As investors, most of us are not chasing short-term highs. What truly matters is generating stable dividend income while aiming to outperform the broad market over the long term.
The latest 5-year backtest (April 2021 – April 2026) of Yield Spot, covering 70 high-dividend stocks from the US, Canada, UK, and Switzerland, shows encouraging results. Using a daily rebalancing weighting strategy, high-score stocks achieved an average α_BH (excess return over buy-and-hold the individual stock) of +6.5%. The best performers reached a Sharpe Ratio of 0.485, with maximum drawdown effectively controlled within -25%.
In this article, I break down all the key metrics — CAGR, Alpha, Sharpe Ratio, MaxDD, and win rate — in plain language, and share the Top 6 high-score quality stocks worth monitoring.
內容目錄
What is YieldSpot and Why It Matters for Dividend Investors?
YieldSpot is a quantitative backtesting tool designed specifically for high-dividend stocks. Its core logic is straightforward and practical, today I will show you one strategy :
- Every day, it calculates the real-time percentile ranking of dividend yields based on the past 3 years (756 trading days).
- When the percentile exceeds the threshold , gradually increase allocation to the stock.
- When below the threshold → gradually switch to SPY (or VOO).
- The main strategy uses daily weighting rebalancing (0%, 30%, 60%, 100% levels) for dynamic asset allocation.
This backtest fully accounts for adjusted close prices and after-tax dividend drag. Both the strategy and buy-and-hold benchmarks use the exact same period, making the alpha figures more reliable. For investors seeking stable cash flow with reduced single-stock risk, this approach offers a structured way to manage allocations dynamically.
Backtest Settings (Fully Transparent)
- Period: April 2021 – April 2026 (5 years, including high interest rate and volatile market conditions)
- Universe: 70 high-dividend stocks (primarily US, plus Canada, UK, Switzerland)
- Risk-free rate: 4.0%
- Transaction cost: 0.4% round-trip per rebalance
- Strategy: Daily percentile-based weighting rebalancing
- Win rate calculation: Non-overlapping 5-day windows (more conservative)
Core Results – Strategy 2 (Daily Weighting Rebalancing)
Overall statistics:
- Correlation between score and α_BH: r = +0.313 (p=0.008) — statistically significant, suggesting the scoring system has predictive power for excess returns.
- Average Sharpe Ratio: 0.222 (medium-to-upper range relative to buy-and-hold individual high-dividend stocks; top names reached 0.485)
- Average MaxDD (Maximum Drawdown): -31.5% (high-score group controlled within -25%)
- Average Win Rate: 55.7%
While the average Sharpe of 0.222 is not exceptionally high, this is a realistic 5-year test during a challenging high-rate environment. The real value lies in the combination of positive alpha and improved risk characteristics for higher-scoring stocks.
Top 10 α_BH Ranking
| Rank | Ticker | Score | α_BH | Strategy CAGR | Sharpe | MaxDD | Avg Holding % | Rebalances |
|---|---|---|---|---|---|---|---|---|
| 1 | TROW | 1.00 | +11.92% | +2.02% | 0.050 | -39.63% | 62.0% | 191 |
| 2 | MDT | 2.75 | +9.34% | +5.09% | 0.145 | -32.37% | 49.1% | 91 |
| 3 | AOS | 3.25 | +7.93% | +9.04% | 0.324 | -33.59% | 46.5% | 91 |
| 4 | APD | 1.00 | +7.92% | +10.51% | 0.401 | -25.15% | 49.1% | 98 |
| 5 | TGT | 2.25 | +6.60% | -1.38% | -0.037 | -50.21% | 67.7% | 65 |
| 6 | SYY | 4.75 | +6.51% | +6.83% | 0.233 | -31.13% | 46.7% | 186 |
| 7 | PPG | 3.25 | +6.48% | +1.77% | 0.032 | -32.01% | 66.6% | 101 |
| 8 | AMCR | 1.00 | +6.15% | +2.47% | 0.033 | -37.02% | 40.1% | 96 |
| 9 | KMB | 4.25 | +5.96% | +1.67% | -0.034 | -25.54% | 57.4% | 154 |
| 10 | V | 4.25 | +5.03% | +12.40% | 0.485 | -24.26% | 50.5% | 132 |
(Data source: YieldSpot backtest)
5 Key Metrics Every Investor Should Understand
- CAGR (Compound Annual Growth Rate) Measures the smoothed annual return if the strategy was run from start to end. Visa (V) reached +12.40%, slightly ahead of SPY’s buy-and-hold return of approximately +12.02% in the same period.
- α_BH (Alpha vs Buy & Hold the Stock) The most important metric here. Positive alpha means the strategy outperformed simply holding the stock. SYY delivered +6.51%, meaning the strategy added about 6.51% annual excess return on top of holding SYY itself.
- Sharpe Ratio Return per unit of risk (volatility). The average 0.222 is moderate, but top high-score names like V reached 0.485, close to SPY levels, indicating better risk-adjusted performance.
- MaxDD (Maximum Drawdown) The largest peak-to-trough decline. Average -31.5% is moderate risk overall, but the high-score group kept it within -25%, significantly better than many individual stocks that exceeded -40%. This helps with psychological resilience.
- Win Rate Percentage of non-overlapping 5-day periods with positive returns. Average 55.7% — modestly above 50%, with the edge compounding over time.
Top 6 High-Score Quality Stocks (Score ≥4.0 with Positive α_BH)
These names stand out for combining high scores, positive alpha, and defensive characteristics — suitable for long-term dividend-focused portfolios:
- SYY (Sysco): Score 4.75, α_BH +6.51%, Avg Holding 46.7% — Leading foodservice distributor with stable dividends.
- KMB (Kimberly-Clark): Score 4.25, α_BH +5.96% — Essential consumer staples, strong defensive qualities.
- V (Visa): Score 4.25, α_BH +5.03%, Sharpe 0.485 — Growth + dividend combination standout.
- NNN (National Retail Properties): Score 4.75, α_BH +3.85% — Retail REIT with reliable cash flows.
- SHW (Sherwin-Williams): Score 4.25, α_BH +2.18% — Paints leader with deep economic moat.
- MCD (McDonald’s): Score 4.75, α_BH +0.26% — Global brand powerhouse.
Final Thoughts: Yield Spot as a Transparent Dividend Tool
This 5-year backtest suggests that higher-scoring stocks (≥4.0) paired with daily rebalancing have a reasonable probability of outperforming pure buy-and-hold on the individual stock level, while helping manage drawdowns in a high-rate environment. The scoring system has shown statistically significant predictive ability across a 70-stock sample.
There is no perfect strategy in investing. The key is finding approaches that match your risk tolerance, time horizon, and goals. Yield Spot is not a black box — it’s an open tool you can test yourself.
Want to run your own tests? Visit the Yield Spot tool and input any US or other stock ticker. It generates a full report quickly.
Which stock would you like me to analyze further or run a longer 10-year backtest on? Feel free to leave a comment below.
To learn more about how dividend yield percentile analysis works, check out our full guide:
Dividend Yield Percentile Explained: A Data-Driven Way to Understand Dividend Yield History
Coca-Cola KO Stock — Is Now Really a Good Timing? What the Data Shows
Important Disclaimer: All data comes from Yield Spot backtests. Past performance does not guarantee future results. Investing involves risk of loss. Please conduct your own due diligence and consult a qualified advisor if needed. This article is for educational and informational purposes only and does not constitute investment advice.
「Charlie chacha，Excel VBA 愛好者、馬拉松跑者、
長線投資人。
🔧 目前在做：
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— 幫存股族了解股息率歷史分位位置的分析工具」