Schafer Cullen High Dividend Value Equity

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Strategy

High Dividend

Investment Strategy

  • High current dividend yield (target 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
Strategy AUM
$14.40bn (Jun 30, 2022)
Holdings
30-45
Benchmarks
Russell 1000® ValueS&P 500®
Inception Date
Jan 1, 1994

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, 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:

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:

  • 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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