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- Technical Information about our investment process
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Technical Information about our investment process
We believe in keeping things simple, but if you are the type of investor that prefers to study the detail, this section is for you.
Our investment analysis and portfolio construction process involves three primary stages that begins with the full universe of FTSE100 equities and ends with the Dividend Income portfolio.
FTSE100 Equities: The FTSE100 index represents the 100 largest companies or blue chips with shares trading on the London Stock Exchange. Constituents are household names that most would be familiar with and include companies like Royal Dutch Shell, HSBC, GlaxoSmithKline and National Grid.
‘Quantitative Analysis and Stock Screens’
Quantitative Analysis refers to the process of analysing or evaluating an equity according to its mathematical and financial variables. Our team has developed, backtested, enhanced and redeveloped a number of times over a sophisticated quantitative analysis model that regularly evaluates all the equities in the FTSE 100 according to a number of dividend appropriate metrics (including cash flows, dividend cover and sustainable growth rates). In addition, the model removes ‘or screens’ out any zero or close to zero dividend paying equities and highlights the quantitatively superior dividend shares in the index.
‘Most Quantitatively Attractive Dividend Paying Shares’
The quantitative model and screens allow us to rank and score the shares in the index according to their respective relative quantitative attractiveness and disregard equities that offer no contribution to an income seeking portfolio.
Thorough Qualitative Analysis: Qualitative analysis refers to the process of looking beyond the numbers and considering the non-numeric components of a company. We employ a rigorous qualitative analysis into the most attractive quantitatively screened companies and consider factors including ‘management’s commentary on their dividend’, and ‘the company’s expressed policy towards returning cash to shareholders’.
‘Most Quantitatively and Qualitatively Attractive Dividend Paying Shares’
The combination of the aforementioned quantitative and qualitative analysis allows us to rigorously analyse the full remit of FTSE100 shares and only regard what we consider the most attractive shares for consideration in the portfolio.
Risk Analysis and Portfolio Construction: Once we have fully screened and analysed the companies in the index we proceed to construct a portfolio of 20 of the most attractive shares all the while considering each selection’s contribution to overall portfolio risk. This includes but is not limited to seeking to ensure a portfolio is well diversified across sectors, geographies and operational exposures.
‘Regularly and consistently repeated and updated’
Our process of analysis and construction is regularly repeated such that the portfolio reflects the most recent financial data and considerations and remains well diversified.