Last updated by BM on July 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 with a YTD price return of +6.9% (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’.
- Five 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
Identifying companies whose dividend growth aligns closely with price growth can considerably enhance the predictability of future returns. Dividend growth investors know that the dividend drives the price in a predictable way, not the other way around. Waste Connections (WCN-T) is another company on ‘The List’ that follows this dividend growth principle.
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
“Earnings warnings are like cockroaches – for every one you see, there are always a few more hiding.”
-Eddy Elfenbein, Crossing Wall Street
Calendar 2023 Q2 earnings season begins to speed up this week with five companies on ‘The List’ reporting. What makes this season more interesting is the effect, if any, the interest rate hikes that began last year will have on earnings. Rather than compare earnings results with analyst estimates, we have added another column showing last years Q2 results (LY Result). We highlight in red where the analyst estimates, and results are lower year over year. If central bank policy is working (slowing of the economy), we should see a lot of red this earnings season.
The updated earnings calendar can be found here.
As dividend growth investors, we are fine with a slowing economy as we still get paid (dividends) even if our quality dividend growers have a price pullback. We will be patiently looking for a market overreaction or two to add to our positions.
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Recent News
Magna to invest more than US$790-million to build three new facilities for electric parts (Globe & Mail)
“Governments in the United States and Canada are spending billions for EV manufacturers to build factories and bolster their battered auto sectors ahead of laws mandating electric-vehicle sales ratios and tougher emissions rules.”
It is hard to bet against the ‘electrification’ of our auto sector. Magna (MGA-N) has been one of our top total return performers since we added it to our model portfolio on May 31 (up +25%).
TC Energy to sell 40% interest in Columbia gas transmission systems for $5.2-billion (Globe & Mail)
“While the headline valuation is likely underwhelming, the deal shores up the balance sheet,” said BMO Capital Markets analyst Ben Pham.
In its last earnings call, management mentioned that they were looking for ways to divest themselves of assets to improve their financials and this meets their target. Although there still may be more challenges for TC Energy before we see their value proposition play out, this deal certainly helps.
To receive breaking news about companies on ‘The List’ follow us on Twitter @MagicPants_DGI.
The List (2023)
Last updated by BM on July 21, 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 | 6.1% | $8.28 | 23.0% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $67.63 | 12.5% | $0.56 | 19.1% | 13 |
| BCE-T | Bell Canada | 6.5% | $58.73 | -2.5% | $3.82 | 5.0% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $35.69 | 5.2% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.6% | $65.02 | 12.0% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 2.0% | $156.71 | -3.8% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 3.7% | $185.04 | 26.2% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 5.2% | $34.30 | -7.1% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $88.46 | 10.8% | $0.27 | 23.8% | 12 |
| EMA-T | Emera | 5.0% | $55.00 | 4.5% | $2.76 | 3.0% | 16 |
| ENB-T | Enbridge Inc. | 7.2% | $49.43 | -7.3% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.8% | $30.70 | -14.0% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 0.9% | $146.43 | 6.0% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis | 3.9% | $57.44 | 3.8% | $2.26 | 4.1% | 49 |
| IFC-T | Intact Financial | 2.2% | $199.25 | 1.8% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.4% | $120.36 | 0.0% | $1.74 | 10.3% | 11 |
| MGA-N | Magna | 3.0% | $62.33 | 8.4% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.6% | $74.29 | -1.6% | $1.21 | 10.0% | 28 |
| RY-T | Royal Bank of Canada | 4.1% | $131.03 | 2.3% | $5.34 | 7.7% | 12 |
| SJ-T | Stella-Jones Inc. | 1.4% | $68.07 | 37.3% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 0.9% | $88.75 | 35.8% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.5% | $86.24 | -1.6% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.1% | $121.76 | 21.6% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.5% | $109.19 | 11.7% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 7.1% | $52.23 | -2.0% | $3.69 | 3.4% | 22 |
| T-T | Telus | 5.8% | $24.79 | -5.8% | $1.43 | 7.3% | 19 |
| WCN-N | Waste Connections | 0.7% | $144.64 | 9.8% | $1.02 | 7.4% | 13 |
| Averages | 3.2% | 6.9% | 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 up with a YTD price return of +6.9% (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 TFI International (TFII-N), up +11.30%; Magna (MGA-N), up +5.45%; and Stella-Jones Inc. (SJ-T), up +2.90%.
Enghouse Systems Limited (ENGH-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.
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.
Five earnings reports from companies on ‘The List’ this week
Canadian National Railway (CNR-T) will release its second-quarter fiscal 2023 results on Tuesday, July 25, 2023, after markets close.
Loblaws (L-T) will release its second-quarter fiscal 2023 results on Wednesday, July 26, 2023, before markets open.
Toromont Industries (TIH-T) will release its second-quarter fiscal 2023 results on Wednesday, July 26, 2023, after markets close.
Canadian Utilities Limited (CU-T) will release its second-quarter fiscal 2023 results on Thursday, July 27, 2023, before markets open.
TC Energy (TRP-T) will release its second-quarter fiscal 2023 results on Friday, July 28, 2023, before markets open.
Last week, no earnings reports from companies on ‘The List’.
