High dividend strategy

on Mar 10, 2013 in Equity, Home | 2,517 comments

Share On GoogleShare On FacebookShare On Twitter

A High Dividend Strategy is structured to provide for the higher cash flow needs of the income oriented investor. The strategy seeks to provide both a stable and growing income stream while also giving clients less volatile participation in market movements, while providing principal protection during periods of rising interest rates.

However, with all investment stories, there are caveats and these are the most significant ones for High Dividend Strategies:

By screening  tax-advantaged, dividend paying shares, for suitable candidates with a market-cap greater than CHF 5 billion, above average dividend growth, investment grade debt rating, and candidates that have not have been forced to cut their dividend over the past 5 years, should provide confidence that the dividend payout is sustainable.

Once a candidate has been identified, a thorough fundamental analysis of the company focusing on valuation and key balance sheet and income statement information should be conducted.

With such an approach, you can construct a reasonably diversified portfolio by owning 30-40 securities spread across sectors, although higher dividend sectors such as for instance utilities will have larger representation.