D-Portfolio
The Dividend Portfolio, or D-Portfolio, is designed for the investor who seeks a more conservative approach to investing in common stocks. The stocks that comprise this portfolio tend to be less volatile in nature than the stocks in the E-Portfolio. Vision Advisors principal objective in its dividend portfolio is to provide returns from a diversified group of companies that have an attractive dividend rate, but still maintain many growth characteristics. Depending on market conditions, this portfolio may have less diversification at times and may be more exposed to sector trends than a more diversified portfolio.
The D-Portfolio is comprised of an appropriate number of mid cap and/or large cap stocks that maintain a targeted minimum dividend yield of at least 2.00% for each stock and exhibit a high level of financial strength coupled with a historical above average return on equity. Mid-cap stocks represent companies that have a total market capitalization of between $2 billon and $10 billion dollars. Mid-cap stocks do have a higher risk/reward ratio then large cap stocks. Large-cap stocks represent companies that have a total market capitalization of over $10 billion dollars.
Vision Advisors employs proprietary screening methods to predict expected revenue and earnings over the next one to two years. Upon identifying a number of issuers, the selection is further narrowed by applying other proprietary investment rules to predict price/earnings ratios and evaluate future price prospects. In addition to financial strength, dividend yield and return on equity, Vision Advisors also examines the dividend payout ratio, the debt/equity ratio and forward looking price/earnings ratios. Finally, Vision Advisors looks at companies that also have an established history of buying back their stock and raising their dividend payments. Although certain industries tend to offer higher yielding stocks, the additional factors that are employed tend to screen out many less desirable stocks.
Vision Advisors believes that it makes sound economic sense to employ from time to time a strategy of writing covered call positions against some or all of the stocks in the dividend portfolio. The primary purpose of option writing is to earn additional income through premiums received from the buyers of the call options. By monitoring the volatility, delta and time to expiration, Vision Advisors works to optimize the trade off between premium income and the potential for future price appreciation. When options are employed, Vision Advisors anticipates that the benefits of the premium income received will outweigh the limitation of gains by use of those option contracts. At the same time, the investor receives a measure of downside protection if the price of the underlying stock declines. By means of this option writing program, Vision Advisors will attempt to enhance total returns in the portfolio by judiciously covering the options written and attempting to capture (all or most of) the premium before the underlying stocks become susceptible to a possible assignment.
