Leveraged Dividend Income

Leveraged Dividend Income is a unique, elegant, and sophisticated strategy that you won’t find anywhere else.

  • The strategy is hedged to reduce downside risk.
  • It taps into the consistency and predictability of dividends to generate quarterly income, or compounded portfolio growth.
  • We start by buying a concentrated basket of high-quality, blue-chip, dividend paying stocks, which usually includes stocks such as AT&T and Verizon.  Our robust fundamental analysis identifies stocks with strong fundamentals, analyzing the following metrics:
    • Sales growth
    • Earnings growth
    • Free cash flow
    • Dividend coverage ratio
    • Pre-tax profit
    • Return on equity
  • We approximately triple the quarterly dividend through leverage.
  • We then hedge the stock positions with options to handle a 25% to 30% correction of the stocks
    • Within the first 30 days of a market correction, drawdown is typically 30% less compared to just buying and holding the stocks.
    • After 60 to 90 days of a market correction, assuming the market stays depressed, the portfolio typically recovers 85% to 100%, as the hedges mature.
    • Portfolio recovery does not require a full market recovery.
    • Downside drawdown is bounded in the case of a black swan event.
    • For additional information and quantitative data and graphs on how the hedges performed during past corrections, such as the COVID-19 crash, please contact us.
  • Targeted returns for the portfolio are 10% to 12% annually, after commissions.
  • This strategy has advantageous tax and liquidity characteristics.
  • Summarizing, this strategy isolates, levers-up and extracts the quarterly dividends, and then reduces a substantial portion of the downside exposure through hedges.