SciVest Growth of Dividend Income Strategy
We currently focus our efforts on our “Growth of Dividend Income Strategy”, with the objectives of delivering investors: (a) a consistent and above average current distribution yield (i.e., income yield), (b) meaningful growth in the absolute level of distributions (i.e., income growth) through time, and (c) meaningful long-term capital appreciation.
We believe that inflation is the greatest enemy to all retired and semi-retired investors. Inflation erodes both the purchasing power of the retirement investment pool and, more importantly, the purchasing power of the retirement income that the investment pool produces. The effects of inflation erosion on the purchasing power of fixed income investments and the fixed income they generate is material over any period longer than several years. For example, at a 3% per annum inflation rate, income and capital are eroded by 26.3% after 10 years, 45.6% after 20 years, 59.9% after 30 years, and 70.4% after 40 years.
We believe that the only way to counteract this degradation of purchasing power through time is to focus on “growing” income, as opposed to “fixed” income, where such income growth is at a rate at least as high as the inflation rate.
From an investment perspective, it is actually easier to manage a portfolio towards growth of income than towards capital gains. Nevertheless, if we can achieve income growth, then capital gains will inevitably follow. With moderate income growth and moderate capital gains, investors can maintain the purchasing power of both their income stream and investment capital pool indefinitely into the future.
SciVest’s solution to these issues is the SciVest Growth of Dividend Income Strategy (the “SGDI Strategy”). The SGDI Strategy focuses on Global, dividend paying, common equity shares – one of only a few “growing” income, as opposed to “fixed” income, opportunities available to investors. Within the Global common equity universe, there currently exists many “growth of dividend” stocks allowing us within the SGDI Strategy to build a large, liquid, diversified portfolio of 30 to 80 stocks offering: (i) an overall current dividend yield of 3.0% to 4.5% per annum, (ii) dividend income growth of over 5% per annum; and (iii) the opportunity for moderate long-term capital appreciation. The SGDI Strategy focuses on providing dividend income growth and sustainability, at a reasonably high level of current income yield, under the premise that if these objectives are met then over the long-term capital appreciation will inevitably follow. That is, long-term capital appreciation is a consequence of growing earnings and dividends.