Investment Strategy
- High current dividend yield (goal of above 3%)
- Low P/E stocks with growing earnings & growing dividends
- 30-45 undervalued large cap stocks (primarily U.S. companies)
- May selectively invest in ADRs
Portfolio Managers
Strategy Attributes
The High Dividend Value Equity strategy, launched in 1994, invests in large capitalization equities with low Price/Earnings and Price/Book ratios, along with High Dividend Yields; this disciplines value approach aims to deliver strong long-term capital appreciation and above-average income with significantly less volatility. The strategy's competitive, risk-adjusted returns over full market cycles are driven by strong upmarket capture and consistent down-market protection.
The strategy's foundation is built on three primary investment disciplines, which have remained consistent since the strategy's inception:
- Low P/E Discipline
First, the strategy invests in equities that trade at a significant discount to the market, which provides multiple expansion potential, while also seeking to protect capital in down markets. - High Dividend Yields
Second, each investment in the portfolio offers a dividend yield of at least 3% at initiation. Dividends have contributed nearly 40% to total equity returns over the last 70 years and provide meaningful downside protection. - Strong Dividend Growth
Lastly, the strategy seeks to invest in companies that consistently grow their dividends - an indication that the underlying business is attractive and growing. The portfolio is concentrated, investing in 30-45 stocks, but also diversified with exposure to each sector of the market.
The High Dividend Value Equity strategy invests in large capitalization equities with low Price/Earnings and Price/Book ratios, along with High Dividend Yields. This disciplined value approach aims to deliver strong long-term capital appreciation and above-average income with significantly less volatility. The strategy's competitive, risk-adjusted returns over full market cycles are driven by strong upmarket capture and consistent down-market protection.
The strategy's foundation is built on three primary investment disciplines, which have remained consistent since the strategy's inception in 1994:
Investment Process
The Schafer Cullen investment team relies heavily on fundamental research as part of its investment selection process. Because the firm has a disciplined value investment philosophy, a rigorous review of company fundamentals vs. industry peer and the overall market is an important part of the investment process.
Screen for Value:
- Begin with largest 2,000 publicly traded equities
- Typical market capitalization > $5 B
- Sector and Industry Inflection Points
Fundamental Research:
- Screen for stocks in bottom quintile according to P/E and P/B basis
- High dividend yield
- Seek low debt to equity and high returns on investable capital
- Search for catalysts that can drive earnings, including:
- New markets
- New products
- Strong management with clear vision and commitment to shareholder value
Portfolio Construction:
- Approximately 30-45 holdings
- Diversification across 15-20 industries
- No more than 4% in any one stock at cost
- No more than 15% in any one industry at cost
- No more than 30% in any one sector at cost
- Top 10 holdings typically represent 35 – 40%
- Up to 25% international exposure (ADR) at cost
Sell Discipline:
- P/E multiple not justified by EPS growth rate
- Deteriorating fundamentals or negative change in investment thesis
- Decline in dividend yield below 2%
- Cuts in dividend policy
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