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Bridge over ocean
1 January 2003 Financial Analysts Journal Volume 59, Issue 1

Dividend-Yield Strategies in the Canadian Stock Market

  1. Sue Visscher
  2. Greg Filbeck, CFA, CIPM

The “Dogs of the Dow” strategy has become an increasingly popular investment strategy for unit investment trusts, resulting in superior performance for U.S.-based investors. To examine its effectiveness for Canadian investors, we applied this high-dividend-yield strategy to the Toronto 35 Index for the first 10 years of the index's existence. The 10 top-performing portfolios' higher compound returns were sufficient to compensate for taxes and transaction costs. Perhaps more important, both the Sharpe ratio, which measures excess return to total risk, and the Treynor index, which measures excess return to market risk, indicate that the strategy produced higher risk-adjusted returns than the Toronto 35. The Dogs strategy also performed well against the broader, but similar, Toronto Stock Exchange 300 Index.

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