Two Dividend Strategies That Doubled the Market’s Growth Over 26 Years

By the Editorial Team · Monday, June 29, 2026

Two Canadian dividend-focused portfolios targeting low-volatility stocks have achieved annualized returns around 16% over 26 years, nearly doubling the broader TSX market's 8.1% return. These strategies offer a blend of higher income and reduced volatility, making them attractive for investors aiming for steady growth with moderate risk over the long term.

Two Canadian dividend-focused investment strategies have delivered annualized returns nearly double that of the broader market over the past 26 years, according to a recent backtest analysis covering data through May 2026.

The study examined two portfolios constructed from the largest 300 stocks on the Toronto Stock Exchange (TSX). Both strategies concentrated on low-volatility dividend payers, selecting the 50 stocks with the lowest price fluctuations over the previous 260 trading days before applying distinct valuation criteria to pick 10 holdings for each portfolio.

The first, named the Stable High-Yield portfolio, favored the 10 stocks with the highest dividend yields, which currently have a median dividend yield of 5.7 percent, a price-to-earnings (P/E) ratio of 16.6, and a median trailing volatility of 19.1 percent. The second, called the Frugal Dividend portfolio, selected the 10 stocks with the lowest P/E ratios, resulting in a median dividend yield of 3.8 percent, a median P/E of 13.0, and volatility of 18.3 percent.

Over the 26-year period ending in May 2026, the portfolios exhibited compound annual growth rates of 16.3 percent and 15.9 percent respectively, significantly outperforming the S&P/TSX Composite Index, which posted an average annual return of 8.1 percent during the same timeframe. These returns include dividend reinvestments but exclude transaction costs, taxes, fund fees, and commissions.

The portfolios were rebalanced on varying schedules—monthly, quarterly, semi-annually, and annually—with more frequent rebalancing generally yielding stronger performance, though all rebalancing frequencies surpassed the market index’s growth. Notably, the portfolios demonstrated low turnover, swapping fewer than two stocks monthly with monthly rebalancing and about six annually, suggesting a low-maintenance approach that could help minimize trading expenses.

Despite their low-volatility focus, the portfolios were not immune to market downturns. During the 2008-09 financial crisis, the Stable High-Yield and Frugal Dividend portfolios declined by 32 percent and 34 percent respectively, while the broader market fell 43 percent. The worst monthly performance for all came amid the COVID-19 pandemic selloff in March 2020, when the portfolios dropped 26 percent (Stable High-Yield) and 20 percent (Frugal Dividend), compared to a 17 percent decline for the market index.

Losses exceeding 10 percent occurred sporadically but less frequently for the dividend strategies compared to the market index. Across the entire period, the portfolios experienced monthly declines over 5 percent fewer times than the broader index, while also achieving positive monthly returns more often—70 to 72 percent of months versus 63 percent for the market.

While future results cannot be guaranteed, these low-volatility dividend strategies have historically provided stronger, steadier returns than the Canadian market as a whole, combining income generation with relative stability. Their consistency may appeal to investors seeking growth alongside income, potentially supporting long-term objectives and even seasonal financial goals.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.