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:
- 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)
- 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)
- 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. Starting January 2020 they are no longer excluded.