If you want to beat the TSX and collect some nice dividends, you are going to have to increase your business/stock quality and potentially decrease your dividend yield.
There is no point buying an outsized dividend yield (like in the 7%-plus range) if your stock price declines by multiples of your yield. Stocks with outsized dividend yields normally indicate serious business issues. The chances of a dividend cut increases drastically as a stock’s yield climbs. You don’t want this situation to arise in your portfolio; it is just too risky.
A small yet fast-growing dividend can be powerful
Stocks that consistently beat the TSX tend to pay smaller dividend yields (like in the 2–5% range) and regularly grow their dividend payments. If you want to beat the TSX, you want companies that consistently compound a majority of their cash back into the business.
As their earnings/cash flows grow, they tend to increase their dividend….
