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Dividend All-Cap Value II

Strategy Overview

River Road’s Dividend All-Cap Value II (DAV II) Strategy employs the same bottom-up, fundamentally driven investment process as the firm’s Dividend All-Cap Value Strategy.  The primary difference between these strategies, other than market capitalizations, is that the greater liquidity in the DAV II universe yields fewer target holdings.

Investment Objective

The Dividend All-Cap Value II Strategy seeks to outperform the Russell 3000 Value benchmark on a total return basis by 200 to 400 bps gross of fees annualized over a market cycle and to provide a yield of at least 150 bps in excess of the benchmark yield.


The Dividend All-Cap Value II Strategy focuses on all stocks with a minimum 2% yield and a market capitalization over $1 billion.  Companies must exhibit adequate liquidity (typically greater than $4.5 million per day average trading volume) to be considered for purchase in the Strategy.  The Portfolio primarily invests in common stock, ADRs, REITs, and MLPs, but may also invest in Income Trusts, BDC/RICs, and Convertible Preferreds.

Investment Process

The Dividend All-Cap Value II Strategy investment process proceeds through four stages:

I. Idea Generation

River Road employs two research methodologies – Systematic and Dynamic.

Systematic Research: Screening of the firm’s two principal databases — Value Line and FactSet.

  • Qualitative screening with Value Line: Provides a snapshot of a business and up to 15 years of relevant quantitative historical trends
  • Quantitative screening through FactSet: Identifies stocks that best exhibit the Strategy’s six critical criteria

 Dynamic Research: An active search for attractive candidates among:

  • SEC filings (10-K/Qs, 8-Ks, proxy statements, insider trading, share repurchases/dividend increases, etc.)
  • Industry news and research
  • Competitor analysis
  • Our Watch List (including former portfolio holdings)
  • Various other contacts and resources established by the Portfolio’s management team

II. Security Analysis

River Road builds portfolios in house, from the bottom up, making security-specific research central to our process.  The Dividend All-Cap Value II Strategy focuses on identifying the most attractive companies that meet the Strategy’s critical criteria:

  • High and growing dividend: Stable payout ratio and yield ≥ 2%
  • Financial strength: Free cash flow, attractive balance sheet
  • Priced at a discount to value: Target discount ≥ 15% of a company’s valuation
  • Attractive business model: Sustainable, predictable, understandable
  • Shareholder-oriented management: Insider ownership, accretive transactions, debt reduction, dividend initiations/raises

III. Portfolio Construction

The Portfolio targets 45 to 70 holdings, with the actual number of holdings dependent upon market conditions.  The stocks purchased are those that best meet the selection criteria and offer the greatest potential for income and capital appreciation.

The decision-making process is dynamic and team-based.  While the lead portfolio manager has controlling authority, typically decisions are made by a consensus of the portfolio managers.

IV. Sell Discipline

We believe that the key difference between a losing strategy and a winning strategy is that losers make big mistakes and winners make small mistakes.

  • Our sell discipline helps keep the inevitable individual mistakes from causing large, permanent losses of capital in the broader portfolio.
  • We do not average down on losing positions.


Dividend All-Cap Value II Strategy Inception Date: January 1, 2011