Stock selection method

Most retail investors – people like you and me – pay fees to financial planners who invest their money in expensive actively managed mutual funds that ultimately underperform the market. The ideal investing strategy is exactly the opposite:  simple, low-cost, without error-prone predictions about the future.

Twenty-five years ago a professor named David Stanley published a method of selecting Canadian blue-chip dividend-paying stocks based on a strategy south of the border called “Dogs of the DOW” which had been shown to consistently beat the index.

The method was simple:

  1. List the stocks on the TSX 60 Index by dividend (Note: the TSX company has changed the organization of their indices occasionally.  The TSX 60 is the most recent collection of Canadian blue-chip companies)
  2. Select the top ten yielding stocks of the index provided they have a history of consistent dividend payments. Usually these will be “TURF” stocks (telecoms, utilities, REITs, and financials)
  3. Purchase these equities in equal parts and hold for one year at which point the list is regenerated and the process is repeated.

*historically, companies that were previously income trusts have been excluded from the BTSX list (IPL, PPL, etc.) because they had inconsistent dividend histories.  I have kept with this practice for the time being.