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Dividend All-Cap Value

Strategy Overview

River Road’s Dividend All-Cap Value (DAV) Strategy utilizes a fundamentally driven research process to identify attractive purchase candidates from an all cap universe of high yielding equity securities. The stock selection process is complemented by a risk averse approach that employs balanced diversification and a structured sell discipline.


The DAV Strategy focuses on North American listed securities with a positive dividend yield and a market cap greater than $700 MM, at the time of initial purchase.

Companies must exhibit adequate liquidity (typically greater than $500,000 per day average trading volume) to be considered for purchase. The Portfolio primarily invests in common stock, ADRs, REITs, and PTPs, but may also invest in Income Trusts, BDC/RICs, and Convertible Preferreds.

Investment Objective

The Dividend All-Cap Value 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% of the benchmark yield.

Investment Process

The 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 three principal databases.

  • Quantitative screening through FactSet (proprietary stock screens): Identifies stocks that best exhibit the Strategies’ critical criteria
  • Our Watch List (including former portfolio holdings)
  • Qualitative screening with Value Line: Provides a snapshot of a business and up to 15 years of relevant quantitative historical trends

We also closely watch daily reports of dividend announcements.

Dynamic Research: An active search for attractive candidates among a myriad of sources, including:

  • Investment media
  • Industry news and research
  • Competitor analysis
  • SEC filings (10-K/Qs, 8-Ks, proxy statements, insider trading (Form 4 filings), share repurchases/dividend increases, etc.)
  • Various other contacts and resources established by the portfolio management team

II. Security Analysis

River Road builds portfolios in house, from the bottom up, making security-specific research central to our process. At the core of River Road’s Absolute Value® approach is a systematic method for assessing the ‘risk-to-reward’ characteristics of an investment. The goal of the research process is to formulate two outputs from which an investment decision is made – conviction rating (risk) and discount to value (reward). A stock’s conviction rating combined with its discount to value determine not only whether the stock qualifies for investment, but also how the stock will be sized within a portfolio.

Conviction Rating

The conviction assessment ranks each of the critical criteria, listed below, on a scale of 1 (highest/best) to 5 (lowest/worst), which are then aggregated into an overall conviction rating.

  • High and growing dividend: Stable payout ratio and positive yield
  • Financial strength: Liquidity and leverage; hidden assets; and free cash flow yield
  • Valuation: Confidence in forecast assumptions
  • Attractive business model: Understandable, predictable, and sustainable; high returns on equity and invested capital; and reasonable growth prospects
  • Shareholder orientation: Significant insider ownership/insider buying; opportunistic stock buybacks; accretive transactions; debt reduction; and dividend raises/initiations
  • Environmental, social, and governance (ESG): Practices; policies; and disclosure

Discount to Value

A stock’s discount to its assessed valuation is a proprietary measure that represents the expected upside or available reward within the valuation time horizon of a stock based on our fundamental approach to security valuation. A company’s market price must be 90% or less of our valuation to qualify for investment, with a target of 85% or less.

III. Portfolio Construction

The DAV Portfolio targets 50 to 70 holdings.  (The target number of portfolio holdings is a working guideline. The actual number may vary depending on market conditions and other factors.) The stocks purchased are those we believe best meet our selection criteria, offer the greatest potential for income and appreciation, and provide appropriate portfolio diversification.

The Strategy employs a proprietary sizing model which considers the security’s conviction rating, discount to value, and dividend yield, as well as the breadth of value in the Portfolio’s investment universe.

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 is designed to help 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 Inception Date: October 1, 2003