The Power Dividend Index Portfolio (Power Dividend Portfolio) is a rules-based strategy that tracks the W.E. Donoghue Power Dividend Index. It has the objective of maximizing total return from income and capital appreciation with the preservation of capital a secondary objective.
The Power Dividend Portfolio employs a disciplined investment selection process with a tactical overlay that determines whether the Portfolio will be in a bullish (invested) or defensive position. The tactical overlay is made up of two triggers. The first trigger tracks exponential moving averages of the stocks in the Portfolio to identify potentially negative intermediate-term trends. The second is an economic indicator that more broadly measures the health of the economy and monitors longer term evolving problems that could lead to bear markets or recessions. Based on the status of each tactical indicator, the Portfolio could be 100% in equities, 50% in equities-50% defensive or 100% defensive. When in a defensive position, the Portfolio will invest in short‐term U.S. Treasury ETFs or cash equivalents. When bullish, the Portfolio allocates equally in up to 50 stocks, 5 from 10 different sectors. The stocks are selected based on having the highest dividend yields in their sector as well as meeting other quality factors. If fewer than five eligible stocks meet the yield and quality requirements in any sector, only stocks that meet all the requirements are included, and the remaining allocation is equally divided between the full final list of selected securities. The 10 sectors used are Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Technology, Materials, and Utilities. Additionally, when bullish, the Portfolio rebalances quarterly to bring the holdings back to an equal weighting and reconstituted annually.
The Power Dividend Index Portfolio as a standalone strategy is appropriate for investors with a high risk tolerance. The portfolio is suitable for investors with a time horizon of five years or longer, as it can exhibit short-term volatility equal to or potentially greater than the overall stock market.