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Investment Philosophy
The RNC Genter 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.
The portfolio is designed to take advantage of the reduced tax on dividends while providing principal protection during periods of rising interest rates. The portfolio targets a dividend yield nearly twice the market yield and a portfolio dividend payout ratio less than 60% to provide confidence that the dividend payout is sustainable.
We look to diversify the portfolio by owning 30-40 securities at any one time spread across many economic sectors, although higher dividend sectors such as financials and utilities to have larger representation. The portfolio is constructed to balance opportunity against risk, but not to resemble the market or the economy as a whole.
Investment Process
RNC screens only tax-advantaged, dividend paying stocks, for suitable
candidates with a market-cap greater than $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. Once a candidate has been
identified, the firm’s security analysts conduct a thorough fundamental analysis
of the company focusing on valuation and key balance sheet and income statement
information.
If the analyst determines that a company meets all of the rigorous criteria
set forth by RNC Genter, and offers the potential for superior performance, a
presentation is made at the Equity Strategy Group's (comprised of the firm's
equity Portfolio Managers and Security Analysts) weekly meeting. During the
presentation, the analyst must provide a price objective that represents "full
value" for the stock ,as well as an earnings model of at least four rolling
quarters and cash flow projections for the company. Finally the firm's portfolio
managers review the suitability of the issue for inclusion in a portfolio based
on client objectives and constraints.
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