Last updated by BM on June 10, 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’.
- Growth Stocks vs. Dividend Growth Investing, in this week’s newsletter.
- Last week, dividend growth of ‘The List’ stayed the course and has increased by +8.8% YTD (income).
- Last week, price return of ‘The List’ was up with a return of +5.2% YTD (capital).
- Last week, there were no dividend announcements from companies on ‘The List’.
- Last week, there was no earnings reports from a company on ‘The List’.
- This week, two companies on ‘The List’ are due to report earnings.
DGI Clipboard
“Where all think alike, no one thinks very much.”
-Walter Lippmann
Growth Stocks vs. Dividend Growth Investing
I was recently invited to join a prestigious investment club founded in 1979. Reviewing the club’s history and bylaws, I realized I was being asked to join the ‘Growth Stock Crowd’. I had tried this approach before and found it challenging. This prompted me to compare the differences between growth stock investing and my preferred method of dividend growth investing for our readers.
The Growth Stock Crowd
Growth stock investors aim to buy stocks at the right time, focusing on companies with rapid growth potential. The goal is to sell these stocks for significant profits and repeat this process continually. Even the most brilliant investors experience both wins and losses, averaging about 7%-9% long-term returns. Perfect market timing and stock selection are unrealistic, as no one can consistently win. Over time, investors hope to improve their skills and achieve more wins than losses.
The Dividend Growth Crowd
In contrast, dividend growth investors like me take a different approach. With years of experience, I may not consider myself extraordinarily intelligent, but I know basic math, how to research earnings reports, and how to assess valuations. More importantly, I have the discipline and patience honed from running my own business for twenty-five years.
Dividend growth investors are passionate about a steady, predictable way to build a secure financial future. Our investment time horizon is indefinite, so we remain undistracted by short-term market fluctuations. We invest in quality companies that consistently pay and grow dividends. Daily share price changes, the broader economic picture, and other details are secondary to a company’s ability to increase its dividend payments. Historically, as dividends grow, so does the stock price. This combination of growing income and capital appreciation is the secret sauce in our strategy, with annualized long-term total returns in the 10%-12% range.
Key Differences Between Growth and Dividend Growth Investing
Growth stock investors juggle multiple factors: selecting the right stocks, assessing current prices, evaluating company products, and timing the perfect sale to make a profit. This process must be repeated continually with different companies.
On the other hand, dividend growth investors focus on ensuring that their chosen companies will continue to pay and increase dividends annually. Lists of companies that have increased dividends for over ten years, even during tough times, are readily available. We follow one such list on this blog every week.
While growth stock investors sell their stocks to realize profits, dividend growth investors rarely sell because doing so would reduce their growing income. This income can also be reinvested in sensibly priced dividend growth companies to increase our returns.
Wrap Up
I plan to attend the investment club’s next meeting to learn more. Life has taught me that personal growth comes from stepping out of your comfort zone occasionally. At the very least, I will meet some interesting people passionate about investing.
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 List’ ‘s price return was up, with a +5.2% 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 TFI International (TFII-N), up +6.59%; Enghouse Systems Limited (ENGH-T), up +6.11%; and Stella-Jones Inc. (SJ-T), up +5.58%.
Franco Nevada (FNV-N) was the worst performer last week, down -5.04%.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $80.14 | 4.4% | $0.70 | 17.4% | 14 |
| BCE-T | Bell Canada | 8.5% | $47.09 | -13.1% | $3.99 | 3.1% | 15 |
| BIP-N | Brookfield Infrastructure Partners | 5.7% | $28.55 | -7.0% | $1.62 | 5.9% | 16 |
| CCL-B-T | CCL Industries Inc. | 1.6% | $72.06 | 24.6% | $1.16 | 9.4% | 22 |
| CNR-T | Canadian National Railway | 2.0% | $170.91 | 2.4% | $3.38 | 7.0% | 28 |
| CTC-A-T | Canadian Tire | 5.0% | $138.69 | 0.1% | $7.00 | 1.4% | 13 |
| CU-T | Canadian Utilities Limited | 5.8% | $31.31 | -2.5% | $1.81 | 0.9% | 52 |
| DOL-T | Dollarama Inc. | 0.3% | $127.12 | 33.8% | $0.35 | 29.5% | 13 |
| EMA-T | Emera | 6.0% | $47.58 | -6.3% | $2.87 | 3.0% | 17 |
| ENB-T | Enbridge Inc. | 7.4% | $49.21 | 1.7% | $3.66 | 3.1% | 28 |
| ENGH-T | Enghouse Systems Limited | 3.4% | $29.01 | -14.6% | $1.00 | 18.3% | 17 |
| FNV-N | Franco Nevada | 1.2% | $117.56 | 6.7% | $1.44 | 5.9% | 16 |
| FTS-T | Fortis Inc. | 4.3% | $55.07 | 0.4% | $2.36 | 3.3% | 50 |
| IFC-T | Intact Financial | 2.1% | $228.54 | 12.4% | $4.84 | 10.0% | 19 |
| L-T | Loblaw Companies Limited | 1.2% | $160.93 | 25.2% | $1.92 | 10.0% | 12 |
| MFC-T | Manulife Financial | 4.5% | $35.59 | 23.2% | $1.60 | 9.6% | 10 |
| MGA-N | Magna | 4.3% | $43.76 | -21.2% | $1.90 | 3.3% | 14 |
| MRU-T | Metro Inc. | 1.8% | $75.19 | 9.8% | $1.34 | 10.7% | 29 |
| RY-T | Royal Bank of Canada | 3.9% | $146.35 | 10.0% | $5.72 | 7.1% | 13 |
| SJ-T | Stella-Jones Inc. | 1.3% | $85.90 | 12.1% | $1.12 | 21.7% | 19 |
| STN-T | Stantec Inc. | 0.7% | $112.99 | 8.0% | $0.83 | 7.8% | 12 |
| T-T | Telus | 6.7% | $22.76 | -4.0% | $1.53 | 7.1% | 20 |
| TD-T | TD Bank | 5.3% | $76.45 | -9.7% | $4.08 | 6.3% | 13 |
| TFII-N | TFI International | 1.1% | $141.00 | 7.5% | $1.60 | 10.3% | 13 |
| TIH-T | Toromont Industries | 1.6% | $120.22 | 6.6% | $1.92 | 11.6% | 34 |
| TRI-N | Thomson Reuters | 1.3% | $170.75 | 19.1% | $2.16 | 10.2% | 30 |
| TRP-T | TC Energy Corp. | 7.1% | $54.18 | 3.6% | $3.84 | 3.2% | 23 |
| WCN-N | Waste Connections | 0.7% | $165.54 | 11.7% | $1.14 | 8.6% | 14 |
| Averages | 3.4% | 5.2% | 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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