SunAmerica Dividend Fund Beats the Market With Buy and Hold

The recent turmoil in equities and bonds didn’t trigger any buying or selling at the $4.5 billion SunAmerica Focused Dividend Strategy Portfolio. The fund chooses its 30 stocks once a year and sticks with them no matter what. So far the strategy is working; from March 2009, when the stock market rally began, through June 24, the fund has a higher total return than all but two of 222 large funds that buy U.S. stocks. It also has less volatility than 84 percent of them. That combination gave it the best risk-adjusted return in the group, according to Bloomberg’s Riskless Return ranking. “The beauty of our model is its simplicity and discipline,” says Timothy Pettee, chief investment officer for SunAmerica Asset Management. “We are not sitting here saying, ‘Gee, do we like this stock? Or do we want to overweight this industry?’ ”

The system has been in place since Brendan Voege became manager in September 2006. Voege holds the 10 highest-yielding stocks in the Dow Jones industrial average—the so-called Dogs of the Dow. He draws the next 20 from the Russell 1000 Value Index, based on a formula that ranks companies by dividends, profitability, and valuation. All must have a dividend yield higher than the median for dividend-paying stocks in the Standard & Poor’s 500-stock index, currently 2.15 percent. The fund has a dividend yield of 3.72 percent, according to data compiled by Bloomberg.