The Lynx Dividend Growth Strategy provides investors with a focused portfolio of high quality companies that exhibit strong revenue growth, above-average dividends that are well covered by cash flows and reasonable valuations.
In addition, these companies have a consistent record of raising their dividends every year. Historically over a full investment cycle (bull and bear markets), companies with these favorable characteristics often have the potential to provide less volatility with above average long term capital appreciation. The Lynx Investment team conducts its own fundamental research, supported by multiple external independent research sources, and utilizes our own proprietary fundamental and quantitative screening and valuation process.
Our time tested investment process is designed to identify securities that will be less volatile than the market, offering better downside protection and outperform over a full investment cycle.
Our portfolios typically have the following structure and characteristics:
- Generally not more than 30 equally weighted positions at cost and rebalanced when needed.
- Substantial dividend yield premium above the broad market.
- Lower annualized standard deviation (volatility) than the market. Offering competitive upside performance in strong markets and lower drawdowns in bearish markets.
- Tax efficient – we favor long term gains and short term losses
- Qualified dividends that are normally taxed at a 15% rate*
We favor defensive, mature, well managed businesses that exhibit:
- Market leadership with high barriers to entry.
- Proven management with integrity.
- Solid balance sheets.
- Attractive entry price.
- Dividends well-covered by cash flow and earnings.
- History of raising dividends consistently year after year.
Rising Dividends May Be Appropriate for Many Different Investors
Investors saving for retirement
Many people hope to pay all living expenses from income generated by their investments, without having to dip into principal. A well-diversified portfolio that includes companies with the potential to raise dividends may help investors build wealth toward achieving such a goal.
To keep up with or ahead of the rising cost of living, retirees may wish to consider allocating a portion of their portfolio to stocks of companies with the potential to increase dividends with regularity. In addition to income potential, rising dividends may provide retired investors with “pay raises” to help keep up with inflation.
Investing early in a Rising Dividend Strategy offers the growth potential of the underlying stock, the rising dividend characteristics and the power of compounding reinvested dividends. Parents and grandparents should consider investing for their children and grandchildren in well-diversified portfolios of companies with the potential to increase dividends.
Favorable Tax Treatment of Dividend Income
Qualified stock dividends for most individuals are taxed at 15%. However, the maximum rate for higher income investors is 20%* (at 0% for investors in the 10% or 15% tax brackets) making equity dividends more attractive than bond income (which is taxed at an investor’s marginal tax rate) for tax purposes.
*Higher income investors are defined as singles with taxable income above $425,800,married joint-filing couples with income above $479,000, heads of households with income above $452,400, and married individuals who file separate returns with income above $239,500. Also, Higher income investors can get taxed with the 3.8% Medicare surtax on investment income, which can result in a maximum 23.8% federal tax rate on dividends. The tax information contained herein is general in nature and not intended to constitute tax advice. Lynx Capital Group Ltd does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decisions.
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