Independent client advisory

DIVIDEND BASKETS

Dividend Baskets

Low Interest Rate Environment

Money market rates are close to zero and bond returns are also very low as a consequence of the very expansive monetary policy of central banks around the world. Real returns, after deducting inflation, are often even negative. While this trend is expected to remain throughout Europe through 2017 also, rates in the US are expected to continue to rise after the Fed hike Dec2016. This will make US fixed income, particularly in short maturities, less attractive to investors. Since the impact of rate increases at the beginning is likely to be small, value stocks with high dividend yields should still be preferred over money market and bond investments. The following table exemplifies this articulately:

Investment Money Market 3 Months 2 Years Bonds 5 Years 10 Years Equity Divident Yield
USA 0.52% 1.19% 1.90% 1.40% 2.06%(S&P500)
Germany -0.32% -0.74% -0.50% 0.32% 2.65%(DAX)
Switzerland -0.72% -0.92% -0.61% -0.17% 3.46%(SMI)
UK 0.36% 0.15% 0.54% 1.32% 3.88%(FTSE 100)

I. Yield (% p.a.)  Comparison Equities / Bonds as of 16.01.2017

Aspermont Dividend Stock Basket Investment Process

  • Stock selection process:
    • Universe of more than 1’000 companies in Europe and the USA
    • Companies with stable or even growing dividends and payout ratios over the past 5 years – often coincides with healthy companies with solid and sustainable business models and global leading market positions
    • Increasing payout ratios often show increasing market capitalization and stock price gains
  • Company analysis:
    • Quantitatve: margin growth, free cash flow, debt-to-equity ratio, healthy balance sheet structure, sustainable revenue and earnings growth, P/E ratio, P/B ratios, stock price volatility, market liquidity
    • Qualitative: management performance, corporate strategy, product pipeline
  • Portfolio construction
    • Diversification between large caps (min. 80% of the basket) and small to mid caps
    • Diversified among regions, currencies and industry sectors

Aspermont Dividend Stock Basket Company Analysis

In-house equity analysis

  • In-depth balance sheet analysis
  • Detailed catalog with clear rules for screening the investment and decision- making

Equity analysis based on various factors such as

  • Balance sheet analysis
  • Earnings trends
  • Research / recommendations from best-in-class analysts
  • Technical analysis
  • Management track record/credibility

Aspermont Dividend Stock Basket Market Monitoring

Market monitoring of AMC positions

  • Continuous monitoring of world markets and individual companies allows us to react to current events in order to minimize negative portfolio effects (tactical adjustments)
  • Focus on macro economic events to stay current in the big picture and discover where investment opportunities are
  • Spot trends in highly correlated asset classes

Aspermont Dividend Stock Basket Option Overlay Strategy

Option overlay strategy

  • As an integral part of the AMC’s investment strategy, ASCAP embeds an options overlay into the portfolio; generally covered calls or fully funded short puts
  • The main purpose of the options is to generate enhanced investment returns by collecting option premium
  • A second effect of the overlay is that stocks which have reached their price targets/option strikes are automatically sold, and/or bought automatically at a discount when their price has fallen sufficiently
  • On average on 35% to 50% of all equity positions covered calls are written
  • We prefer short-term call options (tenor up to 3 months) with strikes out-of-the-money by 5% to 10%
  • The median option premium yields around 2.5% of the prevailing stock price and is typically fully realized three out of four cycles
  • Approximate realized return contribution is around 1.5 – 2.0% p.a.
  • When selecting call options to sell, we look for stocks which trade at the higher end of our price target range and which pay relatively high implied volatilities

Dividend_Basket_Presentation

Contact us

Office Address Aspermont Capital AG
Address: Loewenstrasse 66,
CH-8001 Zurich
Telephone: +41 43 888 66 44
Fax: +41 43 888 66 40
E-mail: info@ascap.ch

mailing Address Aspermont Capital AG
P.O.Box 1669
CH-8021 Zurich
Switzerland