Last updated by BM on June 5, 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 slightly with a YTD price return of +5.1% (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’.
- 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
“Basically, price fluctuations have only one significant meaning for the true investor. They provide an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.”
-Benjamin Graham, Intelligent Investor C-8
Attempting to consistently time the market is an impossible feat. No individual can honestly claim to have succeeded in this task. Moreover, not only is timing the market unachievable, but it can also lead to poor investment returns.
Maintaining confidence and staying invested can be challenging. During market corrections and recessions, there are often significant upswings that set new records. Since timing the market is famously difficult, panicked investors are prone to selling when their emotions are put to the test, often at the market’s bottom. While they may find solace in holding cash, missing out on the market’s subsequent best days during periods of volatility can have a detrimental impact on long-term savings.
As dividend growth investors we prefer to stay invested with only our positions sizes changing when our good dividend growers get a little pricey.
In the chart below, we look at the growth of $10k in the S&P 500 starting January 1, 1980, and the impact of missing out on the market’s best days.
We were fortunate that we listened to Graham’s advice. Forgetting about the stock market and paying attention to the dividend returns and operating results of our quality dividend growers has allowed us to outperform many other strategies.
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Recent News
Rise of the tech giants exposes the problem of index distortions (Financial Times)
“Mega market cap stocks are eating their indices, distorting their usefulness in some cases as market gauges for investors.”
This causes problems for investors who hold ETFs based on some of the more popular indices like the S&P 500 and Nasdaq. These indices are now dominated by only a few companies which makes them very different from their original forms.
By assembling your own dividend growth portfolio, you can control the mix of quality companies and their position sizes.
Telecom stocks may be down, but that doesn’t mean investors should disconnect (Globe & Mail)
“The Canadian wireless landscape has historically seen relatively disciplined behaviour from industry participants. However, we have seen periods of elevated competition and we believe that we are heading into another of these phases.”
We often see articles like this which cause price pullbacks in the quality dividend growers we follow. Like the author, we see “rising competitive pressures may be more of a gift than a threat.” The author correctly points out that high telecom yields often act as a price floor for the stock price. Once a certain yield is reached the investing community tends to jump in and the price reverts. This is dividend yield theory in action.
To receive breaking news about companies on ‘The List’ follow us on Twitter @MagicPants_DGI.
The List (2023)
Last updated by BM on June 2, 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% | $8.53 | 26.7% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $67.67 | 12.5% | $0.56 | 19.1% | 13 |
| BCE-T | Bell Canada | 6.2% | $61.38 | 1.9% | $3.82 | 5.0% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $36.78 | 5.2% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.7% | $63.18 | 8.8% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 2.0% | $157.98 | -3.0% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 4.1% | $168.29 | 14.8% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 4.9% | $36.55 | -1.1% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $83.48 | 4.5% | $0.27 | 23.8% | 12 |
| EMA-T | Emera | 4.9% | $56.55 | 7.5% | $2.76 | 3.0% | 16 |
| ENB-T | Enbridge Inc. | 7.1% | $50.26 | -5.8% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.2% | $37.66 | 5.5% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 0.9% | $147.52 | 6.8% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis | 3.9% | $57.64 | 4.2% | $2.26 | 4.1% | 49 |
| IFC-T | Intact Financial | 2.2% | $200.85 | 2.6% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.5% | $118.49 | -1.5% | $1.74 | 10.3% | 11 |
| MGA-N | Magna | 3.6% | $51.18 | -11.0% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.7% | $71.92 | -4.7% | $1.21 | 10.0% | 28 |
| RY-T | Royal Bank of Canada | 4.3% | $124.06 | -3.1% | $5.34 | 7.7% | 12 |
| SJ-T | Stella-Jones Inc. | 1.5% | $61.34 | 23.7% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 0.9% | $81.36 | 24.5% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.9% | $78.89 | -10.0% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.3% | $110.45 | 10.3% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.6% | $108.32 | 10.9% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 6.7% | $55.23 | 3.6% | $3.69 | 3.4% | 22 |
| T-T | Telus | 5.6% | $25.73 | -2.2% | $1.43 | 7.3% | 19 |
| WCN-N | Waste Connections | 0.7% | $139.49 | 5.9% | $1.02 | 7.4% | 13 |
| Averages | 3.2% | 5.1% | 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 slightly with a YTD price return of +5.1% (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 Stantec Inc. (STN-T), up +2.95%; Enbridge Inc. (ENB-T), up +2.89%; and Algonquin Power & Utilities (AQN-N), up +2.77%.
CCL Industries (CCL-B-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.
One earnings report from companies on ‘The List’ this week
Dollarama Inc. (DOL-T) will release its first-quarter fiscal 2024 results on Wednesday, June 7, 2023, before markets open.
Last week, no earnings reports from companies on ‘The List’.
