Discover a High-Yield Portfolio for Dividend Enthusiasts

Dividend enthusiasts have a reason to be excited about a newly developed portfolio aimed at maximizing returns. This investment focuses on low-volatility dividend stocks, providing steady and significant gains over the long term.

Frugal Dividend Portfolio Overview

The Frugal Dividend portfolio, which began its journey in January 2025, has achieved impressive results. Over a 26-year span, up to the end of January 2026, it has averaged annual returns of 16.2%. This is notably higher than the performance of the S&P/TSX Composite Index, which gained 8.1% annually during the same period.

Methodology

• The portfolio analyzes the largest 300 stocks on the Toronto Stock Exchange (TSX).
• It identifies the top 50 dividend payers with the lowest volatility over the previous 260 days.
• The final selection includes the 10 stocks with the lowest price-to-earnings (P/E) ratios.

Recently, the portfolio method has expanded. In 2024, two new variants emerged, replacing the low-P/E criteria with low price-to-cash-flow and low price-to-free-cash-flow tests. Current variants include options for the lowest price-to-book-value (P/B) or the highest dividend yields.

Performance of Portfolio Variants

The long-term performance of the different portfolio variants indicates promising returns:

• The low-P/B portfolio averaged annual gains of 14.4% over 26 years.
• The high-yield portfolio excelled with average annual gains of 17%.

Additionally, two more testing variants were analyzed, albeit with less impressive results. One focused on stocks with low price-to-tangible-book-value ratios and saw average gains of 14.3%. In contrast, another variant that selected based on low price-to-sales ratios noted disappointing returns of 13.6%.

Investor Outlook

While the backtesting results are encouraging, caution is advised. Relying solely on past performance can lead to unrealistic expectations. Investors might hope for the high-yield portfolio to maintain its high returns but should consider factors influencing future performance.

Stable High-Yield Portfolio

For those looking for a more balanced approach, a lower turnover version was introduced. This variant, rebalanced annually, achieved an average annual return of 14.9% over the testing period.

Conclusion

The high-yield portfolio, now referred to as the Stable High-Yield portfolio, promises exciting opportunities but carries inherent risks. For dedicated investors, keeping abreast of market dynamics and portfolio updates is crucial in navigating the complexities of dividend investing.

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