Can dividend stocks beat the market? Let’s take two scenarios of five-year and three-year returns from two stock market indices, the TSX Composite Index and the S&P 500 Index. A $10,000 investment in the TSX Composite Index in June 2022 would now be $14,030, while that in the S&P 500 Index would be $15,730.
| Market Index | 3-Year Return | 5-Year Return |
| TSX Composite Index | 40.3% | 76.1% |
| S&P 500 Index | 57.3% | 104.5% |
| $10,000 Investment | ||
| TSX Composite Index | $14,030 | $17,613 |
| S&P 500 Index | $15,730 | $20,450 |
If we break down the returns to compounded annual growth, the S&P 500 gave an average annual return of 15.7% and the TSX Composite Index of 12% in the last five years.
Can two 7% dividend stocks beat market returns?
Finding a dividend stock with a double-digit yield spells risk. Growth stocks have higher returns because they reinvest cash in the business to grow and earn more profit. Dividend stocks limit compounding by paying cash instead of reinvesting it to earn more.
We took two 7% dividend stocks, one with no dividend growth and one with 7% dividend growth, and the cumulative returns did not beat the market.
| $10,000 Investment | 3-Year Return | 5-Year Return |
| Timbercreek Financial | $12,552.30 | $13,967.50 |
| Telus Corporation | $11,811 | $13,211 |
Timbercreek Financial (TSX:TF) is a short-term mortgage lender for REITs. The lender enjoyed good returns when the Bank of Canada increased its interest rate. It even gave a bonus dividend on the higher interest income it earned. However, the share price fell throughout the rate hike as high interest reduced borrowers’ capacity, and they stalled their development plans. Timbercreek suffered from negative growth in the loan portfolio as lenders repaid their dues and new loan origination slowed. Some loans even entered stages two and three, increasing Timbercreek’s credit risk.
Nevertheless, the share price has recovered twice in the last five years: once when the Bank of Canada paused the rate hike in October 2023 and again when accelerated rate cuts slowed in April 2025. Thus, its share price surged just 2.8% in three years but fell 12% in five years.
Had you invested $10,000 in this five years ago, your cumulative dividend would be $3,967.
A similar calculation using Telus Corporation, which grows its dividends every year by 7%, showed that a $10,000 investment in June 2020 earned a cumulative dividend of $3,211.
This stock beats the market
It is difficult for dividend stocks to beat market returns. However, stocks that pay dividends and are also growing their business can help you beat market returns.
goeasy (TSX:GSY) is a non-prime lender that is growing its loan portfolio by offering different types of short-term loans, expanding its customer base through an omnichannel distribution network, and controlling risks by offering ancillary products such as loan insurance. Its share price is rising alongside its loan portfolio.
| $10,000 Investment | 3-Year Return | 5-Year Return |
| goeasy | $17,641 | $33,159 |
goeasy is also a regular dividend payer. It has even been growing its dividends at an average annual rate of 25%. This dividend growth comes from the higher interest on a larger loan portfolio. A 32% yield on a $3 billion loan portfolio versus a $4 billion loan portfolio is driving dividends. Moreover, its share count is stable, which means no dilution of dividends per share.
goeasy’s share price has surged 194% in the last five years and 63% in the last three years. This growth alone beat the market returns. The dividend was a bonus. It is a good time to buy the stock, as it still trades 14% below its January high. GSY stock can continue growing its dividend by 20%, while a recovery in loan demand could drive its loan portfolio and share price.
