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Dividends

The Stable Dividend Portfolio: A Low-Volatility Investing Strategy with Consistent Returns

Strategic Insights

— 2 min read

For decades, conservative investors have enjoyed generous returns through stable dividend stocks, outperforming the market with average annual returns of 13.5 per cent over the last 25 years. In contrast, high-volatility stocks have often produced poor results, with the highest-volatility portfolio experiencing a very small loss over the same period. The Stable Dividend portfolio, composed of the 20 lowest-volatility dividend payers from the largest common stocks on the Toronto Stock Exchange, has hit new all-time highs this year, climbing 29 per cent over the 12 months through to the end of September.

Key Takeaways:

  • The Stable Dividend portfolio has outperformed the market, delivering an average annual return of 13.5 per cent over 25 years, compared to 7.9 per cent for the S&P/TSX Composite Index.
  • The portfolio's preference for low-volatility stocks has resulted in a relatively smooth ride, with minimal losses during market downturns.
  • The highest-volatility portfolio experienced a very small loss over 25 years, compared to the market index's average annual gains of 7.5 per cent.
  • Five out of the top six portfolios with the lowest volatility outperformed the market index, with average annual returns ranging from 11.5 per cent to 14.3 per cent.
  • Dividend-paying stocks in the Stable Dividend portfolio have weathered two big market crashes and smaller declines over the past 25 years.
  • The Stable Dividend portfolio is refreshed monthly, with an equal-dollar amount of the 20 lowest-volatility dividend payers from the largest 300 common stocks on the Toronto Stock Exchange.

Statistics:

  • The Stable Dividend portfolio has outperformed the market with an average annual return of 13.5 per cent over 25 years, compared to 7.9 per cent for the S&P/TSX Composite Index.
  • The highest-volatility portfolio experienced a very small loss over 25 years, with an average annual return of 0 per cent.
  • Five out of the top six portfolios with the lowest volatility delivered average annual returns ranging from 11.5 per cent to 14.3 per cent over 25 years.
  • The Stable Dividend portfolio has climbed 29 per cent over the 12 months through to the end of September, far outperforming the market index.
  • The portfolio has weathered two big market crashes and smaller declines over the past 25 years.

Sources:

  • Bloomberg data used in calculations
  • Toronto Stock Exchange data used to compile the 300 largest common stocks
  • The Globe and Mail article by Norman Rothery, PhD, CFA

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