The 1879 Advisors Select Dividend Strategy is an investment strategy that has its roots in the once popular and successful “Dogs of the Dow” strategy. By focusing our investment selection process on high-quality, high-yielding stocks, we provide investors with a methodology and potential to generate a steady income stream from dividends, all the while having the opportunity for market appreciation if the selected stocks rise in value.
The 1879 Advisors Select Dividend Strategy invests in a portfolio comprised of 15 to 30 high-dividend paying stocks, representing a minimum of 4 sectors, whose companies have strong balance sheets, predictable earnings outlooks, and pay a sizable dividend.
The 1879 Advisors Select Dividend Strategy was initially launched on January 1, 2011. To help ensure that clients benefit from our most up-to-date research and security selection process, a new series is launched every quarter. The January 1, 2011 portfolio, in accordance with our strategy, was rolled into a new series in April 2012 and again in July 2013. For a detailed breakdown of this portfolio performance please contact your 1879 Advisors investment consultant. All figures are net of fees and expenses.
Over the years, investors appetite for dividends has waxed and waned. Historically, research in dividend investing has measured everything from performance of equities during periods of heightened dividend yields to improvements in corporate governance due to aligned interests between management and shareholders. We believe dividend-paying stocks are a suitable part of a diversified portfolio for many reasons.* First, dividends are meaningful to total return. Second, dividend-paying companies historically have outperformed non-dividend paying companies, with less risk. Finally, a well-constructed portfolio of dividend-paying companies can help investors fund their long-term liabilities, such as retirement cash-flows or philanthropic endeavors. The purpose of this paper is to explore how to provide solid risk-adjusted returns, build wealth, and increase portfolio cash-flow via dividend investing.
The “Quality” Stock Rotation
Since the financial crisis of 2008 monetary measures such as quantitative easing have created an environment that has collectively brought down interest rates and lessened market volatility. As a result, investors have shown an affinity for lower quality companies, which have gained an appearance of greater safety as a result of the highly unusual monetary policies the Federal Reserve as instituted, economic improvements, and a general absence of market volatility. This backdrop has been unfavorable for higher quality companies, creating a wide divergence in performance (Exhibit 1, below).
From December 30, 2008 through December 31, 2014, the S&P 500 Index (S&P 500) had an average annualized return of 17.2%. During the same time period, companies with the lowest earnings quality in the S&P 500 averaged returns of 26.7%, S&P 500 companies with a beta greater than the market averaged returns of 16.7%, and non-yielding companies in the S&P 500 averaged returns of 23.8%. However, as the Federal Reserve (Fed) measures taper off, the resulting impact might eventually be felt with higher interest rates and potentially increased volatility – an environment that has historically favored higher quality companies. Businesses that exhibit revenue growth, stable earnings, and maintain capital discipline have historically had the ability to consistently raise dividends and also experience below-average volatility.
A total return perspective
Market participants believe that earnings growth has been the driver of long-term
returns. However, decade by decade, with the exception of the 1990s, a period marked by excessive valuations, dividends have been a significant contributor to total return for equity investors. In fact, between 1926 to 2014, 43% of the annual total return of the S&P 500’s annualized return was actually derived from the payment
and reinvestment of dividends, while capital appreciation/depreciation has contributed the rest, as shown in Exhibit 2 (shown below).
Dividends can be an important check on corporate governance
and financial health
Dividends can be an important check on corporate governance. Management teams should allocate capital based on a belief that the payoff will provide a positive net present value. Conversely, examples of inefficient allocation of capital can include: acquisitions that are not accretive to a company’s earnings; investing in capital projects that
have a negative return on investment; or buying back shares, which are then all too often used as executive compensation. But allocating capital to paying and growing dividends can show that management is committed to its shareholders. Companies are currently sitting on a record pile of cash and liquid assets, but they are increasingly putting that cash back into the hands of investors in the form of dividends.
Dividend-paying stocks have outperformed with less risk.
Ultimately, the goal for every investor should be maximizing return while minimizing risk.
As illustrated in Exhibit 3 (right), research has shown that over the long term “dividend growers and initiators” have generated higher returns
with lower standard deviation, a measure of risk, than companies that maintained their dividend, paid no dividend and ones that reduced or eliminated their dividend.
The 1879 Advisors Select Dividend Strategy
Long Island, NY
119 Birch Hill Road
Locust Valley, NY 11560
White Plains, NY
445 Hamilton Ave.
White Plains, NY 10601
3 Hatfield Lane
Goshen, NY 10924
Saddle Brook, NJ
Park 80 West 250 Pehle Ave.
Plaza 2, Suite 106
Saddle Brook, NJ 07663
400 Rella Blvd
Suffern, NY 10901
300 Westage Business Center Dr.
Fishkill, NY 12524
83 Wooster Heights Road
Danbury, CT 06810
1879 Advisors is a marketing name used by Bruderman Asset Management, LLC (BAM), and its affiliated company, Bruderman Brothers, LLC. The information on this webpage is deemed to be complete and accurate as of January 1, 2020, and may be superseded or become inaccurate at any time thereafter. Neither 1879 Advisors, Bruderman Asset Management, LLC nor Bruderman Brothers, LLC have any responsibility to notify the reader of any changes to the information on this webpage, or that any information presented herein has become inaccurate.
Before engaging 1879 Advisors as an investment advisor, prospective clients will be given Bruderman Asset Management’s Disclosure Document, which contains important information regarding BAM’s services, fees, conflicts of interest, and other matters. Prospective clients are urged to read the Disclosure Document carefully before becoming a client. Prospective investors may obtain this important disclosure by visiting our website at or by writing us at:
Attn: Client Services Department
119 Birch Hill Road Locust Valley, NY 11560
The information provided on this webpage is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice. Nothing herein should be construed as guaranteeing that any product, advice, or strategy will be profitable or meet the objectives of the reader. Past performance of an investment product, advice, or strategy is no guarantee of future results. Investing in Securities involves risks. Investment returns and share value will fluctuate and it is possible to lose money by investing. Consider the investment objectives, risks, charges and expenses before investing. Securities offered through Bruderman Brothers, LLC, Member FINRA, SIPC Investment Management Services offered through Bruderman Asset Management, LLC, A SEC Registered Investment Advisor