Dogs of the TSX (Beating the TSX) Dividend Stock Picks – 2021 Volatile Market Edition

Over the past number of years, I’ve been writing about the investing strategy known as Dogs of the TSX (taken from “Dogs of the Dow” in the USA) – also known as the Beating the TSX Dividend Stock Strategy (BTTSX).

At a high level, in this strategy, the largest publicly traded companies in Canada (TSX 60) are sorted by dividend yield, then the top 10 positions are purchased annually (remove former income trusts and stocks that have a history of dividend cuts).  You’ll notice that it has a lot in common with my Canadian dividend stocks 2021 update that I published a couple of months ago.

With the most recent COVID19 induced bear market, this strategy has become even more interesting with dividend yields of strong blue-chip companies reaching sky-high levels.

Dogs of the TSX Dividend Stock Strategy Implementation

Here is the step by step procedure of how this strategy is implemented:

  1. Sort the TSX60 by dividend yield.
  2. Purchase the top 10 positions with equal dollar amounts but remove former income trusts (maybe some exceptions) and stocks that have a shaky dividend history (ie. dividend cuts, cyclical companies, pausing dividends etc).
  3. Hold your positions until the new year at which point you check the list of top 10 yielding blue chips on the TSX again. If there are any differences, you swap out positions until they match.
  4. Repeat annually going forward.

While it may sound like a lot of portfolio churn, since the TSX is fairly small, the top 10 list doesn’t vary much from year to year.

It also turns out that a number of the largest dividend stocks in Canada are also dividend growth stocks.  While the traditional method of picking these positions is to buy the top 10 while removing former income trust and companies that have cut their dividends in the past, I prefer to pick stocks that also have a history of dividend increases (most of them do).

Performance of the BTTSX Strategy

As magical as it may seem, this strategy has been outperforming the TSX over the long term. Mind you, the strategy does not outperform every single year, but it has outperformed over the long term (however, note that past results do not guarantee future returns).

According to the Beating the TSX Wiki page, between 1987 and 2017, the BTTSX had an average return of 12.4% vs the TSX which has returned about 9.6%.

As you know, small improvements in portfolio performance can lead to a significant difference in portfolio size over the long term.  Note my article on improving your portfolio performance by 1.7% through reducing your portfolio MER can lead to a 60% difference in portfolio size over 30 years.  It also helps to use a low-cost discount broker.

I like this strategy in that investors are getting the highest possible yield out of the largest blue-chip stocks in Canada with the possibility of dividend increases.  There already have been several increases thus far in 2020, but there also could be a number of dividend cuts over the next few quarters.

The downsides are that there is annual turn over (usually minimal) which can result in a tax hit in non-registered accounts and potential lack of diversification depending on the year.  For example, one year, it could be a high concentration of financials in the portfolio, and the next could be utilities.

BTTSX Dividend Stock Picks

Now, for what you’ve been waiting for, the BTTSX stock picks.  Before we get into the 2021 picks, let’s take a look at last year.

Here are the picks from 2019:

  1. Enbridge (ENB)
  2. BCE (BCE)
  3. CIBC (CM)
  4. Power Financial (PWF)
  5. TransCanada Corporation (TRP)
  6. Scotia Bank (BNS)
  7. Emera (EMA)
  8. Canadian Utilities (CU)
  9. Telus (T)
  10. Manulife (MFC)

Following this strategy results in the following changes between 2019 and 2020:

  • Selling Power Financial (PWF), Canadian Utilities (CU), and Manulife (MFC)
  • Adding Great-West Life (GWO), Bank of Montreal (BMO), and Brookfield Infrastructure (BIP)

Here are MDJ’s 2021 BTTSX picks:

  1. Enbridge (ENB)
  2. CIBC (CM)
  3. BCE (BCE)
  4. Scotia Bank (BNS)
  5. Great-West Life (GWO)
  6. Telus (T)
  7. Emera (EMA)
  8. TransCanada Corporation (TRP)
  9. Bank of Montreal (BMO)
  10. Brookfield Infrastructure (BIP)

The 2021 group contains 2 telcos, 4 financials, 1 pure utility,  2 pipeline utilities., and an infrastructure company.    For a complete portfolio, we would also need materials/resources, real estate, technology, and consumer stocks. More on how to build a proper dividend growth portfolio.

You may have noticed that Brookfield Infrastructure is an income trust (BIP.UN), so why is it part of the list?  BIP is a recent addition to the TSX60 which means that it’s one of the largest companies in Canada.  It also has a  history of dividend increases (11 years).  To top it off, it is considered one of the better infrastructure companies with a number of quality assets that will produce predictable income over the long-term.

Also note that BIP is now offering a corporate version of their stock, BIPC, which pays eligible dividends.  This helps those who hold BIP in a non-registered portfolio, especially during tax time (income trusts typically have a mish-mash in their distributions).

If you are considering this strategy, I would recommend using it as part of your Canadian exposure and using index ETFs for global diversification.

If I were to start the BTTSX today during this correction, here’s what the list would look like:

  1. Enbridge (ENB)
  2. Power Corp (POW)
  3. CIBC (CM)
  4. Scotia Bank (BNS)
  5. Manulife (MFC)
  6. BCE (BCE)
  7. Bank of Montreal (BMO)
  8. Toronto Dominion Bank (TD)
  9. Telus (T)
  10. Brookfield Infrastructure (BIP)

My Own Implementation of BTTSX

I mentioned in an earlier financial freedom update that my spouse had some cash saved up, and we were looking to deploy into dividend stocks using the Dogs of the TSX strategy.  We ended up opening yet another account at Questrade.

Our “non-registered” dividends shown in a recent update are from our “BTTSX” dividend portfolio.

Q1 2020 Dividend Income Update

SM Portfolio$7,9003.96%
 TFSA 1$4,2004.72%
 TFSA 2$4,0004.75%
 Corporate Portfolio$28,5003.77%
 RRSP 1$7,9002.59%
 RRSP 2$3,4002.44%
  • Total Portfolio Value: $1,263,610
  • Total Yield: 4.71%
  • Total Dividends: $59,500/year (+7.8%)

Being a dividend growth investor, we decided to utilize a hybrid approach to this strategy.  We essentially sorted the TSX60 by yield, but only picked stocks with a history of dividend increases.  We also added a couple of positions for diversification.

While going through this process for almost 3 years now, I’ve noticed that I’m good at picking and buying the stocks, but terrible at selling!  I’d much prefer to add to existing or new positions with new money rather than selling to gain capital.  As of this post, I have not sold any of my original positions.

Having said that, this is what the portfolio looks like today:

  1. BCE (BCE)
  2. Telus (T)
  3. CIBC (CM)
  4. Enbridge (ENB)
  5. Canadian Utilities (CU)
  6. TransCanada (TRP)
  7. Sunlife (SLF)
  8. Great-West Life (GWO) – POW owns GWO
  9. Emera (EMA)
  10. Royal Bank (RY)
  11. Canadian National Railway (CNR) – added this for a bit of diversification
  12. Thompson Reuters (TRI)

Since inception in September 2017 to Dec 2019, using XIRR the portfolio has returned about 10.5% while the index (XIC.TO) has returned about 8%.  Not a bad result, but in reality, I’m more focused on the dividends that the portfolio produces.

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Final Thoughts

As you can see from the post, this strategy has been outperforming the TSX over the long term. Mind you, the strategy does not outperform every single year, but it has outperformed over the long term (however, note that past results do not guarantee future returns).

Perhaps it’s the fact that large-cap stocks on the TSX tend to beat Canadian small caps, which at times can act as a drag on the overall index.  Another reason may be that as yields rise for blue chips, it may mean that their stock price is relatively low which can equate to a form of value investing.

There are some downsides to this strategy though.  First, the annual turn over (usually minimal) can result in a tax hit in non-registered accounts.  Second, there is a potential lack of diversification depending on the year.  For example, one year, it could be a high concentration of financials in the portfolio, and the next could be utilities.

If you are considering this strategy, I would recommend using it as part of your Canadian exposure and using all-in-one ETFs for added diversification.

See my Canadian dividend stocks list for more information on what I’m putting new money into these days.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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8 months ago

If any one is interested, there is a Canadian site dedicated to Beating the TSX:

It has the annual list, plus updates to the portfolio monthly for those needing up to date information. There is also a complete list of the TSX 60 stocks organized by dividend yield.

BTSX has a long history of generating returns in excess of the benchmark. Interestingly, a recent post shows how Beating the TSX has out-performed the index over various time periods after recent market crashes, which is especially helpful given the current situation. If you’re not sure how to implement the strategy in a practical way, there is information on that too. All of the information is free.

9 months ago

I have some of these. The yields are great and these companies have been paying divs for decades.

My big worry right now is the Canadian ecomy is in trouble, 6 million jobs have been lost. I don’t think the full ramification of this is yet know, let alone priced in.

In a conservative approach, which of this would be the most secure to
1- continue paying divs?
2- not depreciate in price substantially?

9 months ago

Hello MDJ, I have ~120k of room between me and my wife’s TFSA account.

Do you think investing the 120k in the TFSA or RRSP account is a better choice right now?

We have the cash sitting in Questrade and I am trying to decide what to do.


9 months ago
Reply to  Kev

I will go for TFSA when market is down and RRSP when is up.