Now open Power Corporation’s second quarter and look for the Wealthsimple line.

You will find Great-West Lifeco at $871 million. You will find IGM Financial at $211 million. You will find Sagard at $33 million. You will not find Wealthsimple.

That gap between the story and the statement is the whole article.

Here is the short version. Wealthsimple is a real success and the growth is not in question. It is also a business whose profits never reach Power Corporation’s income statement, for a reason most shareholders have never been told.

I am a client, by the way. They dangled a transfer bonus in front of me and I took it, same as a lot of you did.

*Disclosure: I am a Wealthsimple client. I own National Bank (NA.TO) and Royal Bank (RY.TO). I do not own Power Corporation (POW.TO) or IGM Financial (IGM.TO). This is education, not advice. Do your own due diligence.*

Here is the full breakdown on video if you would rather watch it than read it.

How Big Is Wealthsimple Compared to the Banks?

$155.6 billion in assets under administration puts Wealthsimple in the top three or four brokerages in Canada. Questrade holds about $50 billion. TD and RBC sit somewhere near $200 billion to $250 billion.

Those numbers took work to assemble. Wealthsimple is private, so it discloses what it wants to disclose. The banks are public and disclose plenty, but not this. They report wealth. They report investments. Not one of them breaks out what sits inside RBC Direct Investing, Investor’s Edge, BMO InvestorLine or National Bank Direct Brokerage on its own.

I searched. I read financial statements. I used AI to help me dig. The cleanest comparison I found was Questrade, which is not a bank but is a direct competitor, and it has declared roughly $50 billion.

So Wealthsimple is three times the size of Questrade. TD is likely the largest platform in the country with Royal Bank close behind, and my estimate puts each of them in the $200 billion to $250 billion range.

Let me be clear about something before I take this apart. The success is real. Close to one in four Canadians between 18 and 40 uses at least one Wealthsimple product. J.D. Power has ranked it the top brokerage in the country for customer satisfaction three years running. The product is good and I use it.

Top three or four in Canada, from a standing start in 2014. I am not going to pretend that is not impressive.

Then you ask the second question, and everything changes.

What Is the Difference Between Assets Under Administration and Assets Under Management?

Assets under management means the firm charges a fee to manage the money. Assets under administration means the firm holds the money for you. Same dollars on the page, different revenue behind them.

This distinction gets skipped in almost every headline written about Wealthsimple, and it does more damage than any other error in this story.

A dollar under management pays the firm every year, whether the client does anything or not. Think of the 1% management fee your advisor charges. That is a subscription with your name on it.

A dollar under administration pays the firm when the client does something. A trade, a currency conversion, a margin loan, a subscription. If the client buys three ETFs and goes quiet for a decade, that dollar generates close to nothing.

Wealthsimple’s $155.6 billion is mostly the second kind.

Hold that thought while we look at where the money comes from.

How Does Wealthsimple Make Money?

Four sources. Management fees on the managed portfolios, paid subscriptions, foreign exchange fees on currency conversion, and net interest margin on cash balances and margin lending.

Let me take them one at a time.

Management fees. Wealthsimple runs a robo advisor, and that piece behaves like traditional asset management. Recurring, predictable, tied to the asset base. This is the good stuff, and it is a slice of the total, not the whole thing.

Subscriptions. Tiered plans that unlock features and better rates. Small per client, meaningful across 3.6 million of them.

Foreign exchange. Every time a Canadian buys a US stock, dollars get converted. That conversion carries a fee.

Net interest margin. The spread between what Wealthsimple pays you on your cash and what it earns on that cash, plus the interest charged on margin loans.

Look at that list and ask which of those four you feed.

If you hold Canadian dividend stocks in a Wealthsimple account, do not trade often, do not use margin, do not carry a big cash balance and do not convert currency, you are a client who costs money to serve and pays close to nothing. Trading is free. The account is free.

I know this pattern well. I worked in a bank for more than ten years and I had clients exactly like that. Big portfolios, quiet accounts, no options, no margin, no active trading. Lovely people. Terrible revenue.

Now multiply that across millions of accounts.

The one thing worth flagging is that this is changing. Wealthsimple’s own second quarter release credits chequing and spending products for the flows. Chequing balances and credit cards feed net interest margin and interchange, which are better revenue lines than a buy and hold brokerage account. The mix is improving. It is still not a 1% management fee.

What Does Wealthsimple Earn on $155 Billion?

My estimate is $1 billion to $1.2 billion of annual revenue and $100 million to $250 million of net income. Wealthsimple is private and publishes neither figure, so treat this as arithmetic, not disclosure.

Start with the one number we have. Back in 2024, with an asset base near $50 billion, Wealthsimple was running about $129 million of revenue in a quarter. Annualize it and you get close to $500 million a year at that size.

The asset base is now about three times larger. Apply the same ratio and you land near $300 million to $400 million per quarter, or $1 billion to $1.2 billion for a full year.

Now the margin. Wealthsimple turned profitable about two years ago, so this is a business still early in its margin story. At a 10% to 20% net margin, $1 billion of revenue produces $100 million to $250 million of net income.

Take the top of that range. Call it $250 million. It flatters them, and the point still holds.

Why Doesn’t Wealthsimple Show Up in Power Corporation’s Earnings?

Because of how the stake is accounted for. IGM carries Wealthsimple at fair value through other comprehensive income, and the change in fair value is not recorded in earnings. The gains land in book value, not on the income statement.

This is the part I did not expect to find, and it is a better answer than the one I went looking for.

I assumed Wealthsimple was too small to break out. The real reason is an accounting choice.

IGM Financial owns about 25% of Wealthsimple and carries the position at fair value through other comprehensive income. In plain English, IGM revalues the stake every quarter and the change goes straight to equity. It never touches the earnings line.

At June 30, 2026, IGM marked its stake at $2.6 billion, up 15% in a single quarter. The full Power group interest, held across Power Corporation, IGM and Portage, was valued at $4.4 billion net of carried interest, up 15% on the same basis.

Now look at how Power Corporation reported the quarter. Adjusted net earnings of $974 million. Great-West Lifeco contributed $871 million. IGM Financial contributed $211 million. Sagard contributed $33 million. Groupe Bruxelles Lambert lost $5 million and Power Sustainable lost $4 million.

Add the pieces and you have the quarter. There is no Wealthsimple line because there is nothing to put on one.

Great-West Lifeco alone accounted for close to 90% of Power Corporation’s adjusted net earnings. Insurance. The least exciting business in the group.

That is the sentence I want you to carry out of this article.

So What Are You Actually Buying?

A valuation mark, not a stream of earnings. Wealthsimple’s growth raises Power Corporation’s book value. It contributes nothing to the profits that fund the dividend.

Everything we estimated about Wealthsimple’s profit still matters, and not the way you would expect. That profit never reaches Power’s income statement. What reaches Power is a valuation, and that valuation gets set by revenue expectations and by what public peers trade at.

When IGM raised its mark 15% in a single quarter, it pointed at Wealthsimple’s performance and at revised revenue expectations as the reason. That is a judgment about the future, refreshed every ninety days.

So your exposure to Wealthsimple through Power Corporation is a mark. Marks move in both directions.

Dividends get paid out of earnings.

How Does That Compare to a Bank?

National Bank, the smallest of the Big 6, earned about $4 billion last year. Royal Bank earned about $20 billion. Wealthsimple, on my most generous estimate, earns a quarter of a billion.

My own guess sits at the lower end. They have been profitable for two years, and early profitability is thin. I would put the number closer to $150 million.

Here is the comparison that explains the whole gap. A client with $1 million invested in a fund charging 1% generates $10,000 of revenue a year. Every year. Without anyone lifting a finger.

To generate that same $10,000 from self-directed brokerage accounts, you might need $10 million to $50 million of assets from investors who buy, hold, and pay no trading fees.

Same dollars on a statement. Two different businesses.

What Is Wealthsimple Worth?

About $10 billion, based on IGM’s own mark. A 25% stake carried at $2.6 billion puts the whole company near $10 billion, and the Power group’s combined interest sits at $4.4 billion.

That is a serious number for a company that opened its doors in 2014.

It is also a number any of the Big 6 could absorb without straining a balance sheet. Royal Bank earns twice that in a single year.

I do not expect a sale. Power Corporation is not a distressed seller and the mark keeps going up. But the idea that Wealthsimple is untouchable, or that it is about to eat the banks’ lunch, does not survive contact with the numbers.

What Should You Take From This?

Separate the story from the statement. A great narrative and a meaningful profit contribution are two different things, and only one of them shows up in what you own.

Wealthsimple is good at what it does. The growth is real. The client count is real. If you use the platform and like it, keep using it. I do.

But if you hold Power Corporation because you think you are buying a piece of the Wealthsimple story, look at what you are buying. A $4.4 billion mark, and none of the $974 million of earnings the company reported last quarter. The businesses paying your dividend are insurance and traditional wealth management.

This is the habit I want you to build. When you hear a number that sounds huge, ask what it earns, and then ask where that number lands in the financial statements.

Assets are not revenue. Revenue is not profit. Profit for the company is not profit for your slice of it. And a mark on a balance sheet is not a dividend.

Four questions. They take ten minutes. They protect you from most of what passes for analysis on the internet.

Learn to Read the Numbers Yourself

Everything in this article came from public documents and a calculator. A quarterly press release, one line in IGM’s disclosure about how the stake is carried, a few segment figures, and some arithmetic. No insider access. No expensive terminal.

That skill is what separates an investor who reacts to headlines from one who checks them. The line that explains this entire article, the one about fair value through other comprehensive income, sits in a place almost nobody reads.

It is also what the third course in Dividend Simplified teaches. Simplified Quarterly Earnings walks you through a quarterly report the way I walk through one. Which lines matter, which ones are noise, how to tell growth that came from the business apart from growth that came from an accounting choice, and how to decide in fifteen minutes whether your thesis is still intact.

The other two courses cover the Simplified Buy Process and the Simplified Sell Process. Three courses, $150 of value, fifteen dollars for the set.

Get Dividend Simplified here

The post Wealthsimple Revenue: Why $155 Billion Earns Less Than You Think appeared first on The Dividend Guy Blog.

Both used the word record. Neither was exaggerating.

This is the best week of the summer if you own Canadian banks, and it started about as well as it could have. I went through both quarters line by line looking for a problem. In the operations, I could not find one.

I found something else instead. It is not in the results. It is in the price.

Here is the short version. The growth is real. Most of it came from two segments that only perform like this in a bull market. And both stocks now trade about 39% above the price-to-earnings ratio they have averaged over the past five years.

*Disclosure: I own National Bank (NA.TO) and Royal Bank (RY.TO). I do not own Scotiabank (BNS.TO) or Bank of Montreal (BMO.TO). This is education, not advice. Do your own due diligence.*

Here is the full breakdown on video if you would rather watch it than read it.

How Did Scotiabank and BMO Do in Q3 2026?

Both posted record quarters. Scotiabank grew earnings per share 21% on revenue up 11%. BMO grew adjusted earnings per share 22% on revenue up 10%.

Start with Scotiabank, and keep in mind it is not my favourite name in the group.

Revenue rose 11%. Earnings per share rose 21%. The CEO called it a record quarter, and the segment numbers back him up.

Canadian banking net earnings were up 12% on stronger revenue and a better interest margin. That is the core business doing what it is supposed to do. Higher provisions for credit losses, mostly in the corporate and commercial portfolio, held it back a little, and I will come back to that.

International banking rose 8% on better margins, better revenue, and lower provisions.

That number deserves a sentence of its own. The whole Scotiabank thesis is that international exposure lets it outperform a bank built only for Canada. This quarter, international grew 8% while Canadian banking grew 12%. Positive, and high single digit is nothing to complain about. It is still not the outperformance the strategy promises.

Then the two that carried the quarter. Wealth management up 23%. Capital markets up 37%.

BMO told a similar story with different numbers.

Revenue up 10%. Adjusted earnings per share up 22%. I use the adjusted figure because it gives the cleaner picture of the operating business.

Canadian personal and commercial banking rose 15%, built on a 6% revenue increase and lower provisions for credit losses. More loans issued, more interest earned, and less money set aside for bad debt.

US banking rose 11%, again on higher net interest income, a higher net interest margin, and lower provisions.

Wealth management rose 22%. That came in despite insurance falling 8% against last year, and that decline is not a business slowing down. It reflects assets BMO sold in earlier quarters.

And capital markets rose 45%.

Read that last one again. Global markets, investment banking, corporate banking, all firing at once. Am I describing an AI chip company or a boring, stable Canadian bank?

Where Did the Growth Actually Come From?

Capital markets and wealth management. Scotiabank grew capital markets 37% and wealth 23%. BMO grew capital markets 45% and wealth 22%.

Line the segments up and the pattern is impossible to miss.

The banking businesses, the parts that take deposits and make loans, grew between 8% and 15%. Good numbers. Normal numbers.

The market-linked businesses grew between 22% and 45%.

That gap is the entire quarter.

Here is why it works this way. Wealth management earns a percentage of assets under administration. When markets rise, that asset base rises with them, and so does the fee. The bank does not have to win a single new client to make more money. Its existing clients got richer, so the bank did too.

I worked in a bank for more than ten years, and I can tell you what that looks like on the ground. Trying to move a client’s account in a rising market is close to impossible. You call, you are professional, they like you fine. Then they tell you they just got their statement, they are up 12% this year, and why would they change something that is not broken? Totally fair question.

So the business is sticky on the way up.

Capital markets is the same story, with more leverage. Market making, order flow, new issues, institutional demand. When everyone is bullish, there is demand for all of it, and the bank takes a cut of every piece.

Both of those work in reverse.

What Are Provisions for Credit Losses Telling You?

They split this quarter. Scotiabank raised provisions 3.7% to $1.079 billion. BMO cut provisions 9% to $722 million.

Provisions for credit losses are the money a bank sets aside for loans it expects will not be repaid. It is a judgment the bank makes about its own loan book. Set aside less and reported earnings go up. Set aside more, and they go down.

That makes it the biggest swing factor in a bank quarter, and the line most investors skip.

Scotiabank raised its provisions 3.7%, to $1.079 billion. A small increase, concentrated in the corporate and commercial portfolio.

BMO went the other way and cut its provisions 9%, to $722 million.

Put those side by side and it changes how you read the headline growth. BMO’s Canadian personal and commercial segment grew 15% on a 6% revenue increase. Some of that gap is the operating business. Some of it is the provisions line moving in BMO’s favour.

Neither bank did anything improper. Releasing provisions when your credit book is performing is exactly what a bank should do. But a quarter built on falling provisions is a different quarter from one built on growing revenue, and the difference matters if you plan to hold the stock for a decade rather than a quarter.

The bigger signal is the one both readings share. Loans are getting paid. Despite tariff threats, commercial wars, and inflation, the economy is still resilient enough for these banks to make a lot of money.

Why Does the Canadian Bank Valuation Look Stretched?

Both trade roughly 39% above their own five-year average. BMO sits near 18 times earnings against an average of 13. Scotiabank near 16.7 against 12.

This is where the good news stops.

BMO trades near 18 times earnings. Its five-year average is about 13. That is a premium of 38.5%.

Scotiabank trades near 16.7 times earnings. Its five-year average is about 12. That is a premium of roughly 39%.

Scotiabank’s lower absolute multiple is not a bargain, by the way. It is earned. Scotiabank has lagged the other five on revenue and earnings growth over five, ten, and fifteen years, so the market has always paid less for it. That discount is justified. What is harder to justify is the same 39% premium sitting on top of it.

You are paying about 40% more than you have paid, on average, for the past five years. For both banks.

That is the number I keep coming back to.

What Happens When the Bull Market Ends?

The market-linked segments shrink with the market. A 10% to 15% drop in bank stocks at that point would be ordinary, not a crisis.

Wealth management and capital markets have posted double-digit growth quarter after quarter after quarter. That is the engine behind both of these results, and behind a good part of the premium.

It will not run at this speed forever. Markets are cyclical. At some point growth slows, or we get a bear market, because that is what markets do.

When it happens, those two segments shrink with it. Fee income on a smaller asset base. Less issuance. Less institutional demand. And the earnings that justify an 18 times multiple stop showing up.

So if your bank stocks drop 10% or 15% at that point, understand that nothing has broken. That would be normal.

Consider yourself warned, and then do nothing with the warning that you would not have done anyway. I am not telling you to sell. I am not changing a thing in my own portfolio. What I am saying is that knowing what you own, and how much of it you own, is worth more right now than it was two years ago, when the price left more room for a mistake.

What About the Rest of the Big 6?

National Bank reported Wednesday. Royal Bank and TD report this morning. All six Q3 releases land inside three days.

Scotiabank and BMO opened the week and set a high bar. National Bank followed on Wednesday. Royal Bank and TD close it out this morning.

If the first names set the tone, the rest should look similar. Strong operating results, a large contribution from the market-linked segments, and multiples that have moved a long way from their own history.

The thing to watch across all six is not the headline beat. It is the split between the banking segments and the market-linked ones, and which direction provisions moved.

I just did a live this morning to share a recap. Watch it here:

Get the Free Canadian Banks Report

All six banks reported within three days, and by the weekend most coverage will have moved on to something else.

So I built a complete report on the Big 6. It covers each business model, the latest quarter for all six, and a full section on valuation, because that is the part that is getting crazy.

It is free, and it goes out tomorrow morning, Friday, August 28th. Today is the last day to register if you want it in that first send.

You have to be on the newsletter to receive it.

Get the free Canadian Banks report here

The post BMO and Scotiabank Earnings: Great Results at a 39% Premium appeared first on The Dividend Guy Blog.

Data centers run hot, and the AI buildout is adding cooling load nobody planned for five years ago. At the same time, older homes and offices keep replacing aging furnaces and air conditioners, and that spending does not wait for a good economy. A furnace that dies in January gets replaced in January.

So I followed that chain this month. Two names came back and went onto my buy list. One builds the systems. The other moves the gas that fuels a large share of the heat.

I think there is a play in each of them. Both have pulled back since July while the businesses kept moving forward, which is the setup I go looking for. They are priced nothing alike, and each one asks you to accept a different risk.

*Disclosure: I do not own Trane Technologies (TT) or AltaGas (ALA.TO). This is education, not advice. Do your own due diligence.*

How to Read My Buy Ideas

One rule before we go any further. Do not read a stock name here and then buy it.

I am not joking. When I go write about a company, it can read like every name is an amazing pick. Each one made the list for a reason. I think there is a play here. Will I be right most of the time? Who knows. What I can promise is the work and a big push for your own research. I want you to see how I read a business model, where I find the growth vectors, and where I find the flaws.

The screen does the first job. A PRO rating of 4 or better says the business quality is there. A Dividend Safety score of 4 or better says the payment is not at risk. Then comes the question I answer for myself every single time. Can I live with this type of risk?

We do not all answer that one the same way. I happily live with the risk of overpaying for a stock. Some investors would lose sleep over my portfolio’s average P/E ratio. Trane and AltaGas both carry a 4 on each score, and each one asks for a different kind of tolerance.

You can read about my previous picks below.

2 Stocks on My Buy List: Northrop Grumman and CCL Industries

Trane Technologies (TT): Paying Up for the Cooling Super Cycle

Investment thesis: Trane is a global climate company. Through the Trane and Thermo King brands, it sells commercial and residential heating, cooling and ventilation systems, building controls and transport refrigeration. It reports in three regions: the Americas, Europe with the Middle East and Africa, and Asia Pacific. The Americas segment is the engine. Trane also builds turnkey data center cooling solutions and liquid cooling technology, which puts it in the middle of the AI power story.

The dividend triangle is strong. Revenue has grown 9.8% a year over five years, earnings per share 18.75%, and the dividend 12.2%. Q2 2026, reported July 30, pushed it further. Revenue rose 11% and adjusted earnings per share 11%, bookings jumped 39% to $7.8B, and the backlog hit a record $12.1B, up 70%. Americas commercial HVAC bookings set an all-time high, up 50%, and applied bookings rose 130%, a fourth straight quarter above 100%. Management raised full-year guidance to roughly 11.5% reported revenue growth with adjusted earnings per share of $15.20 to $15.30.

The moat sits in the installed base. Once a building runs on Trane equipment and controls, the parts, upgrades and service contracts can run for years, and that revenue arrives whether the economy cooperates or not. Switching away means ripping out a system that works. Carrier, Johnson Controls, Daikin and Lennox all compete here, and none of them dislodges an installed base overnight.

Read the dividend as a growth signal, not an income one. The forward yield is 0.85%, below the five-year average of 1.20%, because the share price has climbed faster than the payout. The payout ratio is 28% on earnings and 27% on cash, and the raises have averaged 12.2% a year. You buy Trane for the rising dividend and the earnings compounding behind it.

Now the risk you sign up for. The stock trades near 36.7 times trailing earnings against a five-year average of 30.3; the forward multiple sits near 31. The market already knows this is a great company. That leaves no room for a miss, and any quarter that falls short of the bar could trigger a pullback. The soft spot is Europe, the Middle East and Africa, where revenue fell 1% in the second quarter and adjusted operating margin dropped 420 basis points. If the AI capital cycle cools, the data center tailwind fades faster than the market expects.

So where is the play? Part of it is the price. Trane set an all-time high of $505.87 on June 25 and traded around $479 in mid-August 2026, so you are buying around 5% below the peak instead of into it. The rest is in the backlog. A record $12.1B, up 70%, with bookings up 39% and guidance moving up instead of down, means earnings are chasing the price rather than the other way around. Buying Trane still means paying ahead of that catch-up. That is the overpaying risk, and it is one I can live with. But that choice is yours.

What to watch: backlog and bookings, since that is the stock’s swing factor. Data center cooling orders and any commentary on liquid cooling demand. Americas commercial HVAC volumes and the pace of the European recovery.

AltaGas (ALA.TO): A Rare Moat Carrying a Heavy Load

Investment thesis: AltaGas runs two platforms. The first is a regulated US natural gas utility, principally Washington Gas, serving over 1.6 million customers across DC, Maryland, Virginia, and Michigan. The second is a western Canada midstream business built on extracting, processing and exporting liquefied petroleum gas. AltaGas owns RIPET and Ferndale, the only two large-scale LPG export terminals on the North American West Coast.

The two platforms split EBITDA roughly evenly across a full year, and they do different jobs. Utilities earn approved returns on rate base investment, which is about as predictable as cash flow gets. Midstream captures the spread between West Coast Canadian supply and Asian demand, a netback Gulf Coast exporters cannot match. Q2 2026, reported July 30, was another record. Normalized EBITDA rose 14% to CA$391M and normalized earnings per share rose 15% to CA$0.31, with Midstream up 33% on record LPG exports of 144,420 barrels a day to Asia. Management raised 2026 guidance to CA$2.0B to CA$2.1B of normalized EBITDA and CA$2.35 to CA$2.60 of normalized earnings per share.

Owning both West Coast terminals is close to irreplaceable. A new one takes years of permitting, heavy capital, and the rail and port relationships AltaGas spent years building. On the utility side, regulated monopoly status across four US jurisdictions produces rate-supported earnings that do not move with the commodity cycle. Pembina, Keyera and Enbridge compete for NGL handling, and none of them owns that export footprint.

The dividend comes with an asterisk, and I would rather say it than skip it. AltaGas cut its payment in 2019 after saying it would not. Management then rebuilt the balance sheet and has delivered six straight annual increases since, including a 6% raise in 2026 that took the dividend to CA$1.336 a year. DSR upgraded the Dividend Safety Score to 4 in March 2026. The forward yield is 2.45% and the payout ratio is a comfortable 51% on earnings. Ignore the five-year dividend growth rate of 31.25%. It is a rebound from the cut, not a forecast. Plan on 5% to 7% a year, in line with EBITDA.

Now the risk you sign up for here. This business borrows to build. Financial debt sits at 6.13 times EBITDA, down from 6.75 but still heavy, and that keeps the shares sensitive to long-term rates, which lift refinancing costs and the discount investors apply to the stock at the same time. Rate recovery has to land across four US jurisdictions at once, midstream cash flow depends on RIPET uptime and rail performance, and management raised the 2026 capital budget from CA$1.7B to CA$1.8B, so the building is not slowing down. Shares are up 41.5% over the past year, though they have given back some of that since late July.

The play here looks nothing like Trane’s, and the price reflects that. AltaGas peaked at CA$57.52 on July 24 and traded around CA$52 in mid-August 2026, roughly 9% off that high, after an equity issue took the wind out of a record quarter. Here is the part worth sitting with. That same equity, plus a bigger EBITDA base, is what brought financial debt to EBITDA down from 6.75 times to 6.13. The move that knocked the stock down is the move that made the balance sheet safer. You are not waiting on earnings to catch up to a multiple. You are being paid 2.45% to hold a regulated utility bolted to the only West Coast LPG export terminals in North America, with a payout ratio at 51% and management raising both guidance and the dividend. Rates are still the swing factor. If they ease, the shares have room. If they spike, the debt becomes the story.

What to watch: RIPET export throughput and the FEI to Mont Belvieu spread, which drive the midstream upside. On-time delivery at REEF, MVP Boost and Southgate. Utility rate case outcomes across the four US jurisdictions. And long-term interest rates, given the debt load.

Can You Live With This Kind of Risk?

Both names are on my list because I see a play in each, and price is part of that play. Let me be clear about the size of it. Neither one is a big bargain. These are small entry points for the investor who wants good quality at a good price, not a fire sale. Both are cheaper than they were four weeks ago while the businesses behind them kept getting better. So the useful question is not which one is the better deal. It is which risk you can hold through a bad year without selling at the bottom.

Trane asks you to accept overpaying. You are buying an excellent business the whole market can see is excellent, and betting the data center and electrification runway is long enough to grow into that multiple. I can live with that one. Plenty of good investors cannot, and that is a legitimate answer, not a failure of nerve.

AltaGas asks you to accept leverage. Financial debt at 6.13 times EBITDA buys a 2.45% yield, mid-single-digit dividend growth, and infrastructure that would take years and a fortune to replicate. The bet is that rates behave while the utility earns its approved return and RIPET keeps shipping.

One risk lives in the multiple. The other lives on the balance sheet. Answer that question honestly before you go near a buy button, because it decides which of these two, if either, belongs in your portfolio.

The Hard Part Is Knowing When to Buy

Finding Trane and AltaGas took one screen and an afternoon. Deciding what to pay for them is the part that trips up most investors. A stock trades at 36.7 times earnings. Is that quality worth paying for, or a trap? A stock has pulled back 9%. Do you wait for more, 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 Trane and frozen, this course was built for you.

Get Dividend Simplified here

The post Two Quality Stocks Showing an Entry Point: Trane Technologies and AltaGas appeared first on The Dividend Guy Blog.

I know how to compare two stocks. I know how to look at metrics. But how do I pick the right company when the two companies I am looking at are both amazing?

That is a better question than it sounds. Most investing content teaches you to tell a good company from a bad one. Almost nobody tells you what to do when both pass every test you know how to run.

So I picked the hardest example in my own portfolio. Royal Bank and National Bank. Two Canadian banks I own, both with a strong dividend triangle, both very hard to fault.

I pulled them up side by side and tried to answer honestly.

I could not pick.

That is not a cop-out. It is the most useful thing I can tell you about comparing two great businesses. Sometimes the numbers will not break the tie, and you need a second method ready for when that happens.

*Disclosure: I own National Bank (NA) and Royal Bank (RY). This is education, not advice. Do your own due diligence.*

Royal Bank vs National Bank: Which One Should You Buy?

On today’s numbers, both. Royal Bank and National Bank are nearly identical on yield, payout ratio and valuation, so the decision comes down to which investment thesis you prefer, not which metric reads higher.

My process never changes. Numbers first, story second. I do not want to read the investment thesis early, because I do not want to fall in love with a company before I have looked at the hard facts. Numbers are hard facts. A story is a story.

Here is where the two banks sit today, in Canadian dollars, with market data as of August 7, 2026.

Now look at that table and try to pick a winner.

• Yield: five basis points apart, 2.33% against 2.38%. 
• Payout ratio: 45.77% against 42.79%, both right where a healthy Canadian bank should sit.
• Trailing P/E favours Royal Bank, 19.22 against 20.05. 
• Forward P/E reverses it, 16.32 for National Bank against 17.12. 
• The two valuation metrics point in opposite directions and cancel each other out.
• The earnings leg is just as tight. Royal Bank has compounded earnings per share at 7.72% a year over five years, National Bank at 6.80%. Less than a point separates them.

Two differences are real. National Bank is the more volatile of the two, with a beta of 1.19 against 0.93. And National Bank has grown its dividend much faster, 11.89% a year against 8.78%, which is what lifts its Chowder score to 14.22 against 11.16.

Calmer ride, or faster-growing income. That is a preference. It is not a decision.

One note on revenue. I skip it for banks. Revenue moves with rates, trading activity and acquisitions, and it tells you very little about the health of the business. Earnings and dividends carry the weight here.

What Do You Do When Two Stocks Tie on the Numbers?

Stop looking for a metric to break the tie. Go to the investment thesis instead.

The mistake I watch investors make at exactly this moment is to keep digging for a number that will decide it for them. Chowder score. PEG ratio. Something obscure they have never used before. They are not analyzing anymore. They are looking for permission.

When two companies are this close, the differentiators live outside the spreadsheet. Here is where I actually look.

Who is the leader? If scale and market leadership matter to you, this is a clear Royal Bank win. It is the largest company on the TSX at $412 billion, nearly five times National Bank’s size.

Where is the growth coming from? Royal Bank is far more present in the United States, and diversified through capital markets and wealth management. National Bank is heavy on capital markets and wealth too, but far more concentrated in Canada, with a small US presence and a growing operation in Cambodia through ABA Bank.

Does the company grow by acquisition? Both do, so this one does not help. Royal Bank bought HSBC Canada. National Bank bought Canadian Western Bank, and Laurentian Bank assets before that.

What are those acquisitions actually buying? This is the most interesting one. National Bank’s strategy is to buy client books that feed wealth management. Canadian Western came with roughly $37 billion in loans and a large book of commercial clients who had no private banking relationship. When those business owners eventually sell, they will be looking for advice, and National Bank intends to be there. Royal Bank, being much larger, plays hardball everywhere at once.

What risk are you actually taking? National Bank is more exposed to Quebec’s economy. Royal Bank carries a large mortgage portfolio across all of Canada, and in a genuine mortgage crisis it likely takes the bigger hit. Neither of those is a flaw. They are different bets, and you should know which one you are making.

None of that appears on a screener. All of it is a legitimate basis for a decision.

Should You Just Buy Both?

Often, yes. When two companies both show a strong dividend triangle, owning both is a perfectly good answer, and it is the one I chose.

There are three honest ways out of this, in the order they usually apply.

Buy both. There is no rule that says you must choose. Two strong businesses, two strong triangles, two positions.

Pick one characteristic and let it decide. If you already hold a bank and do not want a third, choose the trait you genuinely prefer and stop. Lower volatility and market leadership point to Royal Bank. Faster dividend growth and more room to compound from a smaller base point to National Bank. Both are defensible. Neither is wrong.

Watch for the duplicate trap. The lazy version of buy both is how portfolios end up holding Visa and Mastercard, Royal and National, Fortis and Hydro One, and forty positions that all do the same job. Expanding your portfolio is not the same as making a decision. If you are buying both because you cannot choose, at least be honest that that is what is happening.

How I Compare Two Stocks, Step by Step

Numbers first, thesis second, always in that order.

I start with the stock comparison tool and let the numbers speak. The dividend triangle, the payout ratio, the valuation. At that stage I do not care about the story, because I do not want to fall in love with one company before the facts are in.

Only then do I read the investment thesis, the risk potential and the dividend growth perspective. That is where I learn what the business actually is, and that is where a tie gets broken.

If the numbers disqualify a company, I am done, and no story rescues it. If the numbers say both are strong, I have already won. At that point I am not choosing between a good company and a bad one. I am choosing between two good ones, and the cost of picking wrong is small.

That is the answer to the member’s question. You do not need conviction that one is better. You need conviction that both clear the bar, and then permission to stop optimizing.

Want a Shortlist of Companies That Clear the Bar?

Finding businesses with a strong dividend triangle is the hard part. Screening 1,100 stocks by hand is not how I want to spend a Sunday, and I doubt you do either.

The Dividend Rock Star List narrows the field for you. It is updated every month and shows 250+ dividend growers with solid metrics and robust business models. Treat it as a starting point for your research, not a shopping list.

Enter your name and email below, and I will send it straight to your mailbox.

The post Royal Bank vs National Bank: How to Pick When Both Stocks Are Great appeared first on The Dividend Guy Blog.

Alphabet, Costco, Visa and Microsoft all sit inside my top 10 holdings. None of them earned that spot with a hot quarter. Each one earned it because something protects its profits from the rest of the world.

Morningstar calls that protection an economic moat. I call it the reason I can hold a stock through two bad years and still sleep at night.

There are seven moats worth knowing. Here they are, and here is how four of my largest holdings use them.

*Disclosure: I own Alphabet, Costco, Visa and Microsoft. This is education, not advice. Do your own due diligence.

What Is an Economic Moat?

An economic moat is a durable competitive advantage that protects a company’s profits from competitors. Morningstar identifies seven types.

A moat does not make a business invincible. It buys time. Time to hold prices, protect margins, and keep earning while a competitor spends years and billions trying to catch up. Here are the seven.

1. Network effects. The more people use the product, the better it gets, and the more people use it. Facebook is the textbook case. More users create more content, more content pulls more reactions, more reactions bring more advertisers, and the flywheel spins on its own. At some point everyone is already there, and nobody wants to start from zero somewhere else.
2. Low-cost producer. Scale pushes the cost of operation down. That lets a company charge less and still earn a better margin than the competition. Jeff Bezos said it best. Your margin is my opportunity.
3. Capital intensity. Some businesses cost billions to build. Canadian National Railway is one of my holdings outside the top 10, and building a second CN today is close to impossible. Buy the land, lay the track, maintain the network. Nobody starts that from scratch. If you want more rail, you buy a railroad. Utilities share the same trait.
4. Switching costs. The cost is not only in dollars. It shows up in time and energy. Change your payroll system and you pay for the software once, then you pay again in training, migration, and mistakes. If the current system works, you stay. Automatic Data Processing lives on this moat.
5. Brand power. If you want to watch Star Wars, it has to be Star Wars. No substitute exists. Coca-Cola works the same way. Someone hands you a Pepsi and you notice.
6. Intellectual property and trade secrets. Big pharma is the clearest example. A blockbuster drug arrives with patents, and those patents buy years of protected profit before the copies show up. Strong moat, with an expiry date attached.
7. Regulatory protection. Canadian banks sit here. Try starting one. Regulated utilities too. They get a territory, and nobody else can sell power inside it. You answer to a regulator, and in exchange you get a wall around your market.

I went deeper on all seven in two earlier articles, one on switching costs and the network effect, and one on intangibles, cost advantages and scale.

The best businesses stack several of these at once. That is what the next four companies have in common.

Does an Economic Moat Guarantee Better Returns?

No. A moat protects the business, not the share price. A company can hold a wide moat and still deliver flat returns for years.

CNR has an advantage few competitors can attack. It was also dead money for about three years. Microsoft has several moats. It has had a rough 12 to 18 months.

Neither company lost its advantage. The market decided to pay less for it.

That is the part investors get wrong. A moat is not a performance promise. It is a reason to stay patient when the price says otherwise. When the thesis holds, and the dividend triangle holds, a slow stretch is a waiting period, not a sell signal.

Alphabet (GOOGL): Network Effects That Feed Themselves

Alphabet is my tenth largest holding, and it might carry the deepest moat stack of the four.

Start with the network effect. Every search feeds Google more data. More data makes the results better. Better results bring more searches. The loop funds itself, and the advertising layer sits on top of it all.

YouTube adds switching cost and brand power at the same time. If you stop publishing on YouTube, where do you go for the same reach? There is no answer. Creators are held there by the audience, and advertisers follow the audience.

Then add the intangibles. Patents, research, and the know-how of running infrastructure at that scale. Put it together and you understand why this is one of the largest companies in the world.

One caveat. Alphabet is new to the dividend game. The first payment landed in 2024, so there is no five-year dividend record to lean on. What you get instead is a revenue line running above $446 billion on a trailing basis, earnings per share climbing without a pause since 2022, and a dividend that has already been raised twice in its short life. I own it for the business and the growth, not for the yield.

Costco (COST): The Low-Cost Producer That Locks the Door Behind You

Costco stacks low-cost producer economics, a membership that keeps customers in, and the Kirkland Signature brand into one of the widest moats in retail.

Costco is my ninth largest holding, and the business model is a clinic in stacking moats.

The low-cost engine comes first. Costco carries roughly 4,000 items where a typical superstore carries 30,000. That concentration makes Costco the largest buyer of a given product for many of its suppliers, and the largest buyer negotiates the best price. Members get the savings. Costco gets the traffic.

The switching cost is the membership itself. You paid to shop there, so you shop there. Renewal rates run above 92% worldwide. Costco raised its fees in 2024, to $65 for Gold Star and $130 for Executive, and members stayed.

Brand power arrives through Kirkland Signature. Building private label products that compete with national brands at a lower price was a smart move that keeps paying. It protects margin and gives members one more reason to come back.

The dividend triangle tells a mixed story. Revenue growth of 9.50% and earnings growth of 13.35% over five years both look healthy. The dividend line is where it gets confusing. You will see a spike on the chart in early 2024, and a five-year dividend growth rate that reads negative. That is the $15 special dividend distorting the math, not a dividend cut. The regular dividend has climbed for 20 straight years.

The moat is not the risk here. The valuation is. The market prices Costco for continued perfection, and discounts are rare.

Visa (V): A Tollbooth on Global Commerce

Visa’s moat is the network effect plus the capital and technology needed to move money across 200 countries without dropping a transaction.

Visa is my eighth largest holding, and it operates in something close to a duopoly. Yes, other cards exist. In practice, Visa and Mastercard are the two networks that can move money anywhere on earth.

The network effect runs both ways. Merchants accept Visa because cardholders carry it. Cardholders carry it because merchants accept it. Visa handles more than $15 trillion in annual volume across 200+ countries, with more than 14,500 financial institutions and over 50 million merchants on the network.

The capital intensity is the part people miss. Building the security and the infrastructure to clear 65,000 transactions per second, without losing a dollar in transit, is not a software project. It is decades of investment. Add the brand and you have a tollbooth that is hard to route around.

Now the honest part. Regulation is not a moat for Visa. It is a threat. The U.S. Department of Justice filed an antitrust suit focused on debit. The EU keeps interchange caps in place. European governments are working on payment systems built to reduce the dependence on both networks. Everyone wants a slice of that pie.

The dividend triangle is strong. Revenue growth of 14.15%, earnings growth of 17.90%, and dividend growth of 14.85% over five years. Here is the part I like most. Visa turns more than $15 trillion of payment volume into roughly $44 billion of revenue. It takes a thin slice of an enormous flow, and that slice compounds. The yield is small. The growth is not.

I bought Visa in 2017 at what was then an all-time high, at a valuation everyone called stretched. I still own it. The valuation was never the point. Nobody was going to rebuild that payment network, at any price.

Microsoft (MSFT): Switching Costs You Cannot Escape

Microsoft’s moat is switching costs, brand power, and the capital required to compete across software, cloud and AI at the same time.

Microsoft is my seventh largest holding. It used to sit in my top three. The last 12 to 18 months have been a tough ride, and that is the best proof I can offer that a moat does not guarantee outperformance.

The switching cost is the strongest of the three. Try removing Windows and Office 365 from a company, or from your own computer. I have thought about it. I am still using both. Office, Azure, Dynamics and SQL Server sit inside the plumbing of corporate systems everywhere, and pulling one out means rebuilding around it.

Brand power comes next, then capital intensity. Azure alone runs above $75 billion in annual revenue. Few companies can fund a fight on that many fronts at once.

I do not see a real network effect here. Selling a lot of software and hosting a lot of cloud workloads is scale, not a flywheel. Switching costs, brand, and capital intensity are the three that matter for Microsoft.

The dividend triangle holds up. Revenue growth of 13.60%, earnings growth of 15.80%, and dividend growth of 10.20% over five years. The market’s worry is the AI spending and whether the return shows up. That is a valuation debate, not a moat debate.

How Do You Find the Moat in Your Own Portfolio?

Name the advantage in one sentence, then ask what it would cost a competitor to copy it. If you cannot answer both, you do not own a moat.

Here is the exercise I run on every holding.

Name the moat in one sentence. If it takes a paragraph, you are describing a story, not an advantage.

Price the copy job. What would a well-funded competitor need to spend, and how many years would it take? Billions and a decade is a moat. A better marketing campaign is not.

Check that the moat shows up in the numbers. A real advantage protects margins and shows up in the dividend triangle. Revenue growth, earnings growth, dividend growth. If a company claims a moat and the triangle is flat, the claim is thin.

Watch for erosion. Regulators, technology shifts and patent expiries end moats. Visa’s regulatory pressure is a live example. Keep an eye on it.

Do not expect the moat to move the stock this year. It protects the business. The market sets the price on its own schedule.

That last rule is how I hold Microsoft through a bad 18 months without touching the sell button. The wall is still standing. The market is in a mood.

Want More Companies Built Like These?

Finding businesses with a durable advantage is the hard part. Screening 1,100 stocks by hand is not how I want to spend a Sunday, and I doubt you do either.

The Dividend Rock Star List narrows the field for you. It is updated every month and shows 250+ dividend growers with solid metrics and robust business models. Treat it as a starting point for your research, not a shopping list.

Enter your name and email below, and I will send it straight to your mailbox.

The post Economic Moats: The 7 Types and 4 Stocks I Own appeared first on The Dividend Guy Blog.