Last updated by BM on July 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 down with a YTD price return of +4.6% (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’.
- 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
One of the most powerful concepts we have learned is how dividends work and how they ultimately drive portfolio performance. In the chart above, notice how Canadian National Railways dividend has driven it’s price higher in lock step with dividend growth over the last decade.
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
“You want to start your dividend growth retirement portfolio as early as you can so that, come retirement, more of your portfolio is ‘bondified’. That way, most of your retirement portfolio is free from market risk. Bondified, to me, means the distance between your purchase price and the current price is really large.”
– Tom Connolly
One of the many concepts I have learned about dividend growth investing from Tom Connolly is the term ‘bondified’. Regardless on whether you have an issue with yield on cost or growth yield, the concept is important.
Many of the stocks on ‘The List’ are, ‘bondified’ already. We’ve owned them for years, they produce growing income and they have been driven well above our purchase price by the growing dividends. Bonds provide fixed income only.
Here’s a ‘bondified’ example.
In the year 2008, Canadian National Railway’s dividend was $0.46, it is now $3.16, up 587%! The yield was ~2.0% in 2008 and the yield today is ~2.0%. What must have happened? In 2008, Canadian National Railway’s price was $23.04, it is now $153.52, up 566%.
The difference between your purchase price and the current price is what makes Canadian National Railway ‘bondified’. Bonds do not provide that type of income and capital growth. This investment made 15 years ago now becomes our fixed income component in asset allocation (if I had a fixed income component). Do the math on any of the other companies on ‘The List’ with 15 plus years of dividend growth and see what you discover for yourself.
Think of all the advisors out there who switch their clients from stocks to bonds as retirement approaches. Is that the best approach? Start your dividend growth investing journey early enough and you won’t have to worry.
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
B.C. port strike sends ripples across Canadian economy (Globe & Mail)
https://www.theglobeandmail.com/business/article-bc-port-workers-strike-economy/
“The strike by B.C. port workers is sending ripples across the Canadian economy as everyone from Saskatchewan potash exporters to Ontario importers of industrial parts feels the impact of the walkout that enters its 10th day on Monday.”
When I read articles like this one, I think of opportunity. The probability of this strike lasting for an extended period of time is relatively low. The effect these short-term narratives have on stock prices, however can be meaningful. We will have to wait and see what the market gives us.
To receive breaking news about companies on ‘The List’ follow us on Twitter @MagicPants_DGI.
The List (2023)
Last updated by BM on July 07, 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 | 6.4% | $7.87 | 16.9% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $65.26 | 8.5% | $0.56 | 19.1% | 13 |
| BCE-T | Bell Canada | 6.4% | $59.54 | -1.1% | $3.82 | 5.0% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $35.65 | 5.2% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.6% | $64.39 | 10.9% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 2.1% | $153.52 | -5.7% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 3.8% | $181.87 | 24.1% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 5.3% | $33.82 | -8.4% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $87.10 | 9.1% | $0.27 | 23.8% | 12 |
| EMA-T | Emera | 5.1% | $53.76 | 2.2% | $2.76 | 3.0% | 16 |
| ENB-T | Enbridge Inc. | 7.3% | $48.38 | -9.3% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.7% | $31.48 | -11.8% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 1.0% | $138.73 | 0.4% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis | 4.0% | $55.98 | 1.2% | $2.26 | 4.1% | 49 |
| IFC-T | Intact Financial | 2.2% | $199.30 | 1.8% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.5% | $118.66 | -1.4% | $1.74 | 10.3% | 11 |
| MGA-N | Magna | 3.2% | $58.18 | 1.1% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.7% | $73.09 | -3.2% | $1.21 | 10.0% | 28 |
| RY-T | Royal Bank of Canada | 4.3% | $125.52 | -2.0% | $5.34 | 7.7% | 12 |
| SJ-T | Stella-Jones Inc. | 1.4% | $68.10 | 37.4% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 0.9% | $86.86 | 33.0% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.7% | $80.88 | -7.7% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.2% | $112.22 | 12.1% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.5% | $108.65 | 11.2% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 7.1% | $52.00 | -2.4% | $3.69 | 3.4% | 22 |
| T-T | Telus | 5.5% | $25.76 | -2.1% | $1.43 | 7.3% | 19 |
| WCN-N | Waste Connections | 0.7% | $138.80 | 5.4% | $1.02 | 7.4% | 13 |
| Averages | 3.2% | 4.6% | 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 with a YTD price return of +4.6% (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 +3.08%; Stantec Inc. (STN-T), up +0.43%; and Canadian Tire (CTC-A-T), up +0.41%.
Algonquin Power & Utilities (AQN-N) was the worst performer last week, down -4.72%.
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.
No earnings reports from companies on ‘The List’ this week
Last week, no earnings reports from companies on ‘The List’.
