Bristol Gate U.S. Dividend Growth Equity
Mandate commentary
Q1 2026
Highlights
① In Q1 2026, the S&P 500 Equal-Weighted TR Index outperformed the broad benchmark, and leadership widened at the expense of recent market winners (direct AI or indirect cohort).
② The oil shock drove turbulence, as commodities dominated inflation fears.
③ Global growth expectations will be adjusted if conflict extends beyond summer.
Mandate overview
Exiting the last quarterly reporting season, our 22 holdings delivered an average 14.2% revenue growth, leading to 23.4% average earnings-per-share (EPS) growth (medians of 12.2% and 17.6%, respectively). This compared with the S&P 500’s 9.4% revenue growth and 13.9% EPS growth. The portfolio’s dividend growth was 14.6% over the last twelve months, compared to 5.5% for the S&P 500 Index. The fundamentals of our holdings are clearly strong, and we expect that to continue. Multiples have compressed, significantly in some instances, providing opportunity.
We are particularly excited about newer additions to the portfolio. We believe these businesses can deliver persistent high-dividend growth supported by clear structural drivers, disciplined capital allocation and resilient demand. These characteristics continue to define our opportunity set and our investment process.
Mandate: lagged the S&P 500 TR Index modestly
Performance contributors
From a sector perspective, energy, industrials and consumer staples were the leading contributors in the quarter.
On an absolute basis, leading contributors included Applied Materials, Targa Resources and Westinghouse Air Brake Technologies.
Performance detractors
Information technology, financials and health care were the main detracting sectors in Q1.
Intuit, Accenture and Microsoft were the leading detractors from a stock perspective.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | Since INC. (NOV. 14, 2016) |
BRISTOL GATE U.S. DIVIDEND GROWTH EQUITY | -4.69
| -4.69
| 5.40
| 11.07
| 8.40
| 12.23
|
Mandate repositioning
During the quarter, we initiated positions in Targa Resources, Walmart, Verisk and Trane Technologies.
The additions were funded by the sales of UnitedHealth, Domino’s Pizza, Carrier and Old Dominion Freight Line, which all faced lower dividend growth predictions.
In addition to the above noted trades, as part of our rebalancing process, we trimmed Applied Materials and Amphenol. We topped up Broadcom, Intuit and MSCI.
Market overview: oil shock drove turbulence, commodities dominated inflation fears
The first quarter of 2026 began with supportive economic momentum; improving manufacturing, a stabilizing U.S. housing backdrop and contained inflation. However, this quickly pivoted as the conflict in the Middle-East involving Iran — along with trade disruption around the Strait of Hormuz — pushed energy commodities higher. The energy shock drove volatility across global equities, yet the underlying backdrop proved more resilient than headlines implied, reinforcing the value of diversification.
Canadian equities were resilient, as higher crude oil prices supported the energy sector and helped offset weaknesses in rate-sensitive areas. Defensive sectors, dividends and real-asset exposure provided additional insulation versus many global peers. U.S. fundamentals remained solid, but sentiment weakened as oil lifted inflation expectations. Investors rotated away from expensive, rate-sensitive growth stocks, making performance more about a valuation reset than deteriorating earnings.
Market outlook: global growth expectations will be adjusted if conflict extends beyond summer
Looking ahead, oil and energy prices remain the central swing factor. A credible path to de-escalation could shift attention back to the positive economic cycle evident early in the quarter; a prolonged disruption would maintain inflation uncertainty and elevated volatility.
In this environment, commodity producers and value‑oriented equities may provide resilience, while long‑duration assets and oil‑importing regions face greater sensitivity to energy-price fluctuations.
Diversification and flexibility remain central to portfolio construction
Canadian equities offer exposure to energy and materials supported by global supply constraints. International developed and emerging markets present valuation‑driven opportunities and help diversify away from concentrated U.S. equity exposure.
Within fixed income, short‑ to intermediate-duration strategies can balance yield and interest‑rate risk, complemented by high‑quality corporate bonds for disciplined income generation. Key areas to watch will be central bank policies, as they look at the impact of higher energy costs and their indirect tax on the consumer.
To discuss your investment strategy, speak to your IG Advisor.
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