iQ Dividend Growth 10 Model

INVESTMENT OBJECTIVE

The iQ Dividend Growth 10 investment model seeks total returns in excess of the S&P 500 High Dividend Index by adhering to a set of rules that focus on dividend growth, yield and pre-tax income.

INVESTMENT PROCESS

The iQ Dividend Growth 10 investment model implements the following rules-based process:

  • Begin with the largest 200 (by market capitalization) domestically-traded stocks.

  • Remove any stock whose dividend has not grown in the last five years.

  • Sort the remaining stocks by the 24-month simple moving average of their dividend yield and select the top 30.

  • Sort the remaining 30 stocks by their pre-tax income to net operating profit ratio and select the top 10.

  • Hold the ten stocks until one drops out of the top 15.

This model reconstitutes every February, May, August and November and averages less than one position change every reconstitution.

Why invest in stocks that grow their dividends?

Investing in stocks with growing dividends can offer several potential benefits for investors. Here are some reasons why investors might choose to invest in stocks with growing dividends:

1. Income Growth: Stocks with growing dividends can provide a reliable and increasing stream of income for investors over time. As companies increase their dividend payments, investors may see an increase in the amount of income they receive from their investment.

2. Inflation Protection: Stocks with growing dividends can provide some protection against inflation. As the cost of living increases over time, companies may increase their dividend payments to keep pace with inflation. This can help investors maintain their purchasing power and keep up with rising expenses.

3. Stable and Established Companies: Companies that consistently grow their dividends tend to be well-established and financially stable. These companies may have a strong track record of generating profits and may be better able to weather economic downturns.

4. Potential for Capital Appreciation: Companies that grow their dividends may also see their stock prices rise over time, potentially providing capital appreciation for investors in addition to dividend income.

However, it's important for investors to carefully evaluate a company's financial health and dividend growth prospects before investing in stocks with growing dividends. Not all companies are able to sustain dividend growth over the long term, and some companies may prioritize other uses of their cash, such as reinvesting in the business or paying down debt.