Leveraged Dividend Income

Leveraged Dividend Income is a unique, elegant, and sophisticated strategy that you won’t find anywhere else.

    • 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 high-quality, 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 triple 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 10% to 12% 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.