Both stocks in this piece came off the same screen: a DSR PRO rating of at least 4, a Dividend Safety score of at least 4, and a price under 21 times earnings. In a market where almost everything looks expensive, buying a quality business for less than 20 times earnings feels rare.

One is an American defense giant that fell 35% this year. The other is a Canadian packaging company most people have never heard of. Different countries, different sectors, same reason they caught my eye. The price moved down while the business kept moving forward.

Disclosure: I own CCL Industries. I do not own Northrop Grumman. This is education, not advice. Do your own due diligence.

What value means on this buy list

A cheap stock and a good value are not the same thing. A falling price on a broken business is a trap. A falling price on a healthy business is an invitation to look closer.

So we start with the dividend triangle: revenue, earnings, and dividend growth over five years. Then we check whether the dividend is safe, whether the balance sheet can carry the company through a rough patch, and how today’s valuation compares to the stock’s own history. Not the market’s average. Its own record.

When a stock trades below its usual multiple and the three lines of the dividend triangle still point up, the discount is worth a closer look. Both names below fit that description, in very different ways.

Northrop Grumman (NOC): Beaten Down, Not Broken

Investment thesis: Northrop is a leading defense-technology contractor with key roles in the B-21 bomber and F-35 programs and a lock on high-altitude, long-endurance drones. About 95% of sales come from government contracts, and the backlog sits near a record $96B, which gives years of revenue visibility. Rising defense budgets across the US and its allies keep demand climbing. The dividend triangle is uneven, but the dividend itself has grown close to 10% a year for five years.

Here is the tension. Revenue grew 2.4% a year over five years and earnings 2.9%, yet the dividend climbed 9.7%. That gap is why the payout ratio matters. Right now it sits near 31%, with a cash payout ratio near 40%, so there is plenty of room to keep raising. The latest hike was a strong 12%, to $2.31 per share, and the dividend growth streak now runs 23 years.

The story this year is the price. NOC fell from about $768 to roughly $499, a drop near 35%, even as the backlog hit that record $96B. The decline came from margin worries on the B-21, where cost-plus contracts carry lower profitability, plus a wave of analyst target cuts across the sector. The thesis did not break. Expectations got ahead of the stock, the company gave conservative guidance, and shares fell after earnings.

That is the classic setup. Decent numbers, a stock that drops because the market wanted more.

The valuation now tells the value story. NOC trades around 16 to 17 times earnings against a 5-year average near 19. The forward yield is close to 2%, above its 5-year average near 1.6%, another sign the price has fallen relative to the business. The question for your research is whether you trust management to hit its 2026 margin and EPS targets. That is what turns the discount into a return.

What to watch: B-21 production progress and any margin update, since that is the swing factor. New defense awards and the backlog trend. Free cash flow against the $3.1B to $3.5B target for 2026. The next earnings date is July 21, 2026.

CCL Industries (CCL.B.TO): The Boring Compounder

Investment thesis: CCL is a global leader in specialty labels and packaging, serving consumer goods, healthcare, automotive, and technology through four segments. It grows low single digits organically and bolts on smart acquisitions, from Avery in 2013 to Checkpoint, Innovia, and the pending Sleever deal. A diversified product line, a global footprint, and steady cash flow make it a stable long-term holding. The dividend triangle is close to perfect.

This is the opposite profile from Northrop. Revenue grew 7.1% a year over five years, earnings 6.5%, and the dividend 11.75%. All three lines point up and stay close together, which is exactly what you want to see. The Lang family holds a controlling stake, so management runs the business like owners.

The dividend is well protected. The payout ratio sits near 28% and the cash payout ratio near 27%, among the lowest on the buy list. After a smaller bump in 2020, CCL delivered double-digit raises almost every year since. The 2026 increase was 12.5%, to $0.36 per share, and the streak now stands at 24 years.

CCL is the steady name here, up about 18% over the past year, so this is less about a crash and more about valuation discipline. The stock trades near 17 to 18 times forward earnings against a 5-year average close to 19, so you are paying near fair value, not grabbing a deep discount. The live risk is margins. Aluminum, resin, and energy costs jumped in early 2026, and an equipment outage at a Pennsylvania plant added pressure. The question is whether CCL can keep its earnings growing while it passes those costs through.

I hold CCL and treat it as a core holding. It is a boring business. Labels and packaging will never trend on social media. They do print reliable cash flow, year after year, and that is the point.

What to watch: the Sleever acquisition close and how fast it contributes. Input-cost inflation in aluminum and resins, and how much CCL can pass on. The Pennsylvania facility’s return to full capacity. The next earnings date is August 11, 2026.

Two flavors of value

These two names show that cheap comes in more than one form.

Northrop is a beaten-down leader. The price fell hard, the multiple compressed below its history, and the payoff depends on management delivering on the B-21. More reward if they do, more risk if they stumble.

CCL is a steady compounder at a fair price. No drama, a near-perfect dividend triangle, and a cost-inflation question to monitor. Less upside from the valuation, more certainty in the business.

Same screen, two very different bets. That is what a buy list is for. A starting point for your own work, not a finish line.

The Hard Part Is Knowing When to Buy

Finding NOC and CCL took one screen and twenty minutes. Knowing when to buy them is the part that trips up most investors. A stock is down 35%. Is that a gift or a warning? A stock is at fair value. Do you wait, or do you start?

That is what I teach in Dividend Simplified. It is a short, practical course that walks through my buy process, my sell process, and how to read a quarterly earnings report without a finance degree. Bite-sized videos, PDF guides, and the same checklists I use. The whole thing costs $15.

If you have ever stared at a stock like Northrop and frozen, this course was built for you.

Get Dividend Simplified here

The post 2 Stocks on My Buy List: Northrop Grumman and CCL Industries appeared first on The Dividend Guy Blog.

Same reminder as before. A moat protects a company’s margins, and those margins are what pay and grow the dividend. The stronger the moat, the safer the raise. These two are the stickiest moats of all.

*Disclosure: This is education, not advice. Do your own due diligence.

What a moat does for your dividend

At Dividend Stocks Rock, the moat is among the first things we look for in our investment thesis, not the last. It is not about how big a company is. It is about how hard it is to replace.

Here is the chain. A moat creates pricing power. Pricing power protects margins. Protected margins fund a dividend that continues to rise. Switching costs and network effects build that wall about as high as it goes.

Switching costs: when leaving hurts too much

A switching cost is the price your customer pays to walk away. When the price is high enough, customers stay even after a cheaper option appears. That is pricing power you can bank on.

Switching costs come in three flavors.

• Financial. Real money was lost in the move. Canceled contracts, new equipment, lost data, retraining bills.
• Procedural. Time, effort, and risk. Moving to a new system can take months and break things along the way. Most teams decide it is not worth the headache.
• Relational. The human glue. Years of service history, trusted contacts, and habits nobody wants to rebuild.

Microsoft is the clearest example anywhere. A company runs its email, documents, spreadsheets, and cloud on Microsoft, and its people have used those tools throughout their careers. Pulling all of that out and retraining everyone is a nightmare most leaders will never sign up for. So they renew, and they pay a little more each year.

S&P Global is the same idea in the market’s plumbing. Its ratings, indices, and data are wired into how the financial world runs. A bond issuer cannot casually drop its rating agency. An asset manager cannot unplug from the S&P 500 without a hard conversation with clients. That lock-in is why both companies raise prices slightly every year and keep getting paid.

The network effect: every new user makes it stronger

The network effect is the rare moat that grows on its own. Each new user makes the service more valuable to every other user. The product improves the more people use it, and a rival cannot copy that with money alone.

It also comes in three flavors.

• One-sided. More users of the same kind add value for each other. A messaging app is only useful if your friends are on it too.
• Two-sided. Two different groups feed each other. More buyers attract more sellers, which attract more buyers.
• Complementary. A web of products that reinforce one another, so leaving one means leaving them all.

Visa and Mastercard are textbook two-sided networks. More cardholders pull in more merchants. More merchants pull in more cardholders. That loop has been spinning for decades, and a new entrant cannot buy its way onto both sides at once. Both businesses run light on assets and heavy on margin, which is exactly why the dividend keeps growing.

How these moats show up in the dividend triangle

You do not have to take a moat on trust. It leaves a mark.

A switching-cost or network business tends to show steady revenue, smooth earnings, and a dividend that rises without pushing the payout ratio higher. When customers cannot easily leave, the company raises prices slightly each year and maintains its margins through the cycle.

If the moat story is loud but the margins swing and the dividend growth stalls, the moat is thinner than the pitch. The triangle settles the argument.

When the moat slips

No moat lasts forever. A network is only a fortress as long as everyone still wants to be inside it. Switching costs fade the moment a rival removes the friction. Plenty of businesses looked untouchable right up until a new model made leaving easy.

So we re-check the moat the same way we check the dividend. The day the margins start slipping is the day the thesis needs a second look, long before the dividend is ever at risk.

Five moats, one question

Across these two articles, we have walked through all five sources of a moat: intangible assets, cost advantages, economies of scale, switching costs, and network effects.

When you analyze a stock, ask one question. Does it have a moat, and what is it built on? Answer that, and you can judge how long a company can defend its profits, and how safe its dividend really is. Everything else is detail.

Skip the Screening and Start With 300 Strong Candidates

Companies with real moats are the backbone of a dividend growth portfolio. I built the Dividend Rock Stars List to help you find them faster. It tracks about 300 dividend stocks with growing trends, already sorted, so you can spot strong candidates without hours of screening.

Enter your name and email below, and I will send the instant download straight to your mailbox.

The post Economic Moats: How Switching Costs and Network Effects Protect Your Dividend appeared first on The Dividend Guy Blog.

First, why does this matter to a dividend investor? A moat protects a company’s margins. Healthy margins are what pay and grow the dividend. Find the moat and you find the reason a payout can keep rising for twenty years. Miss it and you are guessing.

*Disclosure: This is education, not advice. Do your own due diligence. 

What a moat does for your dividend

At Dividend Stocks Rock, we treat the moat as part of the investment thesis, not a nice-to-have. A moat is not about size. It is about being hard to replace.

The chain is simple. The moat creates pricing power. Pricing power holds up margins. Steady margins fund a rising dividend. A long, smooth dividend growth streak is often a moat showing up in the numbers.

Intangible assets: brands, secrets, and know-how

Intangible assets are the moats you cannot touch. Brand equity, intellectual property, and proprietary technology. They are hard to measure and harder to copy.

Start with the brand. A strong brand buys pricing power. Coca-Cola can charge more than a generic cola, and people still reach for the red can. It pairs that brand with a real trade secret, the formula itself, which is intellectual property no competitor can legally copy. 

McDonald’s is the same idea on a different menu. Open a no-name burger joint, and you fight for every customer. Hang the golden arches and the line forms on day one. That brand pull is why McDonald’s has raised its dividend for decades.

A strong brand does not guarantee profits, though. The point is pricing power, not fame. Plenty of famous names operate on thin margins and have shaky payouts.

Proprietary technology is the third intangible. A process or design that rivals cannot easily reproduce. Broadcom designs the specialized chips that run modern networks, smartphones, and data centers, then layers hard-to-replace infrastructure software on top. That mix of silicon and software fuels one of the fastest dividend growth records in tech.

Intangibles can vanish

Here is the catch with intangibles. They can disappear fast. Before Michael Jordan signed with Nike, Converse was the basketball shoe leader. Nike loaded the deal with royalties and perks, landed Jordan, and rewrote the market. Today, Converse is a small piece of Nike, worth a fraction of what it once commanded. A brand moat is real until the day it is not.

Cost advantage: be the low-cost winner

A cost advantage means you make the product or deliver the service cheaper than anyone else. That edge plays out two ways.

Crush on price. Produce cheaper, sell cheaper, take share. Costco is the model. It acts as the largest customer for many suppliers, secures the best prices, and passes the savings on to members. Low prices bring members, membership fees fund the model, and the dividend keeps climbing.

Match the price, keep the difference. When the market sets one price, the low-cost producer simply earns fatter margins. Canadian Natural Resources is a clean energy example. Its long-life, low-decline reserves let it pump oil and gas at a low cost, ramp up when prices rise, and stay profitable when they fall. That cost edge turns CNQ into a cash flow machine.

Walmart runs the same low-price playbook in retail. In transport, the railroads are the cheapest way to move freight across land, which is part of why Canadian National and Canadian Pacific are such durable businesses.

A cost advantage is also a weapon. “Your margin is my opportunity,” Jeff Bezos once said. Barnes & Noble looked safe until Amazon showed up with a leaner model and a relentless focus on cost. Barnes & Noble survived, but it never thrived again.

Efficient scale: markets that fit only a few

Efficient scale is the quiet moat. It shows up when a market is too small to support more than one or a few players, so nobody bothers to build a competitor.

Canadian banking is the textbook case. The Big Six run an oligopoly that controls most of the country’s banking, and the rules make it almost impossible for a seventh national challenger to emerge. Royal Bank sits at the top of that structure with the strongest profile of the group.

Railroads and pipelines share the trait. There is no point in laying a second rail line or pipeline beside one that already works. The cost is prohibitive, and both routes would bleed money. That is why a pipeline like Enbridge can move a huge share of the continent’s energy and keep paying a growing dividend.

One caution. Efficient scale invites regulation. Governments dislike markets with little competition, so price caps and oversight are part of the territory. It is a strong moat, not a free pass.

How these moats show up in the dividend triangle

You do not have to take a moat on trust. It leaves a mark.

A brand, a cost edge, or a scale advantage all land the same way in the numbers: steady revenue, smooth earnings, and a dividend that rises without pushing the payout ratio higher. Real pricing power means a company lifts prices a little each year and keeps its margins through the cycle.

If the moat story is loud but the margins swing and the dividend growth stalls, the moat is thinner than the pitch. The triangle settles the argument.

Find the moat before you buy

When you analyze a stock, start with one question. Does it have a moat, and what is it built on? Switching costs, the network effect, a brand, a cost advantage, scale, or some mix of them?

Answer that and you can judge how long a company can defend its profits, and how safe its dividend really is. Everything else is detail.

Skip the Screening and Start With 300 Strong Candidates

Companies with real moats are the backbone of a dividend growth portfolio. I built the Dividend Rock Stars List to help you find them faster. It tracks about 300 dividend stocks with growing trends, already sorted, so you can spot strong candidates without hours of screening.

Enter your name and email below, and I will send the instant download straight to your mailbox.

The post Economic Moats: How Brands, Low Costs, and Scale Protect Your Dividend appeared first on The Dividend Guy Blog.

I see buying and selling as two sides of the same coin. The reasons you use to buy a stock should be the same reasons you use to sell it. Get that right and you stop trading on price swings.

Ask yourself this. Does it make sense to sell a stock because it dropped 25%, while refusing to buy another because it climbed 25%? It doesn’t. Yet that is how most portfolios get managed.

You don’t need a CFA. You don’t need a dozen spreadsheets. You need a repeatable way to look at a business. Here is mine, in three parts: identify, understand, take action.

*Disclosure: This is education, not advice. Do your own due diligence.

Identify: start by eliminating

The first step of stock analysis is not research. It is elimination.

You cannot review 9,000 public companies. So you need a starting point. The easiest way is to pick your cherries from the best fruit basket. That is why I focus on dividend growth stocks. Those companies have already proved that their models work. They throw off enough cash to pay shareholders and keep growing the business.

There are many doors into that basket. Here are the eight I see most often.

Where good ideas come from

1. Top-down. You start with the big picture, the economy, rates, geopolitics, then narrow to the sectors that benefit, then to individual names. “Rates are falling, so utilities and REITs may benefit, so I will look at quality names there.” It works when your macro call is right, which is harder than it sounds.
2. Bottom-up. You ignore the macro noise and hunt for great businesses one at a time. You look at revenue, earnings, and dividend growth. The dividend triangle lives here. A great business compounds through most environments, so why try to time the economy?
3. Stock screeners. You set your criteria and let the screener hand you a shortlist. This is a tool, not a strategy. It fits inside top-down or bottom-up. The catch: a screen only sees what is quantifiable, so the qualitative work still falls on you.
4. Observation. You notice the line is always out the door at Starbucks and start there. I never use it. I have been a BCE customer for ten years and never wanted a single share.
5. Peer and competitor analysis. You own a company you like, so you study its rivals and suppliers. Back in 2016, I bought Amazon after comparing Walmart, Target, and Amazon. Amazon won that round. It sat in my portfolio as a rare non-dividend payer for years.
6. Thematic investing. You pick a long-term trend you believe in, aging demographics, AI infrastructure, the energy transition, and find the companies riding it. Top-down, but built on structural shifts instead of the cycle.
7. Following smart money. Insider buying and fund manager filings can spark ideas. They are dangerous as recommendations. I avoid them. I can never know why an insider sells. The company might be in trouble, or they just want to buy a villa.
8. News and events. Spinoffs, dividend hikes, earnings surprises, 52-week lows on quality names. I call this FOMO investing. A recent headline can’t taint how you see the next ten years.

My own approach combines two of these. I start with a screener to surface companies with a strong dividend triangle. Then I sort my research by sector, based on what I already own and which themes could move the market over the next five to ten years.

Read the dividend triangle first

The dividend triangle is not three financial metrics. It is a ten-year story about a business.

The three lines are revenue growth, earnings growth, and dividend growth. If you can explain why each one moved the way it did, you know the company inside out.

Revenue tells you how the company grows. A big jump usually means an acquisition. A flat line means a struggling business, often paired with a fat yield. A roller coaster means you are looking at a cyclical name.

Earnings, read against revenue, tell you about margins and cash flow. When earnings lag revenue, free cash flow tends to lag too. When revenue is soft but earnings still climb, the company is squeezing out efficiency. That is fine, but it cannot last forever. Sooner or later, sales have to grow.

Dividend growth tells you how confident management is. When the raises slow down, dig in. Sometimes it is prudence ahead of a storm. Sometimes it is a structural crack.

The relationship between the three matters most. I do not like seeing earnings grow 4% while the dividend jumps 8% to 10% a year. That pushes the payout ratio higher every year, and it does not last. In a perfect world, all three grow at the same pace. Easier said than done.

That one chart covers about 80% of the work.

Understand: build your conviction

The first part was about numbers. I look at the numbers before I fall in love with the story. Numbers speak louder than words.

Once the numbers make sense, it is time to understand what I am about to own. Before I click buy, I write down my investment thesis. That is my tool for conviction. Once you have looked at a business from every angle, you stop checking the market every day.

Here is my test. You should be able to explain the good and the bad of a business to a 12-year-old. If you can’t, you do not understand how the company makes money or what could break it.

Write the bull case (Costco Case)

Your thesis is the list of reasons you like the company. Break it into three blocks.

Playbook. How does it make money? The structure, the core products, the operational edge. Costco sells staples in bulk at thin margins and collects membership fees. Over 70% of operating income comes from those fees. That makes revenue predictable and keeps customers loyal.

Growth vectors. What drives future revenue and earnings? Costco continues to expand overseas, with strong results in Asia. Its e-commerce and same-day delivery are gaining ground. It keeps opening warehouses in North America. The map is not full yet.

Economic moat. Why can it defend its share and its margins? Costco’s moat is cost leadership and loyalty. Renewal rates top 90%. Its scale lets it squeeze suppliers and pass the savings on, which protects its reputation for low prices.

Write the bear case (Costco Case)

Every company has a downside. Writing it out helps you stay calm when the stock drops, because you will know whether the market is wrong or the business is. Break the risks into three blocks.

Business vulnerabilities. The internal cracks. Costco leans on physical traffic and a narrow product range. A supply chain shock or cost inflation could compress margins fast. The stock is also priced for perfection. Miss a quarter and it can fall more than 20% in a year.

Industry and market threats. Zoom out. A long stretch of high inflation could erode Costco’s pricing edge. Wage inflation could pressure its cost base more than that of rivals that outsource labor.

Competitive landscape. Who is gaining or losing ground? Walmart and Amazon press on grocery and e-commerce. This block is also where you might find a better idea. Study Costco against Walmart and you may decide Walmart is the stronger buy.

Dividend safety is dividend growth

Now the question that matters most. Will I get paid, and will my paycheck grow every year?

For me, dividend safety and dividend growth are the same thing. A safe dividend has to rise. If a company can’t raise its payout, the dividend is already low quality.

Picture retiring in 2006 on a portfolio paying $30,000 a year. Now, picture that payment never moving. To buy today what $30,000 bought back then, you need about $49,581. A frozen dividend is a 40% cut to your lifestyle.

The first check is a healthy dividend triangle. Then look at how the dividend has climbed year after year, and watch the payout ratio over time. If earnings grow as fast as the dividend, the payout ratio holds steady. That is the goal.

When the numbers leave a gap

The dividend triangle and the standard metrics answer most of your questions. Sometimes you finish and still have a gap. A number that makes no sense. A trend you can’t explain.

That is not a problem. It is a signal worth following.

Before you move to valuation, ask yourself five questions:

1. Do I understand where the revenue comes from and why customers pay for it?
2. Can I explain why the earnings trend looks the way it does?
3. Do I know the main competitors and why this company wins or loses against them?
4. Is there anything in the debt or balance sheet I cannot explain?
5. Has anything changed in the last two years that the numbers have not caught up to yet?

If you answer “no” or “not sure” to any of them, that is where your next 20 minutes go. Start with cash flow from operations, free cash flow, long-term debt, and the payout ratio. Then read the financial statements until you have a clear answer.

Take action: valuation is context, not the trigger

Valuation is not the trigger. It is the context.

The best business in the world bought at a crazy price will lag for years. A solid business bought at a fair price compounds. That is the whole game. Not the cheapest stock. A quality business at a fair price.

Here is the hard part. You will never know for sure whether the price is too high or too low. Fancy models can boost your confidence, but they all run on assumptions. Plenty of the stocks I bought at all-time highs and “ridiculous” valuations turned into my best performers.

I use two checks to add context. They make valuation feel less like astrology.

Price-to-earnings against its own history. Compare today’s P/E to the company’s average over the past 5 to 10 years. Not the market. Its own record. If a name usually trades at 18 times earnings and sits at 14, that is a possible entry. If it trades at 26 with no change in growth, you are paying up for nothing.

Always ask why the discount exists. The business or the environment might be changing. BlackBerry once traded under 8 times earnings, with no debt and $4 billion in cash, right before the iPhone buried it.

Dividend yield against its own history. Same logic. If a stock typically yields 2.5% and now yields 3.5%, its price has fallen relative to its dividend. If nothing changed in the business, you may be looking at a fair entry.

Together, these two give you a clear yes-or-no answer without a spreadsheet.

Then there is the waiting trap. Holding out for the perfect price is one of the most expensive habits in investing. If the business is strong, the thesis is solid, the risks are clear, and the valuation is reasonable, the move is usually to start a position.

You do not need to buy the bottom to make money. You only need to avoid a price that makes a good return almost impossible. Stop using uncertainty as an excuse. There will always be uncertainty. Great companies survive, adapt, and thrive anyway.

Full Process in Only Three Parts!

You now have a full stock analysis process in three parts: identify, understand, take action.

It is not the most sophisticated method out there. It works, you can run it in one to two hours per stock, and it has held up through every market I have seen in the last decade.

The investors I have watched win over the long run do not own the best spreadsheets or the fastest news feeds. They follow a repeatable process, stay calm when markets turn emotional, and let the numbers lead instead of the headlines.

Process beats instinct. Numbers beat narratives. Conviction beats hope.

One last note before I let you go. You will make mistakes. You will hold losers. Once you accept that and start judging your portfolio as a whole rather than 30 separate bets, investing gets a lot more fun.

Skip the Screening and Start With 300 Strong Candidates

Finding companies with a strong dividend triangle takes time. I built the Dividend Rock Stars List to give you a head start. It tracks about 300 dividend stocks with growing trends, already sorted so you can spot buy candidates faster.

Enter your name and email below and I will send the instant download straight to your mailbox.

The post How to Find and Analyze Stocks to Buy appeared first on The Dividend Guy Blog.

In 2016, I made a life-changing decision: I took a sabbatical, put my family in a small RV, and we drove all the way to Costa Rica.

Upon my return in 2017, I officially quit my job as a private banker at National Bank and started working full-time on my baby: Dividend Stocks Rock. I also decided to manage my pension account held at the National Bank. I’ve built and managed this portfolio publicly since 2017 to create and track a real-life case study.

In August 2017, I received $108,760.02 in a locked retirement account. Locked means I can’t add capital to the account, and growth is only generated through capital gains and dividends. I don’t report this portfolio’s results to brag about my returns or to suggest you follow my lead. My purpose has been solely to share with our members how I manage my portfolio with all the good and the bad that inevitably takes place each month. I hope you have learned and will continue to learn from my experiences managing this portfolio.

We Have a Valuation Problem

You know that I’m not a big fan of valuation models because they rely on assumptions. And you know what we say about assumptions…

However, I’m not blind either. In the past 30 years, the S&P 500 Shiller CAPE ratio has been at a higher level only once.

But first, the results!

Performance in Review

Let’s start with the numbers as of June 2^nd, 2026 (before the bell):

Original amount invested in September 2017 (no additional capital added): $108,760.02.

• Current portfolio value: $337,629.57
• Dividends paid: $5,299.15 (TTM)
• Average yield: 1.57%
• 2025 performance: +7.34%
• VFV.TO= +12.18%, XIU.TO = +28.88%
• Dividend growth: +1.5%

Total return since inception (Sep 2017- June 2026): +210.44%

Annualized return (103 months): 14.11%      

Vanguard S&P 500 Index ETF (VFV.TO) annualized return (since Sept 2017): 16.99% (total return 284.5%)

iShares S&P/TSX 60 ETF (XIU.TO) annualized return (since Sept 2017): 13.40% (total return 194.2%)

I don’t love valuation models because they rely on assumptions, and assumptions can be dangerous. But we still need to pay attention. Over the last three decades, the S&P 500’s Shiller CAPE ratio has been higher only one time.

The Shiller CAPE ratio (Cyclically Adjusted Price-to-Earnings ratio) is a valuation measure for the U.S. stock market popularized by Nobel laureate economist Robert Shiller of Yale. It’s also called CAPE, P/E 10, or the Shiller P/E.

However, it’s not necessarily a reason to panic… not just yet anyway!

• It is a terrible short-term timing signal. The market can stay “expensive” for years or even a decade (the late 1990s and most of the 2010s–2020s are examples). High CAPE does not mean a crash is imminent.
• The “normal” level may have shifted upward. Critics argue structural changes justify a permanently higher CAPE: lower interest rates, changes in accounting rules (e.g., write-down treatment that depressed reported earnings around 2008–2009), higher profit margins, more buybacks, and a different sector mix (more high-margin tech, fewer capital-heavy industrials).
• It says nothing about individual stocks — it’s a whole-market measure.

However, it’s not a reassuring level to say the least.

But the following graph got me thinking a little further.

Last week, I did two podcast episodes about Canadian Banks (you can watch them below). While I covered their most recent earnings (which were excellent), I noticed something: Canadian banks’ dividend yields were abnormally low.

From the top of my memory, I couldn’t remember the last time I saw so many banks with a yield under 3%. 4 Banks now look like they are growth stocks and BMO is not too far behind at 3.07%.

The two metrics I like to use to see if a stock is overvalued is the PE Ratio and the dividend yield vs. their historic averages. For Canadian banks, I didn’t have to calculate the average yield over the past 5 years. They are all clearly offering their lowest yield in history!

Those two graphs are saying pretty much the same thing: investors are paying a higher price than usual for stocks.

The real question is not whether the market is overpriced. The real question is:

Are investors changing their valuation perception?

Most of the time, Canadian banks trade around 11-13 times their earnings. The Forward PE (expected PE in 12 months) is now between 13 and 16! That means investors are paying a premium of 16/13 = 23% on banks like Royal Bank, TD Bank and National Bank.

On the other side, the Canadian bank business model has greatly evolved over the past 20 years:

• Expansion in the U.S. or internationally
• Massive growth of their wealth management business segment
• Massive growth of their capital markets business segment
• Banks are not just savings and loans anymore

Since banks are not what they used to be, it’s only normal to review what price we should be paying. Ironically, you will spend hours trying to find companies growing with high-single to double-digit numbers and still trading under a PE of 20 across the rest of the market.

Maybe a shift is happening in pricing, and it’s not just banks.

Priced for perfection

We see a lot of companies trading above 30 times their earnings. I often use the expression “priced for perfection”. This means investors expect companies not only to grow their revenue, earnings and cash flow by double-digits, but they also expect them to beat estimates like we expect Aaron Judge to hit a homerun every game, or Cole Caufield to score on a Saturday night.

When it doesn’t happen, the stock gets heavily punished. A good example is Microsoft. In the past 2 years, the stock is pretty much flat (+2.85% as of the beginning of June). However, MSFT’s revenue exploded by 30% and its EPS jumped by 40%.

In the last 12 months, the stock is down 8% while revenue is up 13% and EPS up 20.5%.

That is exactly what happens when a stock is priced for perfection.

What to make of it?

Good question, right?

At this point, I want to raise the question, but I don’t necessarily have a clear answer. I see too many pieces moving at the same time to determine if we are on the edge of a bear market or the edge of another strong bull run driven by efficiency.

I wish I had a clear answer to give you today, but I don’t. The market is clearly expecting a lot from companies right now, and that could lead to serious problems.

More than ever, the focus on quality companies that can withstand a massive crisis is central to my strategy. I certainly don’t want to make any wild guesses at this point.

Smith Manoeuvre Update

The portfolio shows 13 companies spread across 8 sectors. My goal is to build a portfolio of thriving companies with a solid dividend triangle (e.g. with positive revenue, EPS and dividend growth trends). The current portfolio yield is at 1.91% with a 5-year CAGR dividend growth rate of 12.24%.

• The portfolio value is now at $36,839.47.
• The portfolio debt is at $28,000.
• Interest paid since April 2022: $2,431.58.
• Monthly contribution is set at $1,000/month.
• The annual income is $704.84, and the projected income is $791.13.
• To report my Smith Manoeuvre, I export the Excel data from my DSR PRO dashboard.

The portfolio is on its way towards generating an extra $1,000 per year in dividends. I’m not there yet, but it will happen in the first months of 2027! By then, my portfolio will be close to $50,000! That will be exciting to see a 13^th influx of $1,000 to boost the portfolio further!

Smith Manoeuvre Portfolio Summary

Here’s my SM portfolio summary as of June 2^nd, 2026 (before the bell):

Sold Brookfield Infrastructure, Bought Stantec

I sold my position in BIPC not because I don’t like the stock or that I’m spooked by recent movement, but rather in the optic of portfolio simplification. I didn’t hold BIPC anywhere else across all my accounts. Therefore, it was more of an “additional line” in my investment statement than it was a position playing a role in my portfolio.

By selling BIPC, I was able to add more Stantec at a depreciated price. I see this as a pretty good deal considering STN’s numbers aren’t slowing down while the price keeps on dropping. Its most recent quarter shows 9% revenue growth and 15% EPS growth. I will take that kind of results any day of the week!

I now have 33 positions across all my investments.

Pension Portfolio Summary

Here’s my pension plan portfolio summary as of June 2^nd, 2026 (before the bell):

Total value: $337,629.57 (+$5,771.95, +1.74% from last month).

Broadcom was priced for perfection…

Broadcom reported a robust quarter with record revenue of $22.2B (+48%) and adjusted EPS was up 85%. AI semiconductor revenue surged 143% to $10.8B, representing 49% of total revenue. Infrastructure software revenue was $7.2B (+9%). Management attributed the outsized growth primarily to accelerating AI-related semiconductor demand, noting AI semiconductor revenue of $10.8 billion that grew 143% YoY, driven by custom AI accelerators and AI networking. Despite the beat, the stock fell approximately 15% on June 4 on guidance disappointment as there are growing fears that many AI companies (such as Alphabet) are working on reducing their reliance on chip makers such as AVGO.

Brookfield keeps on generating cash

Brookfield Corporation reported a strong quarter with distributable earnings before realizations up 7% to $0.59/share and total DE of $0.66/share. Asset management led with DE of $765M and fee-bearing capital growing 12% to $614B, while wealth solutions contributed $430M at a 15% ROE and operating businesses $360M. Revenue grew 4% to $18.6B and net income surged to $1.0B from $215M. BN repurchased $470M of its own shares year-to-date at $41 average, a 38% discount to management’s $66 intrinsic value estimate, with $188B in deployable capital available. The BN-BNT merger is on track to close by year-end, combining $145B in permanent insurance capital with the platform.

CCL Industries shows good results from CCL and Avery segments

CCL Industries reported a good quarter with revenue up 2.8% to CAD $1.94B and adjusted EPS up 1.7% to $1.20. Growth was led by the CCL segment (+4.3%, organic +3.1%) and Avery (+4.3%, organic +2.4%), while Checkpoint was essentially flat (-0.2%) and Innovia declined 5.5% on volume weakness in the U.K. and Australia. An equipment outage at the Pennsylvania aluminum container facility constrained capacity for much of the quarter. Input cost inflation in resins and aluminum is being managed through supply chain levers and customer pass-throughs. CCL closed the quarter at 0.85x leverage with $999M cash, and the Sleever acquisition is expected to close in June 2026.

Home Depot is building slowly

Home Depot reported a decent Q1 FY2026 with revenue up 4.8% to $41.8B and adjusted EPS of $3.43, down 4%. Results were driven by the SRS Distribution acquisition adding incremental revenue, a 2.3% increase in average ticket size to $92.76, and continued strength in the Pro contractor segment. Comparable sales grew 0.6% overall (US +0.4%), reflecting stable underlying demand offset by a 1.3% decline in transaction count as consumers remained cautious on large discretionary projects. Gross margin contracted 75bps to 33.0% on higher acquisition-related costs. Management reaffirmed FY2026 guidance of total sales growth of 2.5-4.5% and flat to +2.0% comparable sales growth.

National Bank disappoints (WHAT???)

National Bank reported a good quarter with EPS up 13%, but it was the weakest performance of all 6 major Canadian banks!

Personal & Commercial was up 18%, driven by the growth in loan and deposit volumes, lower PCLs, but partly offset by a lower net interest margin. PCLs were down $257M, mainly due to initial PCLs of $230M on acquired non-impaired CWB loans recorded in 2025. Wealth was up 18%, driven by growth in all types of revenues, mainly fee-based revenues. Capital Markets was down 3%, mainly due to a decrease in global markets’ revenues, partly offset by an increase in corporate and investment banking revenues.  U.S. & Intl was up 10%, driven by a strong performance from ABA bank and lower PCLs. NA increased its dividend by 6%!

Here is a video about National Bank’s disappointing quarter:

Royal Bank stays the king of banks

RY reported a robust quarter with EPS up 25%. By segment: Personal Banking was up 17%, primarily driven by higher net interest income reflecting average volume growth of 2% and higher spreads. Commercial Banking was up 43%, primarily driven by lower PCL. Last year, PCLs increased significantly due to tariff concerns. Wealth moved up 28% due to higher fee-based client assets reflecting market appreciation and net sales. Insurance was up 3% and Capital Markets were up 23%, driven by higher revenues in Global Markets and Corporate & Investment Banking. PCLs of $912M decreased $512M (36%). RY increased its dividend by 7%!

Here is a video about Royal Bank’s Q2 earnings:

My Entire Portfolio Updated for Q1 2026

Each quarter we run an exclusive report for Dividend Stocks Rock (DSR) members who subscribe to our very special additional service called DSR PRO. The PRO report includes a summary of each company’s earnings report for the period. We have been doing this for an entire year now and I wanted to share my own DSR PRO report for this portfolio. You can download the full PDF showing all the information about all my holdings. Results have been updated as of April 7th^, 2026. Next quarterly report will be available in July.

Download my portfolio Q1 2026 report.

Dividend Income: $331.87 (-21.80% VS. May 2025)

We can see a drop this month as I sold my Starbucks and Apple shares (that used to pay this month), and the dividend from LeMaitre Vascular will be paid in June this year.

Since I started this portfolio in September 2017, I have received a total of $36,444.54 CAD in dividends.  Keep in mind that this is a “pure dividend growth portfolio” as no capital can be added to this account other than retained and/or reinvested dividends. Therefore, all dividend growth is coming from the stocks and not from any additional capital being added to the account.

Final Thoughts

Watching my dividend grow is easing my concerns about the stock market valuation. After all, it’s not the first time I’ve seen the market as being “expensive”. And yet, my dividends keep growing and so do my portfolio values.

Ironically, what was “the end of the world” in 2008 is now just a small blip on a graph, and most people have forgotten what it was like during that “dark time”.

Cheers,

Mike.

The post We have a Valuation Problem – May Dividend Income Report appeared first on The Dividend Guy Blog.