Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

The TSX has gone virtually nowhere over the past 30 days, while the S&P 500 has gained about 2% even though ten of the index's eleven sectors declined. Beneath the surface, weakness is creating opportunities for selective dividend growth investors. Rising bond yields and slowing growth have pushed several quality businesses toward historically attractive valuations.

The hard part is knowing when a company is sensibly priced versus a value trap. Our Timely Ten lists help zero in on opportunities, and then our process takes over.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Timely Ten: We Found Opportunities. We Also Found Reasons to Wait.

Timely Ten Update

The markets may be telling two different stories, but beneath the surface, the message for dividend growth investors is remarkably similar: opportunities are emerging, but selectivity matters more than ever.

Over the past 30 days, the TSX has barely moved, while the S&P 500 has gained about 2%. Yet both markets are showing considerable weakness beneath their headline returns. Rising bond yields, inflation concerns and slowing growth have pressured many traditional dividend-paying businesses, pushing some valuations toward historically attractive levels.

This month’s Canadian and American Timely Ten lists reflect that divergence. Couche-Tard and Zoetis retain their respective #1 rankings, although both face questions about future earnings growth. Meanwhile, Waste Connections, Stella-Jones, and NextEra Energy have presented compelling opportunities for us to put additional capital to work. Others, including Comcast, Intact Financial and Home Depot, warrant closer attention as their share prices retreat.

How We Rank the Timely Ten

Each month, we rank every company on our Canadian and U.S. watchlists by the discount between its current market price and its estimated fair value, using Dividend Yield Theory.

The calculation is straightforward:

Fair Value = Current Annual Dividend ÷ Historical High Dividend Yield

The larger the discount to estimated fair value, the higher the company ranks.

The ten companies above the thick black line represent the most undervalued stocks on our watchlists, as ranked by Dividend Yield Theory. While not all may be trading below their estimated fair values, they currently offer the most attractive valuations relative to their historical dividend yields.

These are our Timely Ten.

No valuation method is perfect, but Dividend Yield Theory has proven an effective way to identify attractive entry points into high-quality dividend growth companies. Combined with our quality-first investment process, it helps us deploy capital more disciplinedly and removes much of the emotion from our decisions.

The Timely Ten is not an automatic buy list. It is a starting point for further research.

Canadian Timely Ten

The TSX has gone virtually nowhere over the past 30 days, but important shifts are taking place beneath the surface.

Rising bond yields have weighed on traditional dividend-paying sectors, particularly telecoms and utilities, while technology has emerged as an unusual source of strength. Even higher commodity prices haven't consistently translated into stronger energy and materials stocks.

For dividend growth investors, this is where discipline matters most.

We are not trying to predict the next move in interest rates or the broader market. We focus on identifying quality businesses with sustainable, growing dividends that trade at sensible valuations.

When share prices fall faster than business fundamentals deteriorate, opportunities begin to emerge.

The upcoming third-quarter earnings season should help separate genuine deterioration in business fundamentals from temporary valuation pressures. That distinction will matter most for several companies on this month’s Timely Ten.

#1 Alimentation Couche-Tard (ATD)

Couche-Tard holds firmly to the top spot on our Timely Ten, and it became even more attractively priced after another 3.5% decline this month.

The company remains a quality dividend growth business, but investors are increasingly questioning its near-term growth prospects.

Management needs to show stronger organic growth and execute its expansion strategy successfully. If it delivers, today’s depressed valuation could prove to be an attractive entry point for long-term investors.

Until then, further valuation compression remains a risk. A great business is not automatically a great investment at any price.

#2 Waste Connections (WCN)

The recent share-price weakness caught our attention, prompting a deeper review of the company’s fundamentals, dividend growth prospects and valuation.

We liked what we found and decided to add to our existing position.

Subscribers can read the research behind that decision in our September 29 newsletter, Inside Our Process: How a Stock Earns a Place in Our Portfolio.

#3 Stella-Jones (SJ)

Stella-Jones climbs another two positions this month, moving from #5 to #3.

Like Waste Connections, Stella-Jones recently caught our attention because its share price offered an opportunity to revisit its valuation.

Our research reinforced our confidence in the company’s long-term dividend growth prospects, so we added to our position.

Two companies moving up our Timely Ten. Two opportunities to put additional capital to work.

#5 Canadian Tire (CTC.A)

Canadian Tire slips three positions, from #2 to #5, as its share price strengthens.

The stock is now up approximately 10% year-to-date and continues to offer an above-average starting dividend yield.

However, dividend growth remains the sticking point.

With dividend growth averaging just 1.4% over the past few years, Canadian Tire has yet to demonstrate the income growth characteristics we prefer.

A generous starting yield is attractive, but without meaningful dividend growth, the long-term compounding potential is limited.

For now, we remain on the sidelines.

Worth Watching: Enbridge, Magna and Intact Financial

The bottom three positions on our Timely Ten, Enbridge, Magna and Intact Financial, also deserve further research.

Of the three, Intact Financial (IFC) is particularly interesting.

Its share price has fallen another 6% since our last Timely Ten update, raising an important question: Is the market simply adjusting the valuation of a quality business, or are investors anticipating a more persistent deterioration in earnings?

The next important checkpoint is November 3, 2026, when Intact is scheduled to report third-quarter earnings.

That report should provide greater clarity on underwriting performance, profitability and the company’s earnings outlook.

If fundamentals remain sound, the recent decline could present an opportunity. If earnings expectations continue to weaken, patience may be warranted.

Note: goeasy Ltd.’s dividend has been suspended so we have moved it to the bottom of the list.

American Timely Ten

The S&P 500 has gained approximately 2.0% over the past 30 days, closing October 9 at 7,811.54, just shy of its recent record high. But like the TSX, the headline index masks considerable weakness beneath the surface.

Technology continues to lead the market, fueled by enthusiasm for artificial intelligence and strong earnings growth. Meanwhile, rising bond yields, higher energy prices and renewed inflation concerns have pressured several traditional dividend-paying sectors, particularly financials, real estate and utilities.

September was especially challenging. Ten of the eleven S&P 500 sectors declined, with technology the lone bright spot. The first full week of October brought some relief, as utilities, consumer staples and energy rebounded while technology took a breather.

For dividend growth investors, the divergence is worth watching. While technology continues to drive index returns, weakness elsewhere is bringing some quality dividend growers' valuations closer to historically attractive levels. The opportunity is to distinguish between companies facing temporary headwinds and those experiencing a more fundamental deterioration in their businesses.

#1 Zoetis (ZTS)

Zoetis remains at the top of our Timely Ten, but its continued share-price weakness is becoming increasingly difficult to ignore.

The company remains a leader in animal health, with valuable brands, attractive margins, and a strong dividend-growth history. However, slowing demand in its U.S. companion animal business, increasing competition, and lower earnings expectations suggest a recovery may take longer than previously anticipated.

The lower share price has made Zoetis look increasingly attractive on historical valuation measures. But a falling price alone does not make a stock a bargain.

The company’s focus remains on stabilizing sales, defending market share and restoring earnings growth. Until we see evidence of improvement, patience is warranted. That's why our process puts quality first and valuation second.

#2 Comcast (CMCSA)

Comcast continues to trade at a historically depressed valuation, but the market has legitimate reasons to be skeptical.

Intensifying competition from fibre-optic and fixed wireless providers is eroding broadband subscribers, pressuring earnings and raising questions about the company’s long-term growth prospects.

Comcast continues to generate substantial free cash flow, which supports its dividend. However, maintaining that dividend is one thing. Delivering the sustainable dividend growth we seek is another.

At today’s valuation, Comcast could represent a compelling opportunity, but the risk of a value trap remains. We want to see broadband subscriber losses moderate, operating margins stabilize and earnings growth resume before becoming more aggressive.

#7 NextEra Energy (NEE)

NextEra Energy climbed two positions in our Timely Ten this month, moving from #9 to #7.

Following additional research, we decided to increase our position in this quality dividend grower.

Rising bond yields have pressured utility valuations, and NextEra is no exception. Higher interest rates can also increase financing costs for capital-intensive businesses, making the current environment challenging for the sector.

But our investment thesis focuses on the company’s long-term earnings and dividend growth potential, not short-term interest-rate movements.

We particularly like NextEra’s dividend return profile. Its reasonable starting yield and strong historical dividend growth offer the potential for an increasingly attractive income return on our original investment over time.

We are comfortable being patient while the business continues to grow its earnings and dividends. As we like to say, dividends lead, prices follow.

#8 Home Depot (HD)

Home Depot is becoming increasingly interesting as its share price continues to retreat.

At about 19 times forward earnings and a dividend yield near 3.3%, the stock trades at a more attractive valuation relative to its historical norms. Its dividend yield is now roughly one percentage point above its 15-year average.

Unlike Zoetis and Comcast, where competitive pressures raise more fundamental questions about future growth, Home Depot’s challenges appear largely cyclical.

Elevated mortgage rates, sluggish housing turnover and cautious consumer spending have weighed on demand for home improvement projects. These conditions have slowed earnings growth and compressed the company’s valuation.

Yet Home Depot remains a dominant retailer with strong cash generation, a durable competitive position and a long history of rewarding shareholders through growing dividends.

The key risk is timing. Mortgage rates could remain elevated longer than expected, delaying a recovery in housing activity and renovation spending.

For patient dividend-growth investors, however, this may be an opportunity to buy a quality business at a sensible valuation while waiting for the housing cycle to improve.

The Takeaway

A falling share price can create an opportunity, but it can also be a warning. That distinction runs through both Timely Ten lists this month. Some companies face cyclical pressures, while others face more fundamental questions about competition, profitability, and future growth. We have acted where our research supports the investment case, adding to Waste Connections, Stella-Jones and NextEra Energy. Elsewhere, we are content to remain patient. An attractive valuation matters only if the underlying business can keep growing earnings and dividends.

The upcoming earnings season should help clarify which companies are experiencing temporary setbacks and which may require a reassessment of their long-term prospects. In the meantime, our approach remains unchanged: quality first, valuation second, and monitor continuously. We are not trying to predict market bottoms or chase the highest yields. We build portfolios of quality businesses that can deliver growing dividend income and capital appreciation over time. When the fundamentals remain intact, and prices become attractive, we are prepared to act.

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DGI Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

(Inception May 1, 2022, to July 31, 2026. Returns are actual results of our model portfolio in CAD with dividends reinvested.)

This Week’s Highlights

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +2.7% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: None

• Earnings Reports This Week: None

Top Performers Last Week:

• Thomson Reuters (TRI-Q), up +5.73%.

• Dollarama Inc. (DOL-T), up +4.34%.

• Canadian Natural Resources (CNQ-T), up +2.46%.

Worst Performer Last Week:

• Toromont Industries (TIH-T), down -9.42%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend-growth stocks, and our new American watchlist (The List-USA) includes 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• Dividend growth streak: 10 years or more.

• Market cap: At least $1 billion.

• 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, we add or remove companies from The List annually on January 1. Prices and dividends are updated weekly.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our dividend growth investing strategy. This evidence-based, unbiased approach has empowered DIY investors to outperform both actively managed dividend funds and passively managed indexes and dividend ETFs over longer-term horizons.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Paid members of Magic Pants Dividend Growth Investing get exclusive ideas and guidance to help them navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

We have been talking a lot about dividend return recently, but sometimes the best way to understand its power is to see it in action. This week, we use a recent purchase in our U.S. model portfolio, NextEra Energy, to show what can happen when a reasonable starting yield combines with consistent dividend growth and the compounding power of reinvestment.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Dividend Return: Building Real Wealth

We have been talking a lot about dividend return recently, so I wanted to share a real-life example from our U.S. model portfolio.

NextEra Energy (NEE) is a recent purchase and provides a good example of what we are looking for: a quality business capable of delivering both a growing dividend return and capital appreciation over time.

To estimate the potential dividend return going forward, we start with NextEra’s current 3.2% dividend yield and assume its dividend continues to grow at approximately its recent five-year rate of 10.1% annually.

The results show why dividend growth can become so powerful with enough time.

NextEra Energy: Potential Dividend Return

Based on these assumptions, a $10,000 investment today would initially generate about $320 in annual dividend income.

If the dividend continues growing at 10.1% annually, that income could rise to approximately $761 per year by 2035, even without reinvesting a single dividend.

Reinvest those dividends along the way, however, and the picture becomes considerably more interesting.

Our projected annual dividend income rises to about $1,164 by 2035, an 11.6% annual income return on our original $10,000 investment.

The green portion of each bar shows the additional income generated through dividend reinvestment (DRIP). Early on, the difference looks relatively small. But as the years pass, compounding does more and more of the work.

That is the power of combining dividend growth with dividend reinvestment.

And remember, this is only the dividend side of the equation.

Dividends Lead. Prices Follow.

Over the previous ten years, NextEra’s dividend increased approximately 187%. Over that same period, its share price increased approximately 166%.

The two did not move together every year. Stock prices rarely behave that neatly. But over longer periods, the relationship becomes much easier to see.

A growing business can support a growing dividend, and over time, a growing dividend can help lift the share price.

That is why we don’t think of dividend return and capital return as competing outcomes.

Takeaway

A 3.2% yield may not look like much today. Give it ten years of dividend growth and reinvestment, and it can become an 11.6% annual income return on your original investment.

That is why we focus on quality, dividend growth, and time.

The starting yield gets you in the game. Dividend growth and compounding do the heavy lifting.

And if the business keeps growing alongside the dividend, capital appreciation can follow.

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DGI Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

(Inception May 1, 2022, to July 31, 2026. Returns are actual results of our model portfolio in CAD with dividends reinvested.)

This Week’s Highlights

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +3.2% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: None

• Earnings Reports This Week: None

Top Performers Last Week:

• Brookfield Infrastructure Partners (BIP-N), up +5.06%.

• Toromont Industries (TIH-T), up +4.86%.

• Canadian Natural Resources (CNQ-T), up +2.87%.

Worst Performer Last Week:

• Franco Nevada (FNV-N), down -7.2%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

The model portfolios I share are my own, funded with my own capital. Every purchase, addition, trim, and sale is timestamped and accompanied by a DGI Alert explaining what we did and why. Subscribers can follow each decision as it happens and watch how it plays out over time.

Each quarter, we review the complete trade history alongside our growing dividend income, including the wins, the losses, and the decisions I would make differently today.

That transparency earns trust. We don’t just show you the results. We show you the decisions behind them.

This week, we go one step further. We take you inside our research process, step by step, to show you how a stock earns its place in our portfolio.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Inside Our Process: How a Stock Earns a Place in Our Portfolio

Six purchases in one week is unusual for our model portfolios.

We bought one new dividend growth stock and added to five existing positions. Each purchase had to earn its place.

Building a dividend growth portfolio takes upfront work. When we buy a quality business at a sensible price, its dividend starts adding to our income while we give the business time to grow. You can see the income and capital returns from one of our model portfolios in the latest Portfolio Letter. As we like to say: dividends lead, prices follow.

So what made these stocks worth buying now?

In this article, I’ll walk through one of last week’s purchases to give you an inside look at how we research a stock when it's on our radar. It also appeared in our Timely Ten list just a few weeks ago. I’ll show you what put it there, how we judged its current quality and valuation, and why we decided it was time to act.

A Quality Business Under Pressure

Waste Connections, Inc. (WCN) is an integrated solid waste services company providing non-hazardous waste collection, transfer and disposal, recycling and renewable fuels recovery, oilfield waste services, and intermodal services across the U.S. and Canada.

The company serves approximately nine million residential, commercial and industrial customers.

Operationally, its latest quarter was strong.

Q2 revenue increased 6.4%, adjusted EBITDA increased 6.8%, and adjusted EPS increased more than 16% year over year. The company also reported underlying margin expansion, strong free cash flow, substantial share repurchases and an increase to its full-year outlook.

So if Waste Connections appears to be firing on most cylinders, why has the share price recently come under pressure?

Part of the answer appears to be valuation.

Waste Connections has historically commanded a premium valuation. Even after the recent pullback, investors still have to decide whether that premium is justified by the company’s quality and expected growth.

That is where our analysis begins.

Quality Indicators

We look at several indicators when assessing the quality of the dividend growth companies we follow.

Very few businesses satisfy every criterion. But generally, the more quality indicators a company checks off, the more interested we become.

For Waste Connections, we are particularly interested in the durability of its business, the consistency of earnings and cash flow growth, its dividend growth record, its payout ratio, and the balance between growth and shareholder returns.

Valuation

Quality alone is not enough.

Regardless of how much we like a business, we exercise caution when initiating or adding to a position unless we believe the shares are sensibly priced.

For valuation work, we find YCharts and FAST Graphs particularly useful because they allow us to compare today’s valuation with the way a company has historically traded.

10YR Yield Chart

Dividend Yield Theory offers a simple way to think about the valuation of established dividend growth companies.

The basic idea is that a quality company’s dividend yield may gravitate around a historical range over long periods, provided its business model, growth profile and dividend policy have not materially changed.

When the current yield rises meaningfully above its historical average, it can be a signal that the shares have become less expensive relative to their own history.

It isn’t a guarantee that the stock price will revert to its historical valuation, but it gives us another useful reference point.

10YR DG vs PG Chart

This is one of our favourite relationships to study.

Over long periods, we like to see dividend growth and share-price growth moving in roughly the same direction. When they do, it provides evidence that a growing underlying business supports the rising dividend.

For dividend growth investors, that’s an important relationship:

Source: YCHARTS

Historical Fundamentals

Over the long run, operating results drive stock prices.

Prices can mislead in the short term. Fundamentals tell us how the business is actually performing.

Studying a company’s historical fundamentals also tells us a great deal about how investors have traditionally valued the business.

Many of the companies we follow trade within what we call a valuation corridor. Their valuations fluctuate, sometimes significantly, but tend to remain within a recognizable historical range.

We examine measures including:

Price to Adjusted Operating Earnings • Price to Operating Cash Flow • Free Cash Flow to Equity • EBITDA • Price to Sales

Buying toward the lower end of these historical ranges, rather than chasing shares near the upper end, can help us establish more attractive entry points.

We use FAST Graphs to visualize these relationships, typically over a 10-to-12-year period. This gives us a view across different market and economic environments rather than relying on a single year’s valuation.

How to Read Our FAST Graphs

• Black line: Price

• White line: Dividend

• Orange line: Graham average of usually 15 P/E (price/earnings) for most stocks

• Yellow Line: Dividend Payout Ratio

• Blue line: Normal P/E

• Dashed or dotted lines: Estimates only

• Green area: Earnings

• Green dots: Purchases

Source: FASTgraphs

Forecasting

Historical valuation tells us where a stock has been.

Forecasting asks the more important question:

What rate of return can we reasonably expect from an investment made today?

We separate that potential return into two components: dividend return and capital return.

Dividend Return

Our growth yield measures the annual dividend relative to our original purchase price. It is similar to what is commonly called yield on cost.

We prefer the term growth yield because it emphasizes the part of the equation that matters most to our strategy: the dividend has grown.

Waste Connections is not a high-yield stock today. That’s important. An investor buying WCN shouldn’t expect substantial immediate income.

Instead, the attraction is the potential combination of a modest starting yield and strong dividend growth.

With the right combination of starting yield, dividend growth and reinvestment through a DRIP, we generally aim for our growth yield to eventually reach the 7% to 10% range.

Capital Return

The second part of the equation is potential capital appreciation.

Here, we’re asking what could happen if Waste Connections delivers something close to analysts’ current operating estimates and the market eventually values those earnings within a range consistent with the company’s historical valuation.

This is not a prediction.

It is a scenario analysis that helps us determine whether today’s price offers an attractive enough potential return for the risk we’re taking.

Source: FASTgraphs

Bringing It All Together

Waste Connections has been one of the stronger-performing dividend growth stocks on our Canadian watchlist over the past decade.

Its approximately 17.4% annualized total return over that period has rivalled many traditional growth stocks while operating in a comparatively defensive industry.

Third-party research from Value Line also rates WCN highly on its quality measures. But what interests us most is what we can see in the underlying numbers.

The dividend growth record has been remarkably consistent, including double-digit increases. Free cash flow growth has been strong, while the payout ratio remains below 25% of earnings.

That combination gives the company considerable room to continue growing its dividend, provided the underlying business continues performing as expected.

What We Like

Waste Connections isn’t a stock we buy primarily for income today.

We buy it for the potential income and capital growth tomorrow.

For younger investors with longer time horizons, WCN offers the characteristics we look for in a potential long-term compounder: a defensive underlying business, a relatively low payout ratio and a history of strong dividend growth.

For retirees, its defensive business characteristics can also be attractive as part of a diversified dividend growth portfolio, although its low starting yield means it may play a different role than a higher-income holding.

The latest quarter reinforces the fundamental case. Despite recent market volatility, the underlying business continued to grow revenue, adjusted EBITDA and adjusted earnings while management raised its full-year outlook.

What We’re Watching

The biggest question is valuation.

Waste Connections has historically commanded a premium, and even after the recent decline, nobody should confuse WCN with a traditionally cheap stock.

Its starting dividend yield is also below what we typically find in many of our dividend growth purchases. That means a larger portion of our expected return depends initially on earnings growth, dividend growth and eventual capital appreciation.

Our forecasting work suggests attractive potential capital returns if Waste Connections delivers results close to current analyst estimates and trades within its historical valuation range.

Those are assumptions, not guarantees.

That’s why price matters.

Takeaway

Chuck Carnevale often reminds investors that ‘it’s a market of stocks, not a stock market.’ Even when markets are expensive or unsettled, individual companies can become attractive. Waste Connections recently gave us one of those opportunities.

Mixing lower-yield, higher-growth dividend stocks such as Waste Connections into a portfolio can complement our higher-yielding holdings.

The immediate income contribution may be smaller, but faster dividend growth and greater potential capital appreciation can provide another source of long-term compounding.

And that brings us back to the question we started with:

A quality company at a sensible price?

We think so.

We now own a 4% position in Waste Connections in our Canadian model portfolio.

And if further price weakness improves the valuation without changing the underlying fundamentals, we’ll be prepared to consider adding to the position.

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DGI Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

(Inception May 1, 2022, to July 31, 2026. Returns are actual results of our model portfolio in CAD with dividends reinvested.)

This Week’s Highlights

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +3.6% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: None

• Earnings Reports This Week: None

Top Performers Last Week:

• Toromont Industries (TIH-T), up +10.28%.

• Dollarama Inc. (DOL-T), up +5.39%.

• Thomson Reuters (TRI-Q), up +4.37%.

Worst Performer Last Week:

• Brookfield Infrastructure Partners (BIP-N), down -3.63%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

I wanted to let you know that I added to a position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (USA).

A three-decade record of consecutive dividend increases, double-digit dividend growth and a starting yield above 3% made this quality company compelling when its share price entered our buying range. Combined with management’s 8%+ annual adjusted EPS growth outlook through 2032 and long-term exposure to rising U.S. electricity demand, we viewed the valuation as an attractive opportunity to add a high-quality dividend compounder.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, so they can follow our process as it unfolds rather than reading about it after the fact.

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I wanted to let you know that I initiated a new position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (USA).

The company’s latest quarter strengthened our investment case. Demand for its AI chips surged, its infrastructure software business continued to grow, and stronger cash generation left the dividend well covered. Yet pressure on the share price amid shifting AI narratives gave us an opportunity to buy a high-quality dividend grower at a more attractive valuation. We saw a growing business, a secure dividend, and a price that made it time to act.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, so they can follow our process as it unfolds rather than reading about it after the fact.

Read more

I wanted to let you know that I added to our position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (CDN).

With more than two decades of consecutive dividend growth, a starting yield of about 2%, and a track record of recent double-digit dividend growth, we saw this as an attractive time to add to our position.

If you’ve been considering upgrading your subscription, this is a good time to do so. Some of the most compelling opportunities emerge before they attract broader attention. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, giving you a front-row view of our investment process and the thinking behind each decision as it happens, not after the opportunity has passed.

Read more

I wanted to let you know that I added to our position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (CDN).

In its latest earnings report, the company raised its full-year outlook after delivering year-over-year growth in revenue, adjusted earnings, adjusted EBITDA and second-quarter adjusted free cash flow. We viewed the combination of solid operating performance and an improved outlook as an attractive opportunity to acquire a high-quality business at a sensible valuation.

If you’ve been considering upgrading your subscription, this is a good time to do so. Some of the most compelling opportunities emerge before they attract broader attention. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, giving you a front-row view of our investment process and the thinking behind each decision as it happens, not after the opportunity has passed.

Read more

Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

This week, we take a closer look at dividend return, the return generated by the dividend alone.

As dividend growth investors, we separate investment returns into two camps:

Dividends provide cash today.
Capital gains increase the value of your shares.

Under the Magic Pants dividend growth investing philosophy, we do not view them as competing forms of return. They are connected outcomes of owning a successful and growing business.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Dividend Return vs. Capital Return: Which Matters More?

Dividend growth investors often divide returns into two separate camps: dividends and capital gains.

One provides cash today. The other appears as a higher share price.

Under the Magic Pants dividend growth investing philosophy, however, they are not competing forms of return. They are two outcomes of owning a successful business.

The Dividend Return

A dividend return is tangible. It is cash deposited directly into your account without requiring you to sell a single share.

More importantly, when a company increases its dividend year after year, the income generated by your original investment continues to grow, regardless of what the stock market is doing.

Share prices may fluctuate, but the dividend keeps arriving.

That growing income stream lets dividend growth investors stay patient during periods of market volatility. We are being paid while we wait for the market to recognize the value of the businesses we own.

The Capital Return

Capital return is different. It depends on what another investor is willing to pay for your shares.

In the short term, stock prices can rise or fall because of interest rates, economic forecasts, investor sentiment, or the latest headline. These movements are difficult, if not impossible, to predict consistently.

Dividends give us something more dependable to measure.

We look for high-quality companies with a history of growing earnings, cash flow, and dividends. We then wait patiently for an attractive valuation that provides a reasonable starting yield and the potential for future dividend growth.

This does not mean capital appreciation is unimportant. It means we believe the most dependable capital growth comes from rising business fundamentals and a growing dividend.

The Advantage of Control

The key difference between dividend return and capital return is control.

Investors relying entirely on capital gains must sell shares to create income. That can become uncomfortable during a market decline, particularly when living expenses force them to sell at an unfavourable time.

Dividend growth investors receive income without predicting where prices are headed or deciding which shares to sell.

The dividend arrives while the investor still owns the asset.

That is the foundation of the Magic Pants approach. Build a reliable, growing income stream first, then let capital appreciation follow.

What $10,000 Invested in 2016 Produced

To illustrate the dividend return component, let’s examine the dividends generated over the past ten years by companies on The List entering 2026.

The chart below assumes that $10,000 was invested in each company on January 1, 2016. It then shows the total dividend income generated by each investment over the following decade along with the 10-year dividend return as of January 1, 2026.

The chart ranks each company by total dividends paid over those ten years.

On average, each $10,000 investment would have generated $4,296 in dividends, returning approximately 43% of the original investment in cash.

Starting yield played an important role in the amount of income collected during the early years. However, it won’t take long for our lower-yielding, faster-growing companies to close the gap.

That is why we don't simply chase the highest yield available today.

The Income Keeps Growing

Today, those original investments collectively generate (on average) annual dividend income equal to 6.2% of their original cost.

This is often referred to as yield on cost (we like to call it growth yield). Compare this to a GIC or bond, which maintains the same yield for the life of the investment.

Better yet, that dividend return continues to rise with every increase. The investor does not have to contribute another dollar or sell a single share for the income to keep growing.

It may not be long before a dividend growth portfolio built from companies on The List generates annual dividend income exceeding 7%-10% of its original investment, before including any capital appreciation.

Why Is 7% Significant?

Historically, the stock market has generated a long-term total return of approximately 7% after inflation. That return, however, includes both dividends and capital appreciation.

Now imagine eventually generating an amount equal to that historical total return from dividends alone, while continuing to own the shares and participate in their future growth.

The dividend income is deposited into your account.

The shares remain in your portfolio.

The businesses continue to grow.

And every dividend increase raises the return on your original investment.

Takeaway

Our objective is not to choose dividend return over capital return.

It is to invest in quality businesses, purchase them at attractive valuations, and build a dependable income stream that grows year after year. As earnings and dividends rise, capital appreciation should eventually follow.

One return pays us to wait.

The other rewards us for being patient.

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DGI Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

(Inception May 1, 2022, to July 31, 2026. Returns are actual results of our model portfolio in CAD with dividends reinvested.)

This Week’s Highlights

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +3.5% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: One

• Earnings Reports This Week: None

Top Performers Last Week:

• Dollarama Inc. (DOL-T), up +4.23%.

• Metro Inc. (MRU-T), down +3.74%.

• Stella-Jones Inc. (SJ-T), down +3.67%.

Worst Performer Last Week:

• TFI International (TFII-N), down -4.63%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

I wanted to let you know that I added to our position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (CDN).

The company delivered a solid second quarter, with funds from operations per unit growing 10%, strong contributions from data infrastructure and midstream assets, and continued progress recycling capital into higher-return opportunities.

Most importantly for dividend growth investors, the distribution remains well covered, the balance sheet is positioned conservatively, and management continues to support its targeted 5% to 9% annual distribution growth.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, allowing them to follow our process as it unfolds rather than reading about it after the fact.

Read more

I wanted to let you know that I added to our position early yesterday in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (USA).

The company’s recent stock surge appears to be driven primarily by a shift in investor expectations around AI monetization, reinforced by continued strength in its advertising business.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, allowing them to follow our process as it unfolds rather than reading about it after the fact.

Read more

Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

Our monthly Timely Ten, which ranks the most undervalued dividend growth companies on our Canadian and U.S. watchlists, remains one of our most-read features. This month, a few high-quality companies have become more attractively valued, creating potential opportunities for investors looking to initiate or add to positions.

For paid subscribers seeking more guidance, our DGI Alerts reveal what we are buying and selling in our model portfolios and why. The final decision is always yours.

We do the work. You stay in control.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Timely Ten: When Quality Stocks Fall, We Pay Attention

Timely Ten Update

Little changed in either our Canadian or U.S. Timely Ten this month, which is not surprising given that markets traded mostly sideways. Beneath the quiet surface, however, several meaningful valuation shifts caught our attention.

The Canadian list remained largely intact, although a few companies moved significantly within the rankings. South of the border, two stocks dropped off the list, making room for two new entrants.

This month, we examine the biggest movers, the reasons behind their recent price weakness, and whether these emerging valuation signals warrant further research.

How We Rank the Timely Ten

Each month, we rank every company on our Canadian and U.S. watchlists by the discount between its current market price and its estimated fair value, using Dividend Yield Theory.

The calculation is straightforward:

Fair Value = Current Annual Dividend ÷ Historical High Dividend Yield

The larger the discount to estimated fair value, the higher the company ranks.

The ten companies above the thick black line are trading below their estimated fair values and currently offer dividend yields above their historical high yields.

These are our Timely Ten.

No valuation method is perfect, but Dividend Yield Theory has proven an effective way to identify attractive entry points into high-quality dividend growth companies. Combined with our quality-first investment process, it helps us deploy capital with greater discipline and removes much of the emotion from our decisions.

The Timely Ten is not an automatic buy list. It is a starting point for further research.

Canadian Timely Ten

#1 Couche-Tard

Couche-Tard remains firmly entrenched at the top of the Timely Ten following a 12.5% pullback in its share price.

The company delivered a strong first quarter, with revenue increasing 25.1%, adjusted EBITDA rising 10.5%, and adjusted diluted EPS advancing 15.4%. Stronger fuel margins, acquisition contributions, and continued organic growth in the convenience business supported the results.

Despite this solid operating performance, the shares have remained under pressure. One possible concern is the proposed $8.6 billion acquisition of Żabka Group, which would significantly expand Couche-Tard’s presence in Central and Eastern Europe. The transaction is expected to be financed using available cash and new and existing credit facilities.

Although the earnings report does not attribute the share-price weakness to the transaction, its size may be contributing to investor caution. With the underlying business continuing to perform well, the recent pullback may soon provide an opportunity to add to our position.

#2 Canadian Tire

Canadian Tire made one of the biggest moves this month, climbing from #4 to #2 as recent price weakness improved its valuation.

Its latest quarter was solid, with normalized EPS increasing 10.4% and return on invested capital improving. However, dividend growth has been minimal in recent years, making us less likely to initiate a position.

Investors focused primarily on capital appreciation may find the shares attractive at this valuation. For dividend growth investors, however, the limited growth in income remains an important consideration.

#3 Waste Connections

Waste Connections remains on the podium at #3.

As one of the highest-quality companies on the Timely Ten, it always warrants attention when its valuation becomes more compelling. The latest quarter reinforced that quality, with revenue increasing 6.4%, adjusted EBITDA rising 6.8%, and margins continuing to expand. Management also raised its full-year 2026 outlook.

Strong free cash flow, continued acquisition activity, and record year-to-date share repurchases further support the company’s position in our Canadian model portfolio.

Waste Connections may not be deeply undervalued, but opportunities to purchase businesses of this quality at a sensible price are always worth investigating.

#5 Stella-Jones

Stella-Jones moved up two positions, from #7 to #5, as recent price weakness improved its relative valuation.

While Canada-U.S. trade uncertainty remains a consideration, the second-quarter results suggest the more immediate concern is margin pressure rather than revenue deterioration. Sales held relatively steady at $1.04 billion, supported by continued strength in Utility Products. However, adjusted EBITDA margin declined to 16.0% from 18.3%.

Higher operating and fuel costs, inefficiencies in the steel-structure business, and delayed pricing recovery all weighed on profitability. Residential lumber sales also declined 5%, reflecting lower lumber prices, softer demand, and unfavourable weather.

Management expects margins to improve during the second half, although full-year adjusted EBITDA margin is now expected to remain below 17.5%. Further research is warranted, particularly around tariff exposure and the potential impact on the residential lumber business.

#6 Metro Inc.

Metro Inc. remains interesting despite slipping from #2 to #6 while its share price remained relatively flat.

The current ranking appears largely tied to near-term headwinds, particularly the ongoing labour conflict at its Laval distribution centre. The disruption reduced third-quarter earnings by an estimated $0.32 per share.

Food same-store sales declined 1.5%, but pharmacy remained a source of strength, with same-store sales increasing 4.8%. With the labour disruption continuing into the fourth quarter, some near-term pressure is likely to remain.

The key question is whether these challenges are temporary or signal a more lasting deterioration in the business. For now, the underlying company continues to show resilience.

Note: goeasy Ltd.’s dividend has been suspended, so we have moved it to the bottom of the list.

American Timely Ten

The most notable changes to the U.S. Timely Ten occurred near the bottom of the rankings. Two companies dropped off the list, allowing NextEra Energy and Home Depot to move into the #9 and #10 positions.

At the top, Zoetis remains the most undervalued company according to Dividend Yield Theory, although its recent results show why investors remain cautious.

#1 Zoetis

Zoetis remains the #1 undervalued American company based on Dividend Yield Theory for another month.

Its latest results help explain why the shares remain inexpensive. Second-quarter revenue was flat at $2.5 billion, while U.S. companion animal sales declined 11%. Management also materially reduced its full-year outlook amid weaker veterinary visits, affordability pressures, and increased competition.

The quarter was not without positives. Livestock sales grew 11%, diagnostics advanced 12%, adjusted EPS increased 4%, and Zoetis returned more than $550 million to shareholders through share repurchases.

With management expecting pressure in its key companion animal franchises to persist through the second half, I do not currently see a near-term catalyst that would displace Zoetis from the top of our valuation screen.

The valuation is becoming increasingly attractive, but investors may need patience while the companion animal business stabilizes.

#9 NextEra Energy

NextEra Energy is a new entrant to the Timely Ten at #9. It has been a strong investment since we added it to our American model portfolio almost three years ago.

Despite a mostly positive second-quarter earnings report, the shares have recently come under pressure as investors consider the prospect of higher interest rates and the uncertainty surrounding the proposed Dominion Energy merger.

Higher interest rates can weigh on capital-intensive utilities by increasing financing costs and making their dividend yields less attractive relative to bonds. The Dominion transaction introduces additional regulatory, integration, and execution risks ahead of its expected closing in the second half of 2027.

The recent weakness, however, appears more reflective of valuation and transaction-related concerns than deterioration in NextEra’s operating performance. The company continues to benefit from expanding regulated investment at Florida Power & Light, a substantial renewable energy and storage backlog, and growing electricity demand from large-load customers.

With earnings growth remaining on track and management maintaining its long-term outlook, the pullback has not altered the positive fundamental picture. Interest-rate sensitivity and the execution of the Dominion combination remain the most important risks to monitor.

#10 Home Depot

Home Depot enters this month’s Timely Ten at #10. As the highest-quality-rated company on the list, it immediately catches our attention.

The stock remains under pressure as investors weigh solid company execution against a challenging backdrop for housing and home improvement. Elevated interest rates, limited housing turnover, and consumer caution continue to restrict spending on larger renovation projects.

Fundamentally, Home Depot’s second-quarter results were encouraging. Management said the quarter exceeded expectations and reported broad-based demand, with customers continuing to spend on smaller projects.

The disconnect is relatively straightforward: Home Depot continues to produce solid results, but investors are waiting for clearer evidence that the home-improvement cycle is strengthening.

Key indicators to watch include customer traffic, larger-project activity, operating margins, and sustained acceleration in comparable sales and earnings. Until those improve, the shares may remain under pressure. For long-term investors, however, the opportunity to purchase a company of Home Depot’s quality at a more attractive valuation deserves further attention.

Takeaway

Sideways markets may produce little change at the index level, but they can still create meaningful opportunities beneath the surface.

Couche-Tard’s strong results have yet to overcome concerns surrounding its proposed acquisition. Canadian Tire and Stella-Jones have moved higher on valuation, but both come with important trade-offs. Waste Connections continues to demonstrate why quality deserves a place near the top of our process, while Metro’s current challenges appear primarily short-term.

In the United States, Zoetis remains inexpensive for identifiable reasons, while NextEra Energy and Home Depot have entered the Timely Ten as higher interest rates and company-specific uncertainties weigh on their share prices.

The Timely Ten tells us where valuation is becoming more attractive. Our next step is to determine whether the price weakness represents a temporary setback or a genuine deterioration in the business.

Quality determines what we want to own. Valuation helps us decide when to act.

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DGI Scorecard

This Week’s Highlights

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +3.5% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: None

• Earnings Reports This Week: One

Top Performers Last Week:

• Toromont Industries (TIH-T), up +2.56%.

• Franco Nevada (FNV-N), down -0.07%.

• TD Bank (TD-T), down -0.31%.

Worst Performer Last Week:

• Thomson Reuters (TRI-Q), down -7.88%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

Nearly twenty years ago, I discovered an investment philosophy that would fundamentally change how I thought about building income and wealth. Dividend growth investing gave me a process I could understand, believe in and follow through every kind of market.

No one influenced that journey more than Tom Connolly. Through his writing, Tom helped me understand the powerful relationship between growing dividends, increasing cash flow and rising share prices. His lessons became the foundation of my investment process and, eventually, much of what we do today at Magic Pants Dividend Growth Investing.

This article is my opportunity to recognize that influence and simply say: Thank you, Tom.

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Standing On The Shoulders of Giants

My tribute to Tom Connolly.

It has been almost twenty years since I discovered dividend growth investing.

Along the way, I have learned from many accomplished investors. But one gentleman was more instrumental than anyone else in helping me build the foundation of the dividend growth investing process I use today.

His name is Tom Connolly.

Tom, a fellow Canadian and the creator of DividendGrowth.ca, captured the essence of dividend growth investing in one wonderfully simple statement:

“If the dividend rises, so does the price. It’s increasing cash flow that makes a stock valuable.”

That idea changed how I thought about investing.

A growing dividend is not merely income deposited into an investor’s account. It is evidence of a business generating more cash and becoming more valuable. Over time, as the dividend grows, the share price tends to follow.

Dividends lead. Prices follow.

That principle remains at the heart of everything we do at Magic Pants Dividend Growth Investing.

It is why our model portfolios own quality individual companies with a demonstrated ability to grow both their dividends and their underlying businesses, often for a decade or longer.

Learning From the Giants

Tom did more than explain his own investment philosophy. Through his blog, he introduced readers to the work of other investing giants whose ideas supported the same basic premise.

Many of these observations came from books written long before mutual funds, exchange-traded funds and modern portfolio theory became dominant forces in the investment industry.

Warren Buffett:

“Intrinsic value can be defined simply: it’s the discounted value of the cash that can be taken out of a business during its remaining life.”

Benjamin Graham, Security Analysis:

“Since the market value in most cases has depended primarily upon the dividend rate, the latter can be responsible for nearly all the gains ultimately received by investors.”

Arnold Bernhard, The Valuation of Common Stocks:

“It has been found that dividend-paying ability is the final determinant of the price of a common stock.”

John Burr Williams, The Theory of Investment Value:

“For reasons which will be given in due course, we shall see fit to define investment value, therefore, as the present worth of future dividends in the case of a stock.”

Daniel Peris, The Strategic Dividend Investor:

“Stocks go up because dividends go up.”

Jack Bogle, Sources of Return

“Future Returns = Dividend Yield + Earnings Growth (Dividend Growth) ± Change in Valuation.”

Different investors. Different eras. The same underlying truth.

Ultimately, the value of a business is determined by the cash it can generate for its owners.

Turning Theory Into Evidence

Tom regularly demonstrated this relationship using his list of Canadian dividend growth companies.

He compared the growth of each company’s dividend with the long-term growth of its share price. Again and again, the two moved in the same general direction.

He also encouraged readers to study long-term dividend-yield charts.

For many established dividend growers, the yield remains within a relatively consistent historical range even as the dividend increases. If the dividend rises while the yield remains relatively stable, the share price must rise as well.

It was a simple but powerful way to see the relationship:

A growing dividend pulls the share price higher over time.

As a subscriber to Tom’s blog, I eagerly awaited each update. Each new article deepened my understanding of the strategy and strengthened my confidence in the process.

Eventually, I decided to build on what I had learned.

From Student to Portfolio Builder

I began publishing my own blog and created a watchlist of Canadian dividend growth companies, updated once each calendar year.

Over time, I expanded the process by adding categories, position-sizing rules and valuation measures based on historical fundamentals. FAST Graphs helped me study the relationship between earnings and valuation, while YCharts allowed me to create the historical dividend-yield charts that remain an important part of our analysis today.

But the foundation came from Tom:

• Own high-quality businesses.

• Focus on growing cash flow.

• Invest in companies that consistently raise their dividends.

• Pay attention to valuation.

• Give time and compounding the chance to do the heavy lifting.

Most importantly, Tom’s work gave me faith in the dividend growth investing process.

That confidence eventually led me to give fellow investors a behind-the-scenes look at how a dividend growth portfolio is built, maintained and improved using real money, real positions and real results.

I committed $100,000 of my own capital to build a public-facing model portfolio, complete with timestamped buy and sell alerts for paid subscribers.

There would be no hiding the mistakes or highlighting only the winners. Every decision would be visible.

That commitment became our MP Wealth-Builder Model Portfolio (CDN).

Enjoying the Fruits of His Labour

Today, many of the companies found on The List, our watchlist of Canadian dividend growth companies, form the foundation of the Wealth-Builder Model Portfolio.

In just over four years, the portfolio’s tax-efficient dividend income has grown faster than inflation. That growing income has helped drive the value of our holdings higher and moved us steadily closer to our long-term retirement-income goal. You can find the results in our most recent Portfolio Letter dated July 31, 2026.

The performance is gratifying, but the real achievement is the process behind it.

A process built on quality, valuation, patience and growing dividends.

I may have added my own tools, measures and portfolio-management rules over the years, but the original building blocks came from the lessons Tom so generously shared.

A Timeless Strategy for all Markets

To be fair, Tom Connolly did not invent dividend growth investing. Like many great investors, he learned from someone who had already demonstrated that the strategy worked.

In 1984, Tom came across a letter published in the Financial Times of Canada. Mr. Thornton, a retired mining engineer living in Victoria, wrote it and described the remarkable results he had achieved during the first 15 years of his retirement by investing in dividend-growth stocks.

In 1968, Mr. Thornton’s portfolio generated $4,815 in annual dividend income. By 1983, that income had grown to $31,398, producing a 14.6% yield on his original investment (Growth Yield). His capital had compounded alongside his income, with the portfolio’s market value rising from $136,000 to $533,000.

What makes his achievement even more remarkable is the timing. Mr. Thornton retired in 1968, just as the market was entering a prolonged and difficult period that would last until 1982. Yet through those challenging years, his dividend income kept rising, and his portfolio value grew with it.

Any strategy that can produce rising income and long-term capital growth through an extended bear market deserves our attention.

Takeaway

We are all shaped by the people who take the time to teach us.

For me, Tom Connolly was one of those people.

His work transformed the way I invest. It gave me the confidence to build a public portfolio and ultimately inspired much of the investing philosophy we share with Magic Pants subscribers today.

This story has a wonderful continuity. More than 60 years ago, Mr. Thornton put dividend growth investing into practice. More than 40 years ago, Tom discovered his story and built on it. Years later, Tom shared what he had learned with investors like me.

Today, I am proud to carry those lessons forward.

Thank you, Tom Connolly.

The magic is in the dividend. As the dividend grows, so does the price.

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DGI Scorecard

This Week’s Highlights

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception

• Total Return (includes dividends): +16.83 % year-to-date

• Dividend Growth: 7.0% year-to-date

• Growth Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +5.9% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: One

• Earnings Reports This Week: None

Top Performers Last Week:

• Loblaw Companies Limited (L-T), up +4.78%.

• Magna (MGA-N), up +4.57%.

• goeasy Ltd. (GSY-T), up +3.51%.

Worst Performer Last Week:

• Canadian National Railway (CNR-T), down -2.56%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how we build, maintain, and improve a dividend growth portfolio using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. We own, size, and track every position in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

I wanted to let you know that I have just initiated a new position in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (USA).

The stock offers well-rounded investment appeal, combining a strong record of shareholder returns with solid operating performance. The company recently joined the ranks of Dividend Kings after increasing its dividend for 50 consecutive years.

The shares remain sensibly valued, while the latest 13.6% dividend increase was broadly consistent with the company’s ten-year average dividend growth rate. Supporting this dividend growth, the company’s most recent quarterly results featured record revenue of $1.57 billion and record adjusted EPS of $7.03, up 8% and 12% year over year, respectively.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, allowing them to follow our process as it unfolds rather than reading about it after the fact.

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Welcome to this week’s MP Market Review, where we put our dividend growth investing (DGI) process into practice with real money, real positions, and real results.

This week, we turn to Royal Bank and TD Bank, two of the largest holdings in our Canadian model portfolio. Following another strong earnings report, we revisit two valuation measures: dividend growth versus price growth and historical dividend yields.

The results reinforce our confidence in these businesses. But as shareholders, we also need to ask:

How much of that success is already reflected in today’s share prices?

IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Great Companies. But at What Price?

Strong earnings reinforce our confidence in the businesses. Valuation helps us decide how much to own.

Most of the time, we use our dividend growth valuation metrics to identify opportunities to buy quality companies at sensible prices.

Our intended holding period? Forever, provided the dividend continues to grow and the underlying business remains sound.

But a long-term mindset does not mean ignoring valuation. Even a great company can become expensive, and a successful investment can grow into a larger position than we intended.

Quality determines what we want to own. Valuation and position sizing help us decide when to buy, hold, or trim.

Following another positive earnings report from our Canadian bank holdings, we are revisiting two valuation measures for Royal Bank and TD Bank: dividend growth versus price growth and historical dividend yields.

Dividends Lead. Prices Follow.

Over time, we expect a growing dividend to be supported by growing earnings. Share prices tend to reflect that progress, although they rarely move in a straight line.

Comparing dividend growth with price growth helps us identify periods when the share price may have moved ahead of, or fallen behind, the company’s dividend growth.

Historical Dividend Growth vs. Price Growth

Both banks have shown a historical relationship between dividend growth and price growth. Periods when those paths diverged offered reasons to look more closely at valuation.

TD experienced the more pronounced swings, particularly in 2020 and 2024. Royal Bank showed a similar pattern, although its deviations were less dramatic.

These gaps are signals to investigate, rather than automatic instructions to buy or sell. A lower price can represent an opportunity, but it can also reflect a deterioration in the business.

It was no coincidence that we initiated positions and added to them during periods of weakness. Our process helped us recognize attractive valuations when uncertainty weighed on prices.

A Second Lens: Dividend Yield Theory

Historical dividend yields offer another way to assess valuation.

Dividend Yield Theory compares a company’s current yield with its historical range. When the yield rises above its usual level, shares may be attractively priced, provided the dividend remains sustainable and the business outlook supports it. When the yield falls below that range, shares may be becoming expensive.

Historical Dividend Yields

The yield charts tell a story similar to that of the dividend growth versus price growth charts.

In 2020 and 2024, yields climbed as share prices came under pressure. As prices recovered, yields moved back toward their historical averages and subsequently lower.

That pattern supported our buying decisions. However, historical averages are reference points, not guarantees. Changes in growth prospects, interest rates, or business risk can justify a different valuation.

More Income. More Capital.

Buying at lower prices allowed us to capture higher starting yields and participate in the subsequent share-price recovery.

We benefited in two ways: higher dividend income per dollar invested and capital appreciation as valuations recovered.

Both banks have continued to grow their dividends, with their recent increases broadly consistent with their longer-term growth rates.

That is the combination we are looking for: a quality business, purchased at a sensible price, that pays us more over time.

Takeaway

When a Winner Becomes a Bigger Position

The question now is how much of that progress is already reflected in the share price.

Record earnings are encouraging, but they do not automatically make a stock attractively valued. Further gains are possible. So is a period when earnings and dividends need time to catch up with the price.

We do not need to predict the next move to manage that risk.

Instead, we assess valuation alongside position size. If a holding becomes expensive and grows beyond our portfolio guidelines, trimming may be appropriate, even when we remain confident in the company.

We can remain committed to a business while reducing the amount of capital we have exposed to it.

For Royal Bank and TD Bank, strong earnings results reinforce our confidence in the businesses. Our valuation measures help us assess whether today’s prices justify adding, holding, or trimming.

The goal is to keep a successful investment from becoming an outsized risk to the portfolio, while allowing our dividend income to continue growing.

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DGI Scorecard

This Week’s Highlights

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception (May 1, 2022)

• Total Return (includes dividends): +14.46 % year-to-date

• Current Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +5.2% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: Two

• Earnings Reports This Week: One

Top Performers Last Week:

• TD Bank (TD-T), up +4.57%.

• Stantec Inc. (STN-T), up +2.16%.

• Manulife Financial (MFC-T), up +1.62%.

Worst Performer Last Week:

• Magna (MGA-N), down -9.84%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how a dividend growth portfolio is built, maintained, and improved using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. Every position shown is owned, sized, and tracked in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

Read more

The portfolio delivered another strong quarter, but the more important developments occurred beneath the headline return. We exited TELUS before its dividend cut, added selectively to three existing positions, and continued holding BCE and goeasy after their original investment thesis changed.

Quarterly dividend income declined 5.0%, largely because of the goeasy dividend suspension and our TELUS sale. We expect income growth to resume as our remaining companies raise their dividends and we redeploy available capital into quality businesses at sensible valuations.

The Quarter At A Glance

*Annualized total return since inception

Portfolio Progress

Portfolio value and annualized dividend income since inception.

Performance Versus Benchmarks

All returns include dividends. The 17.19% figure is the portfolio’s annualized return calculation since inception. Returns are calculated using Excel’s XIRR function and represent the portfolio’s annualized money-weighted return, reflecting the timing and amount of all contributions and withdrawals. Benchmark returns are time-weighted and are shown for general context rather than as a precise like-for-like comparison.

How We Invest

This real-money portfolio is both an investment account and a coaching tool. Every purchase, dividend, gain, loss and mistake is recorded in real time so subscribers can see how a disciplined process works when outcomes are uncertain.

My Wealth-Building Machine is built to do two jobs in retirement: generate a reliable, growing stream of dividends to pay the bills, and allow capital appreciation to expand the portfolio's value and create opportunities to recycle capital into higher-income investments.

This is not merely an income portfolio or a collection of stocks chosen for capital gains. It is designed to deliver both. Dividends provide the cash flow. Growth builds wealth. Together, they create a portfolio capable of producing attractive long-term total returns.

For Paid Subscribers

The remainder of this letter contains the complete quarterly playbook:

• Trades and position-sizing decisions

• Dividend-income details and portfolio holdings

• The rationale behind the TELUS sale

• Our current thinking on goeasy and BCE

• Progress against the original business plan

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Welcome to this week’s MP Market Review, where we demonstrate the real-world application of our dividend growth investing (DGI) process using real money, real positions, and real results.

This week, we look at two investors approaching retirement from very different starting points. One has less capital but more time to compound, while the other has more capital but less time before retirement. We show how both can use the same disciplined dividend growth strategy to build a reliable and growing retirement income.

IN THIS ISSUE DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases

DGI Clipboard

Two Investors, One Retirement Goal

Time and Capital Can Both Build Retirement Income

Not every investor begins the journey to retirement from the same starting point.

One investor may have relatively little capital but 20 or 30 years to invest. Another may have accumulated substantial savings but plans to retire within the next five years.

Their circumstances differ, but both can use dividend growth investing to build a reliable, growing retirement income.

Less Capital, More Time

For the younger investor, time is the most valuable asset.

Imagine someone with $100,000 to invest and 30 years until retirement. Their portfolio may not generate substantial income today, but that is not the immediate objective.

The priority is to own high-quality companies that consistently grow their earnings, cash flow, and dividends. New contributions are added regularly, while dividends are reinvested into the most attractively valued companies.

Over time, three powerful forces work together:

• New savings increase the capital invested

• Growing dividends increase the portfolio’s income

• Reinvested dividends purchase additional shares that generate even more income

With enough time, compounding can turn a modest beginning into a meaningful retirement-income machine.

Using the same assumptions applied to our MP Wealth-Builder (CDN) model portfolio, the table below illustrates how the younger investor’s dividend income could grow and compound over time. Increasing their annual contributions could accelerate that progress and bring their retirement goal within reach even sooner.

More Capital, Less Time

Now consider an investor with $2,000,000 and only five years until retirement.

This investor has less time for compounding, but more capital to put to work. The portfolio can generate significant dividend income almost immediately.

By deploying the capital strategically, reinvesting the dividends, and achieving 7% annual dividend growth, our projection estimates that annual income could reach approximately $82,686 after five years.

For this investor, the balance between current yield, dividend safety, and future dividend growth is especially important. With less time to recover from a poor investment decision, quality, valuation, diversification, and disciplined position sizing must remain at the centre of the process.

Different Starting Points, Same Strategy

The younger investor uses time to compensate for having less capital. The older investor uses accumulated capital to compensate for having less time.

Both benefit from the same disciplined process:

1. Buy quality dividend growth companies

2. Purchase them at sensible valuations

3. Monitor dividend safety and business performance

4. Reinvest and add new capital intelligently

5. Allow income to grow and compound

Markets will always be unpredictable, but the investor can control how much they save, what they own, the price they pay, and how consistently they follow the process. That makes their retirement plan less dependent on market timing and more firmly within their control.

Takeaway

Dividend growth investing does not require everyone to follow the same path. It allows each investor to use the resources they have, whether that is more time or more capital, to pursue the same objective.

A reliable, growing income stream that can help fund retirement without constantly selling the assets that produce it.

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DGI Scorecard

This Week’s Highlights

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.19% since inception (May 1, 2022)

• Total Return (includes dividends): +14.85 % year-to-date

• Current Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +6.8% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: None

• Earnings Reports This Week: Two

Top Performers Last Week:

• Franco Nevada (FNV-N), up +13.46%.

• Canadian Natural Resources (CNQ-T), up +6.63%.

• Magna (MGA-N), up +4.0%.

Worst Performer Last Week:

• Alimentation Couche-Tard Inc. (ATD-T), down -6.85%.

Watchlists

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

• 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.

The watchlists are not a portfolio but a coaching tool that helps us think about ideas and manage risk in our model portfolio. We own some, but not all, of the companies on these watchlists. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

New to Magic Pants?

Magic Pants Dividend Growth Investing is a behind-the-scenes look at how a dividend growth portfolio is built, maintained, and improved using real money, real positions, and real results.

Our objective is to grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the broader market over a full investing cycle.

The name comes from a simple idea: when a quality company pays a dividend, cash moves from the company’s pocket to yours while your ownership stake remains intact. As earnings and dividends grow, the compounding cycle can accelerate. That’s the magic.

Build Your Own Growing Income Machine

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing receive exclusive ideas and guidance designed to help navigate changing market conditions.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. Every position shown is owned, sized, and tracked in real time using our disciplined DGI process.

Become a paid subscriber and see exactly how we put the process into practice. You’ll also receive full access to this post and exclusive subscriber-only content.

We do the work. You stay in control.

DGI News

The 4% withdrawal rule for retirees is dead. Long live the 4.7% rule (Globe & Mail)

https://www.theglobeandmail.com/investing/personal-finance/retirement/article-4-withdrawal-rule-retirees-dead-fire/

Withdrawal rates and inflation are two of the biggest concerns facing retirees. I found a way to address both when I discovered dividend growth investing twenty years ago.

By building a portfolio of quality dividend growth companies well before retirement, ideally ten years or more, I was able to create a dependable and growing income stream. Those rising dividends allowed me to ease into retirement without worrying about how much to withdraw from my portfolio each year or whether inflation would gradually erode my purchasing power.

DGI Updates

Dividend Scorecard

No companies on The List had a dividend announcement last week.

Earnings Releases

Benjamin Graham once remarked that earnings are the principal factor driving stock prices.

Earnings and dividend growth often go hand in hand, providing insights into future dividend growth for quality companies. Regularly monitoring our dividend growers, starting with quarterly earnings releases, is a key part of the process. ‘The List’ is sorted by reporting date and includes the market’s consensus estimates and actual reported results. Red numbers show earnings below the previous year for the same period.

The Q2 2026 earnings calendar can be found here.

Two companies from The List are due to report their off-cycle Q3 earnings this week.

Royal Bank of Canada (RY-T) will release its third-quarter fiscal 2026 results on Thursday, August 27, 2026, before markets open.

TD Bank (TD-T) will release its third-quarter fiscal 2026 results on Thursday, August 27, 2026, before markets open.

Last week, no companies from The List reported earnings.

I wanted to let you know that I have just initiated a new position in another high-quality dividend growth company within the MP Wealth-Builder Model Portfolio (USA).

The company’s share price is down ~50% in 2026, despite strong earnings and an increase in full-year revenue guidance.

It is also a Dividend Achiever, having increased its dividend for 15 consecutive years and achieving an impressive 13% average annual dividend growth rate over the past decade.

Despite these strong fundamentals, recent weakness in the share price has created an opportunity to acquire additional shares at a valuation we believe is both sensible and attractive for long-term dividend growth investors.

If you’ve been considering upgrading your subscription, remember that some of the best opportunities are identified before they become obvious to the broader market. Paid subscribers receive every buy, sell, trim, and portfolio update in real time, allowing them to follow our process as it unfolds rather than reading about it after the fact.

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Summary

This is not a stock-picking newsletter!

It’s a behind-the-scenes look at how a dividend growth portfolio is built, maintained, and improved over time.

Welcome to this week’s MP Market Review.

Before we begin, a quick explanation of the name.

Many years ago, when I first discovered dividend growth investing, I came across a quote that stopped me in my tracks:

“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.”

That is dividend growth investing in its simplest form.

When a quality company pays a dividend, cash moves from the company’s pocket to yours, yet your ownership stake remains intact. As earnings grow, dividends tend to grow. As dividends grow, share prices often follow. Reinvest those dividends into additional shares, and the cycle accelerates: more shares generate more dividends, which buy even more shares.

That’s the magic.

It’s why we call this newsletter Magic Pants Dividend Growth Investing.

Every week, we track the companies on The List, our curated watchlist of Canadian dividend growth businesses selected for their ability to produce rising income over time. While we also publish a U.S. edition each month, Canada remains our primary hunting ground.

Our objective is straightforward:

Grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the TSX Composite in Canada and the S&P 500 in the United States.

What follows is not theory.

It is the real-world application of a dividend growth strategy using real money, real positions, and real results.

Markets create an endless stream of noise. We ignore most of it.

Instead, we focus on a handful of metrics that tell us whether our process is working. No predictions. No forecasts. No crystal ball.

Just results.

The magic is in the dividend. Dividends lead. Prices follow.

This Week’s Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.11% since inception

• Total Return (includes dividends): +16.49% year-to-date

• Current Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +8.2% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: Five

• Earnings Reports This Week: None

DGI Clipboard

“Current yield, using its own historic yield as a guide, is, in my view, a fine valuation measure.”

— Tom Connolly

Timely Ten: Subtle Moves, Important Signals

Timely Ten Update

There was little movement in either the Canadian or American Timely Ten this month, with only one new company joining each list. However, several subtle changes caught our attention and reinforced the value of monitoring quality companies when short-term concerns place pressure on their share prices.

Canadian Timely Ten

Intact Financial joined the Canadian Timely Ten after climbing four positions from last month. A weaker-than-expected second-quarter earnings report, driven largely by elevated catastrophe and large-loss claims, appears to be the primary reason for the recent share-price pressure. Despite this short-term setback, Intact remains a high-quality business and an attractive long-term investment at current levels.

Metro Inc. and Waste Connections remain the two highest-quality companies moving up the list. Both are now trading at sensible valuations and deserve a closer look. I will be conducting a deeper review of each company to determine whether the recent weakness has created an opportunity to add to our positions.

The biggest surprise was Thomson Reuters. After stumbling for several months amid concerns about potential AI disruption, the share price appears to be regaining momentum. Fortunately, we added to our position during the weakness. If the stock eventually returns to its historical average valuation, our decision to buy when sentiment was negative should prove worthwhile.

American Timely Ten

WEC Energy Group was the only new addition to the American Timely Ten this month. Its recent share-price weakness does not appear to signal a problem with the dividend or its core regulated utility operations.

Instead, the market appears to be reassessing a previously elevated valuation while factoring in higher interest rates and uncertainty surrounding future data-centre development in Wisconsin. The long-term investment thesis remains intact, but these risks deserve continued monitoring.

The other notable development was the timely signal the list provided on CME Group and Intercontinental Exchange last month. Both companies ranked attractively, giving us the confidence to add to our positions.

The market has since responded favourably, with ICE rising 14.4% and CME gaining 12.3% over the past month.

The Timely Ten is published monthly and ranks the most undervalued dividend growth companies in Canada and the United States. The rankings are based on Dividend Yield Theory, a valuation framework that I explain in greater detail later in this article.

Note: goeasy Ltd.’s dividend has been suspended, so we have moved it to the bottom of the list.

Background

The third step in our investment process is monitoring. Once we’ve identified high-quality dividend growth companies and purchased them at sensible prices, we continuously monitor them for changes in valuation and business fundamentals.

Tracking dozens of companies can quickly become overwhelming. Fortunately, our focus is limited to the businesses on our watchlists rather than the thousands of stocks that make up the broader market. Even so, we are always looking for ways to improve the efficiency and consistency of our process. One of the most valuable tools we have found is Dividend Yield Theory.

What Is Dividend Yield Theory?

Dividend Yield Theory is a straightforward valuation method based on a simple observation: the dividend yields of mature, high-quality dividend growth companies tend to fluctuate around a historical average over time, provided the underlying business remains fundamentally intact.

Because a stock’s price and dividend yield move in opposite directions, a higher-than-normal dividend yield often signals that the shares are trading below their historical valuation. Conversely, an unusually low dividend yield may indicate that the shares have become expensive.

Dividend Yield Theory doesn’t tell us what to buy. Our quality screening process does that. Instead, it helps us determine when to buy.

Building the Watchlist

Before applying Dividend Yield Theory, every company must first qualify for our watchlist by meeting our quality standards.

• Dividend growth: Minimum 10 consecutive years of dividend increases.

• Market capitalization: At least $1 billion.

• Diversification: Maximum of five companies per sector, with a preference for no more than two per industry.

• Business quality: We generally exclude REITs and pure-play energy companies because their earnings and dividends tend to be more cyclical.

This quality-first approach dramatically reduces the investment universe and allows us to focus only on exceptional businesses.

How We Rank the Timely Ten

Each month, we rank every company on our Canadian and U.S. watchlists by the discount between its current market price and its estimated fair value, based on Dividend Yield Theory.

Fair value is calculated using a simple formula:

Fair Value = Current Annual Dividend ÷ Historical High Dividend Yield

The larger the discount to fair value, the higher the company ranks.

The ten companies above the thick black line are trading below their estimated fair values and currently offer dividend yields higher than their historical highs. These companies have historically provided the best combination of quality, valuation, and upside potential.

These are our Timely Ten.

While no valuation method is perfect, Dividend Yield Theory has proven to be an exceptionally effective way to identify attractive entry points for high-quality dividend growth companies. Used alongside our quality-first investment process, it helps us deploy capital with greater discipline while removing much of the emotion from investment decisions.

Takeaway

This month’s Canadian and American Timely Ten lists reinforce the importance of combining quality with valuation.

Intact Financial, Metro, Waste Connections and WEC Energy are becoming more attractively priced, while Thomson Reuters, CME and ICE demonstrate how quickly the market can recognize value once sentiment improves.

The Timely Ten is not designed to predict market bottoms or short-term price movements. Its purpose is to identify high-quality dividend growth companies trading at sensible prices so we are prepared to act when opportunity appears.

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing get exclusive ideas and guidance to navigate any climate.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. Every position shown is owned, sized, and tracked in real time using our disciplined DGI process.

Become a PAID subscriber, and I’ll show you exactly how I do it. In addition, gain full access to this post and exclusive, subscriber-only content. We do the work; you stay in control!

Subscribe now

DGI Scorecard

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

1. Dividend growth streak: 10 years or more.

2. Market cap: Minimum one billion dollars.

3. Diversification: Limit of five companies per sector, preferably two per industry.

4. 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.

‘The List’ is not a portfolio but a coaching tool that helps us think about ideas and risk manage our model portfolio. We own some but not all the companies on ‘The List’. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

Note: In the last week of every month, I will show the updated watchlist for our American dividend growers, The List-USA. It will be shown after the Canadian watchlist below.

Performance of 'The List'

The dividend growth for The List remained unchanged last week, with an average YTD increase of 6.6% (income).

The price of The List was up last week and now stands at +8.2% YTD (capital).

Top Performers Last Week:

• CCL Industries Inc. (CCL-B-T), up +4.82%.

• Canadian Natural Resources (CNQ-T), up +4.67%.

• TFI International (TFII-N), up +4.40%.

Worst Performer Last Week:

• goeasy Ltd. (GSY-T), down -8.22%.

From breaking news to quarterly earnings reports, we break down the week’s biggest headlines to help you make sense of the market.

Read more

Summary

This is not a stock-picking newsletter!

It’s a behind-the-scenes look at how a dividend growth portfolio is built, maintained, and improved over time.

Welcome to this week’s MP Market Review.

Before we begin, a quick explanation of the name.

Many years ago, when I first discovered dividend growth investing, I came across a quote that stopped me in my tracks:

“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.”

That is dividend growth investing in its simplest form.

When a quality company pays a dividend, cash moves from the company’s pocket to yours, yet your ownership stake remains intact. As earnings grow, dividends tend to grow. As dividends grow, share prices often follow. Reinvest those dividends into additional shares, and the cycle accelerates: more shares generate more dividends, which buy even more shares.

That’s the magic.

It’s why we call this newsletter Magic Pants Dividend Growth Investing.

Every week, we track the companies on The List, our curated watchlist of Canadian dividend growth businesses selected for their ability to produce rising income over time. While we also publish a U.S. edition each month, Canada remains our primary hunting ground.

Our objective is straightforward:

Grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the TSX Composite in Canada and the S&P 500 in the United States.

What follows is not theory.

It is the real-world application of a dividend growth strategy using real money, real positions, and real results.

Markets create an endless stream of noise. We ignore most of it.

Instead, we focus on a handful of metrics that tell us whether our process is working. No predictions. No forecasts. No crystal ball.

Just results.

The magic is in the dividend. Dividends lead. Prices follow.

This Week’s Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.11% since inception

• Total Return (includes dividends): +17.95 % year-to-date

• Current Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +8.1% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: Six

• Earnings Reports This Week: Five

DGI Clipboard

“The best protection against a dividend cut begins before you buy the stock.”

— Magic Pants Dividend Growth Investing

Dividend Cuts Happen. Your Process Matters More.

When the Dividend Gets Cut

A dividend cut changes the investment thesis. Here’s how we deal with it.

In light of TELUS’s recent dividend cut, we thought this would be a timely opportunity to revisit how we handle dividend cuts within our dividend growth strategy.

Dividend growth investing is built around a simple idea: own high-quality businesses that generate growing cash flow and share that growth with shareholders through rising dividends.

But even quality companies can stumble.

When a dividend is cut, suspended, or frozen, we don’t panic. We also don’t ignore it.

We go back to the investment thesis.

The Warning Signs Often Come First

At Magic Pants, we believe dividends lead and prices follow.

A steadily growing dividend is usually evidence of a healthy business: rising earnings, strong cash flow, prudent capital allocation, and management confidence.

But there are often warning signs before a dividend cut occurs.

One of the most obvious is an excessively high dividend yield.

TELUS was a good example. As its share price declined, its dividend yield climbed to increasingly attractive levels. But a rising yield isn’t always an opportunity. Sometimes the market is telling you something is wrong.

When a company’s yield becomes unusually high relative to its history and peers, we dig deeper.

Is the stock genuinely undervalued, or is the market anticipating weaker cash flow, excessive debt, or an unsustainable dividend?

We never chase yield. An excessively high yield is often a warning, not an opportunity.

A Dividend Cut Changes the Conversation

When a company cuts its dividend, our first question isn’t:

“Will the stock price recover?”

It’s:

“Is this still the quality dividend growth company we originally purchased?”

We don’t necessarily sell the morning a dividend is cut. We first determine why it happened.

Is management temporarily conserving capital to strengthen the balance sheet? Or have the economics of the business fundamentally deteriorated?

If earnings power remains intact and there is a credible path toward renewed dividend growth, patience may be warranted.

But if the cut reflects excessive debt, deteriorating fundamentals, poor capital allocation, or a permanently impaired business model, the investment thesis may be broken.

And when the thesis is broken, we’re prepared to move on.

Quality First. Always.

This is precisely why our process begins with quality.

We favour companies with strong balance sheets, sustainable payout ratios, durable businesses, and long histories of growing their dividends.

Our objective isn’t to eliminate dividend cuts. That’s impossible.

Our objective is to make them rare.

Diversification and disciplined position sizing also ensure that one dividend cut doesn’t materially damage our overall income stream.

The Portfolio Matters More Than the Stock

We aren’t emotionally attached to individual companies.

Our goal is to build a portfolio capable of growing its dividend income by approximately 7–10% annually over the long term.

Sometimes that means holding through temporary adversity. Sometimes it means admitting the thesis has changed and reallocating our capital to a better opportunity.

The key is having a process before the bad news arrives.

A dividend cut isn’t automatically a sell signal. It’s a signal to reassess.

Quality first. Valuation second. Monitor always.

Because we’re not simply collecting stocks. We’re building a growing income machine.

Takeaway

Dividend cuts are an unfortunate reality of dividend growth investing, but they don’t have to derail a well-built dividend growth portfolio. Focus on quality, watch for warning signs such as an unusually high yield, and reassess the investment thesis when circumstances change. Our goal isn’t to avoid every mistake; it’s to ensure that no single mistake compromises our long-term objective: a reliable and growing stream of dividend income.

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing get exclusive ideas and guidance to navigate any climate.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. Every position shown is owned, sized, and tracked in real time using our disciplined DGI process.

Become a PAID subscriber, and I’ll show you exactly how I do it. In addition, gain full access to this post and exclusive, subscriber-only content. We do the work; you stay in control!

Subscribe now

DGI Scorecard

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

1. Dividend growth streak: 10 years or more.

2. Market cap: Minimum one billion dollars.

3. Diversification: Limit of five companies per sector, preferably two per industry.

4. 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.

‘The List’ is not a portfolio but a coaching tool that helps us think about ideas and risk manage our model portfolio. We own some but not all the companies on ‘The List’. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

Note: In the last week of every month, I will show the updated watchlist for our American dividend growers, The List-USA. It will be shown after the Canadian watchlist below.

Performance of 'The List'

The dividend growth for The List remained unchanged last week, with an average YTD increase of 6.6% (income).

The price of The List was down slightly last week and now stands at +8.1% YTD (capital).

Top Performers Last Week:

• Franco Nevada (FNV-N), up +12.08%.

• goeasy Ltd. (GSY-T), up +4.79%.

• Toromont Industries (TIH-T), up +4.48%.

Worst Performer Last Week:

• TC Energy Corp. (TRP-T), down -6.58%.

From breaking news to quarterly earnings reports, we break down the week’s biggest headlines to help you make sense of the market.

Read more

Summary

This is not a stock-picking newsletter!

It’s a behind-the-scenes look at how a dividend growth portfolio is built, maintained, and improved over time.

Welcome to this week’s MP Market Review.

Before we begin, a quick explanation of the name.

Many years ago, when I first discovered dividend growth investing, I came across a quote that stopped me in my tracks:

“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.”

That is dividend growth investing in its simplest form.

When a quality company pays a dividend, cash moves from the company’s pocket to yours, yet your ownership stake remains intact. As earnings grow, dividends tend to grow. As dividends grow, share prices often follow. Reinvest those dividends into additional shares, and the cycle accelerates: more shares generate more dividends, which buy even more shares.

That’s the magic.

It’s why we call this newsletter Magic Pants Dividend Growth Investing.

Every week, we track the companies on The List, our curated watchlist of Canadian dividend growth businesses selected for their ability to produce rising income over time. While we also publish a U.S. edition each month, Canada remains our primary hunting ground.

Our objective is straightforward:

Grow dividend income by 7-10%+ annually while achieving long-term capital appreciation that matches or exceeds the TSX Composite in Canada and the S&P 500 in the United States.

What follows is not theory.

It is the real-world application of a dividend growth strategy using real money, real positions, and real results.

Markets create an endless stream of noise. We ignore most of it.

Instead, we focus on a handful of metrics that tell us whether our process is working. No predictions. No forecasts. No crystal ball.

Just results.

The magic is in the dividend. Dividends lead. Prices follow.

This Week’s Scorecard

MP Wealth-Builder Model Portfolio (Canada)

• Annualized Total Return: +17.04% since inception

• Total Return (includes dividends): +15.51 % year-to-date

• Current Yield: 3.2%

The List (Canada)

• Dividend Income Growth: +6.6% year-to-date

• Capital Appreciation: +8.5% year-to-date

• Dividend Announcements Last Week: None

• Earnings Reports Last Week: Nine

• Earnings Reports This Week: Six

DGI Clipboard

“Building wealth is about ownership. When you own strong businesses, you do not chase money. Money comes to you.”

John D. Rockefeller understood this principle better than most.

Start a Business That Pays You

Build an income-producing business without employees, inventory, customers, or premises

Starting a small business can be an effective way to build wealth, but it often requires substantial capital, long hours, specialized knowledge, and a willingness to accept considerable risk.

A franchise may require a six-figure investment before opening its doors. A rental property brings financing, maintenance, tenants, and ongoing expenses. Even an online business requires product development, marketing, customer service, and constant attention.

There is another way to think about business ownership.

You can build a portfolio of high-quality Canadian dividend growth companies and treat it like your own income-producing business.

Your Portfolio Is the Business

The All-Canadian DGI Portfolio provides a practical place to begin.

Instead of starting from scratch, you can establish initial positions in a diversified group of quality Canadian companies with long records of paying and growing their dividends.

These companies already have experienced management teams, established customers, valuable assets, and proven business models.

As a shareholder, you participate in their profits without managing employees, leasing office space, purchasing inventory, or dealing with customers.

Your primary responsibility is capital allocation.

Start With a Foundation. Add When Opportunities Arise.

Rather than investing all your available capital immediately, you can begin by establishing positions using the All-Canadian DGI Portfolio while keeping some cash available.

DGI Alerts can then help you deploy the remaining capital as opportunities arise, directing new investments toward quality companies trading at more sensible valuations.

This allows you to get started without relying on your ability to perfectly time the market.

A Different Kind of Small Business

Compared with many traditional small-business opportunities, a dividend growth portfolio offers several practical advantages:

• It can be started with relatively little capital and expanded gradually.

• It requires no employees, inventory, premises, or customer acquisition.

• It can generate income without demanding your full-time attention.

• Its dividend income has the potential to grow over time.

• Its ownership interests are liquid and can generally be bought or sold easily.

• It provides diversification across several established businesses rather than dependence on one venture.

The Owner’s Responsibility

There are still risks. Dividends are not guaranteed, share prices fluctuate, and successful investing requires patience, discipline, and ongoing monitoring.

But unlike many small businesses, your portfolio does not need you to open the doors every morning.

The companies do the work. Your job is to own quality, pay sensible prices, reinvest intelligently, and give compounding time to work.

That may be one of the simplest businesses you will ever own.

Takeaway

You do not need employees, inventory, or customers to own a successful business. Build your portfolio like a business: start with quality companies, add at sensible valuations, and let growing dividends and compounding do the work.

Looking for a helping hand in the market? Members of Magic Pants Dividend Growth Investing get exclusive ideas and guidance to navigate any climate.

The Magic Pants model portfolios (Canadian and American) are real-money, dividend-growth portfolios funded with actual capital and executed in live accounts. Every position shown is owned, sized, and tracked in real time using our disciplined DGI process.

Become a PAID subscriber, and I’ll show you exactly how I do it. In addition, gain full access to this post and exclusive, subscriber-only content. We do the work; you stay in control!

Subscribe now

DGI Scorecard

The Magic Pants 2026 list (The List) includes 26 Canadian dividend growth stocks, and our new American watchlist (The List-USA) contains 28 companies. Here are the criteria to be considered a candidate on our watchlists:

1. Dividend growth streak: 10 years or more.

2. Market cap: Minimum one billion dollars.

3. Diversification: Limit of five companies per sector, preferably two per industry.

4. 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.

‘The List’ is not a portfolio but a coaching tool that helps us think about ideas and risk manage our model portfolio. We own some but not all the companies on ‘The List’. In other words, we might want to buy these companies when valuation looks attractive.

Our newsletter provides readers with a comprehensive insight into the implementation and advantages of our 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.

Note: In the last week of every month, I will show the updated watchlist for our American dividend growers, The List-USA. It will be shown after the Canadian watchlist below.

Performance of 'The List'

The dividend growth for The List remained unchanged last week, with an average YTD increase of 6.6% (income).

The price of The List was down slightly last week and now stands at +8.5% YTD (capital).

Top Performers Last Week:

• Thomson Reuters (TRI-Q), up +8.85%.

• Magna (MGA-N), up +4.48%.

• Stantec Inc. (STN-T), up +3.99%.

Worst Performer Last Week:

• TFI International (TFII-N), down -10.24%.

From breaking news to quarterly earnings reports, we break down the week’s biggest headlines to help you make sense of the market.

Read more