Provident Investment Management
Provident Investment Management
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Dividend Total Return Strategy

 

 

Dividend Total Return Strategy

  • Objective: The Dividend Total Return strategy (“DTR”) seeks both income and long-term growth of capital. We typically invest in companies offering regular, growing capital return along with potential for share price growth. The intent is that this portfolio will also benefit from downside support during market declines due to solid underlying fundamentals and the regular return of capital to shareholders.


    • Holdings: Holdings will typically range between 25-35 stocks.

      • The DTR Strategy primarily focuses on dividend-paying equity securities, with at least 80% of holdings in common stocks. We may also invest up to 20% in other assets with attractive yields, such as preferred stock, backed by companies possessing strong fundamentals. 

      • Investments are chosen from different industries and market capitalizations to gain the benefits of reduced volatility through diversification. 

      • Turnover of stocks is generally low. While we regularly monitor the performance of the underlying companies and make changes where appropriate, our intention is to hold stocks for the longer term.


    • Benchmark: Russell 1000 Value Index  


    • Yield: Targeting an overall portfolio dividend yield approximately 1% higher than the S&P 500 Index.


    • Investment Characteristics: DTR stocks generally possess slower but steadier growth than traditional Provident stock holdings. We focus on reasonably valued companies with a track record of generating significant free cash flow per share. Robust cash flow allows for the payment of consistent, growing dividends. Along with dividend payments, companies can also direct free cash flow to share repurchases or debt paydown, which are alternative forms of returning capital to shareholders. While the DTR strategy emphasizes dividends, we also invest in companies engaging in share repurchases or debt reduction. We have a strong bias toward investing in companies possessing high-quality balance sheets and capable management with a history of sensible capital allocation. 

Portfolio characteristics and sector information are for a sample portfolio indicative of the DTR strategy.