The Dividend Growth portfolio selects dividend-paying stocks that I believe will provide an attractive income over the next decade and beyond.
I believe a fundamental shift in investor preferences is occurring that favors income over growth. This is due, in part, to the aging of America’s Baby Boomers. At the same time, I see traditional income investments such as bonds and certificates of deposit currently offering unattractive yields that are quite low.
The Dividend Growth portfolio invests in shares of U.S. and international common stocks, real estate investment trusts (REITs), master limited partnerships (MLPs), and other income-producing securities. The primary objective of the portfolio is to potentially generate a high and growing income stream that will outpace inflation over time. The secondary objective is to generate long-term capital gains.
I select investments that meet one or both of the following criteria:
1. They offer a high current yield relative to competing investments.
2. They provide income from the investment that has a long history of rising over time, or I believe that it has potential to rise going forward.
My research attempts to gauge the safety of the income stream. I seek to avoid positions where the risks outweigh the potential for high yields.
The Dividend Growth portfolio is concentrated among asset classes that have a history of rising income payouts. Those include dividend-paying stocks, real estate investment trusts, and master limited partnerships. Other asset classes and investment vehicles (such as closed-end mutual funds or ETFs) may also be considered as valuations and market conditions warrant. My initial investment in a security typically will not exceed 5% of the total portfolio's value, though the allocation may rise above that threshold due to price movements over time.
I will sell holdings that no longer meet the strategy's criteria for dividend growth. Positions that I view as at risk of dividend reductions will be considered for sale. Additionally, positions that I view as overvalued or that no longer offer an attractive yield relative to alternatives will also be considered for sale.
I may buy a security that does not have a history of dividend payouts if my research leads me to believe that a payout will be initiated in the near future.