Bargain prices for stable dividend stocks

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The Frugal Dividend portfolio combines two investment factors by trying to acquire relatively stable stocks at bargain prices

My local farmers’ market returns to life at the start of June to serve up a fresh crop of asparagus. The vegetable sports an envious growth rate and, at the height of the season, its stalks have to be picked daily.

. It starts with the 300 largest common stocks on the Toronto Stock Exchange by market capitalization. It keeps the stocks that pay dividends and then picks the 50 with the lowest volatilities over the prior 260 days. The 50 stocks are sorted by price-to-earnings ratio and an equal-dollar amount is invested in the 10 stocks with the lowest positive ratios.

Keep in mind that the 25-stock variant, for example, will almost always hold some stocks with higher P/Es than the 100-stock variant because the latter has access to four times as many stocks to choose from On the risk side of the equation, the portfolios that admitted stocks with higher prior volatilities were themselves more volatile and usually fell more in downturns.

 

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