Dividend hike emphasises Middlefield Canadian Income’s attraction

MCT looks well-positioned to benefit from a broadening in the US rally of 2023...


The Magnificent Seven led a rally in US equities last year, but what does 2024 hold? We think the US economy looks to be in pretty decent shape, which means a broadening of the rally is a real possibility. This means smaller companies could do well, and it could mean Canadian equities play catch-up too. The Canadian market is dominated by financials and energy, which are both sensitive to any abatement of recession fears, and real estate, which could see valuation uplifts when rates are cut. Middlefield Canadian Income (MCT) is our preferred way to play this theme, and numbers collated by the team there show the Toronto Stock Exchange is highly correlated to the S&P500 ex Magnificent Seven. With valuations modest, and MCT’s shares themselves trading on a c. 19% discount, we think this could be an interesting performer in 2024. Notably the discount of Canadian to US equities is as great as has been seen over the past 30 years, meaning any normalisation could be a powerful tailwind to returns.

An additional attractive feature of the market and the trust is the yield. MCT has just raised its annual payout again, to 5.3p from 5.2p in 2023. This equates to a dividend yield of 5.3% at the time of writing, with the dividend paid in equal quarterly amounts. Dividend growth has been an impressive 8% per annum over the past five years. With rates set to normalise, we think this will lead to renewed interest in equity income.

Dean Orrico, manager of the trust, notes that MCT’s primary asset class weightings are financials, energy and real estate which, in aggregate, represent over 80% of the portfolio. Each of these sectors trades at a discount to their US counterpart, possesses significant free cash flow and is expected to continue increasing dividends in 2024 and beyond.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. You will usually pay brokerage fees to your dealer if you purchase or sell units/shares of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange”). If the units/shares are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units or shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Mutual funds and investment funds are not guaranteed, their values change frequently and past performance may not be repeated. Certain statements in this disclosure are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may”, “will”, “should”, “could”, “expect”, “anticipate”, “intend”, “plan”, “believe”, or “estimate”, or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Middlefield Funds and the portfolio manager believe to be reasonable assumptions, neither Middlefield Funds nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

This material has been prepared for informational purposes only without regard to any particular user’s investment objectives or financial situation. This communication constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described herein is suitable or appropriate for you. Investment decisions should be made with guidance from a qualified professional. The opinions contained in this report are solely those of Middlefield Limited (“ML”) and are subject to change without notice. ML makes every effort to ensure that the information has been derived from sources believed to reliable, but we cannot represent that they are complete or accurate. However, ML assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. ML is under no obligation to update the information contained herein. This document is not to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument.

Subscribe to Our Insights!
Flyout Form
Subscribe for MCT Updates
Flyout Form UK