Last updated by BM on March 20, 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 now of +2.4% (capital). Dividend growth remained the same at +7.3% YTD, highlighting growth in income over the past year.
- Last week, there were no dividend increases from companies on ‘The List’.
- Last week, there were three 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 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 a $100. You take $1 out of the left pocket and put in the right pocket. You now have a $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 Canadian 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 are the principal factor driving stock prices.”
– Benjamin Graham
Q4 2022 earnings season is over for companies on ‘The List’.
The earnings results are now available for viewing at the bottom of the page under the ‘The List’ menu item. Here we track analysts estimated earnings and compare them to actual results. One-third of the companies on ‘The List’ missed expectations last quarter, which is the highest since we started the blog in early 2021.
The probability is rising of an earnings recession in 2023 which will put downward pressure on stock markets both here and in the United States. Additional events, like the banking system issues last week in Europe and the US, could make markets unpredictable in the short term. With lots of cash available in our subscriber model portfolio, we are looking to take advantage of short-term mispricing of the quality companies we follow.
If you have not yet joined as a subscriber of the blog to receive DGI Alerts on the activity in our model portfolio, it’s not too late. Click Here.
Recent News
Who’s to blame for this banking and markets mess? The addiction to debt that started with the baby boomers (Globe & Mail)
“The aim of the wise is not to secure pleasure but to avoid pain”
– Aristotle
“Silicon Valley Bank (SVB) is a bank that wanted to grow fast and took excessive levels of risk by buying billions of dollars of treasury and other bonds when rates were almost zero, but lost significant value when rates started to move higher over the past 12 months. Rather than minimize risk, the bank tried to maximize profits and this backfired exactly as Aristotle had warned.”
The author is not convinced that things are going to end well.
Canadian Banks have always had the reputation of being better regulated and governed than their US counterparts. We will see how deep this problem goes here in Canada.
Couche-Tard to buy more than 2,000 European service stations from French energy giant TotalEnergies (Globe & Mail)
https://www.theglobeandmail.com/business/article-couche-tard-totalenergies-europe-gas-stations/
“This transaction has all the hallmarks of a Couche-Tard deal,” RBC Capital Markets analyst Irene Nattel said in a research note, adding that it is strategically compelling, geographically complementary and attractive in terms of valuation. Couche-Tard is paying a multiple of eight times operating profits, based on the stores’ 2022 results.
This deal looks like it is in Alimentation Couche-Tard’s wheelhouse. Adding significantly more stores in Europe in four new countries gives Couche-Tard a significant market share with 4900 stores now in Europe.
The List (2023)
Last updated by BM on March 17, 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. Provided 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% | $7.96 | 18.3% | $0.51 | -29.0% | 12 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.9% | $61.59 | 2.4% | $0.56 | 19.1% | 13 |
| BCE-T | Bell Canada | 6.4% | $60.02 | -0.3% | $3.82 | 5.0% | 14 |
| BIP-N | Brookfield Infrastructure Partners | 4.4% | $32.46 | 5.2% | $1.44 | 6.3% | 15 |
| CCL-B-T | CCL Industries | 1.7% | $63.63 | 9.6% | $1.06 | 10.4% | 21 |
| CNR-T | Canadian National Railway | 2.0% | $158.30 | -2.8% | $3.16 | 7.8% | 27 |
| CTC-A-T | Canadian Tire | 4.2% | $164.16 | 12.0% | $6.90 | 17.9% | 12 |
| CU-T | Canadian Utilities Limited | 4.9% | $36.80 | -0.4% | $1.79 | 1.0% | 51 |
| DOL-T | Dollarama Inc. | 0.3% | $77.93 | -2.4% | $0.22 | 2.3% | 12 |
| EMA-T | Emera | 4.9% | $55.92 | 6.3% | $2.76 | 3.0% | 16 |
| ENB-T | Enbridge Inc. | 7.1% | $50.19 | -5.9% | $3.55 | 3.2% | 27 |
| ENGH-T | Enghouse Systems Limited | 2.3% | $36.68 | 2.7% | $0.85 | 18.2% | 16 |
| FNV-N | Franco Nevada | 0.9% | $143.50 | 3.9% | $1.36 | 6.3% | 15 |
| FTS-T | Fortis | 3.9% | $57.91 | 4.6% | $2.26 | 4.1% | 49 |
| IFC-T | Intact Financial | 2.3% | $189.40 | -3.3% | $4.40 | 10.0% | 18 |
| L-T | Loblaws | 1.4% | $116.06 | -3.5% | $1.62 | 5.2% | 11 |
| MGA-N | Magna | 3.7% | $50.18 | -12.8% | $1.84 | 2.2% | 13 |
| MRU-T | Metro | 1.7% | $69.95 | -7.3% | $1.21 | 10.0% | 28 |
| RY-T | Royal Bank of Canada | 4.1% | $127.26 | -0.6% | $5.28 | 6.5% | 12 |
| SJ-T | Stella-Jones Inc. | 1.8% | $51.27 | 3.4% | $0.92 | 15.0% | 18 |
| STN-T | Stantec Inc. | 1.0% | $78.35 | 19.9% | $0.77 | 8.5% | 11 |
| TD-T | TD Bank | 4.9% | $77.90 | -11.1% | $3.84 | 7.9% | 12 |
| TFII-N | TFI International | 1.2% | $116.13 | 16.0% | $1.40 | 29.6% | 12 |
| TIH-T | Toromont Industries | 1.6% | $107.77 | 10.3% | $1.68 | 10.5% | 33 |
| TRP-T | TC Energy Corp. | 7.2% | $51.03 | -4.3% | $3.69 | 3.4% | 22 |
| T-T | Telus | 5.2% | $26.87 | 2.1% | $1.40 | 5.4% | 19 |
| WCN-N | Waste Connections | 0.8% | $134.36 | 2.0% | $1.02 | 7.9% | 13 |
| Averages | 3.2% | 2.4% | 7.3% | 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 currency of the dividend and share price 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 would need to 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 now of +2.4% (capital), while its dividend growth remained the same at +7.3% YTD, highlighting growth in income over the past year.
The best performers last week on ‘The List’ were Enghouse Systems Limited (ENGH-T), up +11.93%; Franco Nevada (FNV-N), up +10.01%; and Fortis (FTS-T), up +8.71%.
Stella-Jones Inc. (SJ-T) was the worst performer last week, down -8.71%.
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, there were 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. Last week we saw the end of the Q4 2022 earnings season for companies on ‘The List’.
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 companies on ‘The List’ are due to report earnings this week.
Last week, three companies on ‘The List’, reported their earnings.
Franco Nevada (FNV-N) released its fourth-quarter 2022 results on Wednesday, March 15, 2023, after markets closed.
“Franco-Nevada is reporting strong fourth quarter and annual results for 2022. Our Diversified assets outperformed due to elevated energy prices in the year, stated Paul Brink, CEO. We are pleased that First Quantum and the Government of Panama have agreed on terms for a refreshed concession contract and look forward to Cobre Panama achieving its expanded throughput capacity later this year. Precious metal GEOs and Diversified production in 2023 are expected to be consistent with 2022. We are however guiding to lower total GEOs for the year as current energy prices are below 2022 levels. The organic growth in our 5 year outlook comes from both mine expansions and new mines. Franco-Nevada is debt-free, is growing its cash balances and has an active pipeline of growth opportunities.”
– Chief Executive Officer, Paul Brink
Highlights:
- Earned record GEOs, revenue, Adjusted Net Income, Adjusted EBITDA and operating cash flow in 2022
- No debt and $2.2 billion in available capital as at December 31, 2022
- Generated close to $1 billion in operating cash flow in 2022
- Quarterly dividend increased 6.25% to $0.34/share effective Q1 2023
Outlook:
For 2023, we expect GEO sales from our Precious Metal assets to range between 490,000 and 530,000 GEOs, consistent with 2022, but anticipate total GEOs sales to be between 640,000 and 700,000 GEOs, a reduction from 2022 primarily based on lower assumed oil and gas prices. With respect to Cobre Panama, based on First Quantum’s most recent 2023 guidance of between 350,000 and 380,000 tonnes of copper, our attributable GEO production would be between 131,000 and 142,000 GEOs. Following the restriction of concentrate shipments in February, we have made a larger allowance for the impact of shipment timing for the year. We have estimated GEOs delivered and sold from Cobre Panama to be between 115,000 and 135,000 GEOs. We expect higher production from Antapaccay, MWS and Musselwhite, and initial contributions from new mines including Magino, Séguéla and Salares Norte, partly offset by anticipated decreases in GEO sales from Antamina, Hemlo and Candelaria. For our Diversified assets, we are guiding to lower GEOs, reflecting lower assumed oil and gas prices, partly offset by higher GEO contributions from our Iron Ore and Other Mining assets.
We estimate depletion expense to be between $275 and $305 million. Our remaining capital commitment to the Royalty Acquisition Venture with Continental is $79.4 million. In addition, we expect to commence funding of our $250 million stream on the Tocantinzinho project at the end of Q1 2023.
Source: (FNV-N) Q4-2022 Earnings Release
Alimentation Couche-Tard Inc. (ATD-T) released its third-quarter 2023 results on Wednesday, March 15, 2023, after markets closed.
“As our markets across the globe, especially those in Europe, continue to face persistently high inflationary conditions, we have remained focused and committed to delivering a strong and consistent value to our customers and maintaining cost discipline in our operations. In convenience across the network, we had notable sales in our food program as well as with our private brand items, both offering high quality at lower price points. Throughout the quarter, we continued to be pleased with the resilience of our customers, and through our localized pricing efforts and on-going fuel promotions, we are providing them with further benefits. While our mobility results are still impacted by stay-at-home work patterns and higher prices, we continued to generate healthy fuel margins offsetting the decline in volumes,”.
– Brian Hannasch, President and Chief Executive Officer
Highlights:
- Net earnings were $737.4 million, or $0.73 per diluted share for the third quarter of fiscal 2023 compared with $746.4 million, or $0.70 per diluted share for the third quarter of fiscal 2022. Adjusted net earnings were approximately $741.0 million compared with $746.0 million for the third quarter of fiscal 2022. Adjusted diluted net earnings per share were $0.74, representing an increase of 5.7% from $0.70 for the corresponding quarter of last year. The translation of foreign currencies into US dollar had a net unfavorable impact of approximately $28.0 million on net earnings and adjusted net earnings.
- Total merchandise and service revenues of $5.0 billion, an increase of 3.5%. Same-store merchandise revenues increased by 4.8% in the United States, by 3.5% in Europe and other regions, and by 2.3% in Canada.
- Merchandise and service gross margin decreased by 0.4% in the United States to 33.2%, by 0.5% in Europe and other regions to 37.3%, and increased by 0.7% in Canada to 32.3%.
- Same-store road transportation fuel volumes decreased by 2.3% in the United States, by 1.2% in Europe and other regions, and increased by 0.5% in Canada.
- Road transportation fuel gross margin of 46.85¢ per gallon in the United States, an increase of 7.22¢ per gallon, CA 12.52¢ per liter in Canada, an increase of CA 0.74¢ per liter, and US 8.01¢ per liter in Europe and other regions, a decrease of US 2.82¢ per liter, driven by the impact of currency translation as well as by the volatility of the European fuel market. Fuel margins remained healthy throughout the network due to favorable market conditions and the continued work on the optimization of the supply chain.
- Subsequent to the end of the quarter, the Corporation closed the acquisition of 65 express tunnel car wash sites conveniently located in our core markets in the United States. The Corporation also reached an agreement to acquire 45 modern high-quality company-owned and operated convenience retail and fuel sites, in the United States.
- During the third quarter and first three quarters of fiscal 2023, the Corporation repurchased shares for amounts of $1.2 billion and $1.9 billion, respectively. Subsequent to the end of the quarter, shares were repurchased for an amount of $373.0 million.
Outlook:
LAVAL, QC, March 16, 2023 /CNW/ – Alimentation Couche-Tard Inc. (“Couche-Tard” or the “Corporation”) (TSX: ATD) announces today that it has agreed to a firm and irrevocable offer to acquire certain assets to be carved out from TotalEnergies and has entered into exclusive negotiations on this basis. The proposed acquisition would comprise 100% of TotalEnergies retail assets in Germany and the Netherlands as well as a 60% controlling interest in the Belgium and Luxembourg entities.
“We are excited to welcome the TotalEnergies employees and stores into the Couche-Tard family. As we learned more about their business, it became clear that we share the same customer-centric approach, values, and focus on an engaged workforce. We have deep respect for its operations, management, and people as well as great confidence that by joining forces together, we will build a winning global retail operation in the region. We see this as a strong geographical fit with our existing European network, which will allow us to grow together in some of Europe’s strongest economies and move forward in our vision to become the world’s preferred destination for convenience and mobility,” said Brian Hannasch, President and Chief Executive Officer of Alimentation Couche-Tard.
Source: (ATD-T) Q3-2023 Earnings Release
Algonquin Power & Utilities (AQN-N) released its fourth-quarter 2022 results on Friday, March 17, 2023, before markets opened.
“Despite various challenges throughout the year, we ended 2022 on stable footing, with our Adjusted Net Earnings per common share having met the Company’s revised guidance estimate,” said Arun Banskota, President and Chief Executive Officer of AQN. “We remain confident that the decisive actions previously announced by the Company to realign capital allocation will strengthen our financial and strategic foundation and position AQN for sustainable, long-term growth. AQN continues to be supported by a high-quality asset base and has the right skills and expertise to capitalize on the energy transition and deliver value for shareholders.”
– Arun Banskota, President and Chief Executive Officer
Highlights:
- Fourth quarter Adjusted EBITDA of $358.3 million, an increase of 20%;
- Fourth quarter Adjusted Net Earnings of $151.0 million, an increase of 10%;
- Fourth quarter Adjusted Net Earnings per common share of $0.22, an increase of 5%;
- Annual Adjusted EBITDA of $1,256.8 million, an increase of 17%;
- Annual Adjusted Net Earnings of $474.9 million, an increase of 6%;
- Annual Adjusted Net Earnings per common share of $0.69, a decrease of 3%, in each case on a year-over-year basis.
Outlook:
Reiterate Estimated 2023 Adjusted Net Earnings Per Common Share – The Company reiterates its previously-disclosed estimate of Adjusted Net Earnings per common share for the 2023 fiscal year within a range of $0.55-$0.61 (see “Non-GAAP Measures”).
Source: (AQN-N) Q4-2022 Earnings Call Presentation
