In an era where global headlines often spell market uncertainty, Canadian investors searching for steadier ground might find an answer in a specific, data-driven approach. The Canadian Stable Dividend portfolio, a strategy focusing on low-volatility dividend payers, has demonstrated remarkable resilience and growth over a long-term horizon, significantly outpacing the broader market.
A Track Record of Outperformance and Stability
Extensive backtesting reveals the compelling performance of this strategy. Over the 26-year period ending in 2025, the Stable Dividend portfolio achieved an average annual return of 14.4% when rebalanced monthly. This performance handily eclipsed the Canadian stock market, represented by the S&P/TSX Composite Index, which advanced at an average annual rate of 8.1% over the same timeframe. These calculations, based on data from Bloomberg, assume dividend reinvestment and do not account for fund fees, taxes, or trading costs.
The portfolio's construction is methodical. It begins with the 300 largest stocks on the Toronto Stock Exchange and then selects an equal-dollar amount of the 20 dividend-paying companies that exhibited the lowest volatility over the previous 260 trading days. This focus on low volatility has historically provided a smoother ride. Even when rebalanced just once per year, the portfolio delivered robust average annual gains of 12.3% over the 26-year test period.
Tailored Variants for Income and Growth Investors
The core Stable Dividend portfolio can be adapted to suit different investor preferences, splitting into two distinct variants. The high-yield version holds the 10 stocks from the original list with the highest dividend yields, while the low-yield variant consists of the other 10. Currently, the high-yield portfolio offers an average yield of 4.8%, the original 20-stock portfolio yields 3.6% on average, and the low-yield portfolio averages 2.4%.
Interestingly, the return profiles of these specialized portfolios have been very similar to the original. From 2000 to 2025, the high-yield portfolio grew at an average annual rate of 14.4% with monthly rebalancing (12.2% annually), while the low-yield portfolio posted gains of 14.2% monthly (12.2% annually). Investors should note, however, that there have been periods where one variant outperformed the other, so identical returns are not guaranteed at all times.
Resilience Tested During Major Market Crashes
The true test of any strategy is its behavior during downturns, and here the Stable Dividend approach has shown notable fortitude. All portfolio versions largely avoided the early-2000s dot-com crash, where the market index plunged 43%.
The strategy faced its sternest test during the 2008-09 financial crisis. The original portfolio declined 22% from its prior high. The low-yield variant fared slightly better with a 21% drop, while the high-yield portfolio fell 26%. Crucially, all were far more resilient than the market index, which plummeted a staggering 43%.
During the COVID-19 pandemic sell-off in 2020, the original portfolio fell 18%, outperforming the market's 22% decline. The low-yield portfolio again showed greater stability with an 11% correction, while the high-yield portfolio dropped 25%.
For nervous investors seeking a smoother path, the low-yield portfolio historically offered less severe drawdowns while delivering returns very similar to its counterparts. While past performance is no guarantee of future results, the long-term data presents a compelling case for considering low-volatility dividend stocks as a stabilizing force in a turbulent investment landscape. The strategy and its variants continue to be monitored for the Globe and Mail by Norman Rothery, PhD, CFA, founder of StingyInvestor.com.
