Philosophically, Hamlin believes a well-constructed portfolio should run like a good business, and a good business generates cash flow. The Hamlin Equity Income Strategy is a concentrated portfolio of 25-35 companies that meet the investment team’s strict criteria. The process looks for stocks generating a high current level of yield (1.5x – 2x the S&P 500 yield at purchase), a growing dividend stream with manageable debt, ample free cash flow, and attractive returns on equity. After a detailed fundamental review of the business and management, the team employs an extensive valuation assessment to identify fair value.
Staying disciplined to investing in quality businesses that meet Hamlin’s strict criteria, while trading at an attractive valuation, is why the strategy is concentrated, sector and market cap agnostic. The end result is a high active share, differentiated portfolio that yields over 3.8% (as of 09.30.2022) with a high single-digit dividend growth rate over time. The Hamlin Equity Income strategy is often found in income-oriented portfolios, but investors also use Hamlin as a core value manager. The portfolio has historically exhibited strong downside protection as the dividend has historically smoothed investor returns in down markets.