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The Dividend Monster Portfolio: A 25-Year Track Record of Beating the Market

Strategic Insights

— 1 min read

A unique portfolio approach focused on dividend yields and momentum has yielded impressive returns over a quarter-century, outperforming the Canadian stock market by a significant margin. The Dividend Monster portfolio, created by dividend enthusiast Norman Rothery, uses a systematic approach to select stocks with generous dividend yields and strong past performance. This approach has resulted in average annual returns of 15.8 per cent, substantially surpassing the market's 6.7 per cent annual returns over the same period.

Key Takeaways:

  • The Dividend Monster portfolio has outperformed the Canadian stock market by an average of 9.1 per cent per annum over the past 25 years, with returns of 15.8 per cent compared to the market's 6.7 per cent.
  • The portfolio's returns are based on backtests using data from Bloomberg, with dividend reinvestment and no fund fees, taxes, commissions, or other trading costs.
  • The approach involves selecting the largest 300 common stocks on the Toronto Stock Exchange (TSX) by market capitalization, narrowing down to the highest dividend yields, and then purchasing an equal dollar amount of the 10 remaining stocks with the highest total returns over the prior 12 months.
  • The portfolio is rebalanced monthly and held for one month before being refreshed with a new batch of stocks.
  • The original Dividend Monster portfolio's recent 12-month returns stood at 31.9 per cent, beating the market index's 21.4 per cent returns over the same period.

Statistics:

  • Average annual returns of the Dividend Monster portfolio: 15.8 per cent
  • Average annual returns of the Canadian stock market (S&P/TSX Composite Index): 6.7 per cent
  • Best 12-month returns of the original Dividend Monster portfolio: 31.9 per cent
  • Best 12-month returns of the market index: 21.4 per cent
  • Largest downturn suffered by the market index (summer 2000): 43 per cent
  • Largest downturn suffered by the Dividend Monster portfolios (financial crisis of 2008-2009): 51 per cent (All-Dividend Monster) and 52 per cent (original Dividend Monster)

Sources:

  • Bloomberg data (no date mentioned in the original text)
  • Rothery, N. (Ph.D., CFA) (no specific article or publication mentioned)
  • Globe and Mail (article title and author not specified, but can be found at the provided link)

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