Investment Strategy

At Headwater's, our investment philosophy focuses on dividend growth investing. The framework for this philosophy is focused around dividend growing stocks with an economic moat.

Core of our Investment Philosophy: Current Yield + Dividend Growth = Total Return

By definition, when the dividend yield is unchanged between the date you buy a stock and the date you sell a stock, your total return equals the dividend yield (income) plus the growth rate of the dividends (capital gain).

In the long run, dividend growth has historically driven a stock price and, by extension, total return. For the long-term investor, the value of a portfolio corresponds closely to the present value of dividends.

By contrast, the present value of capital appreciation dwindles greatly in significance. In other words, stocks total returns trend toward dividend yield + dividend growth over time.

Historically speaking, over 10-year investment horizons, approximately 80% of investors returns have come from dividend growth + current yield over the past 40 years.


* Ned Davis Research