This week we unveil our 2024 version of 'The List'; Our watchlist of the top Canadian dividend growth stocks for the year ahead
MP Market Review - December 29, 2023
Summary
This is a weekly installment of our MP Market Review series, which provides updates on the financial markets and Canadian dividend growth companies we monitor on 'The List'.
Last week, 'The List' was up with a 2023 price return of +5.8% (capital). Dividends increased by +8.7% in 2023, highlighting the growth in the dividend (income).
Last week, there were no dividend announcements from companies on 'The List'.
Last week, there were no earnings reports from companies on 'The List'.
No companies on 'The List' are due to report earnings this week.
The List (2023)
The Magic Pants List includes 27 Canadian dividend growth stocks. Each has raised its dividend annually for the last ten years (or longer) and has a market cap of over a billion dollars. Based on these criteria, companies on ‘The List’ are added or removed annually on January 1. 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 newsletter, readers gain a deeper understanding of how to implement and benefit from our Canadian dividend growth investing strategy.
For those interested in something more, please upgrade to a paid subscriber; you get the enhanced weekly newsletter, access to premium content, full privileges on the new Substack website (magicpants.substack.com), and DGI alerts whenever we make stock transactions in our portfolio.
Performance of 'The List'
Last week, 'The List' was up with a 2023 price return of +5.8% (capital). Dividends increased by +8.7% in 2023, highlighting the growth in the dividend (income) over the last calendar year.
The best performers last week on 'The List' were TFI International (TFII-N), up +2.77%; Metro (MRU-T), up +1.96%; and Stantec Inc. (STN-T), up +1.82%.
TC Energy Corp. (TRP-T) was the worst performer last week, down -2.36%.
DGI Clipboard
“If you look for companies that can raise their dividends year after year without milking operations, you will automatically be lead to high quality stocks.”
- Edmund Faltermayer, Fortune magazine, October 1990
Our watchlist of the top Canadian dividend growth stocks for 2024
The year 2023 is now in the past. Last week, I presented the criteria for constructing our watchlist:
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.
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 newsletter, readers gain a deeper understanding of how to implement and benefit from our Canadian dividend growth investing strategy.
Here is ‘The List’ for 2024:
We have removed Algonquin Power & Utilities (AQN-N) from 'The List' as it reduced its dividend in 2023 and no longer qualifies. In its place, we have added two new companies: Manulife Financial (MFC-T) and Thomson Reuters (TRI-N) for 2024.
Manulife Financial recently met our minimum criteria of 10 consecutive years of dividend growth, transforming itself from a high-yield, slow-growth life insurance company to one with a high-growth global wealth and asset management business. Manulife boasts a ten-year dividend growth streak, starting with a yield of 5.0% and a 10-year annualized dividend growth rate of approximately 10%. Over the past decade, it has proven to be an above-average income generator, with a historical growth yield (yield on cost) of 7% on a purchase made ten years ago. Holding onto strong dividend growers for the long term can indeed surpass average historical market returns with dividends alone.
Thomson Reuters was previously on 'The List' but exhibited more characteristics of a 'growth-only' stock due to its sluggish dividend growth. However, the company has recently accelerated its dividend growth rate at a double-digit pace, prompting us to reinstate it on 'The List.' We are also optimistic about the company's significant investments in artificial intelligence in its product offerings and acquisitions. Thomson Reuters holds a thirty-year dividend growth streak, starting with a yield of 1.3%, and a 5-year annualized dividend growth rate of approximately 5.3%. It has delivered above-average total returns (15.7% CAGR) over the past decade, challenging the notion that market-beating returns are impossible with a dividend growth investing strategy.
Under our set criteria, companies on 'The List' are reviewed annually on January 1, leading to additions or removals. Weekly updates ensure that prices and dividends remain current. 'The List' for 2024 comprises 28 companies strategically diversified across nine sectors within the Canadian economy.
In this week’s issue, we’ll look at the customary retirement advice handed out to older investors and how misleading it is and then update our readers on the latest news surrounding Franco Nevada (FNV-N)…
