SECURITY, INCOME, & GROWTH
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INVESTMENT APPROACH
 

Security, Income, & Growth

DCM’s Endowment – Cornerstone strategy was designed in the early 1990s for a church endowment.  Its objectives are:

  1. Long-term preservation of capital (Security).
  2. Create generous and dependable income now and in the future (Income).
  3. Grow both income and principal faster than inflation (Growth).

Preserve capital.  
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.