Benefit from an Innovative Way to Invest in Dividend Stocks
Positive stock market returns come from two sources: price appreciation and dividends. Unfortunately, many investors tend to focus on one or the other, and miss out on other potential opportunities.
Fortunately, Horizons ETFs’ family of equity dividend ETFs, which is sub-advised by Guardian Capital LP (“Guardian”), brings together a focus on both price appreciation and dividend yield in their investment strategies.
Guardian’s goal is to outperform the market in both price appreciation and dividend yield through:
1. Yield carry: Guardian targets 1-2% of additional yield per year over the relevant index.
2. Stock selection: Finding the right stocks across all industry sectors to actively position the portfolio through all market cycles.
Guardian’s GPS Investment Approach
Guardian’s GPS investment approach focuses on three key fundamental drivers: Growth of dividends, Payout of cash flow and Sustainability of the payout profile. Having a portfolio of stocks that offers a combination of these three factors is the core of what makes the GPS strategy such an effective way to invest in dividend stocks.
Different Types of Dividend Stocks
Paying attention to both dividend yield and dividend growth ensures that opportunities can be captured along the growth spectrum, from lower-yielding, high-growth companies in sectors such as technology, all the way through to mature, slower-growing companies in sectors such as utilities and telecoms.
Eligible stocks fall into three different dividend stock categories: Dividend Achievers, Dividend Growers and Dividend Payers.
The GPS Stock Selection Process
The team at Toronto-based Guardian is a recognized leader and technological innovator in the dividend stock investing landscape. Led by Srikanth Iyer, Managing Director, Head of i3 Investments, the team utilizes a hybrid approach to investing in equity markets that combines a systematic stock selection discipline with a team-refined approach to portfolio construction and risk management.
Through rigorous quantitative research, Guardian has discovered a set of intuitive fundamental criteria (see table below) for evaluating and comparing dividend-paying stocks. All stocks in each global sector are ranked on a daily basis. This quantitative screen can be applied to the dividend stock universe of any geographic sector.
The highest-ranked stocks comprise the BUY list. Lower-ranked stocks may be designated as SELLs and will likely be sold from the portfolio, or avoided completely.
Guardian’s experienced team of portfolio managers use the stock rankings as the primary driver of buy/sell recommendations for the portfolio, but ultimately make the final decision in what stocks will be added or removed from the portfolio.
|Sales Growth||Return on Capital||Debt Levels||Price / Book||Dividend Yield||Stock Performance|
|Cash Flow Growth||Profit Margins||Interest Coverage||Price / Sales||Payout Ratio||Stock Volatility|
|Earnings Growth||–||–||Price / Cash Flow||Dividend Growth||–|
|Earnings Revisions||–||–||Price Earnings||Earning Quality||–|
|–||–||–||EV / EBITDA||Payout Sustainability||–|
GPS helps investors access the full breadth of the target dividend stock universe and allows them to capitalize on different market growth cycles. Guardian believes this should lead to superior risk-adjusted returns when compared to traditional dividend strategies, and to the broader stock market.
Horizons ETFs offers two ETFs that use the GPS strategy
|ETF Name||Ticker Symbol||Management Fee*|
|Horizons Active Cdn Dividend ETF||HAL||0.55%|
|Horizons Active Global Dividend ETF||HAZ||0.65%|
*Plus applicable taxes.
Horizons Actively Managed ETFs
• Experienced Portfolio Management
• Higher Income Potential
• Focus on Outperformance
About Guardian Capital LP (www.guardiancapital.com)
Guardian Capital LP is one of Canada’s leading asset managers and has been managing institutional assets since 1962. In partnership with Horizons ETFs, it has successfully implemented its “GPS” approach that focuses on three key fundamental drivers: Growth of dividend payout; payout of cash flow; and sustainability of the payout. Having a portfolio of stocks that offers a combination of these three factors gives Guardian an excellent track record and future in dividend investing.