Rising Dividend Plus

Portfolio Highlights
  • Dividend Growth as Key Driver
    The investment process starts with a universe of the higher dividend growth stocks, expected future dividend growth stocks, and dividend initiators.
  • Value Momentum
    The portfolio targets “value-momentum” stocks with good technical features that we determine have cheap relative and absolute valuation.
  • Flexible
    Portfolio construction is driven by bottom-up stock selection and incorporates timely anomalies from our proprietary research and from academic studies.
Portfolio Overview

Rising Dividend Plus strategy invests in primarily established and seasoned mid- and large-capitalization companies with financial strength that are likely to provide steadily rising earnings and dividends. The portfolio aims to participate in the long-term growth of the economy and the markets by investing in stocks with a high probability of raising dividends in the future. The portfolio targets “value-momentum” stocks with good technical features that we determine have cheap relative and absolute valuation.

Investment Philosophy

Many studies have shown that equities with rising dividends have consistently displayed excess performance relative to the broad market, with reduced volatility. Over time, increases in dividends tend to induce increases in the price of the equity producing those dividends. Companies with strong balance sheet characteristics that consistently raise dividends offer an attractive risk-reward profile and a high probability of outperformance relative to stocks generally in our view. In addition, dividend increases are often seen as signals from management about a company's future prospects.

Portfolio Objective

The goal of the strategy is to outperform the broad equity market. Safety during market declines is an additional objective, since risk control during declines is a major factor that we believe leads to long-term success. The portfolio may contain overweight positions in certain sectors or industries; changing weights in various capitalization sizes; and as market conditions warrant, downside protection through cash holdings. In other words, the portfolio is also characterized by an element of sector rotation, size rotation, and transitional cash. In this portfolio we make active use of market-driven signals, which are often referred to as “technical” indicators.

Portfolio Strategy

We search for companies that serve a proven market, favoring enterprises with a repeating-business model that have a demonstrated track record of success. We always take the position that we are long-term investors in an ongoing business with an established marketplace and a history of sound management. We seek a history of dividend growth as evidence that growth is “real” and that management is willing to share the fruits of prosperity with investors. Companies are screened for financial strength at the balance sheet and income statement level, and for conservative accounting practices. A premium is placed on reliability of future company success. Attractive holdings often have some protection against competition through market dominance, branding, geography, or intellectual property. Features such as growth of cash, stock buybacks, insider buying, insider holdings, consistency between revenue and earnings growth, financial reporting transparency, attractiveness as an acquisition, management frankness, sound corporate governance, and corporate community citizenship are important factors in our overall analysis.

The portfolio may contain overweight positions in certain sectors or industries, changing weights in various capitalization sizes, and — as market conditions warrant — greater cash than would be typical of a long-only portfolio. In other words, the portfolio is also characterized by an element of sector rotation, size rotation, and transitional cash.

Strategy Inception Date: December 2004
Portfolio Manager: MHI Investment Team

Contact MHI for portfolio information and performance data. If you are an advisor/financial professional, you may log on to our Advisor site to to access strategy information.

Investor Insight


Articles of Interest


: