaid churn of 0.70 per cent and Mobile Phone ARPU growth of 3.8 per cent
Record first quarter Fixed customer net additions of 58,000, including 35,000 internet customer additions, powered by industry-leading customer loyalty, with blended PureFibre churn below 1 per cent, in combination with TELUS’ PureFibre network; achieved one million security customer milestone
Strong quarterly financial results including Consolidated Operating Revenue and Adjusted EBITDA growth of 16 per cent and 11 per cent, respectively, and double digit Free Cash Flow growth of 29 per cent; Net Income lower by 45 per cent on higher interest, depreciation and amortization, and restructuring and other costs
Quarterly dividend raised to $0.3636, an increase of 7.4 per cent over the same period last year and our twenty-fourth increase since May 2011, representing a yield of approximately 5 per cent, supported by leading Adjusted EBITDA growth and strong cash flow expansion

Outlook:

Reiterating our 2023 Consolidated Financial Targets including Operating Revenue and Adjusted EBITDA growth of 11 to 14 per cent and 9.5 to 11 per cent, respectively, Capital Expenditures of approximately $2.6 billion and Free Cash Flow of approximately $2.0 billion.

Source: (T-T) Q1-2023 Quarterly Review

Enbridge Inc. (ENB-T) released its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets opened.

“We are very pleased with a strong start to 2023 and how our low-risk business model continues to deliver in all market cycles. Our first quarter results were right in line with our expectations despite extreme volatility in both financial and commodity markets. Operationally, we continue to be a first-choice service provider to our customers and during the quarter, this resulted in high utilization across our systems and record volumes on the Mainline. Enbridge is very proud of its long history of predictable financial and operational performance. For 17 consecutive years, shareholders have benefited from our ability to consistently meet financial guidance and we have delivered 28 consecutive annual dividend increases.”

– President and Chief Executive Officer, Greg Ebel

Highlights:

Debt to EBITDA of 4.6×1, mid-point of the target range
BBB+ credit ratings reaffirmed by all agencies
Settlement in principle reached on Mainline
Acquired Tres Palacios & Signed agreement to acquire Aitken Creek Gas Storage
Signed LOI to advance Blue Ammonia export facility at EIEC
Announced successful bid to design, build and operate Normandy OSW
High utilization across our systems
Strong operational performance in the quarter
Continued strong reliability and personnel
ESG update with audited 2022 statistics
27% reduction in emissions intensity since 2018

Outlook:

Strong Q1 performance – on track to meet full-year guidance

Source: (ENB-T) Q1-2023 Quarterly Review

Magna (MGA-N) released its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets opened.

“Our strong first quarter operating performance reflects strong earnings on higher organic sales. More importantly, we are taking targeted actions to reduce expenses and optimize our cost structure. Our increased outlook is based on the strength of our first quarter results and the expected benefit of these targeted actions. We are highly focused on executing our strategy and remain confident in our ability to meet our long-term growth and margin outlook.”

– President and Chief Executive Officer, Swamy Kotagiri

Highlights:

Sales increased 11% to $10.7 billion, compared to a global light vehicle production that rose 3%
Diluted earnings per share and Adjusted diluted earnings per share were $0.73 and $1.11, respectively
Paid dividends of $132 million
Raised Adjusted EBIT Margin Outlook range to 4.7%-5.1% from 4.1%-5.1%

Source: (MGA-N) Q1-2023 Quarterly Review

MP Market Review – April 28, 2023

Last updated by BM on May 01, 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 +7.4% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.
Last week, no dividend increases from companies on ‘The List’.
Last week, six earnings reports from companies on ‘The List’.
Eight 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

“Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn’t the head, but the stomach that determines the fate of the stockpicker.”

– Peter Lynch

Last week, a subscriber asked about a storyline regarding a company that I had recently included in our model portfolio. Typically, we don’t give much weightage to such news. Nevertheless, this inquiry prompted me to contemplate why I no longer experience unease when I invest in a top-notch dividend growth stock that is priced reasonably. While I cannot assure that I have purchased at the rock-bottom price, I take solace in knowing that our approach and methodology, coupled with a long-term investment horizon, make it highly probable to attain a positive return.

Here is a chart of U.S. Stock Market returns over the last 150 years over different holding periods.

In the long run, stocks have delivered strong returns. The longer you hold the higher the probability of a positive outcome. By building a concentrated portfolio of quality stocks that pay a growing dividend we do even better.

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

Recent News

A lot of acquisition activity recently from companies on ‘The List’. We like acquisitions because they allow our quality dividend growers to increase earnings. Growing earnings translates into growing dividends. Growing dividends drives our stock prices higher.

TFI INTERNATIONAL ANNOUNCES TWO ACQUISITIONS

https://twitter.com/MagicPants_DGI/status/1653038464521183232?s=20

CCL INDUSTRIES ACQUIRING DATA MANAGEMENT INC.

https://twitter.com/MagicPants_DGI/status/1653018756119920647?s=20

ALIMENTATION COUCHE-TARD TO BUY RETAIL SITES FROM MAPCO EXPRESS

https://twitter.com/MagicPants_DGI/status/1653043466002219008?s=20

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

The List (2023)

Last updated by BM on April 28, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.52	26.6%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.62	12.4%	$0.56	19.1%	13
BCE-T	Bell Canada	5.9%	$65.12	8.1%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$34.83	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.7%	$63.71	9.8%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$161.50	-0.8%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.9%	$177.61	21.2%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.6%	$39.17	6.0%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$83.92	5.1%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.65	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.6%	$53.87	1.0%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.3%	$37.29	4.4%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$151.78	9.9%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.49	7.5%	$2.26	4.1%	49
IFC-T	Intact Financial	2.1%	$204.94	4.7%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$127.43	5.9%	$1.62	5.2%	11
MGA-N	Magna	3.5%	$52.16	-9.3%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$77.22	2.3%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	3.9%	$134.51	5.1%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$53.02	6.9%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.44	24.7%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$82.07	-6.4%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$107.80	7.7%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.5%	$109.48	12.0%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$56.31	5.6%	$3.69	3.4%	22
T-T	Telus	4.9%	$28.72	9.1%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$139.15	5.6%	$1.02	7.9%	13
Averages		3.1%		7.4%		8.1%	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 +7.4% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Algonquin Power & Utilities (AQN-N), up +2.04%; Loblaws (L-T), up +2.02%; and Metro (MRU-T), up +1.23%.

TFI International (TFII-N) was the worst performer last week, down -9.5%.

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.

Eight companies on ‘The List’ ares due to report earnings this week.

Q1 earnings season continues in a big way. Eight companies on ‘The List’ are due to report earnings this week.

Franco Nevada (FNV-N) will release its first-quarter fiscal 2023 results on Tuesday, May 2, 2023, after markets close.

Loblaws (L-T) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Fortis (FTS-T) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Brookfield Infrastructure Partners (BIP-N) will release its first-quarter fiscal 2023 results on Wednesday, May 3, 2023, before markets open.

Bell Canada (BCE-T) will release its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets open.

Telus (T-T) will release its first-quarter fiscal 2023 results on Thursday, May 4, 2023, before markets open.

Enbridge Inc. (ENB-T) will release its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets open.

Magna (MGA-N) will release its first-quarter fiscal 2023 results on Friday, May 5, 2023, before markets open.

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

Canadian National Railway (CNR-T) released its first-quarter fiscal 2023 results on Monday, April 24, 2023, after markets closed.

“We are very proud of our performance this quarter. Safety is at the heart of everything we do and I’m particularly proud of our safety performance. We remain confident in our long-term growth despite current economic uncertainty. Our updated guidance reflects the strength of our scheduled operating model and its ability to drive strong operational results. For the immediate future, we remain focused on running our plan and providing reliable service to our customers.”

– President and Chief Executive Officer, Tracy Robinson

Highlights:

Record first quarter Revenues of C$4,313 million, an increase of C$605 million, or 16%.
Record first quarter Operating income of C$1,662 million, an increase of C$435 million, or 35%.
Operating ratio, defined as operating expenses as a percentage of revenues, of 61.5%, an improvement of 5.4- points, or an improvement of 5.1-points on an adjusted basis.
Record first quarter Diluted EPS of C$1.82, an increase of 39%, or an increase of 38% on an adjusted basis.
Free cash flow of C$593 million, an increase of 4%.

Outlook:

In light of the strength of its first quarter results, CN is now expecting to deliver adjusted diluted EPS growth in the mid single digits over 2022 (compared to its January 24, 2023 target of low single digits).

Source: (CNR-T) Q1-2023 Quarterly Review

TFI International (TFII-N) release its first-quarter fiscal 2023 results on Tuesday, April 25, 2023, after markets closed.

“We generated 69% growth in net cash from operating activities and our free cash flow more than doubled over the past year even as intensifying macro headwinds drove reduced volumes, and despite unfavorable FX fluctuations and the sale of CFI assets last summer,” said Alain Bédard, Chairman, President and Chief Executive Officer. “During the quarter we remained active with our many self-help initiatives, including cost reductions through a streamlining of our workforce and the conversion of accounting and finance systems at TForce Freight. At the same time, the many talented individuals of TFI continue to push ahead every day and deliver results through adherence to our operating principles that capitalize on our business line diversity and favorable niche market positioning. We also continue to allocate capital in the interest of enhancing long-term shareholder value. TFI has remained active with opportunistic M&A, completing five acquisitions year to date, each strategically expanding our geographic reach and capabilities. Also during the quarter, our Board of Directors approved our dividend, 30% higher than a year earlier, reflecting our confidence in the long-term outlook for TFI International even as economic uncertainty persists.”

– President and Chief Executive Officer, Alain Bedard

Highlights:

First quarter operating income of $166.4 million compares to $219.8 million the same quarter last year, primarily reflecting reduced freight volumes, non-recurring costs of $21.1 million, including $9.5 million in severance and early retirement buyouts in US LTL, $7.9 million of IT systems and related transition expenses in US LTL and $3.7 million of mark-to-market expense related to deferred share units (“DSUs”). In addition to these items, the results were also impacted by $6.2 million unfavorable currency translation impact relative to the same period last year and $17.4 million from the divestiture of CFI, from which the proceeds largely remain to be invested.
Net income of $111.9 million compares to $147.7 million in Q1 2022. Diluted earnings per share (diluted “EPS”) of $1.27 compares to $1.57 in Q1 2022, due in part to the costs discussed above.
Adjusted net income , a non-IFRS measure, of $116.5 million compares to $157.6 million in Q1 2022, due in part to the costs discussed above.
Adjusted diluted EPS , a non-IFRS measure, of $1.33 compares to $1.68 in Q1 2022, due in part to the costs discussed above.
Net cash from operating activities of $232.1 million increased 69% compared to $137.7 million in Q1 2022, the increase being driven primarily by favorable movements in working capital.
Free cash flow , a non-IFRS measure, of $195.7 million increased 113% compared to $91.8 million in Q1 2022, with the increase again primarily driven by favorable movements in working capital.
The Company’s reportable segments performed as follows:
- Package and Courier operating income increased 5% to $27.3 million;
- Less-Than-Truckload operating income decreased 39% to $57.9 million, driven primarily by weaker volume and the non-recurring items listed above;
- Truckload operating income decreased 1% to $70.5 million, even though the comparative period includes $17.4 million contribution from the divested operations of CFI; and
- Logistics operating income decreased 9% to $31.7 million.
On March 15, 2023, the Board of Directors of TFI declared a quarterly dividend of $0.35 per share paid on April 17, 2023, a 30% increase over the quarterly dividend of $0.27 per share declared in Q1 2022. The annualized dividend represents 12.3% of the trailing twelve month free cash flow .
During the quarter, TFI International acquired selected assets of Stallion Express, LLC, D.M. Breton Inc. which will operate in the TL segment, the Axsun Group which will operate in the logistics segment, and Hot-Line Freight Inc which will operate in the less-than-truckload segment. Subsequent to quarter end TFI International completed the acquisition of SM Freight which will operate in the TL segment.

Outlook:

The North American economic growth forecast from leading economists remains subdued due to a variety of factors including elevated interest rates, high inflation, early signs of weakness in labor markets, global supply chain challenges, and slower growth in many international markets. TFI International’s diversity across industrial and consumer end markets and across many modes of transportation, along with the Company’s disciplined approach to operations, helped support results during the first quarter, but macro conditions have slowed and the possibility of economic recession over the coming year remains.

TFI International remains vigilant in its monitoring for new potential risks that could cause further economic disruption, resulting in additional rounds of declining freight volumes and higher costs that could adversely affect TFI’s operating companies and the markets they serve. Lower diesel prices in the months ahead are likely to cause a headwind. Other uncertainties include but are not limited to geopolitical risk such as the ongoing war in Ukraine, weakening labor market conditions that can affect consumer demand, policy changes surrounding international trade, environmental mandates, and changes to the tax code in any jurisdictions in which TFI International operates.

While North American economic weakness is likely to continue weighing on freight demand dynamics, management believes the Company is well positioned to navigate these difficult operating conditions, benefiting from its financial foundation and strong cash flow that allows for a strategic approach to the business. The Company strives for a lean cost structure and has a longstanding focus on profitability, efficiency, network density, customer service, optimal pricing, driver retention, and capacity rationalization. TFI also continues to have material synergy opportunities related to the 2021 acquisition of TForce Freight, and has opportunities to enhance performance within most of its other operations. Longer term, TFI’s diverse industrial exposure through its specialized TL and LTL segments should continue to benefit from a gradual shift toward domestic manufacturing, while its P&C and Logistics business segments should benefit over the long term from the expansion of e-commerce.

Regardless of the operating environment, management’s goal is to build shareholder value through consistent adherence to its operating principles, including customer focus, an asset-light approach, and continual efforts to enhance efficiencies. In addition, TFI International values free cash flow generation and strong liquidity with a conservative balance sheet that features a high portion of attractive fixed-rate spreads and limited near-term debt maturities. This strong financial footing allows the Company to prudently invest and pursue select, accretive acquisitions while returning excess capital to shareholders.

Source: (TFII-N) Q1-2023 Quarterly Report

Waste Connections (WCN-N) released its first-quarter fiscal 2023 results on Wednesday, April 26, 2023, after markets closed.

“Record solid waste pricing growth, strong operational execution and continuing acquisition activity in the first quarter provided a strong start to the year. Q1 was recognized to be a difficult year-over-year comparison given the precipitous decline in resource recovery values during the second half of 2022, and results in the period were further affected by weather-related impacts to solid waste roll-off activity and landfill volumes, particularly on the West Coast. Underlying adjusted EBITDA margins were in line with our expectations, but acquisitions completed since the year-ago period were 30 basis points dilutive to reported margins, or more than 20 basis points higher than expected, given the disproportionate weather-related impacts on West Coast acquisitions.”

– President and Chief Executive Officer, Ronald J. Mittelstaedt

Highlights:

Price-led organic growth, strong operational execution, and continuing acquisition activity drive strong start to 2023
Revenue of $1.901 billion, up 15.4%
Net income of $197.8 million and adjusted EBITDA of $566.9 million
Net income and adjusted net income of $0.77 and $0.89 per share, respectively
Net cash provided by operating activities of $442.4 million and adjusted free cash flow of $274.0 million
On track to achieve full year outlook as provided in February, with potential upside from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures

Outlook:

“Continued visibility on pricing, improving trends in labor availability and retention, and recent normalization of weather patterns position us to deliver the full year outlook we provided in February. And as we also noted then, upside potential to this outlook remains from any additional acquisitions, increases in recycled commodities and renewable fuels values, or reduction of inflationary pressures. We’ve already closed approximately $45 million of acquired revenue year-to-date, and currently expect that pace of activity to continue throughout the year.”

– President and Chief Executive Officer, Ronald J. Mittelstaedt

Source: (WCN-N) Q1-2023 Earnings Release

Toromont Industries (TIH-T) released its first-quarter fiscal 2023 results on Thursday, April 27, 2023, after markets closed.

“We are pleased with the solid start to the year, buoyed in part by a solid opening order backlog. The Equipment Group executed well delivering on several large customer orders, as well as growing rental and product support results. CIMCO revenue improved in the quarter on project construction and higher product support activity. Across the organization, we remain committed to our operating disciplines, driving our after-market strategies and delivering customer solutions.”

– President and Chief Executive Officer, Scott J. Medhurst

Highlights:

Revenue increased $201.1 million (23%) to $1.1 billion for the quarter. Revenue increased in both groups, with the Equipment Group up 24%, compared to last year on higher equipment sales (+33%), product support (+20%) and rental activity (+6%), while CIMCO was up 17% versus the first quarter last year, on higher package revenue (+29%) and product support activity levels (+8%).
Operating income increased 48% in the quarter, and was 12% of revenue compared to 10% in the similar period last year, reflecting a lower relative expense ratio.
During the quarter, a vacant property was sold for $7.4 million, resulting in an after-tax gain of $3.1 million ($0.04 per share basic).
For the quarter, net earnings increased $36.5 million or 61% to $96.0 million, or $1.17 EPS (basic) and $1.16 EPS (fully diluted).
Bookings decreased 33% compared to the similar period last year. Equipment Group booking decreased against a tough comparable which included several large orders, exacerbated by cautious market ordering during the uncertain economic environment. CIMCO bookings increased on solid demand for our products and services. A number of factors previously reported have impacted booking activity over the past several years, over-riding typical seasonality.
Backlog was $1.2 billion as at March 31, 2023, compared to $1.5 billion as at March 31, 2022, reflecting progress on construction and delivery schedules as well as some improvement in general equipment flow through the supply chain.

Outlook:

Expecting the business environment to gradually improve, however a number of factors are at play:
- Dynamics of the supply chain and improving availability
- Inflationary & macro-economic trends
- Balancing customer credit risk in light growth opportunities
Our focus areas:
- Execute safely
- Serve and support our customer requirements
- Disciplined focus on building our business for the future (leverage operating model & managing risks)
Backlogs remain well positioned, as bookings are shifting toward pre-pandemic levels – careful monitoring of customer buying patterns
Technician hiring is a key priority, we made progress in 2022 and it remains an essential focus to support the growing customer demand for our products and services
Operationally and Financially, we are well positioned with ample liquidity and our strong leadership teams, disciplined culture and focused operating models

Source: (TIH-T) Q1-2023 Earnings Release

Canadian Utilities Limited (CU-T) released its first-quarter fiscal 2023 results on Thursday, April 27, 2023, before markets opened.

“Overall, it was a great quarter that saw our newly acquired assets contribute to earnings in a meaningful way and our core businesses continue to deliver great performance during this key regulatory transition period.”

– Executive Vice President and Chief Financial Officer, Brian Shkrobot.

Highlights:

Canadian Utilities achieved adjusted earnings of $217 million, or $0.81 per share, in the first quarter of 2023, compared to $219 million in the first quarter of last year.
Invested $304 million in capital expenditures in the first quarter of 2023, of which 86 per cent was invested in regulated utilities and 14 per cent mainly in Energy Infrastructure.
Closed the acquisition of the renewable generation portfolio on January 3, 2023. The 232-MW of operating Forty Mile and Adelaide wind assets have contributed revenues of $27 million for the three months ended March 31, 2023. Uprating work is currently underway for the Forty Mile wind assets with expected completion in the fourth quarter of 2023. This uprating is expected to increase Forty Mile Wind generation capacity from 202-MW to 225-MW.
In 2023, the Electricity Distribution and Natural Gas Distribution businesses, following the conclusion of the second performance-based regulation (PBR) term, began a one-year cost-of service rebasing. The cost efficiencies generated over the second generation PBR term are now being passed along to customers, providing lower rates and creating long-term savings for Albertans. Following a one-year cost-of-service rebasing in 2023, these businesses will move to a third generation of performance-based regulation (PBR3) beginning in 2024.

Outlook:

“Overall, with our 2023 estimates remaining largely intact, including AFFO/sh at $3.56 (was $3.54) and D/EBITDA at 5.2x, our $37 target remains unchanged.”

– National Bank

Source: (CU-T) Q1-2023 Earnings Release

TC Energy (TRP-T) released its first-quarter fiscal 2023 results on Friday, April 28, 2023, before markets opened.

“First quarter 2023 results were underpinned by the strong demand for our assets and our ability to safely and reliably deliver essential energy services across North America. Comparable EBITDA was $2.8 billion, up 16 per cent compared to first quarter 2022, and segmented earnings were $2.2 billion compared to $1.2 billion in first quarter 2022. Comparable earnings per share for the quarter was $1.21, up eight per cent compared to $1.12 in first quarter 2022. Net income per common share was $1.29, up from $0.36 in first quarter 2022.

Over the winter construction season, the Coastal GasLink project progressed in line with our revised cost and schedule and is now approximately 87 per cent complete. The entire project route has been cleared, grading is approximately 99 per cent complete, welding is approximately 95 per cent complete and we continue to target mechanical completion in late 2023.”

– President and Chief Executive Officer, François Poirier

Highlights:

First quarter 2023 results were underpinned by strong utilization and demand for our assets and services
- NGTL System total deliveries averaged 14.5 Bcf/d, up compared to first quarter 2022
- Throughput across U.S. Natural Gas Pipelines averaging 28.5 Bcf/d with several assets performing at near record levels during peak demand
- S. Natural Gas Pipelines achieved a new all-time record for deliveries to LNG export facilities
- Alberta cogeneration power plant fleet reached 100 per cent peak price availability in February
- Bruce Power achieved 95 per cent availability
First quarter 2023 financial results:
- Net income attributable to common shares of $1.3 billion or $1.29 per common share compared to $0.4 billion or $0.36 per common share in first quarter 2022. Comparable earnings1 of $1.2 billion or $1.21 per common share compared to $1.1 billion or $1.12 per common share in 2022
- Segmented earnings of $2.2 billion compared to segmented earnings of $1.2 billion in 2022 and comparable EBITDA of $2.8 billion compared to $2.4 billion in 2022
Dividend Reinvestment and Share Repurchase Plan (DRP) participation rate amongst common shareholders was approximately 38 per cent, resulting in $363 million reinvested in common equity from the dividends declared on February 13, 2023
Continuing to advance our industry leading secured capital program, placing $1.4 billion of projects in service in first quarter 2023 and on track to place $6.0 billion in service during 2023
Canadian Natural Gas Pipelines brought $1.1 billion of projects in service in first quarter 2023, enabling 700 MMcf/d of additional market access with an incremental 500 MMcf/d expected in second quarter 2023
Placed Port Neches Link Pipeline System in service in March 2023 providing last mile connectivity to key demand markets
Acquired 155 MW Fluvanna Wind Farm for US$99 million in cash, before post-closing adjustments in Scurry County, Texas. Entered into an agreement to acquire 148 MW Blue Cloud Wind Farm for US$125 million in cash, before post-closing adjustments in Bailey County, Texas. Closing of the Blue Cloud acquisition is pending regulatory approval
Received FERC approval for ANR Section 4 Rate Case on April 11, 2023
Bruce Power Unit 3 removed from service March 1, 2023 to begin its Major Component Replacement (MCR) outage with return to service expected in 2026.

Outlook:

We reaffirm our 2023 comparable EBITDA growth outlook of five to seven per cent relative to 2022, while comparable earnings per common share is expected to be modestly higher than 2022, showcasing the resiliency and sustainability of our earnings and cash flows. In addition, we expect capital spending in 2023 to continue to be $11.5 to $12.0 billion. Our 2023 outlook reflects our commitment to driving long-term growth and value for our shareholders. Based on the confidence of our business and growth outlook, TC Energy’s Board of Directors declared a quarterly dividend of $0.93 per common share for the quarter ending June 30, 2023, equivalent to $3.72 per common share on an annualized basis. We expect to continue to grow the common share dividend at an annual rate of three to five per cent, enabling our shareholders to benefit from our growth and success in the coming years.

Source: (TRP-T) Q1-2023 Earnings Release

MP Market Review – April 21, 2023

Last updated by BM on April 24, 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 again with a YTD price return of +8.3% (capital). Dividend growth remained the same and is now at +8.1% 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 companies on ‘The List’.
Six 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

“Most managers of dividend funds skew toward income: our strategy picks up both, income and growth. When you have the growing income, you have growing capital.”

-Tom Connolly

The average 12-month result for the 10 dividend funds in this fifth instalment of the 2023 Globe and Mail ETF Buyer’s Guide was a loss of -5.7 per cent (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-2023-globe-and-mail-etf-buyers-guide-part-five-canadian-dividend-etfs/

The financial media published a couple of articles on Dividend ETFs last week that finally shed some light for the everyday investor on what we have been saying all along. This article not only highlights some of the issues with dividend ETFs but the problem with ETFs in general.

Here are a few takeaways from the article:

Yields vary widely amongst dividend ETFs depending on the mandate of the fund.
Canadian dividend ETFs are overweighted in too few sectors which can affect returns when those sectors experience a downturn (think energy and financials).
The bar for entry is low (3 years dividend growth in some cases).
Some ETFs payout dividends received while others reinvest which limits the dividend income you’ve earned.

Here are few more reasons why dividend ETFs are not as good as holding some of your own individual dividend growth companies:

Not enough emphasis on growth and too much on yield.
ETFs are typically fully invested. No ‘dry powder’ when downdraft begins.
You pay fees which chip away at returns.
Professionals can’t afford to lose alone. They must conform.

If you rely on dividend ETFs or funds for income, it’s worth examining their track records and considering whether you could have achieved better results with your own dividend growth portfolio. You may be pleasantly surprised by how well you perform compared to the professionals. Additionally, managing your own portfolio ensures a more reliable and growing income stream.

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

Recent News

Why dividend growth investors may want to pass on ETFs (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-rob-carrick-why-dividend-growth-investors-may-want-to-pass-on-etfs/

“Unfortunately, dividend growth in the stocks held by a dividend ETF doesn’t always translate into dividend growth for investors holding the fund. If you look at the dollar amount of eligible dividends these funds pay, you’ll find they tend to move both up and down over the years.”

Our blog has long been critical of ETFs, especially dividend ETFs, as they often suffer from issues such as under-diversification, too many subpar holdings, and high fees, all of which can erode income and returns.

Although the ETF may be constructed with dividend-growth stocks, the varying levels of cash dividends instead of steadily increasing payouts makes you wonder what is going on. By building your own portfolio of only the best dividend growers, your income is dependable and always growing. This article provides another compelling reason to be cautious of dividend ETFs.

If you have time, check out our decade long performance versus the CDZ-T ETF here and you will understand why.

Algonquin Power & Utilities terminates deal to buy Kentucky Power (Globe & Mail)

https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-algonquin-power-utilities-terminates-deal-to-buy-kentucky-power/

“The US$2.6-billion deal to acquire Kentucky Power from American Electric Power Co. Inc. was announced in October, 2021, when borrowing costs were low and Algonquin – a significant renewable-energy producer and regulated electricity provider – was riding a wave of investor confidence that supported debt and share issuance necessary for larger acquisitions.”

It’s common knowledge what occurred subsequently: Algonquin reduced its dividend by 40% in January and unveiled plans to offload $1 billion worth of assets in order to bolster its balance sheet and safeguard its credit rating.

The piece highlights Ancora Holdings Group, an activist investor holding Algonquin shares, which recommends that Algonquin proceed with its asset sales to restore investor confidence. As Algonquin will no longer be on ‘The List’ next year after their dividend cut, we need not be concerned about the eventual outcome. Rather, our attention will be on management teams that we are familiar with and have faith in.

The List (2023)

Last updated by BM on April 21, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	6.1%	$8.35	24.1%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.70	12.6%	$0.56	19.1%	13
BCE-T	Bell Canada	5.9%	$64.44	7.0%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.19	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$65.55	12.9%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$166.53	2.2%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$183.00	24.8%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.6%	$39.09	5.8%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$84.77	6.1%	$0.27	23.8%	12
EMA-T	Emera	4.7%	$58.40	11.0%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.7%	$53.23	-0.2%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$37.93	6.2%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$152.30	10.2%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.82	8.1%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$203.44	3.9%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$124.91	3.8%	$1.62	5.2%	11
MGA-N	Magna	3.5%	$52.56	-8.6%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$76.28	1.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	3.9%	$135.30	5.7%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$53.73	8.4%	$0.92	15.0%	18
STN-T	Stantec Inc.	0.9%	$81.93	25.4%	$0.77	8.5%	11
TD-T	TD Bank	4.6%	$83.55	-4.7%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$119.11	19.0%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$108.16	10.7%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.6%	$55.78	4.7%	$3.69	3.4%	22
T-T	Telus	4.9%	$28.73	9.2%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$145.10	10.2%	$1.02	7.9%	13
Averages		3.0%		8.3%		8.1%	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 again with a YTD price return of +8.3% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Stantec Inc. (STN-T), up +3.62%; TD Bank (T-T), up +2.77%; and Intact Financial (IFC-T), up +2.50%.

Enghouse Systems Limited (ENGH-T) was the worst performer last week, down -5.08%.

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.

Six companies on ‘The List’ ares due to report earnings this week.

Q1 earnings season is about to kick into high gear. Six companies on ‘The List’ are due to report earnings this week.

Canadian National Railway (CNR-T) will release its first-quarter fiscal 2023 results on Monday, April 24, 2023, after markets close.

TFI International (TFII-N) will release its first-quarter fiscal 2023 results on Tuesday, April 25, 2023, after markets close.

Waste Connections (WCN-N) will release its first-quarter fiscal 2023 results on Wednesday, April 26, 2023, after markets close.

Toromont Industries (TIH-T) will release its first-quarter fiscal 2023 results on Thursday, April 27, 2023, after markets close.

Canadian Utilities Limited (CU-T) will release its first-quarter fiscal 2023 results on Thursday, April 27, 2023, before markets open.

TC Energy (TRP-T) will release its first-quarter fiscal 2023 results on Friday, April 28, 2023, before markets open.

Last week, one earnings report from companies on ‘The List’.

Metro (MRU-T) released its second-quarter fiscal 2023 results on Wednesday, April 19, 2023, before markets opened.

“We are pleased with our results in the second quarter as our teams continued to deliver value to our customers in the current high food inflation environment with competitive everyday prices, growing private label sales and effective promotional strategies. We will continue to invest in our people, our retail network and the modernization of our supply chain, and we are well positioned to achieve our long-term growth objectives. Finally, we are looking forward to the launch of our new loyalty program MOİ later this spring.”

– President and Chief Executive Officer, Eric La Fleche

Highlights:

2023 SECOND QUARTER HIGHLIGHTS

Sales of $4,554.5 million, up 6.6%
Food same-store sales up 5.8%
Pharmacy same-store sales up 7.3%
Net earnings of $218.8 million, up 10.4%, and adjusted net earnings of $225.4 million, up 10.1%
Fully diluted net earnings per share of $0.93, up 13.4%, and adjusted fully diluted net earnings per share of $0.96, up 14.3%

Outlook:

We remain focused on offering quality products at competitive prices as higher than normal inflation and market challenges persist. While we are not able to predict how the current macro-economic environment will evolve, we are seeing some moderation in food inflation, although it is still elevated compared to pre-pandemic levels. With this backdrop, we remain resilient and committed to providing the best value for our customers.

Source: (MRU-T) Q2-2023 Earnings Release

MP Market Review – April 14, 2023

Last updated by BM on April 17, 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 again with a YTD price return of +7.9% (capital). Dividend growth remained the same and is now at +8.1% 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’.
One company on ‘The List’ is 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

“A dividend is something tangible; it’s not an earnings projection, it’s something solid, ‘in hand’. A dividend is a true return on the investment. Everything else is hope and speculation.”

– Richard Russell, The editor and publisher of the Dow Market Theory Letter, 2007

The calendar Q1 2023 earnings season is about to begin. See our earnings calendar at the bottom of ‘The List’ page for more information as our quality dividend growers begin to report.

In the fourth quarter of 2022, nine out of the twenty-seven companies featured on ‘The List’ failed to meet earnings expectations, marking the highest level of underperformance since the blog’s inception two years ago. Tom Connolly, my mentor, characterizes this quarterly earnings expectations game as a fixation on short-term figures that often detract from long-term thinking. Companies frequently lower their outlook before the earnings announcement, only to surprise investors by exceeding the lowered bar they had set for themselves.

Tom Connolly and his adherents contend that dividends, not earnings, provide a better measure of a corporation’s performance. We agree with Mr. Connolly’s view on this. Nevertheless, we publish estimates versus actual earnings, along with links to earnings reports, to apprise our readers of the reasons why a company on ‘The List’ might experience short-term pressure on its stock price, and to serve as a starting point for further investigation.

If you’re interested in learning more about the ongoing debate on the accuracy of earnings reporting, you may find it helpful to read ‘Accounting and the Truth of Earnings Reports: Philosophical Considerations’ by Norman B. McIntosh, a Canadian academic at Queens University.

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

Recent News

TD is a lagging bank stock, and a rare opportunity (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-td-bank-stock-opportunity/

“…investors may want to focus on the bank’s curiously low valuation and ask themselves if the selloff is overdone.”

This article supports our blog post from last week and DGI Alert to subscribers in mid-March that Toronto-Dominion Bank is trading at a discount to historical fundamentals.

For more information on why we too think that the selloff is overdone click here for our analysis.

Brookfield to acquire freight container company Triton International for $4.7-billion (Globe & Mail)

https://www.theglobeandmail.com/business/article-brookfield-acquisition-triton-international/

“The COVID-19 pandemic led to widespread problems in global supply chains, but many of the issues are now being resolved. Still, shifts in consumer demand have led to some imbalances in the market. According to market forecaster Container xChange, the shipping industry is experiencing a freight recession as retailers who overstocked use up their excess stock.”

Brookfield Infrastructure Partners (BIP-N) is a quality dividend growth company on ‘The List’ due to its long-term investment strategy and ability to acquire businesses that generate increasing cash flow. This quality dividend grower is particularly attractive due to its focus on investing in infrastructure assets, which are typically long-lived and provide stable cash flows.

Triton International, a leading container leasing company with a large fleet of containers leased under long-term contracts, appears to be a good fit for (BIP-N). However, valuing Brookfield Infrastructure Partners can be challenging due to the complexity of the Brookfield empire, which has many moving parts. Despite this, the average dividend yield is currently at its ten-year average, and trending upwards. A sign that a ‘sensible price’ may yet appear.

The List (2023)

Last updated by BM on April 14, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.63	28.2%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.95	13.0%	$0.56	19.1%	13
BCE-T	Bell Canada	6.0%	$63.55	5.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$35.89	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$66.45	14.5%	$1.06	10.4%	21
CNR-T	Canadian National Railway	1.9%	$163.57	0.4%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$180.71	23.3%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.7%	$38.54	4.3%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$82.80	3.7%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.69	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.6%	$53.56	0.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.1%	$39.96	11.9%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$156.19	13.1%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.29	7.1%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$198.47	1.4%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$126.16	4.8%	$1.62	5.2%	11
MGA-N	Magna	3.4%	$54.35	-5.5%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$75.53	0.1%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$132.79	3.7%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.7%	$52.89	6.7%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$79.07	21.0%	$0.77	8.5%	11
TD-T	TD Bank	4.7%	$81.30	-7.3%	$3.84	7.9%	12
TFII-N	TFI International	1.2%	$117.50	17.3%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$106.37	8.9%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.5%	$56.55	6.1%	$3.69	3.4%	22
T-T	Telus	5.0%	$28.31	7.6%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$143.10	8.6%	$1.02	7.9%	13
Averages		3.1%		7.9%		8.1%	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 again with a YTD price return of +7.9% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Magna (MGA-N), up +6.26%; Brookfield Infrastructure Partners (BIP-N), up +5.87%; and TFI International (TFII-N), up +5.46%.

CCL Industries (CCL-B-T) was the worst performer last week, down -1.80%.

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.

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

Metro (MRU-T) will release its second-quarter fiscal 2023 results on Wednesday, April 19, 2023, before markets open.

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

MP Market Review – April 06, 2023

Last updated by BM on April 10, 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 +6.5% (capital). Dividend growth remained the same and is now at +8.1% 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 company on ‘The List’ is due to report earnings this week.
If you’re interested in creating your own 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

“Bear markets are a great opportunity for investors in the accumulation phase of their investing journey.”

– Austin Rogers, Seeking Alpha Contributor

A quick Easter update on our MP Wealth-Builder Model Portfolio (CDN) compared to major North American indexes over the same period.

The inception date of the portfolio was May 1, 2022. Dividends and Prices reflect the amounts as of close on Thursday, April 06, 2023.

Bear markets have been kind to us as we build our model portfolio together.

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

Recent News

Short seller bets against Canadian banks are nothing to worry about (Globe & Mail)

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-should-we-worry-about-the-canadian-banks-when-it-comes-to-short/

“One way to assess the risk is to look at short-selling activity in bank stocks. Are short-sellers ramping up their bets to an extent that would suggest they are expecting a banking crisis is on the horizon?”

The article is in reference to a previous article published by Bloomberg News earlier in the week in which they pointed out that the bank with the largest short position in the world is Toronto-Dominion Bank.

The absolute number of shares sold short by a bank does not necessarily indicate whether there is cause for concern. Instead, the percentage of a bank’s float that is sold short can provide a more accurate measure of the level of short interest.

The float refers to the number of company shares available for trading on the open market, excluding shares held by insiders, such as executives and major shareholders. The higher the percentage of a bank’s float that is sold short, the greater the level of short interest in the stock.

If a bank has a relatively low percentage of its float sold short, then there may not be cause for alarm, as this suggests that the market does not have significant concerns about the bank’s future performance. On the other hand, if a bank has a high percentage of its float sold short, it may indicate that investors are betting against the bank’s success, potentially due to concerns about its financial health or other factors.

In the case of TD Bank, the author reassures investors that the percentage of its float sold short has not risen much since January 2022 and currently stands at a low of 4 percent.

Misleading narratives in the financial media can often lead to good buying opportunities for our quality dividend growers.

CCL Industries Announces Two Intelligent Label Acquisitions (MT Newswire)

eAgile, located in Grand Rapids, Michigan, is a privately held start-up technology company with proprietary, patented hardware and software solutions for the healthcare industry supplied alongside RFID inlays embedded into labels. The $54 million purchase price includes an estimated $1 million net cash assumed with $7 million deferred for five years. The new business will become an integral part of CCL Label’s Healthcare & Specialty business while adding RFID know-how across the Company.

Privately owned Alert, based in Denmark, provides patented anti-theft solutions currently sold alongside Checkpoint’s Merchandise Availability Solutions (“MAS”) product lines to many European retailers. The acquired technology is expected to add approximately $0.5 million EBITDA to Checkpoint in its first full year, compared to a purchase price of $3 million.

Geoffrey T. Martin, President & Chief Executive Officer of CCL, commented, “By 2027, we expect eAgile products to generate at least an incremental $15 million EBITDA through a combination of augmenting sales to CCL Label’s existing healthcare customer base globally and new business wins. Alert’s technology is an important addition to our MAS platform at Checkpoint.”

The strategy of acquiring and integrating companies quickly has been successful for many companies over the years, and CCL Industries is no exception. This is because it allows companies to expand their operations, enter new markets, and increase their revenue streams without building everything from scratch. Acquisitions also provide companies with access to new technologies, expertise, and intellectual property, which can help them gain a competitive advantage.

When we added CCL Industries to our MP Wealth-Builder Model Portfolio (CDN) in November 2022, I am sure we raised a few eyebrows. (CCL-B-T) is certainly not a household name for a lot of Canadian investors. Our investment thesis is now playing out, and these acquisitions will only add to the success CCL Industries has enjoyed over the past two decades as a dividend growth company.

The List (2023)

Last updated by BM on April 06, 2023

SYMBOL	COMPANY	YLD	PRICE	YTD %	DIV	YTD %	STREAK
AQN-N	Algonquin Power & Utilities	5.9%	$8.61	27.9%	$0.51	-29.0%	12
ATD-T	Alimentation Couche-Tard Inc.	0.8%	$67.10	11.6%	$0.56	19.1%	13
BCE-T	Bell Canada	6.1%	$62.95	4.5%	$3.82	5.0%	14
BIP-N	Brookfield Infrastructure Partners	4.4%	$33.90	5.2%	$1.44	6.3%	15
CCL-B-T	CCL Industries	1.6%	$67.67	16.6%	$1.06	10.4%	21
CNR-T	Canadian National Railway	2.0%	$159.84	-1.9%	$3.16	7.8%	27
CTC-A-T	Canadian Tire	3.8%	$180.88	23.4%	$6.90	17.9%	12
CU-T	Canadian Utilities Limited	4.7%	$38.37	3.9%	$1.79	1.0%	51
DOL-T	Dollarama Inc.	0.3%	$82.26	3.0%	$0.27	23.8%	12
EMA-T	Emera	4.8%	$57.67	9.6%	$2.76	3.0%	16
ENB-T	Enbridge Inc.	6.8%	$52.57	-1.4%	$3.55	3.2%	27
ENGH-T	Enghouse Systems Limited	2.2%	$39.27	10.0%	$0.85	18.2%	16
FNV-N	Franco Nevada	0.9%	$154.04	11.5%	$1.36	6.3%	15
FTS-T	Fortis	3.8%	$59.67	7.8%	$2.26	4.1%	49
IFC-T	Intact Financial	2.2%	$197.15	0.7%	$4.40	10.0%	18
L-T	Loblaws	1.3%	$126.00	4.7%	$1.62	5.2%	11
MGA-N	Magna	3.6%	$51.15	-11.1%	$1.84	2.2%	13
MRU-T	Metro	1.6%	$75.95	0.6%	$1.21	10.0%	28
RY-T	Royal Bank of Canada	4.0%	$130.55	2.0%	$5.28	6.5%	12
SJ-T	Stella-Jones Inc.	1.8%	$51.18	3.2%	$0.92	15.0%	18
STN-T	Stantec Inc.	1.0%	$77.83	19.1%	$0.77	8.5%	11
TD-T	TD Bank	4.8%	$79.65	-9.1%	$3.84	7.9%	12
TFII-N	TFI International	1.3%	$111.42	11.3%	$1.40	29.6%	12
TIH-T	Toromont Industries	1.6%	$104.63	7.1%	$1.68	10.5%	33
TRP-T	TC Energy Corp.	6.7%	$54.94	3.1%	$3.69	3.4%	22
T-T	Telus	5.0%	$27.98	6.3%	$1.40	5.4%	19
WCN-N	Waste Connections	0.7%	$137.83	4.6%	$1.02	7.9%	13
Averages		3.1%		6.5%		8.1%	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 +6.5% (capital). Dividend growth remained the same and is now at +8.1% YTD, highlighting growth in income over the past year.

The best performers last week on ‘The List’ were Franco Nevada (FNV-N), up +5.65%; TC Energy Corp. (TRP-T), up +4.51%; and Telus (T-T), up +4.29%.

TFI International (TFII-N) was the worst performer last week, down -6.60%.

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

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

Category: MP Market Reviews

MP Market Review – June 9, 2023

MP Market Review – June 2, 2023

MP Market Review – May 26, 2023

MP Market Review – May 19, 2023

MP Market Review – May 12, 2023

MP Market Review – May 05, 2023

MP Market Review – April 28, 2023

MP Market Review – April 21, 2023

MP Market Review – April 14, 2023

MP Market Review – April 06, 2023

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