Investing is about finding the right fit for your goals, not just chasing returns or minimizing risks. We manage our Concentrated Dividend Equity Strategy with an eye toward meeting the day-to-day needs and concerns of investors who care about tax efficiency, income, growth, and resilience in the face of market volatility. If these are the challenges you’re trying to solve for, keep reading.
1. Generating Income Without Sacrificing Growth Potential
Income generation is a priority for many investors, especially in today’s low-interest-rate environment. A dividend equity strategy offers a consistent income stream through regular dividend payments, making it an attractive option for those seeking reliable returns.
Unfortunately, income-seeking investors often feel they must choose between income today and growth tomorrow. We don’t think you should have to choose. Chasing the highest yield can often force investors to compromise on total return, and we don’t believe that’s the best path forward. So, while our Concentrated Dividend Equity Strategy is focused on delivering steady income, we’re also focused on price appreciation to drive long-term value. The Strategy historically not only has outyielded the broader value category by a healthy margin but also the S&P 500 Index.
2. Minimizing the Impact of Taxes
Taxes can weigh heavily on your returns, but a dividend equity strategy can lighten the load. Since qualified dividends are typically taxed at a lower rate than ordinary income, these strategies offer a smart, tax-efficient way to invest.
For even greater tax efficiency, look for a dividend equity fund with relatively low turnover. While it’s not a specific mandate of our Concentrated Dividend Equity Strategy, a tilt toward companies with durable growth prospects means we make fewer trades, have fewer taxable events, and ultimately, have a lower tax bill.
3. Protecting Downside While Capturing Upside
Navigating turbulent markets while seeking growth can feel like walking a tightrope. Dividend-paying companies typically have strong balance sheets, making them more resilient in economic downturns and helping to preserve capital.
One of the things that distinguishes our Concentrated Dividend Equity Strategy is its flexible investment mandate. With the ability to adapt to changing market conditions and seize opportunities typically beyond the reach of traditional dividend equity managers, our Strategy has demonstrated resilience during tough markets and captured gains when markets recover. In 2022, for instance, our Concentrated Dividend Equity Strategy held up much better than its benchmark and the broader market, offering investors a measure of stability when it was needed most. But we don’t believe in sacrificing upside just to minimize downside risk. Our goal is to provide downside protection when it counts, but also capture upside when markets improve.
Limiting the Downside & Participating on the Upside
Based on quarterly returns from 03/31/2012 to 06/30/2024. Up and Down Market defined by Russell 1000 Value Index.
4. Rebalancing Toward Value in a Growth-Focused Market
Many investors’ portfolios have drifted toward growth stocks in recent years. A dividend equity strategy could help shift some of your portfolio back toward value.
With broad market indices becoming increasingly growth oriented, some investors have found their portfolios more heavily weighted toward growth stocks. Our actively managed dividend equity strategy is structured in a way that enables us to tap into a diverse set of opportunities, blending traditional large-value names with companies that have more growth characteristics. This results in a broad opportunity set while still maintaining a disciplined, value-oriented approach. As shown below, our Strategy sits firmly within the value style box and can hold its own when competing against other value managers, whether they have a dividend focus or not.
Style Consistency & Active Management
Each circle, smallest (oldest) to largest (newest), represent the period-end location on the graph: 12/2018, 03/2019, 06/2019, 09/2019, 12/2019, 03/2021 06/2020, 09/2020, 12/2020, 3/2021, 6/2021, 9/2021, 12/2021, 03/2022, 06/2022, 09/2022, 12/2022, 03/2023, 06/2023, 09/2023, 12/2023, 03/2024, and 06/2024.
We spend a lot of time thinking about the challenges investors face. The market landscape is constantly shifting, and with it, the needs of those who are planning for their financial future. Our Concentrated Dividend Equity Strategy wasn’t developed as a one-size-fits-all solution; rather, it was developed with specific investor needs in mind.
Interested to learn more about our Concentrated Dividend Equity Strategy? Check out this recorded interview with Portfolio Manager Mike Alkhazov.