Security, Income, & Growth
DCM’s Endowment – Cornerstone strategy was designed in the early 1990s for a church endowment. Its objectives are:
- Long-term preservation of capital (Security).
- Create generous and dependable income now and in the future (Income).
- Grow both income and principal faster than inflation (Growth).
DCM does things at the beginning of its investment selection process that help preserve capital.
We screen every security (equities and fixed income) for the underlying financial strength. Financially strong companies and municipalities hold their value in tough times. In really tough times, they have the ability to attract new capital as needed to keep themselves strong.
We only purchase stocks in companies that pay generous dividends and keep those dividends growing year after year. Most importantly, this preserves capital allowing clients to spend dividend income (not principal) even when stock prices fall.
We use a balance of stocks and bonds to smooth out bumps in the markets and generate cash income that keeps clients from invading principal to make withdrawals.
Create generous and dependable income. The fixed income (bonds and preferred stocks) portion of our endowment portfolios generates about two-thirds of the income. Therefore, we stick to high quality bonds, knowing with some certainty on the day that we buy them what their long-term return will be. We do not trade bonds or preferred stocks trying to boost total return.To supplement the income received from fixed income securities, DCM will own only common stocks that pay generous and growing dividends.
Growth of both income and principal. As with any asset that generates cash flow (think rental property), if the cash benefit paid to its owner increases over time, the asset becomes more valuable. Companies that have increased their dividends over the last forty years have significantly out-performed companies that have never paid a dividend and those that have paid one but not increased it. As the equities in the endowments we manage grow in value, we sell part of the position and reinvest a portion of the profits into fixed income securities, in effect buying more income.
What if you had invested $1 Million with DCM before the 08/09 financial crisis?
If you had invested $1,000,000 in DCM’s Endowment Cornerstone strategy before the 2008/2009 financial crisis and withdrawn $50,000 a year, the value of your portfolio at the end of 2013 would have been $1,162,332.
If you had invested $1,000,000 in the S&P 500 (SPY) and withdrawn $50,000 a year, your market value would have been $968,857.
That’s a $193,475 difference1.
1 All Supporting data available upon request.
The composite performance results reflect time-weighted rates of return, the reinvestment of dividends and other account earnings, and are net of applicable account transaction and custodial charges, DCM’s investment management fees, third-party solicitor/advisor fees. The reinvestment of dividends and other earnings may have a material impact on overall returns. For reasons including variances in strategy account holdings, variances in the investment management fee incurred, market fluctuation, the date on which a client engaged DCM’s investment management services, and any account contributions or withdrawals, the performance of a specific client's account may vary substantially from the indicated DCM composite performance results. A portion of each account may be actively managed in an attempt to respond to changing conditions. Past performance is not indicative of future results and the performance of a specific individual client account may vary substantially from the composite performance results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal either the ENCS composite performance results reflected above, or the performance results for any of the comparative index benchmarks provided.The S&P 500 Index is an unmanaged index and includes a representative sample of large-cap U.S. companies in leading industries. SPY is an Exchange Traded Fund (ETF) sponsored by State Street Global. The investment seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the S&P 500 Index.