The IQ Wealth Black Diamond Dividend™ Portfolio
Aiming For Excellence
THE IQ WEALTH BLACK DIAMOND DIVIDEND™ PORTFOLIO
An actively managed rules-based portfolio with a systematic approach to the selection of equities. Objective: to help optimize dividends to the investor while maintaining a disciplined set of standards.
The IQ Wealth Black Diamond Dividend portfolio is not a mutual fund. It is a managed portfolio account consisting of dividend-paying stocks, rebalanced quarterly.
The IQ Wealth Black Diamond Dividend™ Portfolio is suitable for those investors who:
- Require a systematic, rules-based approach to investing for long term growth and total return.
- Prefer owning companies paying consistent dividends
- Place a value on companies which have delivered consistent dividends through both up and down economic cycles, with at least ten consecutive years of increases, combined with consistent profitability and lower debt
- Understand the long term compounding benefits of reinvesting dividends over time
- Are comfortable investing in a portfolio that consists of both individual large/mid cap equities and ETFs
Investors today are faced with one of the more challenging investment environments in decades:
Markets are overvalued by traditional measures, the current bull market is “long in the tooth” compared to other bulls, economies are quite uncertain, and interest rates are at historically low levels.
The result is that the investor may have fewer clear options for growing and preserving their retirement capital.
With this challenging set of realities, it’s not easy for investors to make their own quality financial decisions. Successful long-term investment planning has grown quite complex, specialized, and challenging--even more challenging for the do-it-yourselfer or day-trader.
Those who are seeking a systematic approach to growing and preserving their net worth appear to be faced with the following choices:
- Door #1: Remain fully invested-- “full steam ahead regardless of market valuations”, with a hodge-podge of mixed strategies, hunches, internet tips, and guesswork.
- Door #2: Try to time the market—believing its possible to know “when to be in” and “when to be out” (even though the best investors in the world like Warren Buffett and Peter Lynch have proclaimed it impossible)
- Door #3: Pull out of the market completely until the next crash, keeping all money in cash or “under the mattress”
- Door #4: Buy and hold the indexes, making no withdrawals, going up and down with the markets, with no clear strategy for capitalizing on downturns, accepting diluted dividend yields, and simply waiting 10 to 20 years for the results. This is a strategy for the extremely patient and optimistic.
- Door # 5: Hire a money manager to try to do all of the above (in the name of diversification)
- Door # 6: Begin a dividend investing strategy that pays the investor to own shares of profitable companies with high traditional valuations, with lower debt ratios, and which are confirmed leaders in their industries. With this strategy you actively require that every company you own is profitable every year, and in fact is increasing its earnings. You require they share their profits by paying steady dividends at predictable intervals in increasing amounts. If not, you trim the company from the portfolio at each quarterly rebalancing. You select companies paying a dividend yield—in relation to their share price—of 3% or higher. However, you do not choose any shares based on dividend yield alone. You require that the companies in your portfolio are those that increase those dividends every year, and have a documentable track record of doing so, for ten years or longer.
If “Door number 6” appeals to you—we invite you to explore
The IQ WEALTH BLACK DIAMOND DIVIDEND™ PORTFOLIO.
An actively managed rules-based portfolio with a systematic and predictable approach to the selection of equities. Depending on the client, we utilize the Black Diamond Dividend portfolio as a tool in the "growth" bucket. We view the portfolio as a purpose-driven investment.
- The Portfolio comprises predominantly domestic large cap stocks, with some focus on larger mid cap stocks that exhibit the required dividend performance and history.
- Diversification is primarily derived from holding multiple stock selections at all times, cash at certain times, and including the use of Exchange Traded Funds for a portion of the portfolio which may track an entire index or sector without exposure to a smaller group of individual securities. ETFs comprise 12% of the portfolio.
- NOT A MUTUAL FUND. Each client’s portfolio is managed within a single separate account and not as part of a pooled fund. Each client has 24/7 access to reporting.
- Prior to selection, all investments are quality assessed and approved based on credit rating, balance sheet, volatility, dividend paying history, yield, and liquidity
- Minimum Investment is $50,000 and can be transferred as cash or ‘in-kind’ securities.
Methodology and Supervision
The IQ Wealth Black Diamond Dividend™ Portfolio was originated and designed by financial planner Steve Jurich, founder of IQ Wealth Management in Scottsdale, a registered investment advisor. It is the intellectual property of IQ Wealth Management.
The strategy seeks to base selections on a set of mathematical determinants that separate stocks by virtue of their ongoing profitability through both good and bad times, evidenced by the payment to the investor of steadily increasing dividends over time followed by steady reinvestment back into the Black Diamond selections. We believe this practice may result in the accumulation of more shares during market pullbacks and eventually more overall accumulation in the account through increased shares.
Through the use of independent sophisticated screening software, repeatable methodology, and quarterly rebalancing, the investor seeking a set of rules to invest by may find the Black Diamond Dividend portfolio a fit for a part of their overall investment mix.
Under our current philosophy and rules, a fully invested portfolio generally will be allocated with 88% individual dividend-paying equities and 12% dividend exchange traded funds (ETFs).
As the PE ratio of the S & P rises above 20, management may choose to reduce the percentage committed to equities.
For example, with PE ratios on the S & P at the 25 level, the equity commitment may roll back to 85%, partitioning 15% to cash. Management believes this is a prudent step that may reduce volatility and keep "dry powder" available to accumulate more shares in the event of a pullback.
After a correction in the market, the objective of management is to remain fully invested.
The portfolio will typically hold 10-20 individual equities, with a target of 18 holdings. There are two primary screens.
- A current dividend yield of 3% or greater.
- A dividend-paying history of 10 consecutive years or more, of stable or increasing dividends.
The preferred length of time for stable or increasing dividends is 25 years. Stocks with this characteristic are known as “Dividend Aristocrats.”
It is our objective that Dividend Aristocrats will comprise a minimum of 30% of the individual securities. Exceptions may be made but only in the instance that we deem it necessary to add more stock selections for diversification.
Securities that meet the initial two screening criteria are then evaluated on the following fundamental information:
- Normalized Price/Earnings: We look for companies with a current price below the valuation indicated by normalized earnings, as evaluated by the calibrated software system.
- Debt/Equity: A ratio of 50% or less is desired.
- Debt Coverage: A ratio of 3:1 or greater.
- Earnings Growth: 5-10%, at a minimum.
- Dividend Growth: 1% or greater (4% growth preferred)
- Payout Ratio: Less than 60%.
- Cash Flow Per Share: Greater than the industry average.
- Credit Rating: Investment grade of BBB+ or greater.
- Subjective Factors: Include industry and company outlook; competitive advantages; management quality.
EXCHANGE TRADED FUND (ETF) CORE PORTFOLIO
In addition to pure equity positions, the Black Diamond Dividend Portfolio™ includes a core portfolio of dividend paying ETFs. The underlying securities in these ETFs consist of companies that have raised their dividend for 10 years or more. The ETFs selected represent various asset classes to provide portfolio diversification. The ETFs include S&P 500, mid-cap, small-cap, and European Dividend Achievers. These ETFs are chosen for the purpose of broadening the diversification of the portfolio. They often may not meet the 3% dividend yield minimum which is a focus on individual equity selections.
While the Black Diamond Dividend Portfolio and its holdings are continuously monitored, rebalancing takes place on a quarterly basis. If an individual equity’s dividend yield has fallen below 3%, it is scrutinized to determine the cause of the decline. If the fall is due to a lowering of the dividend, it is removed from the portfolio. If the decline is due to an increase in price, the holding may remain in the portfolio for a maximum of two quarters. We would prefer to take profits when rising share value leads to a falling dividend yield.
Annual Investment Advisory Fees
Annual Management Fees:
$50,000 to $500,000 .95%
$500,001 to $999,999 .85%
Asset Custodian: Fidelity Institutional member Finra, SIPC
Accounts are billed quarterly, in advance. (See Investment Advisory Agreement)
Additional fees and/or expenses:
Our firm accepts no commissions on any transactions. Any trading or transactional expenses are per Fidelity Institutional and passed through to client with no mark up.
The Portfolio is designed as a total return portfolio with dividends reinvested.
However if income is desired, quarterly withdrawals may be arranged with a charge of $75 per disbursement to cover the costs of handling, filing, and accounting.
INVESTMENT STRATEGY SUMMARY
IQ WEALTH BLACK DIAMOND asset allocations change over time based on proprietary research and analysis which attempts to take advantage of changing market conditions and opportunities. The aim is to dynamically manage the portfolio with the goal of investing in asset classes where the balance of risk and return potential is attractive, while seeking to avoid unattractive areas. The Portfolio generates income by investing in dividend paying equities and ETFs. The investments are focused on common stocks with attractive dividend yields.
Investments are selected using a top down approach which identifies asset type, industry, relative industry leadership, balance sheet, earnings growth over time (through both up and down economic cycles), and consistent dividend paying history (minimum of 10 years or longer.)
The management team allocates a portion of capital to cash at intervals when the consensus of the Team is that a defensive posture is prudent. The goal is to remain fully invested as we believe investors should have other allocations outside the portfolio dedicated to fixed income and cash liquidity.
The IQ Wealth Black Diamond Dividend Portfolio is designed to be a specialized and focused component of the overall investor mix.
A security’s indicated yield is the most recently announced dividend, annualized based on the security’s dividend frequency, then divided by the Security’s current market price.
How we select stocks
Steve Jurich, CIS™, CAS®, FOUNDER,
IQ WEALTH MANAGEMENT
A REGISTERED INVESTMENT ADVISOR.
Steve is an experienced financial professional who conceived and helped design the IQ Wealth Black Diamond Dividend Portfolio.
Mr. Jurich has access to institutional tools at Fidelity Institutional, software technicians with more than three decades of screening stocks, as well as assistance from the team at Sterling Capital.
Founded in 1970, Sterling Capital is a group of 131 seasoned investment and client service professionals who manage $51 Billion (as of 12/31/2016). We are an independently operated subsidiary of BB&T Corporation—one of the largest and most respected financial services institutions in the country—offering us shared resources, financial stability and support.
FOCUSED ON METRICS, NOT OPINION.
The stock selection process revolves around time honored stock selection metrics that have been used for more than forty years by well known institutional managers.
A sophisticated software system, linked in real time to company share prices, dividend yields, market cap, PE ratios, earnings metrics, sector, price to cash flow, credit ratings, and dividend consistency, is programmed for each Black Diamond screen input, and is employed for quarterly rebalancing.
The objective is to rely upon the mathematical determinants provided by the performance of each qualified equity over the past quarter, while seeking to keep trading to a minimum.
The portfolio is not a mutual fund but rather a separately managed account focused on a systematic method of equity selection. The Team uses quarterly rebalancing to maintain portfolio standards. The goal is that no trades will be made between the quarters unless a company in the Portfolio announces an earnings or dividend decrease, or the Team deems an increase in the cash position is warranted due to extreme economic conditions. Consultation with an experienced, qualified financial adviser is recommended before investment. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be profitable. The use of IQWM offered investment models and strategies may be appropriate for certain investors as part of their overall investment strategy. An investment should be made only after a financial advisor has reviewed the prospective investor’s risk tolerance, time horizon, and investment objectives
A security’s indicated yield is the most recently announced dividend, annualized based on the security’s dividend frequency, then divided by the Security’s current market price. These distributions are not guaranteed and can fluctuate. A dividend yield is not an interest rate. It is a percent of the share price. The total annual return of the portfolio is a combination of annual distributions and price fluctuation which can be positive or negative.
There are no “loads”, front or back end, to the portfolio, and no 12B1 fees, due to the fact that the portfolio is not a mutual fund. The ETFS in the portfolio, which make up 12% or less—will have their own internal fees over which we have no control.Past performance of any security or index should never be relied upon to predict future results. Stock markets and individual stocks may be subject to large price fluctuations. Diversification cannot guarantee to protect an investor from these fluctuations. Although the portfolios seek low volatility and principal protection, asset allocation decisions may not achieve these goals in all cases. There is no guarantee a portfolio will meet a target return or investment objective. The investor is investing in the stated methodology, not past performance. Client has 24/7 access to view the selections in real time and may cease the portfolio if he or she so chooses.. If the client believes that any change to the portfolio falls outside the stated rules for selection, the account may be terminated, typically the next trading day, without a load or surrender charge. There may be a nominal fee of not more than $75 to close the account.. (Messages left on our answering system do not constitute an order to trade. Email or written instructions are required.)
Have a no-cost, no obligation conversation with an experienced adviser and fiduciary.
Steve accepts 4 to 8 new clients per month in order to serve each with optimal attention and personal service.
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