Schafer Cullen SMID Dividend Value Equity


SMID Dividend Value

Investment Strategy

  • 30-40 undervalued small and mid-cap stocks (primarily U.S. companies)
  • Low P/E and earnings growth potential
  • Above-average dividend yield and dividend growth
Strategy AUM
$5.0m (Mar 31, 2024)
Russell 2500® Value
Inception Date
Mar 31, 2020

Strategy Attributes

The Schafer Cullen SMID Dividend Value strategy invests in small and mid-cap equities with low Price/Earnings and Price/Book ratios, along with strong 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 foundation is built on four primary investment disciplines:

  • Low P/E Discipline
  • Higher Dividend Yields
  • Strong Free Cash Flows
  • Strong Dividend Growth

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.

Jim Cullen, Portfolio Manager

Screen for Value:

  • Bottom-up approach that begins with a universe of 2,500+ stocks with a market capitalization generally below $15 billion
  • Seek out companies with price-to-earnings (P/E) ratios less than the Russell 2500 Value with long-term earnings growth in the mid-to-high single digits or higher annually
  • Look for companies with strong dividend and free cash flow yields, strong dividend growth potential and moderate payout ratios

Fundamental Research:

  • Quantitative and qualitative analysis focused on earnings growth drivers, balance sheet strength, cash flow consistency and improving returns
  • Identify catalysts that unlock shareholder value or drive earnings growth
  • Dominant or leading position in industries with stable market shares
  • Meetings and discussions with management, industry analysts, suppliers and customers
  • Management committed to disciplined capital allocation and sustaining dividend payouts

Portfolio Construction:

  • Diversification across approximately 30-40 stocks
  • No more than 5% invested in any one stock at cost
  • Diversification across 15-20 industries
  • No more than 20% invested in any one industry at cost
  • Above-average dividend yield and dividend growth
  • Generally fully invested

Self Discipline:

  • Price to earnings multiple not justified by earnings growth rate
  • Deteriorating fundamentals or negative change in operating environment
  • Dividend cuts, negative change in dividend policy or significant decline in yield due to price appreciation

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