What if you could beat the Canadian market by selecting ten stocks each year? The Dogs of the TSX strategy gets its name from the Dogs of the Dow, an investing technique well-known in the U.S. for selecting the “dogs” (paying a higher dividend yield) of an index.
The Dogs of the TSX, or Beat the TSX (BTSX) strategy was developed by a professor named David Stanley. He suggested that by selecting the highest dividend yielders of the TSX each year, you could beat the index.
If you are tired of losing money on bad stocks, this strategy could help you quickly build a solid core portfolio.
The Dogs of the TSX in a nutshell
One of the BTSX method’s main advantages is its easy implementation. You can start trading with four simple steps:
#1 List the TSX 60 index by dividends. The TSX 60 is the index of the 60 largest Canadian companies. Most of them are blue-chips like banks or telecoms and pay a dividend.
#2 Select the top 10 yielding stocks from the TSX 60. The ten most generous stocks are called the dogs of the TSX. As they offer the largest yields, they haven’t performed well the year before. Therefore, their yield is higher, and you buy them at a relatively low price.
#3 Buy the top 10 yielding stocks in equal weight. Boom! You build your core portfolio for the year! The strategy is based on buying the dogs in January.
#4 Each January, review the new Dogs of the TSX and trade accordingly. Each year, you must do steps from #1 to #3 to ensure you always have the highest Canadian yield stocks.
The Dogs of the TSX Portfolio 2024
Here’s the list of the top 10 yielding stocks from the TSX 60 for this year. All you have to do is to invest an equal amount of money in each dividend stock to build your portfolio.
| COMPANY | SYMBOL | PRICE | DIVIDEND | YIELD | |
| 1 | Enbridge | ENB | $48.43 | $3.66 | 7.56% |
| 2 | Bell Canada | BCE | $54.79 | $3.87 | 7.06% |
| 3 | Algonquin Power | AQN | $8.08 | $0.57 | 7.05% |
| 4 | TC Energy Corp | TRP | $52.92 | $3.72 | 7.03% |
| 5 | Bank of Nova Scotia | BNS | $62.30 | $4.24 | 6.81% |
| 6 | Telus | T | $24.36 | $1.50 | 6.16% |
| 7 | Emera | EMA | $48.80 | $2.87 | 5.88% |
| 8 | CIBC | CM | $61.54 | $3.60 | 5.85% |
| 9 | Pembina | PPL | $46.72 | $2.67 | 5.71% |
| 10 | Power Corp | POW | $39.70 | $2.10 | 5.29% |
30 years of outperformance
Matt from Dividend Strategy is doing a monk’s work to keep track of this strategy. Shockingly, The Dogs of the TSX has outperformed the market for 30+ years! While it did not beat the market in 2023, but that’s one year. Average for three years still exceeds the market.
Source and more graphs at BTSX portfolio by Dividend Strategy
Why the BTSX works so well?
I was a bit skeptical when I heard of this strategy at first. It’s unlikely that such a simple strategy would outperform the market consistently. I’ve done my research to understand the success rate behind the BTSX strategy.
#1 Buying blue-chips quality stock. The TSX 60 refers to the 60 largest stocks in Canada. Chances are, those companies will be around for a while.
#2 Canadian stocks have a great history of paying and increasing dividends. There are many dividend aristocrats among the TSX 60. Dividend growers tend to outperform the market over a long period of time.
#3 Buy low, sell high. The Dogs of the TSX is based on a classic investment principle: buy when stocks are low and sell them at a higher price. By rotating your portfolio each year with the new “dogs”, you ensure to buy the best stocks at the lowest price while selling those with a great return over the past 12 months.
#4 It’s relatively easy to beat the Canadian market. The fact that the BTSX is working isn’t necessarily an achievement. The Canadian market is heavily concentrated in two sectors: Financials and Energy. By investing in other sectors, you can easily beat the TSX.
Why I don’t use the Dogs of the TSX strategy
Investors can beat the TSX with an easy-to-use and straightforward strategy. Why am I not using the Dogs of the TSX for my portfolio?
#1 Know what you hold and why you hold it. It is one of the foundations of my investment model. I prefer researching and understanding a company’s business model before I add it to my portfolio. Buying stocks based on an index and a dividend yield seem too simplistic. It won’t hold very well during market crashes.
#2 Sector concentration. The BTSX forces you to buy only ten stocks based on the dividend yield regardless of the sector. The Dogs of the TSX 2022 shows 30% of financial companies and 30% of energy stocks. With 2/3 of your money invested in two industries, your portfolio is subject to intense volatility.
#3 Transaction costs and taxes. Rotating your stocks each year could trigger several transactions and prevent you from deferring tax on capital gains. This will have a severe impact on your returns in a non-registered account. Investing in the Dogs of the TSX in a RRSP or a TFSA account is best.
#4 I already beat the TSX. I’ve been a dividend growth investor since 2010. My years of experience in the financial industry and research helped me build a proven investing strategy. My results are not only better than the TSX, but they are also better than the BTSX strategy. Therefore, I don’t see any reasons to change something that already works.
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