Last updated by BM on August 12, 2024
Summary
This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
- 5 Lessons from Dividend Growth Investing.
- Last week, dividend growth of ‘The List’ stayed the course and has increased by +8.8% YTD (income).
- Last week, the price of ‘The List’ was down with a return of +7.3% YTD (capital).
- Last week, there were no dividend announcements from companies on ‘The List’.
- Last week, there were six earnings reports from companies on ‘The List’.
- This week, two companies on ‘The List’ are due to report earnings.
DGI Clipboard
“The most durable education is self-education.”
– Charles Swain Thomas
5 Lessons from Dividend Growth Investing
The recent market volatility made me think about the lessons I have learned over the last fifteen years that make periods like last week less emotional than before I discovered dividend growth investing.
Although we are proud of our performance, we have learned a lot over the last fifteen years. Yes, we made some mistakes but thankfully we stuck to our process. Here are five lessons that help us stay calm when the markets are volatile.
Lesson #1
We only buy ‘quality’ companies. Early on, we purchased a few companies that had respectable dividend growth records but were not sufficiently capitalized. When the market turbulence occurred, these companies suffered more than our high-quality companies and were slow to recover. In the end, we exited our positions at a loss and chalked one up to experience.
Lesson #2
Do not buy cyclical companies. Cyclicals can do very well when in favour but can turn quickly when the cycle trends the other way. Case in point are the pure ‘Energy’ companies and Real Estate Investment Trusts (REITs) in Canada. You must incorporate ‘market timing’ into your process and hold on for the ride if you want to add cyclicals to your dividend growth portfolio. For most investors, the emotional rollercoaster is too much.
Lesson #3
Rarely sell your good dividend growers. Early on, we sold some companies too early when they appeared overvalued. They continued to go higher, and we were unable to participate. If you must sell due to perceived overvaluation, sell some and take your position size down but don’t exit totally. If they continue higher, you still have some skin in the game.
Lesson #4
Have a position sizing strategy. First separate your quality companies into ‘Core’ and ‘non-Core’ categories. In Canada, ‘Core’ companies are essential to the economy (e.g., telcos, utilities, banks, railroads, pipelines). Determine, based on your comfort level, what percentage of your investable capital you will allocate to each company in each category.
Lesson #5
Take advantage of market sell-offs. By having confidence in a market sell-off, you can supercharge your investment returns by purchasing more of the quality companies on your list. Over the last fifteen years, we have had a few opportunities to initiate or add to our core positions at a steep discount. We ended up being too conservative when the opportunities presented themselves, and our returns were not as good as they could have been. Chat with yourself before a sell-off on your strategy and try and eliminate the emotion for when the time comes. Trust the process.
Wrap Up
Lesson five resonates with me now, particularly given the recent market volatility. Having weathered many similar weeks over the past decade and a half, we’ve come to recognize the value of seizing opportunities to acquire more of our quality dividend growers at discounted prices. Our confidence in this strategy remains steadfast, and we will continue to act decisively whenever such opportunities present themselves.
Do you have a repeatable investing process? We prefer dividend growth investing because it is less active than other forms, does well in both bull and bear market cycles and no matter what, we always have our growing income to fall back on. If you are still unsure, try it with a percentage of your portfolio and track your performance against other strategies you believe in. If you are like us, you will like what you see.
For those of you who need a little more help, you can always become a paid subscriber to the blog and build your portfolio alongside ours.
DGI Scorecard
The List (2024)
The Magic Pants 2024 list includes 28 Canadian dividend growth stocks. Here are the criteria to be considered a candidate on ‘The List’:
- Dividend growth streak: 10 years or more.
- Market cap: Minimum one billion dollars.
- Diversification: Limit of five companies per sector, preferably two per industry.
- Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.
Based on these criteria, companies are added or removed from ‘The List’ annually on January 1. Prices and dividends are updated weekly.
While ‘The List’ is not a standalone portfolio, it functions admirably as an initial guide for those seeking to broaden their investment portfolio and attain superior returns in the Canadian stock market. Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our Canadian dividend growth investing strategy. This evidence-based, unbiased approach empowers DIY investors to outperform both actively managed dividend funds and passively managed indexes and dividend ETFs over longer-term horizons.
For those interested in something more, please upgrade to a paid subscriber; you get the enhanced weekly newsletter, access to premium content, full privileges on the new Substack website magicpants.substack.com and DGI alerts whenever we make stock transactions in our model portfolio.
Performance of ‘The List’
Last week, dividend growth of ‘The List’ stayed the course and has now increased by +8.8% YTD (income).
Last week, the price return of ‘The List’ was down with a return of +7.3% YTD (capital).
Even though prices may fluctuate, the dependable growth in our income does not. Stay the course. You will be happy you did.
Last week’s best performers on ‘The List’ were Canadian Tire (CTC-A-T), up +6.45%; Thomson Reuters (TRI-N), up +2.55%; and CCL Industries Inc. (CCL-B-T), up +2.20%.
Stantec Inc. (STN-T) was the worst performer last week, down -6.18%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $79.89 | 4.1% | $0.70 | 17.4% | 14 |
| BCE-T | Bell Canada | 8.3% | $48.03 | -11.4% | $3.99 | 3.1% | 15 |
| BIP-N | Brookfield Infrastructure Partners | 5.4% | $30.12 | -1.9% | $1.62 | 5.9% | 16 |
| CCL-B-T | CCL Industries Inc. | 1.6% | $73.92 | 27.8% | $1.16 | 9.4% | 22 |
| CNR-T | Canadian National Railway | 2.2% | $152.21 | -8.8% | $3.38 | 7.0% | 28 |
| CTC-A-T | Canadian Tire | 4.7% | $149.51 | 7.9% | $7.00 | 1.4% | 13 |
| CU-T | Canadian Utilities Limited | 5.6% | $32.35 | 0.7% | $1.81 | 0.9% | 52 |
| DOL-T | Dollarama Inc. | 0.3% | $127.06 | 33.7% | $0.35 | 29.5% | 13 |
| EMA-T | Emera | 5.8% | $49.15 | -3.2% | $2.87 | 3.0% | 17 |
| ENB-T | Enbridge Inc. | 6.9% | $53.36 | 10.2% | $3.66 | 3.1% | 28 |
| ENGH-T | Enghouse Systems Limited | 3.5% | $28.96 | -14.7% | $1.00 | 18.3% | 17 |
| FNV-N | Franco Nevada | 1.2% | $121.11 | 10.0% | $1.44 | 5.9% | 16 |
| FTS-T | Fortis Inc. | 4.0% | $58.99 | 7.5% | $2.36 | 3.3% | 50 |
| IFC-T | Intact Financial | 2.0% | $245.92 | 21.0% | $4.84 | 10.0% | 19 |
| L-T | Loblaw Companies Limited | 1.2% | $164.97 | 28.3% | $1.92 | 10.0% | 12 |
| MFC-T | Manulife Financial | 4.6% | $34.44 | 19.3% | $1.60 | 9.6% | 10 |
| MGA-N | Magna | 4.9% | $38.80 | -30.1% | $1.90 | 3.3% | 14 |
| MRU-T | Metro Inc. | 1.7% | $79.75 | 16.4% | $1.34 | 10.7% | 29 |
| RY-T | Royal Bank of Canada | 3.8% | $149.84 | 12.6% | $5.72 | 7.1% | 13 |
| SJ-T | Stella-Jones Inc. | 1.3% | $89.31 | 16.6% | $1.12 | 21.7% | 19 |
| STN-T | Stantec Inc. | 0.8% | $109.65 | 4.8% | $0.83 | 7.8% | 12 |
| T-T | Telus | 6.8% | $22.52 | -5.1% | $1.53 | 7.1% | 20 |
| TD-T | TD Bank | 5.2% | $78.36 | -7.5% | $4.08 | 6.3% | 13 |
| TFII-N | TFI International | 1.1% | $144.32 | 10.0% | $1.60 | 10.3% | 13 |
| TIH-T | Toromont Industries | 1.6% | $122.42 | 8.5% | $1.92 | 11.6% | 34 |
| TRI-N | Thomson Reuters | 1.3% | $161.45 | 12.6% | $2.16 | 10.2% | 30 |
| TRP-T | TC Energy Corp. | 6.5% | $59.46 | 13.7% | $3.84 | 3.2% | 23 |
| WCN-N | Waste Connections | 0.6% | $180.30 | 21.7% | $1.14 | 8.6% | 14 |
| Averages | 3.3% | 7.3% | 8.8% | 21 |
Note: Stocks ending in “-N” declare earnings and dividends in US dollars. To achieve currency consistency between dividends and share price for these stocks, we have shown dividends in US dollars and share price in US dollars (these stocks are listed on a US exchange). The dividends for their Canadian counterparts (-T) would be converted into CDN dollars and would fluctuate with the exchange rate.
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