Last updated by BM on December 25, 2023
Summary
- This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on ‘The List’.
- Last week, ‘The List’ was up with a YTD price return of +5.1% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).
- Last week, there were no dividend announcements from companies on ‘The List’.
- Last week, there were no earnings reports from companies on ‘The List’.
- No companies on ‘The List’ are due to report earnings this week.
The List (2023)
The Magic Pants List includes 27 Canadian dividend growth stocks. Each has raised their dividend annually for the last ten years (or longer) and has a market cap of over a billion dollars. Based on these criteria, companies on ‘The List’ are added or removed annually, on January 1. Prices and dividends are updated weekly.
While ‘The List’ does not function as a portfolio on its own, it serves as an excellent initial reference for individuals looking to diversify their investments and achieve higher returns in the Canadian stock market. Through our newsletter, readers gain a deeper understanding of how to implement and benefit from our Canadian dividend growth investing strategy.
If you’re interested in creating your own dividend growth income portfolio, consider subscribing to our premium service. Subscribers gain access to buy/sell alerts and exclusive content available only to subscribers.
Performance of ‘The List’
Last week, ‘The List’ was up with a YTD price return of +5.1% (capital). Dividends have increased by +9.1% YTD, highlighting the growth in the dividend (income).
The best performers last week on ‘The List’ were TFI International (TFII-N), up +11.43%; Loblaws (L-T), up +6.31%; and Brookfield Infrastructure Partners (BIP-N), up +5.21%.
Telus Corp. (T-T) was the worst performer last week, down -2.80%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| AQN-N | Algonquin Power & Utilities | 7.9% | $6.44 | -4.3% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $76.76 | 27.6% | $0.60 | 26.6% | 13 |
| BCE-T | Bell Canada | 7.5% | $51.41 | -14.6% | $3.87 | 5.2% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $31.68 | 1.1% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.8% | $59.70 | 2.8% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 1.9% | $165.67 | 1.7% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 4.9% | $139.97 | -4.5% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 5.7% | $31.48 | -14.8% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $94.19 | 17.9% | $0.27 | 23.8% | 12 |
| EMA-T | Emera | 5.7% | $49.43 | -6.1% | $2.82 | 5.0% | 16 |
| ENB-T | Enbridge Inc. | 7.4% | $47.82 | -10.3% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.4% | $35.51 | -0.6% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 1.2% | $111.24 | -19.5% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis Inc. | 4.2% | $53.96 | -2.5% | $2.29 | 5.3% | 49 |
| IFC-T | Intact Financial | 2.2% | $200.23 | 2.3% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.4% | $126.06 | 4.8% | $1.74 | 13.2% | 11 |
| MGA-N | Magna | 3.1% | $59.03 | 2.6% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.8% | $67.27 | -10.9% | $1.21 | 12.0% | 28 |
| RY-T | Royal Bank of Canada | 4.0% | $133.67 | 4.4% | $5.34 | 7.7% | 12 |
| SJ-T | Stella-Jones Inc. | 1.2% | $75.93 | 53.1% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 0.7% | $104.48 | 59.9% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.5% | $85.12 | -2.9% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.1% | $132.32 | 32.1% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.5% | $115.63 | 18.3% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 7.0% | $53.01 | -0.5% | $3.69 | 3.4% | 22 |
| T-T | Telus Corp. | 6.1% | $23.29 | -11.5% | $1.43 | 7.4% | 19 |
| WCN-N | Waste Connections | 0.7% | $147.33 | 11.9% | $1.05 | 10.5% | 13 |
| Averages | 3.4% | 5.1% | 9.1% | 19 |
Six Canadian stocks on ‘The List’ declare earnings and dividends in US dollars and are inter-listed on a US exchange in US dollars. The simplest way to display dividend and price metrics for these stocks is to show their US exchange symbols along with their US dividends and price. The stocks I am referring to have a -N at the end of their symbols. You can still buy their Canadian counterparts (-T), but your dividends will be converted into CDN dollars and will fluctuate based on the exchange rate.
DGI Clipboard
“Success in investing begins with a watchlist – the carefully chosen stocks that have the potential to transform your financial future.”
– Anonymous
Making ‘The List’ and checking it twice
Many of the most important concepts I learned about running a business came from two of my mentors, Bill Gates and Warren Buffett. Both Gates and Buffett believe that focus, concentration on key goals, and the ability to say “no” to distractions are crucial elements in achieving success in their respective fields.
Creating a focused watchlist helps me stay invested and reduces distractions compared to following the entire market. It simplifies updating key metrics regularly and gaining a deeper understanding of selected companies. Starting the year with a watchlist of Canadian dividend growth stocks, I monitor their performance over twelve months to identify potential investment candidates, although I may not invest in all of them.
To begin our selection, we start with a review of the listed companies on The Toronto Stock Exchange (TSX). The TSX is one of the world’s largest stock exchanges and the third largest in North America. It is home to over 1500 companies across all sectors of the Canadian economy.
‘The List’ criteria are simple:
- Dividend growth streak: 10 years or more.
- Market cap: Minimum one billion dollars.
- Diversification: Limit of five companies per sector, preferably two per industry.
- Cyclicality: Exclude REITs and pure-play energy companies due to high cyclicality.
By screening for the first two criteria, ten years of consecutive dividend growth and a market cap of one billion dollars or more, we winnow our candidates down to only 57 companies (less than 4% of the companies on the TSX).
We delve into the last two criteria, diversification, and cyclicality, aiming for our list to represent the Canadian economy and serve as a coaching tool for our DGI strategy. Many Canadian investors are overly concentrated in a few sectors or tend to chase trends, resulting in diminished returns during economic shifts. Applying these criteria enables us to compare companies within a sector using quality indicators, resulting in approximately 30 companies on ‘The List’ (2% of TSX-listed companies).
One of the first things I learned about dividend growth investing (DGI) is that it is a risk-reduction strategy. By its nature, DGI forces investors into higher-quality names. After all, for a company’s management to commit to a dividend payout policy, the company needs to generate cash to pay the dividends. As it turns out, high-quality companies are more likely to be profitable and generate cash to pay dividends consistently.
Not all stocks on ‘The List’ will enter our MP Wealth-Builder Model Portfolio (CDN), but the majority will. Clearly defining your goals and objectives makes ‘The List’ an excellent starting point for any DGI journey.
I prefer keeping ‘The List’ under 30 companies for easier monitoring of quality dividend growers. Last year, it comprised 27 stocks. I rarely remove any the next year unless they don’t meet our initial criteria or undergo a significant business model change. For instance, Algonquin Power & Utilities Corp. (AQN-N) cut its dividend last year. As a result, (AQN-N) will be removed from the list in 2024, and at least one new stock will be added.
Although the markets can be volatile and price growth uncertain in the short term, the same is not true about dividend growth. Dividend growth is highly predictable. Since I have been creating a public watchlist, the average dividend growth of the companies on ‘The List’ has far exceeded inflation. This growing and inflation-protected income is one of the more magical things about a dividend growth investing strategy.
Next week, I will unveil ‘The List’ for 2024.
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Recent News
Dividend portfolios: the gift that keeps on giving (Globe & Mail)
“Opening Christmas presents is a treat for children, but these days I’d rather have my stocking stuffed with dividends and kept well away from the fire. After all, dividends can pay for a comfortable retirement and many happy holidays.”
All of the dividend portfolios the author tracks have outperformed the index over the long term.
Tiff Macklem isn’t ready to bring the same holiday cheer that Jay Powell is (Globe & Mail)
“It’s still too early to consider cutting our policy rate,” he said. “Until we see evidence that we are clearly on a path back to two-per-cent inflation, I expect Governing Council will continue to debate whether monetary policy is restrictive enough, and how long it needs to remain restrictive to restore price stability.”
According to the author, Canada’s declining productivity gives Mr. Macklem less wiggle room than Cousin Jay south of the border and less likely to let his policy guard down anytime soon.
Canadian logistics firm TFI International to buy Daseke in $1.1-billion deal, including debt (Globe & Mail)
“The combined company’s truckload segment is expected to generate about $3.6 billion in annual total revenue on a pro forma basis and would become one of the largest truckload businesses in Canada, TFI said.”
TFI International has been an excellent total return performer. Growing through strategic acquisitions and integrating them well has been how this quality dividend grower continues to outperform its peers.
Dividend Increases
“The growth of dividend paying ability is of significance in the determination of a stock’s quality, or general safety…”
– Arnold Bernhard (the founder of Value Line)
No companies on ‘The List’ had dividend announcements last week.
Earnings Releases
Benjamin Graham once remarked that earnings are the principal factor driving stock prices.
Each quarter, we will provide readers with weekly earnings updates of stocks on ‘The List’ during the calendar earnings season.
The updated earnings calendar can be found here.
No earnings reports from companies on ‘The List’ this week
Last week, there were no earnings reports from companies on ‘The List’.
