Dividend Income & Growth is a unique, elegant, and sophisticated strategy that you won’t find anywhere else.
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- The strategy is hedged to reduce downside risk.
- It taps into the consistency and predictability of dividends to generate quarterly income, or compounded portfolio growth.
- We start by buying a concentrated basket of blue-chip, dividend paying stocks, which usually includes stocks such as AT&T and Verizon. Our robust fundamental analysis identifies stocks with strong fundamentals, analyzing the following metrics:
- Sales growth
- Earnings growth
- Free cash flow
- Dividend coverage ratio
- Pre-tax profit
- Return on equity
- We approximately quadruple the quarterly dividend through leverage.
- We then hedge the stock positions with options to handle a 25% to 30% correction of the stocks
- Within the first 30 days of a market correction, drawdown is typically 30% less compared to just buying and holding the stocks.
- After 60 to 90 days of a market correction, assuming the market stays depressed, the portfolio typically recovers 85% to 100%, as the hedges mature.
- Portfolio recovery does not require a full market recovery.
- Downside drawdown is bounded in the case of a black swan event.
- For additional information and quantitative data and graphs on how the hedges performed during past corrections, such as the COVID-19 crash, please contact us.
- Targeted returns for the portfolio are 8% to 10% annually, after commissions.
- This strategy has advantageous tax and liquidity characteristics.
- Summarizing, this strategy isolates, levers-up and extracts the quarterly dividends, and then reduces a substantial portion of the downside exposure through hedges.