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 portfolio with a multi-threshold hedge, which reduces downside exposure from market corrections or crashes. (The COVID-19 crash in Feb 2020 took most stocks, ETFs and indexes down 35% to 45% in less than 3 weeks)
  • In the event of a market correction or crash, the near-term drawdown of the portfolio is typically 35% less severe than the market’s drawdown. Moreover, if the market declines and stays depressed, the portfolio will usually recover as the hedges mature, and as the held blue-chip stocks recover to one of the hedge thresholds.  Portfolio recovery does not require a full market recovery.  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 characteristics.
  • Summarizing, this strategy isolates, levers-up and extracts the quarterly dividends, and then reduces a substantial portion of the downside exposure through hedges.
  • The strategy will be available in Sep 2020. We spent 3 years developing the strategy and it’s been running live on real client’s assets for the past 1.5 years.