Looking for dividend stocks at bargain prices? Time to go fishing, but be prepared for some turbulent waters. Norman Rothery, PhD, CFA, introduces the Perch portfolio, a fishing expedition in the stock market that has yielded impressive results over the past 26 years. The Perch portfolio is a carefully curated selection of Canadian low-volatility dividend-payers trading at bargain prices. It starts with the largest 300 common stocks on the Toronto Stock Exchange, narrows it down to 250 smaller names, and then focuses on dividend payers and stocks with the lowest volatilities and positive price-to-earnings ratios. The 20-stock portfolio has averaged 14.4% annual gains, outpacing the Canadian stock market's 7.9% average annual rate of return. But Rothery also explores variants of the Perch portfolio, such as the 10-stock low-P/E and high-yield versions. The 10-stock low-P/E portfolio has outperformed with 15.3% annual gains, while the high-yield portfolio has been a bit of a disappointment with 13.3% annual gains. Volatility is a key consideration, and the 20-stock portfolio has a modest annualized volatility of 13.4%, while the 10-stock low-P/E portfolio has a higher volatility of 15.1%. The 10-stock high-yield portfolio has the highest volatility of 16.5%. Despite the strong gains, Rothery reminds investors that there are no guarantees and stormy periods are inevitable. The Perch portfolio has performed well during downturns, such as the 2008-2009 financial crisis, with the 20-stock portfolio declining 37% compared to the market's 43% decline. The 10-stock low-P/E portfolio declined 49%, and the high-yield portfolio dropped 45%. Rothery concludes by emphasizing the importance of diversification and the Perch portfolio's potential for strong long-term returns. However, he also advises investors to expect turbulent waters along the way. The article provides a detailed explanation of the Perch portfolio's strategy and results, making it a valuable resource for investors seeking dividend stocks at bargain prices. It also highlights the importance of diversification and the need to be prepared for stormy periods in the market. The author's commentary adds a layer of insight and analysis, making the article a thoughtful and engaging read for investors.
