Canadian Stocks Analysis

A Business Built Around Utility Poles and Railway Ties — And It Works

Lumber stocks usually run hot with housing booms and crash just as fast. But not this one. This Canadian company built its business around utility poles and railway ties — essential infrastructure that keeps cities powered and freight moving. In a sector known for wild swings, this one offers surprising consistency (and a few earnings surprises too).

Business Model: Where Wood Meets Infrastructure

Most investors hear “lumber” and think housing starts, sawmills, and cyclical chaos. However, Stella-Jones (SJ.TO) took a different route — it built its business around utility poles and railway ties, two products that are essential in modern infrastructure.

Instead of chasing construction booms, Stella-Jones established long-term supply relationships with power utilities, telecommunications companies, and railroads. These customers aren’t just placing one-time orders — they come back again and again for maintenance, upgrades, and replacements. That’s the kind of stability we like to see in a dividend-paying company.

Here’s what Stella-Jones focuses on:

Utility poles for electrical and telecommunications grids
Railway ties for short lines and commercial railroads across North America
Industrial wood products are used in bridges, marine pilings, and foundations
Residential treated lumber, primarily sold through Canadian retailers

With over 70% of revenue coming from poles and ties, Stella-Jones sits in a unique niche: boring, essential, and high-repeat. Sounds like a recipe for reliable cash flow.

Stella-Jones (SJ.TO) Nort American Network from its Annual Report of 2024.

Investment Thesis: Stable Demand, Smart Expansion

Stella-Jones isn’t your typical lumber stock. It built its business around utility poles and railway ties, supplying essential infrastructure with steady, repeat demand. These are not one-time purchases — they’re part of long-term maintenance cycles for utilities and railroads.

This provides SJ with a reliable customer base and predictable cash flow, even when residential construction slows. Its clients — power companies, telecoms, and railroads — don’t delay upgrades when interest rates rise.

Additionally, management has executed strategic acquisitions effectively, expanding its North American footprint in a fragmented market. With its core products tied to infrastructure — not housing — Stella-Jones offers steady growth potential backed by disciplined operations and rising margins.

Build a Smarter, Safer Dividend Portfolio

Whether you’re looking for income today or wealth tomorrow, you need stocks that deliver on all three parts of the Dividend Triangle.

That’s precisely what the Dividend Rock Star List is built for:

No fluff — just fundamentally strong dividend stocks
Includes both Canadian and U.S. dividend payers
Easily sort by dividend growth rate, payout ratio, and more
Updated every month — no stale picks, no guesswork

Use it to build your watchlist, strengthen your portfolio, or start fresh with confidence.

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The Dividend Triangle in Action: Solid, Steady, and Sharpening Margins

Stella-Jones (SJ.TO) 5-Year Dividend Triangle.

Looking at Stella-Jones through the Dividend Triangle lens reveals exactly why it stands out in a volatile sector:

1. Revenue Growth: Revenue reached $3.467B, showing a stable, upward trajectory since 2021. While growth has flattened recently, the trend remains positive, particularly in infrastructure-facing segments like utility poles and industrial products.

2. Earnings Growth: EPS sits at $5.58, up firmly from 2021 levels. Despite fluctuations in specific segments, SJ has improved its margin profile through disciplined cost management and pricing power — especially visible in the latest 23% jump in EPS.

3. Dividend Growth: The dividend increased to $0.31, representing a nearly doubling since 2021. While still modest in yield, it reflects a sustainable and consistent payout strategy, backed by stable cash flows and a conservative payout ratio.

Summary: SJ delivers on all three fronts. Even when revenues stall (as seen in the latest quarter), earnings and dividends continue to rise, signaling healthy operations and a resilient business model.

Bull Case: Built-In Repeat Business

There’s a lot to like here for investors who value stability and recurring demand. Consider the following:

Over 70% of sales from utility poles and railway ties = repeat demand
Clients include utilities and railroads that replace wood regularly
Growing U.S. presence and acquisition strategy support long-term growth
Low payout ratio = dividend growth runway

This isn’t a timber boom stock. It’s an infrastructure business disguised as a lumber company.

Bear Case: Macro + Tariffs = Wild Swings

Still, the company isn’t without its risks — and some of them could hit hard in a volatile year:

Revenue can get hit by currency fluctuations or sudden order shifts
One Class 1 railroad started producing its own ties — not great
The residential lumber business still relies on housing demand
Volatile stock: Double-digit daily moves aren’t rare, especially with tariff concerns brewing

Investors should expect bumps along the way — even if the long-term story looks solid.

Latest News: Flat Top Line, Fat Bottom Line

The latest quarter had a little bit of everything:

Revenue flat, but $38M FX headwind masked real progress
Utility poles +4% thanks to pricing power
Railway ties -8% due to client production shift
Residential lumber stable
EPS +23%, helped by insurance gains and leaner operations

In short: management delivered higher profits even without growth fireworks. That’s how you win long-term.

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🔍 Over 300 U.S. and Canadian dividend-paying stocks
✅ Screened using our Dividend Triangle: Revenue growth, EPS growth, and dividend growth
🚨 Updated monthly with the latest data
📊 Filter by yield, sector, payout ratio, dividend growth rate, and more
💡 Discover reliable growers that can power your portfolio through bull and bear markets

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Final Word: You’re Not Buying a Lumber Company. You’re Buying a Utility Supplier

Stella-Jones isn’t sexy. It’s not flashy. But it is essential.

Between utility poles, railway ties, and disciplined execution, SJ has carved out a strong niche in a cyclical space. If you’re looking for dividend growers that do the job year after year — not just when lumber prices spike — this name should be on your radar.

Just don’t expect it to sit still. Volatility is part of the deal. Growth, however, is still on the table.

This Canadian IT Stock Deserves a Spot in Your Portfolio

In a tech world obsessed with disruption, some firms win by delivering mission-critical services with precision and consistency. This company has built one of the most dependable consulting and IT infrastructures supporting governments and enterprises across the globe — and its latest results show it’s still gaining ground.

Business Model: The Backbone of Digital Bureaucracy

CGI Inc. (GIB.A.TO) is a global consulting and IT services company that thrives on long-term contracts, particularly in the public sector. With operations in over 40 countries and more than 90,000 employees, its core strategy is simple: being close to the client.

The firm deploys a proximity-based model, which places offices near its customers — especially effective for sensitive government work where data sovereignty, security, and compliance are paramount. Its comprehensive service suite spans:

IT and business consulting
Managed IT and business process services
System integration
Proprietary software solutions

Its client-first approach is underscored by a 95% contract renewal rate, proving the strength of its long-term relationships.

CGI Revenue Mix from their Q2 F2025 Presentation.

Investment Thesis: Built for Resilience, Positioned for Growth

This company stands out not through flash, but through stability and execution. Serving governments and large enterprises with critical infrastructure, it builds high-retention, multi-year recurring revenue. Its book-to-bill ratio of 110% signals sustained demand, while public sector work — nearly 40% of total revenue — provides a defensive core.

In a world accelerating toward digital transformation and automation, this firm is well-positioned with capabilities in AI, cybersecurity, and data analytics. As governments modernize and enterprises automate, this company is the quiet engine behind the upgrade.

For an even more detailed investment thesis, watch my video on CGI below.

Want More Stocks Like This One?

The Dividend Rock Star List is our hand-picked collection of quality dividend stocks.
Here’s what you’ll find inside:

🔍 Over 300 U.S. and Canadian dividend-paying stocks
✅ Screened using our Dividend Triangle: Revenue growth, EPS growth, and dividend growth
🚨 Updated monthly with the latest data
📊 Filter by yield, sector, payout ratio, dividend growth rate, and more
💡 Discover reliable growers that can power your portfolio through bull and bear markets

Start browsing the Dividend Rock Star List now and find your next winner before everyone else does.

The Dividend Triangle in Action: Growth, Growth and… Not Much Yield

GIC (GIB.A.TO) 5-Year Dividend Triangle. — CGI Inc. (GIB.A.TO) 5-Year Dividend Triangle.

Let’s look at the company through the lens that matters: the Dividend Triangle.

1. Revenue Growth: Revenue sits at C$15.14B, up steadily over the past three years. That’s what you want to see — clients are spending, and the firm is landing new contracts.

2. Earnings Growth: EPS climbed to $7.87, tracking right alongside top-line growth. This shows substantial operating leverage and margin discipline.

3. Dividend Growth: The dividend is symbolic: $0.15 per share. This isn’t an income stock. Management prefers to reinvest capital into growth and acquisitions. And frankly? With these returns on equity, that’s not a bad call.

Bull Case: A Backlog that Buys Time and Growth

Investors bullish on this name point to several strengths:

A backlog of C$30.99B, equivalent to 2x annual revenue
Strong public sector exposure — offering resilience during economic downturns
A scalable global model with recent acquisitions driving margin improvements
Expanding into AI-driven solutions, where demand is surging
Financial discipline with rising EPS and a history of effective capital allocation

This is a stock built for compounders who value visibility, execution, and sticky client relationships.

Bear Case: Acquisition Risks and Margin Ceilings

While its recurring revenue model is attractive, bears flag a few key risks:

Its growth strategy leans heavily on acquisitions, raising concerns about integration execution and potential overpayment
Government contracts, while stable, tend to come with lower margins
The company’s low dividend payout (currently $0.15) and slow dividend growth may turn off income-seeking investors
In a talent-driven industry, maintaining headcount and quality amid global wage inflation could become a drag

Any stumble in acquiring, integrating, or retaining key staff could pressure performance.

Latest News: Booking Big, Growing Steady

The most recent quarterly report was strong across the board:

Revenue and EPS up 8% YoY
U.S. Commercial & State Government segment up 24.6% in EBIT
Scandinavia, Northwest & Central-East Europe EBIT up 21.7%
Book-to-bill ratio: 111.5%, with solid new contract momentum

These results reinforce the strength of the firm’s international footprint and its ability to scale contracts profitably.

Final Word: A Low-Yield, High-Confidence Compounder

This company may miss the spotlight like tech giants, but it compounds value through consistency, thoughtful acquisitions, and long-term client relationships. For dividend growth investors, the fundamentals are in the right place.

With its deep backlog, public sector strength, and push into AI and digital transformation, this is a stock worth watching — and potentially owning.

Build a Smarter, Safer Dividend Portfolio

Whether you’re looking for income today or wealth tomorrow, you need stocks that deliver on all three parts of the Dividend Triangle.

That’s exactly what the Dividend Rock Star List is built for:

No fluff — just fundamentally strong dividend stocks
Includes both Canadian and U.S. dividend payers
Easily sort by dividend growth rate, payout ratio, and more
Updated every month — no stale picks, no guesswork

Use it to build your watchlist, strengthen your portfolio, or start fresh with confidence.

Explore the Dividend Rock Star List now:

Canadian Banks Ranking 2025

Think all Canadian banks are the same? Think again.

Your choice could mean the difference between market-beating returns and lagging.

A common belief is that all Canadian banks perform similarly because of the country’s strong banking system. Since the 2008 financial crisis, each member of the Big Six (Royal Bank, TD Bank, ScotiaBank, BMO, CIBC, and National Bank) has taken a different path.

They all benefited from the banking oligopoly in Canada to fund new growth vectors. Fifteen years later, picking the wrong bank will leave much money on the table.

While most have outperformed the Canadian stock market for 5, 10, 15, and probably 25 years, as of March 2025, five of six had outperformed the market, and four also outperformed the ZEB.TO equal weight banks ETF over 10 years.

In other words, two are lagging. So which one is best this year and for decades to come?

Canadian Banks Ranking 2025

#6 ScotiaBank (BNS.TO)

Investment Thesis: International Edge – A Double-Edged Sword

Scotiabank differentiates itself from Canada’s Big Six banks with its extensive international presence, particularly in Latin America. While this provides higher long-term growth potential, it also introduces volatility and risk.

The bank has streamlined its global footprint, focusing on key markets like Mexico, Peru, and Chile. However, it has consistently struggled to outperform its peers.

Growth will depend on optimizing international operations, expanding wealth management, and navigating economic challenges. While Scotiabank benefits from Canada’s highly regulated banking system, its international moat is narrower than competitors, limiting its pricing power abroad.

Potential Risks: Volatility Ahead

BNS’s international presence brings unique risks, including exposure to economic downturns, political instability, and currency fluctuations.

The bank has faced rising provisions for credit losses (PCLs), an inefficient cost structure, and challenges in improving profitability.

Domestically, Scotiabank remains vulnerable to a housing market correction and economic slowdown. Broader macroeconomic risks, such as rising interest rates and trade tensions, add further uncertainty. Despite its international reach, Scotiabank has struggled to achieve superior financial performance compared to its peers, lacking dominant market share in key regions and facing stiff competition in wealth management.

The ONLY List Using the Dividend Triangle

After this first example, you may wonder how I was able to differentiate these positions.

I analyze companies according to their dividend triangle (revenue, earnings, and dividend growth trends), combined with their business model and growth vectors. While this may seem too simple, two decades of investing have shown me it is reliable.

While many seasoned investors also use these metrics in their analysis, no one has created a list based on them before. This is exactly why I created The Dividend Rock Stars List.

The Rock Stars List isn’t just about yield—it’s built using a multi-step screening process to ensure the highest-quality dividend stocks. You can read more about it or enter your name and email below to get the instant download in your mailbox.

#5 Canadian Imperial Bank of Commerce – CIBC (CM.TO)

Investment Thesis: A Safe Bet or a Slow Grower?

CIBC shows a strong focus on domestic retail and commercial banking.

Unlike peers with extensive international exposure, CIBC has pursued U.S. expansion to diversify its revenue streams, particularly in wealth management. However, integrating private banking remains a challenge.

The bank trades at a discount due to its slower growth trajectory, making it appealing to income-focused investors.

Its digital banking platform, Simplii Financial, presents an opportunity for long-term customer retention, while reliance on mortgage lending poses risks in economic downturns. While benefiting from Canada’s banking oligopoly, CIBC lacks the competitive moat of more diversified peers.

Potential Risks: Too Focused on Canada?

CIBC faces significant risks due to its heavy reliance on the Canadian housing market, making it more vulnerable than its peers to rising interest rates and a potential real estate downturn.

The bank’s high exposure to uninsured mortgages could increase loan loss provisions in an economic slowdown. Its domestic concentration further exposes it to Canadian economic cycles, regulatory changes, and potential recessions.

Among the Big Five, CIBC has underperformed in total returns and future growth expectations, with its strong dividend yield coming at the cost of lower capital appreciation. While its U.S. expansion aims to diversify risk, its mortgage-heavy model remains a key weakness.

#4 TD Bank (TD.TO)

Investment Thesis: Canada’s Most American Bank

Toronto-Dominion Bank (TD) stands out due to its strong retail banking franchise and significant U.S. presence.

With the largest branch network of any Canadian bank in the U.S., TD has historically relied on acquisitions and organic expansion for growth. However, recent regulatory scrutiny and an anti-money laundering investigation in the U.S. have limited its expansion opportunities.

While TD benefits from a stable Canadian business, rising interest rates present both an opportunity for higher margins and a risk of loan defaults.

Potential Risks: Can TD Overcome Its U.S. Setback?

TD Bank faces mounting risks due to its U.S. anti-money laundering investigation, which led to a multibillion-dollar fine and asset growth restrictions on its U.S. operations.

This directly impacts TD’s long-term expansion strategy, forcing it to shift focus from aggressive growth to regulatory compliance and operational efficiency.

The bank also remains exposed to the Canadian housing market, where rising interest rates could increase mortgage defaults. Broader economic risks add further uncertainty, including trade tariffs and slowing growth.

While TD’s strong brand and market position remain advantages, regulatory constraints could allow competitors to expand more aggressively, putting TD at a disadvantage.

#3 Bank of Montreal – BMO (BMO.TO)

Investment Thesis: Capital Markets, Wealth Management & U.S. Banking

BMO is a diversified financial institution with a strong presence in Canada and the U.S., generating about one-third of its revenue from U.S. operations.

Its strategic expansion, particularly through the 2023 acquisition of Bank of the West, strengthens its cross-border footprint.

BMO has also been a leader in wealth management and ETFs, leveraging these segments for stable fee-based revenue. However, rising provisions for credit losses (PCLs), integration challenges, and exposure to capital markets introduce volatility to its earnings.

Potential Risks: Can It Manage Rising Risks While Competing with Industry Giants?

BMO’s reliance on wealth management and capital markets for growth exposes it to heightened risk, particularly during periods of economic uncertainty.

Rising provisions for credit losses (PCLs) have significantly impacted earnings, partly driven by the challenges of integrating its Bank of the West acquisition.

The bank faces competitive pressures in traditional banking and the ETF space, where BlackRock (BLK) remains a dominant force.

Additionally, macroeconomic headwinds—including trade tensions and potential recession risks—could lead to earnings volatility. While BMO’s U.S. expansion provides diversification, it also increases exposure to higher credit risks compared to more domestically focused Canadian banks.

#2 National Bank (NA.TO)

Investment Thesis: Western Expansion and Global Investments

NA is the most domestically focused of the Big Six banks, with 73% of its revenue generated in Canada, primarily in Quebec.

Its recent $5B acquisition of Canadian Western Bank is set to expand its presence in Western Canada, creating cross-selling opportunities, particularly in private banking.

The bank has also diversified beyond traditional banking, with significant growth in capital markets, wealth management, and international investments, including ABA Bank in Cambodia and Credigy in the U.S.

Potential Risks: Growing Challenges

National Bank’s strong performance comes with significant risks, primarily due to its heavy reliance on Quebec, which accounts for about 50% of its revenue. This geographic concentration makes it more vulnerable to regional economic downturns than its larger, more diversified peers.

This also explains why it has fallen second this year, considering the economic uncertainty linked to political tensions between Canada and the U.S.

The bank also takes on higher risk through its international investments in Cambodia (ABA Bank) and alternative lending in the U.S. Rising provisions for credit losses, particularly from ABA Bank, add further uncertainty.

Additionally, its exposure to financial markets introduces earnings volatility, while its smaller scale puts it at a competitive disadvantage against Canada’s largest banks.

I discussed NA’s current challenges in more depth in the Q1-2025 earnings review video. You can then fully grasp why it now holds the second position while remaining one of the best banks for investors.

#1 Royal Bank – RBC (RY.TO)

Investment Thesis: Built for Global Growth

RBC is the largest Canadian bank by market capitalization, with a well-diversified revenue model spanning personal and commercial banking, wealth management, insurance, and capital markets.

Over 50% of its revenue now comes from insurance, wealth management, and capital markets, reducing dependence on traditional banking. RBC’s focus on expanding these segments post-2008 has positioned it well for stable cash flows, market-driven profitability, and global growth.

While Canadian banking regulations create high barriers to entry, RBC’s strong international presence enhances its resilience. Its brand strength, extensive client base, and broad service offerings make it a dominant force in the financial sector.

Potential Risks: Housing, Regulation, and Market Volatility

Despite its diversified business model, RBC faces key risks, including exposure to the Canadian housing market, regulatory constraints, and economic downturns, just like any other bank.

Rising interest rates could increase mortgage defaults, impacting its loan portfolio and necessitating higher provisions for credit losses (PCLs).

A potential recession could slow lending activity and increase default rates in both personal and commercial banking. Additionally, regulatory changes could limit profitability, while competition from both domestic banks and global financial institutions pressures RBC to innovate and adapt continuously.

All things considered, it remains the best Canadian Bank option for dividend growth investors.

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Final Thoughts: Don’t Overdo It!

I’m a foodie, and I love cooking. I particularly like adding spices to get the right taste in a good recipe.

But one thing I don’t do when I cook is to open my cabinet and select sea salt, pink salt, lava salt, Kosher salt, Celtic salt, smoked salt, and a pinch of Fleur de Sel all for the same recipe.

You probably know why, as the taste would very likely be disgusting.

Like seasoning in a meal, a little exposure to Canadian banks can enhance your portfolio. But overdoing it? That could leave a bad aftertaste. Choose wisely.

Canoe Income Fund (EIT.UN.TO) Review – 2024

Canoe EIT Income Fund is a Canadian closed-end investment trust. The investment objective of the Fund is to maximize monthly distributions relative to risk and maximize net asset value while maintaining and expanding a diversified portfolio. In other words, EIT has been created to take your money, manage it, and distribute juicy monthly dividends to help you manage your retirement budget.

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What Canoe Income Fund looks like

The Canadian fund includes 47.3% (7% less than last year) of Canadian equity stocks, 50.4% (+7%) of U.S. stocks, 5.58% (you read that right, the website shows 103% of the money invested…that’s probably linked to leverage.) of international equity, and 0% (in line with last year) cash. Despite having less than 50% of its assets invested in Canadian firms, its sector breakdown is heavily concentrated in financials, energy, and materials (55.98%).

Source: EIT website

Top-25 Holdings

They have an impressive diversification of stocks from low yield to high yield with various safe stocks and other quite speculative securities. The fund has greatly diminished its exposure to the energy sector, as they have made the smart move of cashing in on many of their gains in that sector.

Another interesting point is the amount of turnover in the fund when we compare their top holdings from August 2023. I have highlighted (in green) 9 positions out of 25 (36%) that are not in the top 25 this year. Last year, it was 12 positions for a 48% turnover rate.

But my opinion does not really matter if the fund helps you retire happily. Let’s look at what does really matter though and that is how the fund’s money has been managed over time and how much you profit (or not) from the management team led by Rob Taylor, CPA, CA, CFA (yes, he needs 2 business cards to include all his titles!).

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Performance & Distributions

From their website, we can see that EIT has outperformed the TSX on a consistent basis (which was not the case prior to 2020). Their focus on the energy and basic materials sectors clearly paid off after the pandemic and now the fund has moved to other sectors.

However, I don’t particularly appreciate that they only use the TSX as their benchmark and ignore the S&P 500. With 50% of their portfolio invested in the U.S., it seems only fair to include U.S. and international components to their benchmark measures.

Just for fun, I ran the calculations using a portfolio with 47% XIU.TO, 50% SPY and 3% XEF.TO (for international equity) for the past 10 years, 5 and 3 years. Results include dividends and are as of 7/31/2024 to match their website.

CAGR: 10yr: 10.44%, 5yr: 12.72%, 3yr: 8.6%.

This is quite interesting, as our conclusions in 2021 and 2020 were not the same. The first two times we analyzed the fund, it had underperformed the index portfolios we created. This time, it is quite the opposite. You can see that change occurred around mid-2021 where Canoe started to surge while indexes reached a plateau and eventually decreased in 2022.

The idea of having a high-yield investment (EIT.UN.TO pays 8.5% yield at the time of writing) where distributions are paid monthly is quite interesting. If you reinvest the distribution, you could beat the market, which is quite impressive! Strangely enough, EIT.UN.TO returns are now quite similar to my personal portfolio.

The lesson here is that conclusions and returns can vary from one year to another. We will review Canoe again next year. The Canoe fund could be an interesting way to generate a high income from your investments. However, if you cash this distribution, make sure you realize two things:

#1 Your capital will not likely grow over time

#2 Your dividend will not likely grow over time

Therefore, it’s an interesting investment vehicle for income, but that income is not inflation-proof. In fact, you receive a lot less today than 10 years ago. If you reinvest the dividend in the fund, then, you get a good total return. However, you don’t get to cash the dividend to fund your retirement.

Do you see how we run into circles?

Canoe and the habit of issuing more shares

Another interesting point is that Canoe has continuously issued more units year after year since 2018. This is great for raising money to invest and capture opportunities. However, it’s not that great when you consider that it increases the amount to be paid in dividends each year.

With this kind of structure, it looks like Canoe will do well as long as we are in a bull market. If units start to tumble, Canoe will have difficulty issuing more shares to invest and pay the current dividend. This could put serious pressure on Canoe’s ability to maintain its generous distribution.

Final Thoughts

Canoe EIT income fund is not the worst investment in the world. In fact, it generated decent returns considering its dividend. While recent performance has been impressive, the fund is not perfect. First, ownership of this fund does not avoid value fluctuations when the market is shaky. If you looked at your portfolio value during corrections Canoe did not save you from headaches.

The only thing that is “guaranteed” is the dividend payment… until it isn’t. Does any Canadian remember Financial Split Corp (FTN.TO) or Dividend 15 Split Corp (DF.TO)? They were both famous for their high yields and super solid investment strategy. I will leave it to you to research them today if you are curious. Did I ever tell you there is no free lunch in the world of finance and investments?

Canoe looks good today, but it was not the same story three years ago. Can it show more consistency going forward? Only time will tell.

Thomson-Reuters (TRI.TO) – Anything but Boring

Thomson-Reuters (TRI.TO) seems pretty boring. After all, software and services for lawyers, accountants, and corporations don’t make us jump to our feet excitedly. However, with a market cap of $110B CAD, 31 consecutive years of dividend increases, and 5-year total returns of 200%, Thomson-Reuters is an industrial stock that is anything but boring.

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Formed in 2008 with the merger of Thomson and Reuters, TRI.TO is mostly known to the general public for its news service and media, but this only represents a few percentage points of its total revenue. Thomson-Reuters’s largest business is selling complex software and services for the legal profession (42% of its revenue), accounting profession (20-25%), and corporations (20-25%). The company was also in the financial data service, with Refinitiv, which it sold to the London Stock Exchange in 2019.

TRI’s Legal Professionals segment sells research and workflow products to law firms and governments. The Tax & Accounting Professionals segment does the same, but for tax, accounting and audit professionals in accounting firms. Its Corporates segment sells a full suite of content-driven technology solutions for small businesses all the way to multinational organizations, including the seven global accounting firms.

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What’s to like about Thomson-Reuters?

TRI’s generates 80% of its revenue from subscription-based services; this predictable revenue and cash flow is great, as long as the customers stick around. This brings us another strength of Thomson-Reuters: its sticky business model. It sells products and services for complex and regulated domains such as law and accounting.

Through its WestLaw business unit, TRI offers an important service to lawyers. Law firms don’t have the time to jump from one provider to another. With WestLaw and Checkpoint, the tax & accounting software, Thomson-Reuters offers top-of-the-line software to two stable industries. Implementing and learning these services required a high degree if involvement from both TRI and the customers, which tends to cement the relationship between them.

This large customer base to offer cross-selling opportunities. Corporate clients have legal and accounting departments, law firms have accounting departments, etc.

The company generates steady organic growth throughout all segments. The pivot towards cloud-based software should allow it to lower acquisition costs while keeping its existing customer base. The complexity of its fields of business provides a strong barrier to entry against competitors. TRI is well-diversified geographically and enjoys a strong brand name.

Thomson-Reuters revenue, earning per share, and dividend payments evolution from 2014 to 2024 — TRI.TO revenue, earnings per share (EPS), and dividend payments for the last 10 years

The company is heavily investing in innovation, particularly in generative AI, to capitalize on the rising complexity of regulatory compliance and the demand for AI-driven solutions. It made notable progress with products like Westlaw Precision and CoCounsel, and the integration of Pagero to enhance corporate tax and audit capabilities.

Last quarter, Thomson Reuters reported solid results with revenue up 8.5% and EPS up 36%. Total organic revenue growth was 9%, with the “Big 3” segments growing by 10%, driven by strong transactional revenue and seasonal offerings. By segment, growth was as follows: Legal +7%, Corporate +12%, and Tax & Accounting +14%.

Potential Risks for TRI.TO

Selling its Financial and Risk (FR) segment brought in a good amount of cash, but reduced TRI’s business diversification. Following the transaction, TRI’s legal services now represent close to half of their revenues. While this segment is quite stable, it does not show rapid growth. A new technology emerging disrupting TRI’s financial legal services isn’t impossible either. TRI is an important shareholder of the London Stock Exchange (LSE) with a 15% stake. This participation is subject to market fluctuations and highly cyclical volumes.

While TRI counts on its Big 3 segments, the rest of its businesses (news and print) could adversely affect margins and slow overall growth. Finally, we saw TRI’S margin being affected by higher inflation in recent quarters. Multiyear contracts take time to reflect price increases.

TRI.TO Dividend Growth Perspective

Thomson Reuters has increased its dividend every year since 1993, but its dividend growth rate is not very impressive.

Selling Refinitiv in 2019 brought in a healthy infusion of cash into the business. Management bought back shares and authorized another 5M in share buybacks. An investor can expect a low single-digit dividend growth rate from now on, perhaps with nice surprises along the way as we were in 2022 with the 10% dividend increase, followed by another one in 2023. TRI did not disappoint in 2024 with another 10% increase.

Thomson-Reuters pays its dividend in USD.

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Final Thoughts on Thomson-Reuters

At 1.25% dividend yield, Thomson-Reuters is a low yield stock. It is also high growth. Total returns over 5 years were 200%! TRI has a stable business model that generates consistent cash flow. With its yearly dividend increased, TRI management is showing its confidence for the future.

Management increased the dividend by 10% in early 2024 and expects to buy back for $1B worth of share. Full-year 2024 outlook expects organic revenue growth of approximately 6%.

TRI.TO stock is trading at a high valuation. It’s trading at a lower P/E ratio than its five-year average, but a P/E ratio of 33 and a Fwd P/E ratio of 44 might give you reason to pause. With market expectations high, will Thomson-Reuter be able to innovate to keep high-single digit revenue growth going? It’s certainly worth a look.

Foundational Stocks: TFI International (TFII.TO)

A foundational stock, or core holding, is one you can buy and forget about for 10 years without worry. TFI International (TFII.TO) is such a stock. A sleep-well-at-night investment you know will be around 10 years from now and give you growth. Find out more about TFII.

Build on foundational stocks to create income for life! Learn more in our Dividend Income for Life Guide!

TFI International Business Model

TFI International is one of the largest trucking companies in North America. Its segments include Package and Courier, Less-Than-Truckload, Less-Than-Truckload, and Logistics.

Package and Courier picks up, transports, and delivers items across North America. Less-Than-Truckload picks up small loads, consolidates, transports, and delivers them. The Truckload segment offers conventional and specialized truckload services, including flatbed trucks, tanks, dumps, and oversized. It offers specialized trailers and a million-plus square feet of industrial warehousing space. Logistics provides asset-light logistical services, including brokerage, freight forwarding, transportation management, and small package parcel delivery. TFII hauls compostable and recyclable materials and offers residential waste management services.

With its size and vast network, it enjoys economies of scale, giving it an edge over the competition. While it competes with lower-cost rail transportation, the flexibility of truck transport means there will always be demand.

Another benefit of TFII’s size is that it can buy smaller competitors to fuel its growth. It has completed over 80 acquisitions since 2008.

TFII.TO Investment Thesis

Since TFI International is expanding, it might be time to invest and ride with them for a while. It made a wise move to expand outside Canada since the U.S. and Mexican economies have great potential.

With a larger fleet, TFI will be ready to pick up any available steady growth. Investing in a leader in Canada and North America is a safe bet for any investor looking to build a dividend growth portfolio. The company displays an appetite for further growth by acquisition that bodes well for the years to come. TFI completed the major acquisition of UPS Freight in April 2021 and it’s already a transformational success. The company is expanding its margins as it benefits from additional economies of scale and the network effect.

Below is TFII’s stock price evolution over 10 years, as well as its revenue, EPS, and dividend growth. Note that what looks like a dividend cut in the dividend triangle graph in April 2021 was really a conversion to USD when TFII started paying its dividend in US currency.

TFII could see some headwinds for a bit as many economists expect a recession. However, this also means TFII should remain in a solid position to make more acquisitions as smaller competitors may struggle in this economy.

Potential Risks for TFII

While road transportation beats railroads in flexibility, railroads win on cost. The transportation industry is highly cyclical; stock values could suffer in downturns. Oil prices affect the trucking industry; there is a limit in fuel surcharges companies can add to their bill.

Big fish eating little fish. — TFII will need to gobble up more smaller companies

TFII will have to identify other potential mergers and acquisitions transactions to ensure continued earnings growth. The organic trucking business stay cyclical in the future. The next time we hit a recession, the stock price could drop rapidly. Remember that TFII is a volatile stock. On one earnings day, the stock price fell 8% on weaker-than-expected results. Finally, if there is a tariff war in North America, TFII will be stuck in the middle.

TFII Dividend Growth Perspective

TFII has had consecutive dividend increases since 2016. While it has a 5-year dividend growth rate over 13% (CAGR), the payout ratios remain low. This leaves much room for increases in its dividend payout. We would have liked to see a smoother trend for earnings, but the dividend payouts aren’t at risk for now. In 2023, TFII rewarded shareholders with a dividend increase of 14%, and another one of 12.5% in 2024!

Get more information about creating sustainable dividend income in our Dividend Income for Life Guide.

In Closing

TFI International (TFII.TO) is a great foundational stock for any portfolio. You can be confident that, though volatile, a position in this stock will grow over time. Of course, when we say you can “forget” about a foundational stock for 10 years, we’re exaggerating. It’s still best practice to monitor all your holdings quarterly, including TFII. With foundational stocks, however, I don’t spend much time or dig too deep into the quarterly results unless I see signs of trouble, which I rarely do.