Discover a High-Yield Portfolio for Dividend Enthusiasts

Investors seeking high-yield portfolios that offer impressive returns should pay attention to the Frugal Dividend portfolio. This portfolio targets low-volatility dividend payers on the Toronto Stock Exchange (TSX) trading at attractive valuations.

Frugal Dividend Portfolio Performance

Since its inception, the Frugal Dividend portfolio has delivered exceptional results. It achieved an average annual gain of 16.2% over 26 years, concluding in January 2026. In comparison, the S&P/TSX Composite Index recorded an average annual return of 8.1% during the same timeframe. This performance is based on backtests using monthly data from Bloomberg, adjusted for dividend reinvestment but excluding associated costs.

Selection Process

The portfolio begins its selection process with the top 300 stocks on the TSX. It then narrows this down to the 50 dividend payers with the lowest volatility over the last 260 days. Ultimately, it targets the 10 stocks with the lowest price-to-earnings ratios (P/E).

Portfolio Variants

In 2024, the Frugal Dividend portfolio was expanded to include variants. These variants altered the low P/E criterion to utilize low price-to-cash-flow and low price-to-free-cash-flow metrics. Recently, two new variants emerged, focusing instead on low price-to-book-value (P/B) and high dividend yield.

Performance of Variants

• The low-P/B portfolio yielded an average annual return of 14.4% over the same 26-year span.
• The high-yield portfolio outperformed all others, generating an impressive average annual return of 17%.

Alternative Investment Strategies

Two more portfolios were tested without being included in performance graphs. The first targeted stocks with low price-to-tangible-book-value ratios, achieving an average annual gain of 14.3%. The second portfolio, which selected stocks with low price-to-sales ratios, underperformed with an average annual return of 13.6%.

Insights and Cautions

While historical returns offer promise, they must be interpreted cautiously. The potential for data mining exists, suggesting that past performance is not a guaranteed indicator of future results. Investors should moderate their expectations regarding the high-yield portfolio’s ability to maintain its impressive average annual returns.

Long-Term Outlook

For those looking for a longer-term strategy, a lower turnover version of the high-yield portfolio achieved an average annual return of 14.9% when rebalanced annually rather than monthly. This stable high-yield portfolio remains under observation for its long-term performance.

For detailed insights into the specific stocks comprised within the Stable High-Yield portfolio and further options, investors can refer to resources provided by El-Balad.