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Finding the right opportunities


1.Identifying  the investment universe

  • Must be members of the S&P 500
  • Must have increased dividends every year for the last 25 years.

2.Dividend screening

  • Dividend yield analysis  
    • Identify companies that meet our minimum yield requirements. 
      • Companies with at least a reasonable level of current income. We favor higher yielding companies and will entirely eliminate companies that don’t meet our yield requirements
  • Payout ratio 
    • Companies that will be able to continue paying and increasing dividends as indicated by a reasonable payout ratio. We favor companies with lower payout ratios and will eliminate any company with a payout ratio we deem to be excessive.

3.Quality & volatility screening

  • Long-term debt/ market capitalization
    • We favor companies that don't have excessive leverage.
    • The LTD/MC metric is one criteria we use to identify companies with a strong balance sheet and reasonable debt.
  • Return on equity
    • This is used to identify companies that are prudent stewards of shareholder capital and are using the money to generate profits.
  • Stock volatility
    • We use multiple volatility metrics to help us identify the expected volatility of a stock. We tend to favor lower volatility stocks.

4.Fundamental & technical analysis

  • Fundamental analysis
    • This analysis is done with the goal of identifying companies we feel are undervalued, have strong cash flows and solid balance sheets. Even if a company meets all the screening criteria, it will not be included in the portfolio unless it’s deemed a good investment based on our research.
  • Technical Analysis
    • While technical analysis is never the primary reason for purchasing a stock, we will lean towards companies that have a favorable technical profile based on our internal technical analysis and screen system.

5.Portfolio construction

  • The portfolio will generally be constructed of 20-30 stocks
  • Once companies are identified for purchase they are weighted in the portfolio based on dividend yield with a heavier weighting to companies with a higher dividend yield.
  • To maintain sector diversification we generally limit any one sector exposure to a maximum of 30% at the time of purchase. Due to stock movement, individual sector exposures will increase or decrease over time.
  • Portfolio will be continuously monitored and traded as often as necessary.