This portfolio seeks quality, large-cap companies with rising dividends at reasonable valuations. A quality company should have low debt, stable cash flow, and productive assets. We generally look for firms with five or more consecutive calendar years of dividend increases. Moreover, we attempt to buy these quality companies without paying premium prices.
The watchword for the WCA Rising Dividend Portfolio strategy is quality. We look for resilient, conservatively-financed businesses with a competitive advantage. Academic studies show that quality is one of the few market anomalies that tend to persist over time.
Eligible companies must have demonstrated at least five consecutive years of dividend increases. Failure to raise the dividend is grounds for removal from the portfolio. Yet, we do not see a rising dividend as an end in itself, as much as a means to find quality. Thus, dividend growth rather than dividend yield is most important to us.
Quality endures and we seek to buy it at a reasonable price. We use a proprietary valuation process using leading-edge techniques.
We seek solid risk-adjusted returns and income growth, but no strategy outperforms in all markets. Quality styles tend to perform better in flat to down markets, but lag in strong bull markets. Because the strategy avoids high debt and volatile earnings, performance can differ substantially from traditional value strategies.