The hidden element behind dividend increases
26 May 2021
Far more important, and generally missed, is the hidden part of that dividend activity that one does not see. A magician waves one hand around to get your attention while the other hand does the trick. To be smart, watch the other hand. The waving hand is the current dividend yield: current income that grabs the attention of most market participants. But a DivGro type company, selected from a higher-quality subset of all companies, tends to pay only a small part of its earnings out as dividends and tends to trade at a low current dividend yield. This means that most of the earnings are therefore retained by our companies for reinvestment...
18 months of strongly rising dividends
24 February 2021
While the system has always worked in purely financial terms, when overlaid with our psychological reinforcements, it increases an investor’s benefit when viewed in total utility terms. This is why a DivGro type solution is unique in its ability to function as a foundational building block in investment portfolios...
Celebrating ur 50th (!) consecutive dividend increase
15 December 2020
Indeed, we are unaware of any investment house, anywhere, that over the same period was willing or able to commit in advance to showcasing any dividend upgrades on any stock, let alone across the entirety of their portfolio. Under normal circumstances we estimate the probability of forecasting 50 consecutive dividend increases (even independent of increase magnitude) as being extremely remote, let alone under crisis conditions such as the recent pandemic...
A note on staying power and a look at a dividend star
9 October 2020
As a result of this simple but elegant shift of investor attention, the DivGro system can be defined as a ‘+5 system’. A +5 system is one which is worth an extra 5% per annum to investor returns because it increases the likelihood that an investor will actually benefit from any ultimate underlying positive performance where the path to this positive outcome is volatile, random or psychologically destabilizing. While some may overlook the utility of such a system, we believe it cannot be overstated...
An excellent first year
7 August 2020
There are many reasons for why dividend-growth companies continue to outperform – they are qualitatively better across most important metrics, including for example financial strength, superior competitive positioning, high quality and more aligned management etc. There are very few companies able to continue paying and increasing dividends during this crisis – most of these exceptional companies are either held in this fund or are on our watch list. This is possibly best captured by Geoff Martha – Medtronic’s CEO: “at a time when a lot of our competitors… are raising capital, we’re raising our dividend. And I think that speaks to two things… our financial health and the strength of our balance sheet as well as our commitment to shareholders”.
A unique combination of investment outperformance and positive psychological reinforcement
5 June 2020
Some investors may not appreciate the mission critical role that emotional or psychological comfort plays in investment success. However, Ben Graham – Wall Street’s most illustrious teacher of investment wisdom – would begin his courses by stressing that ‘to make money in Wall Street one must have the proper psychological attitude’. We think cultivating this psychological temperament has an investment performance delta of at least 5% a year...
The importance of finding companies that are
'easy to hold'
18 April 2020
Easy to hold is an attribute that most people gloss over most of the time. When markets trend upwards people look at rising prices and relegate dividend information to lesser priority. In extraordinary times however, when it feels like the economy is falling apart, the temptation to 'do something' becomes very strong. People are glued to the news, desperately hoping for a hint to allay their concerns. Feeling a desperate desire to ‘do something’ suggests that their ‘investment’ is perhaps more fragile than they might have hoped. This is where the DivGro system truly shines...