When your yields grow to double digits, do you really care about price or what the market is doing?
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.
I’ve always been fascinated by what separates exceptionally successful business leaders and investors from everyone else. What do they see that others miss? What gives them an edge?
Sometimes, the answer is surprisingly simple.
Amazon founder Jeff Bezos once shared an insight that helps explain his extraordinary success. It wasn’t about having better information, predicting the future, or outsmarting the competition.
It was about thinking further ahead than everyone else.
His observation captures one of our most powerful advantages as dividend growth investors. While much of the market obsesses over the next quarter, we focus on what quality businesses can deliver over the next seven to ten years and beyond.
This week, we’ll explore why time may be our greatest competitive advantage, and how one of my favourite metrics, Yield on Cost (YOC), reveals the magic of dividend growth investing.
IN THIS ISSUE: DGI Clipboard • DGI Scorecard • DGI News • DGI Updates • Earnings Releases
DGI Clipboard
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.”
— Jeff Bezos, Founder of Amazon, 2011.
The Magic Metric: +2.6%|+6.9%|+11.4%
There are plenty of reasons to love dividend growth investing, but one of the most powerful is what happens when you give a quality business enough time to work its magic.
Most investors obsess over tomorrow’s share price. We focus on what a business can deliver over the next ten years and beyond.
The difference is remarkable.
Buy a quality dividend grower at a sensible valuation, let its earnings and dividends compound, and something extraordinary can happen.
What begins as a modest dividend yield can grow into a substantial annual income return on your original investment.
That’s the magic of Yield on Cost (YOC).
Quality First. Always.
Not every dividend-paying company earns a place in our portfolio.
Our research starts with quality. We look for established businesses with durable earnings, a history of consecutive dividend increases, and the financial strength to weather difficult markets.
We favour businesses with less cyclical earnings and sufficient scale to withstand economic turbulence.
That’s our starting point, not our finish line.
Next comes valuation. Even a wonderful business can be a disappointing investment if you pay too much.
Where the Magic Happens
Once quality and valuation pass our tests, we examine historical dividend growth and estimate what that growth could mean for our future income.
YOC helps us visualize the long-term dividend return potential of an investment, not determine whether the stock is attractively priced today.
Consider this:
A 3% starting yield growing at 10% annually becomes a 7.1% annual dividend return on our original investment after only nine years.
That’s without reinvesting a single dividend.
And if the business continues growing its dividend, our annual income keeps climbing.
No heroic share price forecasts required.
Of course, future dividend increases are never guaranteed. That’s why quality, valuation and ongoing monitoring remain at the heart of our process.
Fifteen Years of Dividend Growth. The Results Speak for Themselves.
The chart below showcases our All-Canadian DGI Portfolio, a select group of quality businesses from our Canadian Watchlist (The List), each with at least 15 consecutive years of dividend increases.
We compare today’s dividend yields with the Yield on Cost (YOC) investors would have achieved by purchasing these companies 10 or 15 years ago and holding them through today, without reinvesting dividends.
The numbers tell a powerful story. What started as a modest dividend yield has, in many cases, grown into an impressive double-digit annual income return on the original investment. No additional capital required. Just quality businesses consistently growing their dividends over time.
A company that consistently grows its earnings and dividends can build substantial wealth, even when its share price temporarily disappoints.
That’s the magic of dividend growth investing. The longer you own a quality dividend grower, the harder your original investment can work for you.
The Takeaway
Jeff Bezos made a powerful observation about long-term thinking in his 2011 interview with WIRED:
Bezos explained that extending your time horizon lets you pursue opportunities shorter-term thinkers cannot.
The same principle applies to dividend growth investing.
Most investors are focused on the next quarter, the next earnings report, or the next move in share prices. We’re focused on what a quality business can deliver over the next seven to ten years and beyond.
That’s where Yield on Cost reveals its magic.
A modest dividend yield today can become an extraordinary annual income return tomorrow. Not because we predicted the market, but because we bought quality businesses at sensible prices and gave their dividends time to grow.
Our competitive advantage isn’t necessarily knowing more than other investors. It’s being willing to wait longer.
The market rewards patience, but few investors are willing to give it enough time.
We are.
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: +6.7% year-to-date
Dividend Announcements Last Week: None
Earnings Reports Last Week: None
Earnings Reports This Week: One
Top Performers Last Week:
Loblaw Companies Limited (L-T), up +11.85%.
Waste Connections (WCN-N), up +9.86%.
Dollarama Inc. (DOL-T), up +7.62%.
Worst Performer Last Week:
Toromont Industries (TIH-T), down -1.98%.
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.
Each month, in the last week, I will share the updated watchlist for our American dividend growers (The List-USA). I will show the watchlist after the Canadian watchlist above.
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.
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From relevant news and quarterly earnings to the latest dividend announcements, we highlight what matters most and explain what it means for dividend growth investors.
