Timely Ten: Top Dividend Growth Stocks You Need on Your Radar
MP Market Review - June 13, 2025
Summary
Welcome to this week’s MP Market Review – your go-to source for insights and updates on the Canadian dividend growth companies we track on The List! While we’ve expanded our watchlists to include U.S. companies, The List-USA, our Canadian lineup remains the cornerstone of our coaching approach.
Don’t miss out on exclusive newsletters and premium content that will help you sharpen your investing strategy. Explore it all at magicpants.substack.com.
Your journey to dividend growth mastery starts here – let’s dive in!
Last week, dividend growth stayed the same with an average return of +6.9% YTD (income).
Last week, the price of The List was up from the previous week with an average return of +7.3% YTD (capital).
Last week, there were no dividend announcements from companies on The List.
Last week, there was one earnings report from a company on The List.
This week, no company on The List will report earnings.
DGI Clipboard
"Current yield, using its own historic yield as a guide, is, in my view, a fine valuation measure."
— Tom Connolly
Timely Ten: Top Dividend Growth Stocks You Need on Your Radar
Intro
Below are the ten most undervalued dividend growth companies (according to dividend yield theory) from our Canadian and American watchlists, based on last Friday's closing prices.
One month typically isn't sufficient for stocks in the Timely Ten to move entirely off the list unless they're already positioned near the bottom. It's more effective to monitor shifts in rankings to identify promising candidates that may be on the move.
Last month, we anticipated Toronto Dominion Bank’s (TD-T) upward momentum. As expected, TD has now exited the Timely Ten (CDN) list and continues to deliver strong performance. With our full position in this high-quality Canadian bank firmly established within the Wealth-Builder Model Portfolio-CDN, we’ll continue to benefit from its solid dividend growth and ongoing capital appreciation until it reaches overvalued territory.
Enbridge Inc. (ENB-T) has taken TD's place in the tenth spot. Other positions from last month remain relatively stable, although Enghouse Systems Limited (ENGH-T) continues to hold the top undervalued position for several months in a row, signaling ongoing concerns.
The Timely Ten (USA) presents more noticeable changes. Starbucks (SBUX-Q) declined four spots to eighth due to a recent stock rally. Conversely, Essential Utilities (WTRG-N) advanced two positions on price weakness, while Domino's Pizza Inc. (DPZ-Q) made the most significant jump, climbing from fifteenth to tenth place.
Significant jumps, such as last month’s UnitedHealth Group and Domino’s Pizza Inc., this month are worth a closer look. We always start our research with two valuation charts and then decide if a deeper dive is warranted.
The 10-Year Yield Chart for Domino’s Pizza highlights its current undervaluation, with the yield significantly above the decade-long average. Since yield and price move inversely, a reversion to the mean suggests potential upside for the stock.
The 10-Year Dividend Growth vs. Price Growth Chart also reveals that Domino’s stock price has recently lagged its historical alignment with dividend growth. This divergence increases the likelihood of future price appreciation.
With favourable results on both valuation metrics, we will proceed with deeper analysis on this high-quality dividend grower.
With a couple of notable shifts this month, the Timely Ten lists present compelling starting points for further research. Each stock has already passed our rigorous screening process, so much of the heavy lifting has been done. If you'd like to skip the research component and invest alongside us in our model portfolios, consider subscribing to our paid service.
Timely Ten
Here's a recap on how we select our Timely Ten:
Step three in our process involves monitoring our quality dividend growers regularly, which can become quite challenging depending on the number of companies we track. Fortunately, we rely on 'The List' instead of the vast array of stocks in the index, which streamlines our task. Nevertheless, we continually seek methods to enhance our efficiency. Through dividend yield theory, we've discovered an approach that has proven remarkably effective in aiding us with our efforts over the years.
Dividend yield theory is a simple and intuitive approach to valuing dividend growth stocks. It suggests that the dividend yield of quality dividend growth stocks tends to revert to the mean over time, assuming that the underlying business model remains stable. In practical terms, if a stock pays a dividend yield above its ten-year average annual yield, its price will likely increase to return the yield to its historical average. Knowing that price and yield go in opposite directions, this theory helps us find stocks poised for a favourable price correction.
We have pre-screened our candidates using the criteria we initially laid out in building our watchlists. This helps us considerably narrow the universe of investable stocks.
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.
Next, we rank our Canadian and American watchlists based on how far each stock's price is below its fair value (Low Price), as determined by dividend yield theory. To find fair value, divide the current dividend (Dividend) by the stock's historical high yield (High Yield).
Since price and yield move in opposite directions, a lower price results in a higher yield, and vice versa. The ten companies above the thick black line have a current price (Price) below fair value (Low Price). Put simply, these stocks have a current dividend yield higher than their historically high yield. According to dividend yield theory, these companies are sensibly priced and have the highest probability of a price increase in the short term. These are our Timely Ten.
Wrap Up
When making investment decisions, always prioritize a company's 'quality' over a 'sensible price’. For more details on our quality indicators, download our Free Guide to Finding Quality Dividend Growth Stocks here.
If you're a new investor looking to build positions in the 'Timely Ten,' now is the perfect time to start your research and act.
Join as a paying subscriber to gain full access to this post and exclusive, subscriber-only content. Plus, get real-time DGI alerts from our model signaling service whenever we make trades in our portfolios. We do the work; you stay in control. Subscribe today and take your dividend growth investing to the next level!
DGI Scorecard
The List (2025)
The Magic Pants 2025 list includes 29 Canadian dividend growth stocks. Here are the criteria to be considered a candidate on ‘The List’:
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 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'
Last week, dividend growth stayed the same, with an average return of +6.9% YTD (income).
The price of 'The List' was up from the previous week, with an average YTD return of +7.3% (capital).
Even though prices may fluctuate, the dependable growth in our income does not. Stay the course. You will be happy you did.
Last week's best performers on 'The List' were Dollarama Inc. (DOL-T), up +10.02%.; Bell Canada (BCE-T), up +3.99; and Franco Nevada (FNV-N) up +2.72%.
Enghouse Systems Limited (ENGH-T) was the worst performer last week, down -4.82%.
In the News section below, you will find two articles that provide key insights on spiraling government debt and how psychological biases undermine investment performance. Both will help you navigate today’s uncertain markets.
Keep reading with a 7-day free trial
Subscribe to Magic Pants Dividend Growth Investing-MP Market Review to keep reading this post and get 7 days of free access to the full post archives.