Sequoia Concentrated Yield Strategy

Sequoia Asset Management developed its concentrated yield strategy for investors looking to access a portfolio of high dividend yielding stocks which also offer long term growth potential. With interest rates at historically low levels, SMSF trustees and other self-directed investors are looking to dividend-paying stocks for income and stability in their portfolios. The stocks are carefully selected based on a number of key rules:
Size

The Strategy targets a concentrated portfolio of 5-12 ASX listed shares with individual Market Caps of at least $500million at time of purchase.

Sustainable Dividends

The Strategy has a targeted average yield (including franking credits) of at least 5.4% at time of purchase. The companies in The Strategy are required to have a solid track record of providing dividends, and a positive consensus dividend forecast.

Earnings Growth

The companies need a track record of increasing Earnings Per Share (EPS), and a consensus forward forecast of increasing EPS. One of the key determinants of affordable and sustainable dividends is the quality of the underlying business and its ability to consistently grow earnings.

Comfortable debt levels

The Strategy aims to select companies with debt to equity ratios within a specified range and interest coverage ratios that are considered suitable for their particular sectors.

Positive Stock Sentiment

The Strategy will identify stocks that have a positive consensus sentiment rating from the major Australian research houses and broking firms.