Published Date: February 10, 2026
Author: HANetf
Market in review
The S&P/TSX High Dividend Index returned +14% (local currency) in Q4’25, outperforming most developed markets’ high dividend equity indexes. Canadian equities benefited from a confluence of supportive macro factors, including strengthening commodity prices, a stabilising inflation backdrop and renewed confidence in domestic economic growth.
During the year, the Bank of Canada delivered multiple policy rate reductions, easing financial conditions and improving visibility for interest-rate-sensitive sectors such as Real Estate, Financials, and Utilities. At the same time, the Federal Budget reinforced the government’s commitment to large-scale infrastructure investment, housing supply initiatives, and competitive tax policy, providing a multi-year tailwind for capital deployment and private-sector investment. Commodity markets also played a supportive role, with firm energy prices and improving base metal fundamentals contributing to stronger earnings momentum across the Materials and Energy sectors.
Against this backdrop, as predicted we observed investor re-engagement in Canadian equities, reflected in rising M&A activity, increased capital refinancing, and renewed foreign investor interest across Real Estate, Energy and Materials. While Canada continues to trade at an approximate 5x forward P/E valuation discount to the S&P 500, we believe this gap significantly understates the improving earnings outlook and balance sheet strength of many Canadian companies within our core sectors.
Financials
Financials were a positive contributor to performance during the quarter, led by Power Corporation of Canada, which returned +24% in Q4 2025. The key driver was earnings performance at Great-West Lifeco and IGM Financial, two of Power’s largest holdings, which delivered solid organic growth and continued to execute across their insurance and wealth businesses. Power also benefited from a successful funding round at Wealthsimple, Power’s largest fintech holding, which marked a $10 billion valuation milestone and reinforced investor confidence in the company’s long-term value creation strategy.
Although the portfolio remains modestly underweight Financials relative to the benchmark, active stock selection proved additive, with Power Corporation and AGF Management representing the largest contributors within the sector. Canadian banks also delivered another solid quarter, supported by robust capital markets activity, declining provisions for credit losses, and improving expectations for loan growth. As a result, the major banks posted mid-teens percentage returns during Q4.
Real Estate
Canadian REITs lagged in Q4 2025, following a strong earlier-period rally driven by M&A activity and renewed foreign investor interest. The sector faced a more challenging backdrop late in the quarter as the U.S. 10-year Treasury yield rose from approximately 3.95% to 4.20% by December, pressuring rate-sensitive assets like real estate.
Despite near-term headwinds, underlying fundamentals across retail, industrial, and seniors housing remain constructive. Same-property net operating income growth, leasing spreads, and occupancy rates are near cycle highs, while the sector continues to trade at an average 13% discount to net asset value. Sienna Senior Living was a notable bright spot, rising +10% during the quarter and ranking among the Fund’s top individual contributors.
Energy
The Fund’s Energy exposure is concentrated in high-quality producers and pipeline operators characterised by solid balance sheets, conservative leverage, disciplined capital allocation, and attractive dividend profiles. Canada’s importance as a reliable and geopolitically secure energy supplier continues to grow amid elevated global tensions and structural underinvestment in energy infrastructure.
Pipeline operators such as Enbridge and TC Energy issued forward guidance near record levels during the quarter, highlighting the durability of contracted cash flows and the essential role these assets play in transporting natural gas and oil across North America. These characteristics align well with the Fund’s objective of delivering stable income and capital preservation.
Source: Middlefield Limited as of 31.12.2025. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.
During the quarter, we initiated a position in Telus Corp, one Canada’s leading telecommunication providers with a national wireless and broadband network. Telus offers a compelling combination of recurring cash flows, attractive dividend yield, and is undergoing a strategic review to simplify its business model. We believe recent share price weakness presented an attractive entry point into a high-quality franchise trading at a discount to historical valuation levels.
We also initiated a position in Mullen Group, a leading North American trucking and logistics company. Mullen has been executing well on operational improvements, integrating prior acquisitions, and maintaining a disciplined capital allocation framework. With several nation-building infrastructure projects set to commence across Canada, we viewed the opportunity to acquire a high-quality logistics operator at trough valuation multiples and an attractive dividend yield, as particularly compelling.
We made profits and exited our position in Rogers Communication during the quarter. Throughout the year, management has been working on monetising its sports assets to help surface value and drive multiple expansion. With much of the value now reflected in the share price, we sold our position and redeployed capital into opportunities offering more attractive risk-adjusted returns and income growth potential for the Fund.
Real Estate remains the Fund’s largest overweight relative to the index. Despite competitive year-to-date performance, Canadian REITs continue to trade at a significant discount to net asset value, offering attractive upside potential alongside improving fundamentals and average distribution yields of approximately 4%.
The portfolio remains underweight Communication Services, where we continue to see elevated competitive intensity, regulatory uncertainty, and a less compelling growth outlook relative to other sectors within the portfolio.
Looking ahead to 2026, we are constructive on the outlook for Canadian equities, underpinned by expectations for double-digit earnings growth, attractive relative valuation multiples, and a supportive macro and policy backdrop. The Canadian economy’s resilience is being reinforced by fiscal support from the Carney government and a consumer that is holding up better than expected, as evidenced by Canadian banks broadly reducing provisions for credit losses toward the end of 2025.
Canada is entering a period of renewed economic momentum, driven by the rollout of large-scale nation-building infrastructure projects, rising foreign direct investment, and strengthening trade relationships with Asia and Europe. The country’s abundance of natural resources, well-capitalised financial system, and stable regulatory environment continue to position Canadian companies favorably relative to global peers.
The Fund’s core exposure to financials, real estate, energy, pipelines and utilities, remain less sensitive to trade uncertainty and well supported by domestic policy momentum, including efforts to deregulate and accelerate infrastructure development under the newly elected government. By focusing on high-quality businesses with solid balance sheets, robust free cash flow generation, and a demonstrated ability to grow dividends, MCTP offers an attractive blend of growing income and capital appreciation, with a constructive outlook heading into the year ahead.
Source: Middlefield Limited. Additional sources available upon request.
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