Large Cap Dividend Growth
The objective of the Large Cap Dividend Growth strategy is to provide superior investment performance within the confines of a conservative risk profile. To accomplish this goal, the strategy focuses on companies with a history of annual dividend increases and higher than average current yields. We view these as tangible evidence of management’s confidence in future earnings growth. In addition, dividend income provides a measure of price stability in volatile markets and year-after-year dividend increases make a significant contribution to total return over time. Benchmarked against the S&P 500 Index, stocks are selected on a bottom-up basis by a team of three portfolio managers/analysts. Portfolios contain a diversified, high conviction list of between 25 and 35 stocks.
Our core investment philosophy is that earnings growth drives stock prices. Companies that increase their dividend year after year are providing investors with a strong signal about the prospects and earnings visibility for their businesses. Additionally, we believe the price paid for any asset is a major determinant of that investment’s expected return.
RESEARCH AND SCREENING PROCESS
Our stock selection process is rigorous, independent and bottom-up. We screen the Zack’s database of approximately 8,000 companies to identify those that meet the following criteria:
- Annual dividend increase for past five years, except 2009 when stable or increase qualifies
- Company bonds rated investment grade
- Return on equity of 10% or greater
- Projected earnings growth of 6% or greater
- Market capitalization of $1 billion or greater
- Average daily trading volume 200,000 shares or greater
This quantitative screening process narrows the active research universe to approximately 175 companies. Our research staff then performs proprietary in-house analysis on these companies using qualitative screens, assessment of the companies’ fundamentals, and technical analysis. The primary sources of information we use are company reports and SEC filings, including annual and quarterly reports, proxy statements, recent press releases and conference calls, and the Zack’s Investment Research database. We also have access to a wide variety of Street research through Telemet America, Inc., and Thomson First Call.
This comprehensive research enables us to assess each company’s ability to generate future earnings growth. One of the determining factors in the success (or failure) of managing investment portfolios is how the masses of data are analyzed, interpreted and used to make decisions. At Campbell Newman, we believe we have a distinct advantage in is this area: our team of proven professionals, each with over 25 years of investment management experience.
We monitor and evaluate the portfolios’ composition and holdings on a daily basis. In conjunction with this, our Investment Team is continually searching out and researching new opportunities.