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 250-300 equity securities that can be considered for investment.

The 250-300 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.

Business analysis is conducted with particular emphasis on company outlook, including balance sheet strength, free cash flow generation and dividend payment history. Our goal is to identify quality companies with secure and growing dividends. Our disciplined approach utilizes internal and external research in addition to a variety of information resources. Company conference calls and recent conference presentations are reviewed to determine the current tone of business and potential catalysts for improved share price performance. We view company commitment toward returning capital to shareholders via dividends and dividend increases as an important aspect for portfolio inclusion.

Once a comprehensive investment case covering all aspects of our investment discipline has been developed for a security, the ultimate purchase decision is based on the agreement of the investment team members. Investment decisions are based on the strength of the investment case combined with top down and portfolio sector specific judgments. Initial positions are generally 1.5 – 2%. Our maximum purchase commitment in a company is restricted to 4% of market value.

Option Strategy

Integral to the Equity and Dividend Plus portfolio is the utilization of an active call option writing strategy. Call options are written to enhance portfolio cash flow, improve total return of the portfolio and as part of our exit strategy. The strategy can also provide downside protection in weaker markets. Option writing decisions are made based upon strike price relative to company valuation, the option premium received, the time to expiration, and the anticipated total return of the security assuming exercise.


Portfolio investments are monitored by team members on an ongoing basis for changing company fundamentals, investment case progression and price to valuation discrepancies. Primarily monitored sources include company financial reports, conference presentations, and internal and external research. Changes to individual company weightings in the portfolio may be based on depressed or excessive valuation relative to fundamentals.