It was a good news, bad news story for my model Yield Hog Dividend Growth Portfolio in 2025.
First, the good news: Thanks to a combination of capital appreciation and dividends, the portfolio posted a total return of 21.6 per cent. In most years, that would be reason to pop open the bubbly.
The “bad” news? The portfolio still trailed the surging S&P/TSX Composite Index, which finished 2025 with a scorching total return (including dividends) of more than 31 per cent – its best showing since 2009 when it rebounded from the financial crisis.
While I’m disappointed that my dividend portfolio couldn’t keep up, I am nonetheless thrilled for Canadian investors (like me) who own the index through exchange-traded funds. (More on that in a moment).
Let’s take a closer look at the year that was. Then I’ll dust off my crystal ball to see what 2026 might have in store for dividend investors.
Some quick background: When I launched the model dividend portfolio with $100,000 of virtual cash on Oct. 1, 2017, my main goal was to identify companies with a track record of increasing their dividends and a high probability of continuing to do so.
The idea was to build a collection of stocks that generate increasing cash flow every year to supplement other sources of income. The money in the model portfolio isn’t real, but I follow the same strategy – and own the same stocks, plus some others – personally.
The model portfolio has delivered on its dividend growth mission every year, including in 2025 when 19 of the 21 securities raised their payouts. The two exceptions were SmartCentres REIT (SRU-UN) and South Bow Corp. (SOBO), both of which already yield more than 7 per cent.
Dividend increases, and regular dividend reinvestments, have supercharged the portfolio’s cash flow. As of Dec. 31, it was generating $8,538 of income annually, based on current dividend rates. That’s up 108 per cent from the $4,094 of annualized income it was paying at inception a little more than eight years ago.
As pleased as I am with the portfolio’s income growth, capital appreciation hasn’t been quite as impressive. The portfolio finished 2025 with a value of $215,882, representing a total return of 115.9 per cent since inception, or about 9.9 per cent on an annualized basis. That’s good, but not as good as the S&P/TSX Composite Index, which has returned an annualized 12.4 per cent over the same period.
Why has the portfolio lagged the index lately? Gold is one factor. In 2025, gold stocks posted explosive gains as the precious metal hit a record high of more than US$4,500 an ounce. The model portfolio doesn’t have a single gold producer. Nor does it hold any tech stocks – which, like gold companies, aren’t known for paying big dividends but have produced stellar share price returns.
The portfolio also suffered a few self-inflicted wounds. Two of the biggest drags were Telus Corp. (T), which sank amid investor worries about its debt load and sustainability of its dividend, and Canadian Apartment Properties REIT (CAR-UN), which was hurt by high interest rates, an influx of new rental supply and the federal government’s decision to reduce immigration levels.
Apart from those pockets of weakness, most of the stocks posted solid returns, led by strong gains for banks and utilities. It’s worth noting that the model portfolio and the S&P/TSX both topped the S&P 500, which ended 2025 with a total return of about 17.9 per cent.
What other lessons can we draw from 2025? For dividend investors, the main takeaway is that diversification is still important. As I’ve said many times, supplementing your dividend holdings with index ETFs that cover the United States and Canada will allow you to participate in most of the gains the market has to offer while enjoying the benefits of growing income.
Another thing we learned is that predicting the market’s performance is futile. Who would have thought that, in the face of punishing tariffs and Donald Trump’s 51st state bluster, the Canadian market would produce its best showing in 15 years? As always, the best approach is to build a well-balanced portfolio and ride out the market’s ups and downs.
That advice is just as relevant for 2026 as it was in 2025. While I’m not going to guess what stock prices will do, I’m confident that the vast majority of companies in the model portfolio will continue to raise their dividends, just as they’ve done for many years. That seems like a pretty safe bet in a highly uncertain world.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.