Equity Dividend Plus Investment Approach

The investment philosophy of our Equity Dividend Plus Portfolio recognizes and emphasizes the historical significance of dividend yield to investor total return. By utilizing a relative dividend yield discipline coupled with fundamental research focusing on historical valuation metrics and comprehensive business analysis, we construct a diversified portfolio of securities providing above-average dividend streams and potential for capital appreciation. Our investment philosophy melds above-average dividend yield, traditional value manager equity selection and a conservative covered call option writing strategy. The objective of the portfolio is to provide high dividend yields, a growing cash flow stream and competitive total returns.

Key Aspects


Historically, dividends and dividend growth have provided investors with a consistent and growing cash flow return. We emphasize companies possessing above-average dividend yields with the financial flexibility to grow dividends in the future.  This stream of cash flow can provide opportunity for reinvestment, a steady stream of income for investors, or a portfolio cushion in weak markets.


Valuation history is important in equity selection. Companies are analyzed based on historical valuation ranges of price/sales, price/book, price/cash flow, price/earnings, as well as dividend yield. Equity selection is focused on companies that are trading at a discount to historical valuation ranges and at the upper end of their dividend yield range. Purchasing companies at historically depressed valuation levels provides capital appreciation upside to the portfolio.

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Purchase Process

Purchase Discipline

The security universe consists of approximately 1,500 securities with a market capitalization of $1.5 billion or greater as provided by FactSet Research Systems. This group is then screened for companies generating dividend yields at least 25% greater than the yield of the S&P 500. This yield parameter typically narrows the universe to 300-350 equity securities that can be considered for investment.

The 300-350 securities are then reviewed applying traditional value-oriented methodology encompassing both valuation and business analysis. Valuation work is used to determine companies with depressed stock prices relative to their history. This analysis involves metrics such as price/sales, price/book, price/cash flow and price/earnings. Our goal is to identify quality companies currently selling at a discount to their normal valuation range.

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Sell Discipline

Sell decisions are based upon individual company fundamentals focusing on valuation metrics and business analysis with particular emphasis on anticipated forward dividend yield levels. Sell candidates are typically in the upper end of their valuation ranges. In addition, certain portfolio characteristics and potential reinvestment alternatives are considerations in the decision-making process. Exit strategies are based upon the availability of attractive call option premium and annualized total return relative to required holding period as compared to outright sell. Agreement among team members is attained following review of exit strategies and final decisions are then executed.

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