Equity Income Strategy

This strategy is a market cap and style agnostic utilizing a bottom up stock picking approach. Our goal is to purchase shares of companies that have the following characteristics:

  • Dividend paying stocks that have historically increased those dividends
  • Easy to understand business model
  • Durable competitive advantage
  • Strong balance sheets with low debt to total capital ratios
  • Strong free cash flow
  • Honest and capable management

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How It Works

How It Works

The Investment Process

  • The goal of the strategy is to purchase shares with a yield greater than the S&P 500. However, the portfolio managers have the ability to purchase shares with a lower yield than the S&P 500 if they believe management is committed to increasing the dividend over time. As well as individual stock analysis, the managers consider broad macroeconomic trends, which can influence the outlook of sectors and industries when constructing the portfolio.

The Pillars or Our Investment Philosophy

  • We focus on free cash flow and balance sheet strength because we believe a companys balance sheet strength and free cash flow are their life jackets during volatile times. If a company has enough cash on hand, has the ability to increase debt, or generates a healthy level of free cash flow, then we believe it has the ability to be a survivor during difficult markets. Companies with a strong, free cash flow and strong balance sheets can recreate themselves by creating new markets or creating new products, and therefore, survive.

A company that generates free cash flow can do several things with it:

  • Invest internally (R&D) or externally (mergers and acquisitions), to grow the company
  • Pay down debt (de-leverage)
  • Buy back stock
  • Initiate or increase dividends

Therefore, by investing in companies that pay a dividend, shareholders not only receive income from a quarterly cash payment, we believe they are also typically investing in quality companies that have the potential to grow profits.

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