Beating The FTSE 100 With Dividend Dogs: Portfolio Update

Thu 1:06pm by Roland Head

3 comments 565 reads

A year ago, I noticed that Stockopedia’s Dividend Dog screens had been outperforming the market by a comfortable margin since late 2022 – broadly speaking, when interest rates started to rise.

I created a model portfolio to test whether this outperformance would continue – and to see how much income it could generate in a market where risk-free yields were over 4%.

One year later, the initial results are in. This simple high yield strategy has almost matched the FTSE 100 on share price gains…

… but it’s beaten the index when dividends are included:

Period: 15/10/24 - 15/10/25	Share Price Return	Total Return (share price + dividends)
Dividend Dogs	12.4%	19.8%
FTSE 100	14.2%	18.3%

While the total return outperformance is only 1.5%, it’s worth remembering that the Dividend Dogs portfolio generated an income of 7.4% over the year, compared to just 4.1% for the FTSE 100.

For investors interested in generating a natural income from their portfolio – withdrawing dividends without selling stocks – I think this could be an attractive result.

Certainly I am sufficiently encouraged to refresh the portfolio and keep it running for another year. Before I look at the updated stock selection though, here’s a snapshot of how my selection from last year performed.

2024/25 Dividend Dogs review

To create the portfolio, I merged the results of Stockopedia’s two Dividend Dog Guru Screens:

Dividend Dogs: uses trailing 12-month dividend yields
Dividend Dogs (Forecast): uses rolling 1-year forecast yields

I chose to do this mostly because it provided a larger and more diversified result set than relying on either screen alone.

In terms of historic performance, the historic Dividend Dogs have outperformed the forecast Dogs since the screens’ inception, but the pattern of performance has been fairly similar.

I ended up with 13 stocks in last year’s portfolio. While this is below the 15-20 I’d ideally target, I think it was enough for a useful experiment. Here’s how they performed last year:

I would not have predicted this set of outcomes at the start of the year (I was relatively bullish about the biggest loser, B&M European Value Retail SA (LON:BME)) – but that’s the nature of this kind of investing. Shares…

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Richard Leishman

11:22am

Thanks, as always, Roland, for another thought provoking article.

I am always keen to keep things as simple as possible and your article made me think about whether there may be an alternative, simpler way to have outperformed both your screen and the FTSE 100 this last year, whilst still generate a decent income and gain greater diversification.

One that sprung to mind along the same lines - namely large cap, broadly UK based, high income shares - was that if you had simply held the City of London Investment Trust (CTY) then you would have managed a 22.4% return this last 12 months, not including income.

If you include dividends then the total return would have been a mightily impressive 27.5% this last year.

Yes there are fees involved but I would consider them pretty reasonable at only 0.358% and you would have gained far greater diversification with 80 large cap holdings, and almost a 10% boost in performance over the FTSE 100.

All the very best and keep up the great work that you and the team do. It is very much appreciated.

Richard

WTT

12:22pm

CTY has certainly had a good run, although it's yield says only 4.1% and so it's no match for the income requirement that is the aim of the dividend dogs. Thank you for doing this Roland, it's great to see and every dog has its day! It's been a good period for dividend shares, I imagine due to them being severely undervalued and the high uncertainty of late. I think for people in retirement who want a minimalist strategy this works well. I do something similar myself but with more positions (incl. trusts) to smooth the return volatility a bit and am happy to accept a lower return to sleep better.

intuitive6191

12:55pm

A good article on one option for longer term investing. The Stockopedia five year figures for both screens are given as..

Dividend Dogs Forecast 34%

Dividend Dogs 62.68%

This suggests some divergence for the two strategies which has not been fully picked up in the article? Also, I assume that the Stockopedia figures (34 and 62.68) here are not total return and exclude dividends.

A final question of the subject of screens - how exactly does a screen have a performance? I assume that a screen is simply picking up the shares at that time which qualify for the screen. This implies that there is portfolio in the background which is being constructed from the screen and from which the performance is measured. In which case, this portfolio must have some rules for buying and selling over a five year period?

It would be interesting if Stockopedia could generate more articles on the merits of simple low maintenance long term investing. I suspect that the results would be quite startling.

Beating the FTSE 100 with Dividend Dogs: portfolio update

2024/25 Dividend Dogs review

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Roland Head

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