Catholic Dividend Fund Rejects Allure Of High Yields


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Conservative strategies usually work best in dividend investing.

Investors who chase high yields can undermine the safety aspects that drew them to dividend stocks in the first place.

Ave Maria Rising Dividend Fund probably is best known for its adherence to Catholic morality. Yet, investors of no faith can appreciate how the fund resists the temptation to succumb to high yields.

"When you see 'Rising Dividend Fund,' people naturally focus on the dividend part. We focus on the rising part," Rick Platte, co-portfolio manager for the fund, told IBD.

In a practical sense, this means "more growth, less yield," said Platte. Ave Maria avoids utilities and real estate investment trusts despite their juicy yields.

Platte said he avoids utilities because they are "regulated monopolies" with poor growth prospects. REITs also often lack growth.

The fund looks for companies that are boosting the dividend every year. The CEOs at such companies don't want to be the one who ends the streak, Platte said.

The Ave Maria Rising Dividend Fund usually holds 40 to 45 stocks. Year to date, the fund is up about 10%. The yield is 1.4%.

Selections are 80% bottom up and 20% top down, Platte said. Bottom up involves looking at the individual attributes of a stock. Top down looks at the economy and sectors.

Holdings include industrial conglomerateEmerson Electric ( EMR ), medical products firmStryker ( SYK ) andUnited Parcel Service ( UPS ).

A stock is sold if it rises so much the gains appear unsustainable, or if the company develops business problems, or if it violates Catholic morality.

Avon Products ( AVP ) was dropped for its business problems, whileW.W. Grainger ( GWW ) andFastenal (FAST) were sold to lock in gains.

The minimum investment in the fund is $1,000.

Platte said the fund's cash position is "on the high side" now, but wouldn't reveal the percentage.

The Catholic-ethics aspect involves avoiding companies linked to abortion, embryonic stem cell research and pornography. Companies offering nonmarital benefits are avoided if possible, but such benefits aren't a deal breaker.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: AVP , EMR , GWW , SYK , UPS

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