MP Market Review - November 10, 2023
Posted by BM on November 13, 2023
Summary
This is a weekly instalment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on 'The List'.
Last week, 'The List' was up with a YTD price return now of +1.4% (capital). Dividends have increased by +8.8% YTD, highlighting the growth in the dividend (income).
Last week, one dividend announcement from companies on 'The List'.
Last week, nine earnings reports from companies on 'The List'.
Two companies on 'The List' are due to report earnings this week.
The List (2023)
Last updated by BM on November 10, 2023
The Magic Pants List contains 27 Canadian dividend growth stocks. ‘The List’ contains Canadian companies that have raised their dividend yearly for at least the last ten years and have a market cap of over a billion dollars. Below is each stock’s symbol, name, current yield, current price, price return year-to-date, current dividend, dividend growth year-to-date and current dividend growth streak. Companies on ‘The List’ are added or subtracted once a year, on January 1. After that, ‘The List’ is set for the next twelve months. Prices and dividends are updated weekly.
While 'The List' does not function as a portfolio on its own, it serves as an excellent initial reference for individuals looking to diversify their investments and achieve higher returns in the Canadian stock market. Through our blog, we provide weekly updates on 'The List' and offer valuable perspectives along with real-life examples of our Dividend Growth Investing (DGI) strategy in action. This aids readers in gaining a deeper understanding of how to implement and benefit from this investment approach.
If you're interested in creating your own dividend growth income portfolio, consider subscribing to our premium service. Subscribers gain access to buy/sell alerts for our MP Wealth-Builder Model Portfolio (CDN) and exclusive content available only to subscribers.
Performance of 'The List'
Last week, 'The List' was up with a YTD price return of +1.4% (capital). Dividend growth remained the same and is at +8.8% YTD, highlighting growth in income.
The best performers last week on 'The List' were Stella-Jones Inc. (SJ-T), up +11.32%; Stantec Inc. (STN-T), up +8.72%; and Intact Financial (IFC-T), up +3.79%.
Brookfield Infrastructure Partners (BIP-N) was the worst performer last week, down -5.58%.
Six Canadian stocks on ‘The List’ declare earnings and dividends in US dollars and are inter-listed on a US exchange in US dollars. The simplest way to display dividend and price metrics for these stocks is to show their US exchange symbols along with their US dividends and price. The stocks I am referring to have a -N at the end of their symbols. You can still buy their Canadian counterparts (-T), but your dividends will be converted into CDN dollars and will fluctuate based on the exchange rate.
Note: When the dividend and share price currency match, the calculation is straightforward. But it’s not so simple when the dividend is declared in one currency, and the share price is quoted in another. Dividing the former by the latter would produce a meaningless result because it’s a case of apples and oranges. To calculate the yield properly, you must express the dividend and share price in the same currency.
DGI Clipboard
“As a dividend increase is a positive sign of a company's financial strength, the safest purchase, after research, is a stock with a recent dividend increase.”
— Tom Connolly (the founder of dividendgrowth.ca)
Dividends send signals
Our list of high-quality dividend stocks is currently in the process of revealing upcoming dividend increases for the next year. While the past couple of years have presented challenges for capital returns, the steady growth of dividends remains a reassuring trend. As we analyze 'The List,' it becomes evident that dividends are conveying valuable signals that can inform our decision-making when it comes to purchases.
In his 2006 article, ‘Go for Dividends’, author Steve Hanke says it best:
The positive, intuitive idea is that companies adjust dividend payouts to signal prospects. Corporate insiders have better information about potential sales growth, margins and free cash flows than investors do. Dividends are simply an efficient way for insiders to convey this valuable information to the market. A rise in dividends signals better prospects, and a decrease signals that a company expects trouble. An increase in dividends signals that corporate insiders believe the company will have enough cash flow to sustain operations and complete investment plans. And, of course, make good on their dividend commitments.”
It's important to consider the size of the dividend increase. If a company announces a smaller increase than in the previous year, it may suggest impending short-term challenges. This could either reflect prudent management or serve as a signal that all is not well.
Here are a couple of recent dividend announcements as examples:
Waste Connections (WCN-N) on Wednesday, October 25th, said it increased its 2023 quarterly dividend from $0.255 to $0.285 per share, payable November 28, 2023, to shareholders of record on November 8, 2023.
This represents a dividend increase of +11.8%, marking the 14th straight year of dividend growth for this quality solid waste and recycling services company.
(WCN-N) raised its dividend by +10.5% in the past year, maintaining a five-year average increase of +13.7%. The announced increase for next year (+11.8%) aligns with its historical average, suggesting that management is expressing confidence in the company's outlook.
Canadian Tire (CTC-A-T) on Thursday, November 9, said it increased its 2024 quarterly dividend from $1.725 to $1.750 per share, payable March 01, 2024, to shareholders of record on January 31, 2024.
This represents a dividend increase of +1.45%, marking this quality retailer's 13th straight year of dividend growth.
On the flip side, (CTC-A-T) raised its dividend by +17.9% in the past year, maintaining a five-year average increase of +15.8%. The modest increase for next year (+1.45%) suggests management is expressing heightened caution about their prospects in 2024. Nonetheless, their commitment to sustaining their dividend streak remains evident.
In both cases, you see a commitment to not only paying a dividend but growing that dividend. Not all companies on ‘The List’ consistently raise their dividends by the same rate each year, so pay attention to the signals!
In this week’s issue, I’ll go over all the latest earnings reports and dividend increases from the companies we follow on ‘The List’. But first, let’s take a closer look at some of the news stories we found relevant last week...
