The Globe and Mail reports in its Tuesday, May 21, edition that to avoid sleepless nights, many investors turn to dividend stocks for succour because they have offered good returns with a modest amount of downside risk.
The Globe's Norman Rothery writes that for the Inside the Market column he looked for stable dividend stocks with relatively placid return patterns because they have fared well in the past.
Mr. Rothery begins his search in Canada with the largest 300 common stocks that have their primary listings in Toronto. It is a group that is similar to the S&P/TSX Composite Index. A portfolio that invested an equal amount of money in each of the 300 stocks, rebalanced each year, grew by an average of 8.8 per cent annually over the 25 years through to the end of 2018. By way of comparison, the S&P/TSX Composite Index gained 7.4 per cent annually over the same period.
Good returns are one thing, but risk-averse investors also want to be able to sleep at night. Mr. Rothery created what he calls the Stable Dividend portfolio. Five of Mr. Rothery's stable dividend stock picks are Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce.
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