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
“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
“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)
“…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
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% | $8.63 | 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 |
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 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.
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 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’.
