New Schwab Dividend-Focused Strategy Offers Income and Growth
SAN FRANCISCO--(BUSINESS WIRE)-- With investors focused on the importance of generating income for today's needs while growing their nest eggs for the future, Charles Schwab has introduced ThomasPartners™, a dividend income-focused money management strategy newly available for Schwab retail clients and its independent Registered Investment Advisor (RIA) clients.
Last December, Schwab acquired the Wellesley, 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 percent versus 7.41 percent for non-dividend payers.
Ninety percent of respondents to a recent Schwab survey** say that having consistent monthly income in retirement is very important, while 83 percent are interested in seeing their retirement income grow over time, and 78 percent say it's 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," said Gregory N. Thomas, senior vice president and chief investment strategist of ThomasPartners. "The concept for ThomasPartners was born when I realized 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. ThomasPartners also offers significant value to investors. For retail investors, the ThomasPartners strategy has an investment minimum of $100,000 and pricing starts at 90 basis points per year (.90 percent).
Over the 10-year history of its dividend portfolio as of March 31, 2013, Thomas Partners has provided investors:
Dividend income: A 10-year track record of generating income from an investment portfolio
Dividend income growth: Dividend income stream growth from approximately $24,000 to nearly $75,000 on a $1 million portfolio***
Total Return Growth: Cumulative portfolio returns of 143.27 percent
While 55 percent 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 don't traditionally think about stock dividends as a retirement income strategy. Only 26 percent say that their broker or financial advisor has raised the topic of stock dividends as part of a retirement income plan, and just 14 percent 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 percent of investors consider it very important to have an investment strategy in place to help guard against market volatility.
The launch of ThomasPartners is the latest addition to Schwab's line-up of advised solutions joining Schwab Managed Portfolios™-Mutual Funds, Schwab Managed Portfolios™-ETFs, Windhaven Portfolios™, Schwab Private Client™, Managed Account Select and Managed Account Connection and Schwab Advisor Network®, which connects investors who have complex wealth management needs to local independent investment advisors. Total assets under management in Schwab's advised solutions stood at more than $135 billion as of April 30, 2013.
About Charles Schwab
The Charles Schwab Corporation (NYS: SCHW) is a leading provider of financial services, with more than 300 offices and 8.9 million active brokerage accounts, 1.6 million corporate retirement plan participants, 895,000 banking accounts, and $2.11 trillion in client assets as of April 30, 2013. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com. (0513-3739)
Portfolio management is provided by ThomasPartners, Inc. ("ThomasPartners"), a registered investment advisor and an affiliate of Charles Schwab & Co., Inc. ("Schwab").
Both versions of the ThomasPartners Dividend Growth Strategy are available through the Schwab Managed Account Connection® ("Connection") program. Please read Schwab's disclosure brochure for important information and disclosures relating to Connection and Schwab Managed Account Services™. Schwab makes available other equity strategies in its managed account programs that focus on dividend-paying stocks, including strategies that are managed by firms that are unaffiliated with Schwab.
*Source: ThomasPartners research with data from the CRSP® 1962 U.S. Stock Database. ©2012 Center for Research in Security Prices (CRSP). Includes all publicly traded U.S. companies with market capitalization of at least $1 billion (in today's dollars), adjusted historically for inflation. Beginning in 1972, membership in each dividend classification is set as of December 31 for each year, and then held constant for the next 12-month period. Dividend Growers and Initiators include stocks that initiated or increased their dividend during the previous 12 months. No-Change stocks are those that maintained their existing per-share cash dividend over the previous 12 months. Dividend Cutters and Eliminators are companies that lowered or eliminated their dividend at some point in the previous 12 months. Dividend Non-Payers are companies that did not pay a dividend at any time in the previous 12 months. The average return is the compound annualized average return for the 1972-2012 timeframe.
**The survey was conducted by Koski Research among a geographically dispersed U.S. panel of 1,000 people ages 55-75 with $250,000 or more in assets from April 20 to April 26, 2013. Margin of error is approximately +/- 3.1%.
***Based on a hypothetical $1 million initial investment on 3/31/03. Income growth during certain periods may have been flat or negative.
Past performance is not indicative of future results; the value of investments and the income derived from them can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur.
Please refer to ThomasPartners Form ADV, Part 2A, for more information.
Diversification strategies do not ensure a profit and do not protect against losses in declining markets. Investments in managed accounts should be considered in view of a larger, more diversified investment portfolio.
There are risks associated with any investment approach, and the ThomasPartners Dividend Growth Strategy has its own set of risks. First, there are the risks associated with investing in dividend-paying stocks, including but not limited to the risk that stocks in the strategy may reduce or stop paying dividends, affecting the strategy's ability to generate income. Second, investor sentiment could cause dividend-paying equities to fall out of favor or price earnings multiples to compress. Please discuss this and other potential risks with your Financial Consultant prior to investing.
The composite and index information shown above is based on historical performance, does not account for taxes, and assumes reinvestment of dividends. Additionally, the composite and index returns are total returns, not just price-only returns. The ThomasPartners Dividend Growth Strategy Composite income shown is a combination of the annualized dividend yield at each indicated point in time and the returns earned on the strategy since the inception date. The dividend yield is the last dividend paid divided by the price of the stock on that pay date, which is then annualized. There is no guarantee that a stock will continue paying a dividend in the future, or that the yield will remain the same or increase, as cash dividends and stock prices change over time.
The ThomasPartners Dividend Growth Strategy as shown is not available for direct investment, and it includes accounts from the ThomasPartners Dividend Growth K-1 Generating and Dividend Growth Non-K-1 Generating versions of the strategy. Actual performance of these two versions of the strategy may vary from that of the overall Dividend Growth Strategy Composite. Please note that there are material differences between the indexes shown, including potential differences in holdings and in how each calculates dividend yield. ThomasPartners believes that although the S&P 500® Total Return Index does not seek dividend income as a primary objective, it is a suitable proxy for the overall market.
The NASDAQ U.S. Broad Dividend Achievers Index TR (DAATR) comprises U.S.-accepted securities with at least 10 consecutive years of increasing annual regular dividend payments. The S&P 500 Total Return Index is a commonly recognized, market-capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. Indexes are unmanaged and cannot be invested directly.
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