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New Schwab dividend-focused strategy offers income and growth

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Charles Schwab has introduced ThomasPartners, a dividend income-focused money management strategy for Schwab retail clients and its independent registered investment advisor (RIA) clients.

 
Last December, Schwab acquired the Massachusetts money management firm, which uses a growth-oriented investment portfolio to generate dividend income streams. At the heart of the ThomasPartners approach is equity investments in companies that, even in down markets, have consistently paid their shareholders regular dividends and have generally grown those dividends year over year. According to ThomasPartners research, between 1973 and 2012, stocks that grew or initiated a dividend had an annualized performance of 13.32 per cent versus 7.41 per cent for non-dividend payers.
 
Ninety per cent of respondents to a recent Schwab survey say that having consistent monthly income in retirement is very important, while 83 per cent are interested in seeing their retirement income grow over time, and 78 per cent say it is very important that the value of their retirement portfolio increases over the long term.
 
The ThomasPartners dividend growth strategy seeks to meet three key goals for investors:
 
                •             Dependable income every month
                •             Income growth every year
                •             Capital appreciation over the years
 
“When I decided to retire, I knew I wanted two things from my investment strategy: dependable, regular income and the opportunity to grow annual income in pace with inflation. I found that typical strategies could deliver one or the other but not both,” says Gregory N Thomas, senior vice president and chief investment strategist of ThomasPartners. “The concept for ThomasPartners was born when I realised that I wasn’t alone in my search.”
 
ThomasPartners provides a disciplined approach through diversified equity holdings to help mitigate the risk of overexposure to any specific asset category or industry. The strategy uses rigorous selection criteria and actively monitors and manages its portfolio holdings to maintain broad exposure to domestic and international common stocks across a range of equity asset categories.
 
For retail investors, the ThomasPartners strategy has an investment minimum of USD100,000 and pricing starts at 90 basis points per year (0.90 per cent).
 
While 55 per cent of respondents to Schwab’s survey say that dividend stocks or capital gains account for at least a portion of their retirement income plan, additional findings suggest that people do not traditionally think about stock dividends as a retirement income strategy. Only 26 per cent say that their broker or financial advisor has raised the topic of stock dividends as part of a retirement income plan, and just 14 per cent of people have brought up this topic proactively themselves.
 
According to Thomas, the value of a dividend income growth strategy goes beyond retirement investing: “For many people, the need for income, safety and growth becomes more prominent as they approach retirement, but our approach of focusing on dividend-paying stocks may be appropriate for anyone looking for dependable income with potentially less volatility through market swings.”
 
Schwab’s survey also found that 89 per cent of investors consider it very important to have an investment strategy in place to help guard against market volatility.

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