“'Life is like a snowball. The important thing is finding wet snow and a really long hill.” – Warren Buffett
The purpose of this portfolio is to protect capital, identify growing dividends, and provide long running income streams.
Portfolio Selection & Goals
This portfolio looks for companies with the following characteristics:
* Margin of Safety - companies should exhibit a durable competitive advantage to protect the company's cash flows and the ability to payout dividends
* Yield - A higher than average dividend yield. Generally only interested in the companies with the ability to pay at least 50% more than the current S&P 500 yield
* Low payout ratio - stocks should payout a low percentage (generally less than 60%) of their overall profits as dividends. This is to protect the dividend in the event of downturns.
* Dividend growth - stocks selected for this portfolio should be able to support a dividend growth rate that combined with their current yield exceeds 10 percentage points. For example, a stock paying 3.5% dividend yield should be able to grow its dividend by at least 6.5% or more each year
The primary metrics that I use to measure the performance of the Snowball Portfolio are as follows:
- Total Return: the combined return of the stocks’ capital gains plus the dividend income received
- Current Yield: the “look through” yield of the portfolio as a whole
- Dividend Raises and Cuts: tracking the total number of the Portfolio companies’ dividend raises and cuts over time
Current portfolio metrics