Dividend Growth Investing

Sleeping well at night is underrated. That’s one of our favorite mantras, and it underpins the importance of a strategy that reduces risk as much as possible. When you’re constantly checking your portfolio, worried about your paper gains, you’re not sleeping well at night.

By investing in a diversified portfolio of high quality dividend growth stocks, you can achieve the returns of stocks with the security and income of bonds. This is a concept that Warren Buffett refers to as “equity bonds.”

Like us, Warren Buffett doesn’t like traditional corporate bonds. He doesn’t like the fact that with fixed income, your income is, well… fixed. Warren would rather invest in an “equity bond,” or a high quality company with a durable competitive advantage, and we’ve identified over 80 of these companies using a proprietary strategy called Quantigence.

Quantigence was developed over a decade by tenured finance professionals. It uses an objective, factor-based approach to investing in equity bonds. We identify companies with a track record of over 25 years of consistent dividend growth – what are known as Dividend Champions. We then filter by market cap to ensure these companies will be resilient and as stable as possible. Finally, we score each company based on seven factors to identify the best of the best.

How do we know it works? Besides the fact that we have the majority of our own, real money invested in this strategy, we also commissioned a paper that backtested our strategy and found that it outperformed the S&P 500 over a multi-decade time period.

We also found a research paper by the great Hendrik Bessembinder which dug up the thirty top performing stocks of all time. Over one third of these companies were Dividend Champions.

This speaks to the potential of dividend growth stocks to deliver outsized returns while also providing consistently growing income.

Interested in learning which stocks are part of our core Quantigence universe, and how you can build you own Dividend Growth Portfolio? Consider subscribing here.