Rising Dividend Portfolio
Separately Managed Account
The WCA Rising Dividend strategy focuses on quality large-cap value companies with rising dividends at reasonable valuations. To be considered a quality company, we look for low debt, stable cash flow, and productive assets, measured as return on capital. Portfolio companies must have demonstrated dividend increases for at least five consecutive years, with ability to further raise the dividend over time. The portfolio is a long-only equity strategy, diversified across a range of sectors, industries, and issuers.
Steadily Rising Dividends
Portfolio companies must have demonstrated at least five consecutive years of dividend increases. Failure to raise the dividend is grounds for removal from the portfolio.
The watchword for the WCA Rising Dividend Portfolio strategy is consistency. Therefore, the selection process favors companies with strong balance sheets and consistent earnings that are capable of sustained growth of shareholder value.
Income and Capital Growth
We believe that chasing yield without regard for capital growth is folly. Therefore, this portfolio seeks companies we believe are capable of growing the dividend as the result of expected improvement in earnings and free cash flow.
Because the portfolio does not focus solely on yield, the WCA Rising Dividend Portfolio is free to invest across many sectors and industries. We limit exposure to a single sector to 30%. While diversification does not eliminate the risk of investing, and losses are possible in diversified portfolios, the goal is to increase returns while reducing risk.
We look at how the “style” framework is leading many to question one aspect of traditional equity investing. An alternative framework focusing on a quality dimension is offered as a more appropriate approach given today’s environment.
For years, stock investors have fixated on “style,” which means investing in “growth” or “value.” “Value” in this context is usually defined as buying stocks with low price-to-book or low price-to-earnings ratios. Some are now rethinking the very foundations of this framework as the return to value indexes continues to…
Today, The Wall Street Journal ran a front-page, above-the-fold article titled “Dividend Darlings Trail Stock Market Despite Pumped-Up Yields.” The authors point to underperformance by dividend payers within the S&P 500 Dividend Aristocrats index, an equally weighted index consisting of all S&P 500 companies that have increased dividends every year…
The best-performing stocks since the beginning of the pandemic have had one thing in common — a high degree of financial flexibility. The worst-performing stocks were the least flexible. Before we start, it is important to define “flexibility.” For us, it has always meant low debt and high profitability. These…
The stock market is up over 40% from the March 23 bottom. This spectacular 50-day rise bookends the 33% market drop from mid-February to the March bottom. Overall, the S&P 500 moved by more than 70% in a little over three months, leaving many investors bewildered. But recent market action…
Some companies are cutting dividends as the economy weakens. A recent Barron’s article lists about sixty firms that eliminated, suspended, or cut dividends since February. We decided to look at the fundamental characteristics of the companies cutting dividends. To do this, we created an equally-weighted portfolio comprised of the stocks…