ThomasPartners Strategies: Performance

ThomasPartners® Strategies strive to deliver a reliable source of income to help you reach and maintain your retirement goals.

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An in-depth look at dividends.
Portfolio Management for the ThomasPartners Strategies is provided by Charles Schwab Investment Management, Inc. ("CSIM").

Bill McMahon [onscreen]: Hi, I'm Bill McMahon, and I'm the Chief Investment Officer of ThomasPartners.

A wall appears with the ThomasPartners logo. Two men in business attire are having a conversation in front of a window overlooking a bay.

Bill: Our philosophy is to focus on companies that pay their shareholders dividends. Why dividends? Well, let's take a look at our approach.

A man works in front of four computer monitors showing charts and analytic information. A man in business attire is having a conversation on a phone, while five people in business attire have a discussion in a conference room.

Bill [off-screen]: Dividends are always positive. They always make a positive contribution to total returns.

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Dividends are always positive.

An urban area appears with boats going in and out of the bay next to it.

Man [off-screen]: Let's take a closer look at those returns.

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Contribution of Dividends to the S&P 500®
Total Return (1926–2019)

A bar graph appears, illustrating the difference between price appreciation and dividends from 1926 through 2019. The dividends appear in blue and the price appreciations appear in white, both containing the percentages for each year or timespan.

Man: Since 1926, the S&P 500® has averaged about 10% annualized returns. Some of that is due to prices going up, and some of that is from dividends. Here, the white column shows the contribution from price appreciation. The blue column shows the contribution of dividends. Price appreciation can go negative, but dividends are always a positive contribution to total returns.

Each part of the bar graph highlights as the man addresses the meaning of each.

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See important disclosure “Contribution of Dividends to the Total Returns” at the end of this video.

Different buildings appear within the urban area, one of which is a clock tower.

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How have dividends performed over time?

Bill [off-screen]: Historically, dividends have proven to be a very important component of total returns over time. 

Man [off-screen]: This example shows the growth of a hypothetical investment in the S&P 500® Index over 40 years. 

A line graph appears with the following title:

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Growth of a Hypothetical Investment in
the S&P 500®

The graph shows the difference in price appreciation in money value versus the total portfolio money value from 1979 through 2019.

Man: Let's assume you purchased one share of the index 40 years ago at the then-current market rate. Forty years later, that one share would have experienced a fair amount of appreciation. 

The price appreciation with only money value, represented in yellow, increases from $107.94 to $3,231.

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See the important disclosure “Growth of the S&P 500 Index” at the end of this video.

Man: But, if you'd reinvested the dividends paid by the index each year, your total investment would have grown even more. That's the power of dividends.

The total portfolio money value, represented in blue, increases from $107.94 to $9,391.

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with Dividend Reinvestment
S&P 500

How have companies that increased their dividends performed over time?

The urban setting next to the bay reappears. Bill sits in his office.

Bill [onscreen]: A dividend increase is a very powerful signal. A company that is telling you that business is doing well and increases its dividends shows that management’s confidence in their long-term earnings power.

Man [off-screen]: Companies that increase their dividends have historically performed better than companies that don't. 

A group of four bars appears with the following title:

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The Power of Dividend Growth
Historical Total Returns of Stocks (1980–2019)

Man [off-screen]: This study looks at companies with an inflation adjusted market capitalization of one billion dollars or more, as of 40 years ago. Each company was placed in one of four buckets based on their annual dividend payout policy: companies that didn't pay a dividend; companies that reduced their cash dividend payments compared to the previous year; companies whose policy stayed the same; and companies that increased their dividend payment over the previous year.

Each bar grows a little as the man addresses each one. Each bar is a different color and has its own name in the following order: Dividend Growers or Initiators; Stocks with No Change in Dividends; Dividend Cutters or Eliminators; and Non-Payers. The first bar contains 13.9%; the second contains 11.2%; the third contains 8.7%; and the fourth contains 8.1%.

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See the important disclosure, “The Power of Dividend Growth,” at the end of this video.

Man [off-screen]: Each year these buckets were reallocated and sorted in the same manner. In the end, companies that initiated or increased their dividends provided much better total returns than those with other dividend policies. So those are the companies that ThomasPartners tends to select when building a portfolio.

The “Dividend Growers or Initiators” bar grows a little bigger than the others. The urban area next to the bay reappears.

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What are the ThomasPartners® investment objectives?

ThomasPartners® income growth strategies seek to provide:

Bill [off-screen]: The ThomasPartners objectives are income every month, income growth, and total returns over time. Our investment strategy and research process is really organized around those three objectives. 

Three overlapping circles appear below the text. The first circle contains the text “Income Every Month; the second contains the text “Income Growth;” and the third contains the text “Competitive Total Returns Over Time.” Each circle grows a little as Bill addresses it. Bill sits in his office.

Bill [onscreen]: Dividend income every month is important because it gives our investors a sense of certainty as they are budgeting for their year, particularly for those that are retired. The income growth piece is also very encouraging because it gives our clients an inflation offset. People's bills go up over time and we expect the portfolio to generate more income over time to help offset those effects.

The urban area next to the bay reappears.

Man [off-screen]: Here's an estimate of the annual income that could have been generated over those years. 

A bar graph appears, showing the estimated income growth since inception. The horizontal line at the bottom represents the time period between March 31, 2003, and December 31, 2019. The vertical line represents $0 to $160K. The graph has the following title:

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Estimated Income Growth Since Inception

Man [off-screen]: Let's assume, hypothetically, that on March 31, 2003, $1 million was invested in each of three portfolios: the ThomasPartners Dividend Growth Composite (Net of Fees); the NASDAQ Broad Dividend Achievers Total Return Index; and the S&P 500® Total Return Index. Here's the estimated annual income for the next 12 months.

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Estimated Income is simply an annual indication of income. It is not actual income earned nor does it guarantee income payment. Past performance is no guarantee of future results. See the important disclosure “Estimated Income Growth” at the end of this video.

A bar representing the S&P 500® estimated annual income appears on the left side of the graph, reaching $18,000.

Man [off-screen]: From the S&P 500® portfolio, the estimated annual income was roughly $18,000. From the U.S. Broad Dividend Achievers, it was around $23,000. 

Another bar representing the NASDAQ U.S. Broad Dividend Achievers Index TR (DAATR) estimated annual income appears to the left of the first one, reaching $23,000.

Man [off-screen]: And from the ThomasPartners Composite Portfolio, roughly $24,000. 

A third bar representing the ThomasPartners Dividend Growth Strategy Composite estimated annual income appears even further to the left, reaching $24,000.

Man [off-screen]: If we repeat this calculation each year on December 31, the example shows that the ThomasPartners portfolio would have provided more estimated income at the end of each year since inception versus the other two indices. And, it provided a more steady income growth experience, delivering on its objectives of monthly income and income growth.

More bars appear, representing that investing with ThomasPartners yields a greater estimated annual income over time as opposed to the other two options. The final amount shown is $150K.

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The 4% withdrawal

Man [off-screen]: Now let's see what would have happened if an investor withdrew 4% from the account every year. Similar to the estimated income chart, we'll assume a hypothetical $1 million investment in the ThomasPartners Dividend Growth Composite (Net of Fees) on March 31, 2003. 

A bar graph appears with the following title:

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Estimated Annual Portfolio Income
with a 4% Initial Distribution Requirement

The bar graph shows the potential growth of annual portfolio income with a 4% initial distribution requirement from 2003 through 2019. The potential growth represented spans from $0 to $90K.

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Estimated Income is simply an annual indication of income. It is not actual income earned nor does it guarantee income payment. Past performance is no guarantee of future results. See the important disclosure “Estimated Annual Portfolio Income with a 4% Initial Distribution.” at the end of this video.

Man [off-screen]: Again, estimated income for the first twelve months is around $24,000. 

A bar representing estimated annual income appears on the left side of the graph.

Man [off-screen]: However, at the end of 2003, $40,000 is withdrawn from the account. That's 4% of the original investment. Each year on December 31, another withdrawal takes place increasing at a rate of 3.5% per year, the assumed annual cost of living adjustment. 

A line appears above the bar, increasing over the years from $40,000 in 2003 to $69,000 in 2019.

Man [off-screen]: Over time, the annual withdrawal would have grown, distributing a substantial portion in total on the original $1 million investment. 

The bar expands to the right, increasing and decreasing over the years until it reaches $90,000 in 2019.

Man [off-screen]: The annualized estimated income from the ThomasPartners Composite Portfolio has grown over time, after fees and accounting for hypothetical distributions. And the account value, after all fees and withdrawals, has also grown.

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Ending Portfolio
Value After
Annual Draws

Total
Withdrawals
Taken

A bar appears to the right of the graph, containing the number $2.86 Million. A second bar rises up a third of the way up inside the first bar, containing the number $908K.

People walk upstairs and an older woman picks up a little girl. 

Man [off-screen]: By seeking to provide a stable and growing income stream, ThomasPartners allows investors to receive the income generated from their equities and experience the long-term capital appreciation benefits of continuing to own stocks.

An older man chops herbs on a cutting board and slides vegetables onto a skewer. He sprinkles the chopped herbs on a plate with a fish fillet covered with lemon slices and smiles. An older man rides a bike down a street. The windows of a building reflect the bay. People in business attire sit around a table in a conference room.

Man [off-screen]: ThomasPartners' approaches to investing share a similar investment philosophy: monthly income; income growth; and competitive total returns over time. 

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Dividend Growth Strategy
Balanced Income Strategies

A circle opens under "Dividend Growth Strategy" with the text "Equities." Two circles open under "Balanced Income Strategies," each divided into two uneven slices. The circle on the left has the text “Fixed Income” in the smaller slice and "Equities" in the bigger slice. The circle on the right has the text “Fixed Income” in the bigger slice and “Equities” in the smaller slice.

Three overlapping circles appear below the others. The circles contain the text “Income Every Month,” “Income Growth,” and “Competitive Total Returns Over Time.”

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The portfolio allocations for the Balanced Income Strategies are for illustration purposes only.

Man [off-screen]: Talk to your financial professional to see if ThomasPartners is right for you.

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Talk to your financial professional to see if ThomasPartners is right for you.

ThomasPartners®

Past performance does not guarantee future returns; the value of investments and the income derived from them can go down as well as up. Future returns and the achievement of stated goals are not guaranteed and a loss of principal may occur. 

Please refer to the ThomasPartners Strategies Disclosure Brochure for additional 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 Strategies have their 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 Strategies may reduce or stop paying dividends, affecting that Strategy's ability to generate income. Second, investor sentiment could cause dividend-paying equities to fall out of favor and decrease in price. Third, there are risks associated with investing in fixed income asset classes, including through the use of exchange-traded funds (ETFs), that include, but are not limited to, interest rate risk, credit risk, high yield risk, and government security risk. Please discuss these and other potential risks with your Financial Consultant or investment advisor prior to investing.

Portfolio Management for the ThomasPartners Strategies is provided by Charles Schwab Investment Management, Inc. ("CSIM"). CSIM is a registered investment adviser and an affiliate of Charles Schwab & Co., Inc. (“Schwab”). Both CSIM and Schwab are separate entities and subsidiaries of The Charles Schwab Corporation. 

©2020 Charles Schwab Investment Management, Inc. All Rights Reserved.
CC2521428 (1020-0GDY) (10/20)

Contribution of Dividends to Total Returns: Source: 2018 Stocks, Bonds, Bills & Inflation® (SBBI®) Yearbook. Bloomberg. The S&P 500® Total Return Index assumes reinvestment of dividends, includes capital gains, and does not reflect the effect of taxes and fees. Indexes are unmanaged and not available for direct investment. Past performance does not guarantee future results.

Growth of the S&P 500 Total Return Index assumes reinvestment of dividends, includes capital gains, and does not reflect the effect of taxes and fees. Source: 2018 Stocks, Bonds, Bills & Inflation® (SBBI®) Yearbook. Bloomberg. Indexes are unmanaged and not available for direct investment. Past performance does not guarantee future results.

The Power of Dividend Growth
Starting with the first quarter of 2019, CSIA changed vendors to Ned Davis Research, Inc. (NDR) for the generation of this study. The results of this transition produced different values for each of the dividend groups, in particular, the 'Dividend Cutters and Eliminators' group now show a noticeably higher total return than in prior charts. The 'Dividend Growers' and 'Non-Payers' groups' returns are now generally lower than under the previous calculation methodology. The 'No Change' and 'Dividend Cutters' groups' returns are now generally higher than under the previous calculation. Factors that affected these results include a change in the data source from the CRSP® 1962 U.S. Stock Database to S&P Capital IQ Compustat and S&P Dow Jones Indices, a change in the rebalancing period from annually to monthly, a removal of the $1 billion inflation adjusted market cap requirement (the stocks included in the study are from the NDR Multi-Cap universe, which represent the top 97% of capitalizations in the NDR All-Cap Universe), and a shortening of the evaluation period (i.e., the NDR Multi-Cap Stocks Universe starts on 12/31/1980, while the previous study covered a 40-year period). As of the most recent evaluation period, the NDR Multi-Cap universe contained 6 stocks, or 0.4% of the universe, with a market cap less than $1 billion.

The Dividend Paying Stocks chart shows the historical total returns of stocks based on their dividend policies. These stocks were grouped into four categories of dividend policies: Non-Dividend-Paying stocks, Dividend Growers and Initiators, Dividend Cutters and Eliminators, and Dividend Payers with No Change in Dividends. The methodology in creating this chart is as follows. 

1) Dividend Paying vs. Non-Paying
Each company's dividend policy is determined by its indicated annual dividend. Ned Davis classifies a stock as a dividend-paying stock if the company indicates that it is going to be paying a dividend within the year. A stock is classified as a 'non-payer' if the company's indicated annual dividend is zero. Prior to July 2000, the indicated annual dividends were updated on a quarterly basis. Since July 2000, the indicated annual dividends are updated on a daily basis, so the most up-to-date information is used. The annualized returns are calculated using monthly equal-weighted averages of the total returns of all dividend-paying (or non-paying) stocks during the 1981–2018 time frame. A stock's return is only included during the period it is a component of the underlying NDR Multi-Cap universe. The dividend figure used to categorize the stock is the company's indicated annual dividend, which may be different from the actual dividends paid in a particular month. Indices are unmanaged and cannot be invested.

2) Dividend Growing, No-Change-in-Dividend, and Dividend Cutting
Each dividend-paying company is further classified into one of the three categories based on changes to their dividend policy over the previous 12 months. 'Dividend Growers and Initiators' include stocks that increased their dividend anytime in the last 12 months. Once an increase occurs, it remains classified as a 'Grower' for 12 months or until another change in dividend policy. 'No-Change' stocks are those that maintained their existing indicated annual dividend for the last 12 months (i.e., companies that have a static, non-zero dividend). 'Dividend Cutters and Eliminators' are companies that have lowered or eliminated their dividend anytime in the last 12 months. Once a decrease occurs, it remains classified as a cutter for 12 months or until another change in dividend policy.

Source: S&P Capital IQ Compustat. Dow Jones S&P Indices.
 
©2019 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.
See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

The Estimated Income Growth Since Inception – Dividend Growth chart assumes that a client invested $1 million in the strategy on March 31, 2003 (the strategy's inception date). The period-end estimated annual income shown is hypothetical. Each period's estimated annual income shown is the product of that initial $1 million investment times the composite's cumulative total return, net of actual fees, since the inception date times the dividend yield. The dividend yield for the strategy is based on the model portfolio. The dividend yield for the strategy, the S&P 500 Index, and the DAATR is the weighted average trailing 12-month yield. Dividend yields for the strategy and indices are obtained from Bloomberg. Strategy yields are based on the ThomasPartners Dividend Growth Strategy (Non K-1 Generating.).

Prior to 2019, the dividend yield at each listed measurement date was derived by annualizing the last dividend paid for each security in the composite, and then dividing that dollar amount by the price of the security. Beginning in 2019, the strategy's annualized dividend yield is derived using the model portfolio as noted above. The pre-2019 methodology for strategy yield could have resulted in a higher or lower yield than the new methodology because the last dividend paid could have been higher or lower than dividends paid over the trailing 12 months. For the indices, prior to 2014, the S&P 500 yield was calculated using data from Dow Jones S&P Indices and the DAATR was calculated using data from the historical index data provided by NASDAQ OMX.

Hypothetical annual income estimates have inherent limitations. The estimated annual income and portfolio value shown for the Strategy do not represent the results of any actual account. No representation is made that a client will achieve results similar to those shown. These charts should not be used as the sole basis in forming any investment decisions. Actual accounts have had performance that differs from the performance shown in these charts during comparable periods due to the customization of advice to each client and other factors. Information shown is supplemental to the Global Investment Performance Standards (GIPS®). The investment results shown are not representative of an individually managed account's rate of return or strategy yield.

The estimated annual income and portfolio value shown for the ThomasPartners strategies do not represent the results of any actual account. No representation is made that a client will achieve results similar to those shown. These charts should not be used as the sole basis in forming any investment decisions. Actual accounts managed by ThomasPartners have had performance that differs from the hypothetical performance shown in these charts during comparable periods due to the customization of advice to each client and other factors. Past performance does not guarantee future results.

Estimated Annual Portfolio Income with a 4% Initial Distribution: The ThomasPartners Dividend Growth Strategy Composite as shown is for illustrative purposes only and not available for direct investment. The composite assumes a hypothetical $1,000,000 initial investment in the ThomasPartners Dividend Growth Composite (net of fees) on 3/31/2003. Beginning 12/31/2003, 4% of the initial investment ($40,000) is withdrawn from the portfolio. Subsequent annual withdrawals take place each December 31, increased annually at an assumed 3.5% cost-of-living adjustment. The Estimated Income Growth with 4% Distribution chart is hypothetical. Hypothetical performance results have inherent limitations. The estimated annual income calculated based on the ThomasPartners Dividend Growth Strategy Composite does not represent the performance of any actual account. No representation is made that a client will achieve results similar to those shown. This chart should not be used as the sole basis in forming any investment decisions. Actual accounts managed by ThomasPartners may have had performance that differs from the performance shown in the chart during comparable periods due to the customization of advice to each client and other factors such as the timing of cash flows, inception of the management of the account, and securities held. Past performance does not guarantee future results.

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Choose a strategy that's right for you.

ThomasPartners® Strategies are designed to deliver you a reliable source of income for today and for your retirement. The ThomasPartners portfolio management team focuses on three objectives: monthly income, income growth, and competitive total returns over time. Depending on your financial goals and tolerance for risk, you can choose from two strategies.

ThomasPartners Dividend Growth Strategy

  • Estimated Income Growth Since Inception

    Estimated income growth for the Dividend Growth Strategy since Inception chart

    The Estimated Income Growth Since Inception chart assumes that a client invested $1 million in the ThomasPartners Dividend Growth Strategy on 3/31/2003 (the strategy’s inception date). Each period’s estimated annual income shown is based on the composite's cumulative total return, less actual fees, since the inception date. Annual income shown is hypothetical and not representative of any actual account. Please see explanatory notes and disclosures at the end for additional information.

  • Growth of a Hypothetical $1 Million Investment

    Growth of a hypothetical $1 million investment in the Dividend Growth Strategy chart

    Growth of a hypothetical $1 million investment assumes the client was invested in the ThomasPartners Dividend Growth Strategy Composite beginning 3/31/2003. The ThomasPartners Dividend Growth Strategy Composite, as shown, is for illustrative purposes only and is not available for direct investment. Please see below for further information.


ThomasPartners Balanced Income Strategy

See the income growth and portfolio value performance of our Balanced Income strategies and how each compares with their benchmarks.

  • Estimated Income Growth Since Inception

    Estimated income growth for the Balanced Income Strategy since Inception chart

    The Estimated Income Growth Since Inception chart assumes that a client invested $1 million in the ThomasPartners Balanced Income Strategy on 5/31/2003 (the strategy’s inception date). Each period’s estimated annual income shown is based on the composite's cumulative total return, less actual fees, since the inception date. Annual income shown is hypothetical and not representative of any actual account. Please see explanatory notes and disclosures at the end for additional information.

  • Growth of a Hypothetical $1 Million Investment

    Growth of a hypothetical $1 million investment in the Balanced Income Strategy chart

    Growth of a hypothetical $1 million investment assumes that the client was invested in the ThomasPartners Balanced Income Strategy Composite beginning 5/31/2003. The Balanced Income Strategy is not representative of any single client account and, since the launch of the strategy on Connection, uses exchange-traded funds for fixed income exposure, rather than the historic use of both individual bonds and ETFs that are reflected in this performance chart. Please see below for further information.

ThomasPartners Balanced Income Conservative Strategy

See the income growth and portfolio value performance of our Balanced Income strategies and how each compares with their benchmarks.

  • Estimated Income Growth Since Inception

    Estimated income growth for the Balanced Income Conservative Strategy since Inception chart

    The Estimated Income Growth Since Inception chart assumes that a client invested $1 million in the ThomasPartners Balanced Income Conservative Strategy on 5/31/2003 (the strategy’s inception date). Each period’s estimated annual income shown is based on the composite's cumulative total return, less actual fees, since the inception date. Annual income shown is hypothetical and not representative of any actual account. Please see explanatory notes and disclosures at the end for additional information.

  • Growth of a Hypothetical $1 Million Investment

    Growth of a hypothetical $1 million investment in the Balanced Income Conservative Strategy chart

    Growth of a hypothetical $1 million investment assumes that the client was invested in the ThomasPartners Balanced Income Conservative Strategy Composite beginning 5/31/2003. The Balanced Income Conservative Strategy is not representative of any single client account and, since the launch of the strategy on Connection, uses exchange-traded funds for fixed income exposure, rather than the historic use of both individual bonds and ETFs that are reflected in this performance chart. Please see below for further information.

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