MAR­RIOTT SIX-STEP FIL­TER PROCESS FOR DIV­I­DENDS

Financial Mail - Investors Monthly - - Cover Story -

STEP 1

Mar­ket cap fil­ter: South African com­pa­nies need to have a mar­ket cap­i­tal­i­sa­tion of more than R2bn and in­ter­na­tional com­pa­nies need to be listed on a ma­jor First World ex­change. This ex­cludes smaller, more spec­u­la­tive in­vest­ments.

STEP 2

Div­i­dend fil­ter: Com­pa­nies that have not paid div­i­dends over the last three years are fil­tered out.

STEP 3

Eco­nomic screen: We ex­clude com­pa­nies vul­ner­a­ble to cur­rent eco­nomic con­di­tions. MTN, for ex­am­ple, has re­cently been re­moved from our lo­cal eq­uity port­fo­lio due to its large ex­po­sure to the volatile Nige­rian econ­omy.

STEP 4

In­dus­try screen: Com­pa­nies op­er­at­ing in un­pre­dictable in­dus­tries are fil­tered out, such as com­mod­ity pro­duc­ers. Thus, de­spite be­ing the most widely held share in SA, Sa­sol has never been in­cluded in a Mar­riott port­fo­lio as the com­pany’s prof­itabil­ity is linked to the price of oil. In­ter­na­tion­ally, tech­nol­ogy stocks such as Ap­ple and Sony are avoided due to their re­liance on in­no­va­tion to grow.

STEP 5

Com­pany screen: We avoid com­pa­nies with spe­cific risks to div­i­dends, for ex­am­ple, com­pa­nies with too much debt or risky busi­ness mod­els. This fil­ter en­sured that our port­fo­lios had no ex­po­sure to African Bank, a share which hurt in­vestors in 2014.

STEP 6

Yield screen: Com­pa­nies of­fer­ing in­vestors best value are se­lected from the re­main­ing pool of se­cu­ri­ties.

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