Below is a chart of the performance of the Dogs of the TSX 60 from December 31, 2021 to December 31, 2022.
The Toronto Stock Exchange increased approximately +11.19% in the last year.
The Low P/B (2,3,4) category gained the most while the Top 3 Low Yield category lost the most. The category that had across the board gains was the High P/E group.
The Top 10 Low Yield outperformed the Top 10 High Yield group but failed to exceed the gains of the Toronto Stock Exchange by a wide margin. The High Yield stocks should not be underperforming the Index based on the theory as proposed by Michael O'Higgins.
In our January 2, 2022 posting, we said the following:
“Even though the high yield stocks underperformed the low yield stocks in 2021, we believe that the consistency to outperform the index makes it necessary to opt for the high yield stocks rather than the low yield stocks.”
The high yield stocks are not making a compelling case other than the fact that they beat the index in two prior years. When adjusted for the dividends, yes, the high yield stocks are good. However, the low yield stocks have the better growth potential and when we consider that it is looking like a toss-up when choosing between the two, we'd rather opt for the growth component of the dividend paying stocks.
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