Jenny Harrington - Dividend Investing, Risk Management, and Building Reliable Income Streams

Summary

---

Podcast Summary: Value Investing with Legends

Episode: Jenny Harrington – Dividend Investing, Risk Management, and Building Reliable Income Streams
Date: April 17, 2026
Host: Columbia Business School (Michael Mauboussin & Tano Santos)
Guest: Jenny Harrington, CEO and Portfolio Manager, Gilman Hill Asset Management

---

Episode Overview

This episode offers a deep dive into the philosophy and practice of dividend investing, featuring Jenny Harrington—an accomplished income-focused portfolio manager. The discussion traverses Jenny’s personal journey, her investment process, the utilitarian and psychological benefits of dividends, strategies for risk management, and perspectives on the future of value investing in the age of artificial intelligence. The conversation showcases practical insights and memorable anecdotes illustrating the durable power of steady income streams in equity markets, appealing to a broad investor base—including retirees, risk-averse investors, and increasingly, younger generations.

---

Main Topics & Key Discussion Points

1. Jenny Harrington’s Background and Path to Portfolio Management

[03:05 – 16:07]

• Entrepreneurial Roots: Jenny credits her entrepreneurial family and volatile financial upbringing for her appreciation of stable income and for fostering her relentless work ethic.

  • “It was a huge financial roller coaster. We had big ups, we had big downs… I learned resiliency and flexibility and the value of having a dependable income stream.” (03:18 – Jenny Harrington)

• Early Industry Exposure: A chance internship with Harry Keefe at Keefe Managers at age 19, where high-profile banking mergers and bold investment targets made an indelible impression.

• Learning from the Greats: From organizing bankers’ conferences and interacting with legendary figures to compiling decades of market strategist predictions versus real outcomes—Jenny became keenly aware that even ‘the smartest people are always wrong’ at times.

  • “At age 20 and a half…I realized…they’re always wrong. So maybe I’ve got a chance.” (07:33)

2. Early Professional Lessons

[09:31 – 18:16]

• Goldman Sachs Experience: Jenny began her post-college career in Private Client Services at Goldman, rejecting investment banking for a closer track to portfolio management.

  • “The fact that Goldman Sachs hired me blew my mind and frankly, 30 plus years later, it still blows my mind.” (09:49)

• Surviving the Dot-Com Crash: Jenny’s own experience of rapid paper wealth through options, followed by a precipitous loss, grounded her approach to risk.

  • “Even I got confused for a moment in time with being wealthy and being smart. I was not smart, I just got lucky. And I saw that $400,000 collapse down to 100 in the matter of weeks.” (12:35)

3. Founding Principles: Dividend Investing as Utilitarian Portfolio Management

[16:24 – 20:58]

• Philosophy: Jenny reframes portfolio management as a pragmatic pursuit—optimizing for both tangible and psychological outcomes for real people.

  • Notable Quote:
    “I see portfolio management as the pursuit of utilitarian outcomes, be they tangible and/or psychological, for real people.” (16:25 – Jenny Harrington, referencing her book)

• The Power of Steady Income: Realizing the practical utility and emotional comfort provided by consistent dividends, especially for clients with income needs and behavioral constraints.

  • “It didn’t matter if you had the best returns in the whole world. If the client couldn’t stay in the strategy, couldn’t have the emotional comfort to stay in the strategy…great returns were for nothing.” (19:23)

4. Practicalities of Dividend Investing

[20:58 – 32:09]

• The Equity Income Strategy:

  • Portfolio of 30–40 stocks, targeting an average dividend yield of 5%+.
  • Systematic weekly screening (US stocks, $100M+ market cap, yield above 3.5%). Focus on mature, high free cash flow, transparent businesses.

• Client Base:

  • Not just retirees:* Also appeals to risk-averse investors and—more recently—young adults seeking supplemental income or stability.
  • “I’m surprised by how many young people like this certainty of dividends.” (24:50)

• Dividend Growth vs. Dividend Yield:

  • Key differentiation between dividend “aristocrats” (often high quality, low yield, steady growth) and high yielders (currently offering neglected value).
  • “Huge difference… Dividend income is either a stock or a fund with a yield above 3.5 percent. The S&P 500 right now has a yield of 1.4% and that’s great. But [with aristocrats]…in general, the yields…aren’t that high. What you’re getting from that list is quality, quality, quality.” (27:31)

5. Screening and Qualitative/Quantitative Analysis

[30:06 – 32:09]

• Quantitative: Longevity, dividend history, payout coverage, valuation multiples.
• Qualitative: Management philosophy towards dividends, board communication, recent language shifts in earnings calls.
  • Uses AI tools (e.g., Notebook LLM) to efficiently analyze management commentary over years—a process that previously took hours or days.

6. Handling Dividend Cuts and Capital Allocation

[32:09 – 34:10]

• Dividend Cuts as Red Flags:
  • “You do not cut or trim the dividend from a point of strength…if you’re cutting or trimming, it’s generally not from a place of strength. It’s probably not a business that is going to be able to grow their earnings…” (33:17)

7. Margin of Safety and Risk Management

[34:10 – 36:24]

• Risk Mitigation via Cashflow:
  • Margin of safety is primarily about entering at reasonable valuations, not just chasing high yield.
  • “If you know what you need...is coming to you regardless of the market being down 20% or up 20%...that’s a huge risk mitigator.” (35:10)

8. Portfolio Construction and Position Sizing

[36:24 – 39:22]

• Simplicity & Scale:
  • Default sizing around 3% per position, varying for cap size.
  • Typically holds 30–40 names: “If you own over 50 stocks, you kind of might as well own the market… if I own in this 30 to 40 range, I’m able to add value.” (38:17)

9. Real-World Examples: Clorox & Best Buy

[39:46 – 49:29]

• Clorox:

  • Pandemic distortions created deep value opportunity as share price swung from extreme highs ($250+) to undervalued territory (sub-$110).
  • “It’s a dividend aristocrat...I know they’re committed to it, and it’s not that hard. It’s Clorox.” (42:25)
  • Uses both normalized earnings analysis and dividend discount modeling.

• Best Buy:

  • Opportunity emerged through indirect research (initially via Hewlett Packard).
  • “Best Buy has been on the screen for a long time…I think to myself, wow, I can buy something trading at 10 times earnings with a 6 and change percent dividend yield with that level of management commitment.” (46:20)

10. Reflections on Columbia Business School’s Influence

[50:02 – 54:21]

• Empowerment and Conviction:
  • “Columbia Business school fused the rods of steel in my spine. And it gave me confidence and conviction in a way that there’s no other place...I possibly could have gotten that.” (50:16)
• Memorable Lessons:
  • You are buying the investment process, not just stock picks (from Paul Sonkin).
  • Value investing is about “doing unpopular things” and enduring social pressure (from Andrew Weiss, Tom Russo).
  • Communication, negotiation (BATNA), and critical questioning (Carter Racing case) are all vital skills.

11. Advice for Future Investors

[54:59 – 56:29]

• Human Communication Matters:
  • “All we have right now as humans is our ability to be human. And that comes down to communication.” (55:10)
  • Empathy and clarity are key for helping clients stay the course.

12. Looking Forward: Risks and Opportunities

[57:15 – 59:12]

• Worries:
  • AI’s impact on the job market, particularly the difficult transition for younger generations used to tech-driven, solitary work.
• Excitement:
  • Efficiency gains from AI (“It’s amazing to not need to read nine years of earnings transcripts...”), and its usefulness as a conversation partner for investors.

---

Notable Quotes

• “I think people say it’s value versus growth investing, but I think it’s really valuation investing versus speculation investing.”
  — Jenny Harrington [12:46]

• “If you’ve got a million dollars invested and you’re getting $50,000 a year...there’s a very strong incentive not to cash out when the market’s going south because you’re cutting off your income.”
  — Jenny Harrington [19:38]

• “There is a huge discrepancy between dividend income and dividend growth. So don’t just assume dividend means high yield.”
  — Jenny Harrington [29:56]

• “You do not cut or trim the dividend from a point of strength.”
  — Jenny Harrington [33:18]

• “All we have right now as humans is our ability to be human. And that comes down to communication.”
  — Jenny Harrington [55:07]

• “What worries me and what excites me is two sides of the same coin.”
  — Jenny Harrington [59:10]

---

Timestamps for Key Segments

• 03:05: Jenny’s family influence & early financial lessons
• 07:33: Learning from legendary investors and strategists
• 12:26: Dot-com bubble: overconfidence, risk management lessons
• 16:25: Utilitarian philosophy of portfolio management
• 19:38: Emotional benefits of dividends
• 24:50: Surprising appeal of dividends to young investors
• 30:06: Screening process—qualitative vs. quantitative factors
• 33:17: Approach to dividend cuts
• 35:10: Risk mitigation: psychological comfort of dividends
• 38:17: Portfolio concentration and value-add
• 42:25: Case study: Clorox
• 46:20: Case study: Best Buy
• 50:16: Influence of Columbia Business School
• 55:07: Importance of communication in investment management
• 57:15: Worries and optimism about AI
• 59:19: Recommended readings and resources

---

Memorable Moments

• Jenny’s humility and humor about her early career and luck:
  “I think even I got confused for a moment in time with being wealthy and being smart. I was not smart. You know, I just got lucky.” [12:28]

• On behavioral investing risks:
  “It doesn’t matter if you beat the market by 1% if the end client...can’t stay in. It’s not worth it, you’re going to lose money.” [55:03]

• On the sell decision:
  “The sell decision is as hard as the buy decision. Nobody ever asks about things you sold and why you sold them and how they’ve done since.” [52:08]

---

Reading & Listening Recommendations from Jenny

[59:19]

• News Items by John Ellis (newsletter – current affairs, diverse sources)
• Vital Knowledge by Adam Crisafulli (market-oriented)
• Poor Charlie’s Almanack by Charles T. Munger
• Pioneering Portfolio Management by David Swensen (Yale’s endowment manager)
• Elon Musk by Walter Isaacson (not just a biography, but a lens on the modern world)

---

Conclusion

Jenny Harrington delivers a masterclass in practical dividend investing, blending rigorous methodology, behavioral insight, and a deep commitment to serving the real needs of clients. Her approach demonstrates that reliable income streams—and the psychological safety they provide—are a powerful antidote to market speculation and volatility, especially in an era of rapid technological change. The episode underscores the lasting influence of Columbia Business School’s investment philosophy, and highlights the enduring importance of human connection in an increasingly automated world.

---

End of Summary

Transcript

[A]

Welcome to a new edition of the Value Investing with Legends podcast. My name is Michael Mauboussin and I'm an adjunct professor at Columbia Business School and a faculty member at the Heilbron center for Grandma Dot Investing. I'm here with my co host, Tano Santos, the Robert Heilbron professor of Asset Management and Finance at Columbia Business School and the Faculty Director at the Heilbron Center. Hi Tano, how are you doing today?

[B]

Doing great. Whatever you sell.

[A]

Michael we teach that the value of a company is the present value of the cash the company can distribute to its shareholders over its life. However, we don't always dwell on how that happens, that is the ways the company can enrich its owners. Our guest today is laser focused on the stocks of companies that pay meaningful dividends to their shareholders as a source of steady and reliable income. There is no doubt that receiving dividends every quarter can benefit shareholders financially while providing them with peace of mind. Companies in The S&P 500 paid out roughly $670 billion in 2025, and we know that dividends are less volatile than earnings or share buybacks. The question is how to find those companies that are willing and able to provide that steady stream and to build a diversified portfolio to capture the benefits.

[B]

Yeah, this is absolutely correct that dividends is sometimes forgotten as that critical component of returns. We emphasize earnings growth, rates of multiple expansion or comp. But that dividend yield can be a phenomenal source of returns and the reinvestment of those dividends can compound dramatically to yield very good performance over the long run. So we don't talk enough about these and I think it's wonderful to have our guest today illuminate all these topics for us.

[A]

Yes, let's get into it. We are delighted to welcome Jenny Harrington, Chief Executive Officer of Gilman Hill Asset Management, an income focused boutique investment management firm. Jennie also serves as Portfolio manager of the firm's flagship Equity income strategy, which she created and has managed since its inception. The mandate of the fund is to generate a 5% or higher dividend yield with some potential for capital appreciation. Prior to joining gilman hill in 2006, she was a Vice President in Private Wealth Management at Neuberger Berman, where she originated the equity income strategy. She began her career at Goldman Sachs, first as an analyst in the Private Client Services Group and later as an associate in the Investment Management Division. She is a contributor on cnbc, where she regularly appears on Halftime Report and Worldwide Exchange, and is the author of the book Dividend Investing, published in 2025 Jenny is generously donating all the profits from that book to the Council for Economic Education. And perhaps most importantly, and to our delight, she is also a graduate of the Columbia Business School. So welcome, Jenny, and thank you very much for joining us today. There's a lot of ground we'd like to cover.

[C]

Thank you so much for having me.

[A]

Let's start at the beginning. Tell us a little bit about your family and how you found your way into portfolio management.

[C]

Okay, sounds great. So I come from a purely, entirely, extremely entrepreneurial family. My father was an entrepreneur. It was a huge financial roller coaster. We had big ups, we had big downs. I am the oldest of four. I have three younger brothers and we all work for ourselves now. In fact, two of my brothers you might recognize from Van Leeuwen Ice Cream. So the name is not coincidental, but it was a roller coaster and I learned a lot from it. Some really hard lessons like the value of having a safety net and what it feels like to have your car break down and have a full on panic attack because you can't pay for it. But I also learned resiliency and flexibility and the value of having a dependable income stream. So I was always working. I had three jobs at a time. All through high school, I would be babysitting on Friday nights, I was bookkeeping for a sales rep who sold Bulay sunglasses. I was cashiering at a local grocery store. It was back then called Heyday. I believe it's now Baluchi's and so many other jobs in the mix too there. But one of my many odd jobs along the way was I was working at a barn and I was also cashiering and counting money in a drawer. I have always loved making money. Our neighbors when we were growing up would tell you I would come around with like traveling tag sale in a wheelbarrow. I'd go sell chocolate chip cookies. But making money has always been thrilling to me. So I was working at this barn, also cashiering, talking to one of the customers and said, what does Mr. Keefe do? She said, Mr. Keefe's a money manager. Having no idea what money management actually meant besides counting money in a cash register drawer. I told her, oh, I love money management. Do you think he wants a free intern? To which she said, I'll ask him. So the next day she comes back and she says, harry says you can intern for him. Well, it turned out that was Harry Keefe. Harry Keefe, who had been one of the founders of Keith Bretton woods, who had retired and Started a hedge fund called Keefe Managers. And this was 1994, right when the bank and thrift stock merger boom was taking off. I found myself at age 19, like the luckiest human on earth, working for Harry Keith. And it was fascinating. The two portfolio managers were a guy named Matt Burns and Fleece Gelman, who were incredibly well respected in that bank and thrift stock area. Back. One of my jobs as an intern was to help organize the annual America Bankers association annual meeting. You know, and they'd say, call Moshe Orenbach and figure out what we're having for lunch. I remember literally them saying, like, jenny, get Jamie Dimon on the phone. You know, Jamie Dimon wasn't Jamie Dimon then, but it was amazing. And I remember this was 1994, and I went back to try and figure it out ahead of this, But I remember there was something going on with Bank Boston and Dimensions, or maybe it was Bank Boston and Fleet or Dime. But that was when all that was taking off. And they were having me get people on the phone and saying, like, hey, we're standing against this merger. It was amazing to me. And the thing that I loved most here at age 19 was I was surrounded by incredibly smart people, incredibly high quality people. And I liked the way they thought and I liked the way that they understood companies and they had to understand the way the world worked. I loved the macroeconomic perspective. I loved the regulatory environment perspective that weighed into what was happening, happening. And I remember they had a whiteboard and they wrote, plus 40% or bust. It seemed crazy and ambitious, and they made it while I was interning there. This is unbelievable. But we had Ralph Acampora come in just to talk to us. He had taken a sabbatical, and he said, you know, I went away for a few months, and I came back, and what I think is, I think the dow's going to 12,000. And I remember people were kind of laughing at him, thinking he was ridiculous to think the Dow was going to 12,000. And it did. And he was credible and compelling, and it was amazing. So I really fell in love with this business and just scraped and scrapped my way into one internship after the next. And I would just get the white pages, you know, and call up and say, hey, my name's Jenny. Are you looking for an intern? Hey, my name's Jenny. Are you looking for an intern? The next internship I found myself in was with a firm called DTN Field, which was a true Garp manager back in the 90s, and a guy named Barry Haynes. Who was one of the portfolio managers there, really took me under his wing and gave me an unbelievable experience. He let me fly out to Chicago with and interview the management of Tribune and come back and, like, build Garp models with them. And we took the train to Pennsylvania and a car service to qvc, and we marched around QVC for the day. I remember, actually, Mark Gabelli was on the same tour that we were on, but it was incredible. And then eventually I found myself at Barini with Laszlo Burrini. And Laszlo loved his interns, and we worked on extraordinary projects there. In fact, one which was really formative. I have a list right here. We took the top 30 or so market strategists and technicians and went back for the previous about 25 or 30 years and tracked everything they said and then charted it versus the Dow. So at age, at this point, I'm probably like, 20. 20 and a half. At age 20 and a half, I'm looking at what Barton Biggs and Abby Cohen and Ned Davis and Byron Wine and Marty Zweig said and charted it versus the Dow. And I realized at that age, I'm like, whoa, these people are really smart. They're probably making six, seven million dollars a year. And guess what? They're always wrong. They're always wrong. So maybe I've got a chance because I was at Holland's college. You know, I didn't have any Ivy League credentials. I didn't have huge confidence and a lot of love and enthusiasm, but not a lot of confidence. And it was formative. And then Laszlo would have his friends have lunch with us. We had lunch with John Merriweather. Like, he sent us into New York City. This is crazy. He sent us into New York City to have lunch with Mike Bloomberg and took us down to Timonium to watch him record Wall Street Week with Louis Rukeyser. It was an extraordinary experience. And each of these things made me just fall more and more in love with the business and really say, come hell or high water, when I grow up, I want to be a portfolio manager. And coming from Holland's, like, that wasn't the easiest path.

[B]

So Jenny then lost a little bit. So you're doing all these internships when you were in college or when you

[C]

were in college in the summers during college.

[B]

Yep, I see that. It sounds like phenomenal fun and to meet and to come across, particularly at the beginning of this phenomenal bull market we had in the late 90s. Right, right. And with people calling this agreeing, I'm sure it was a wonderful school. So you graduate from college and what do you do right after that?

[C]

You go on right after that. Actually, Tahano, before I graduated, about two weeks before I graduated, I started working at Goldman Sachs. Yeah, the woman that I was working, that I had been assigned to work for was going on maternity leave. So they said, hey, can you actually start and fly back down for your graduation?

[B]

I assume you said yes immediately.

[C]

Absolutely. I mean the fact that Goldman Sachs hired me blew my mind and frankly, 30 plus years later it still blows my mind. So yeah.

[B]

And what do you do for Goldman? Do you go through the analyst training program? What do you do with it?

[C]

Yeah, I went through the analyst training program. I started in private client services and I remember interviewing for them and everyone was all about investment banking. The HR woman said to me, why not investment banking? And I said, oh, I'd rather die. And the reason I'd rather die was because that I didn't want to work 120 hours a week. And I knew I wanted to be a portfolio manager. And private client services back then was as close as I was going to get. It was kind of research, sales, kind of sales, trading, kind of some portfolio management. But it was very much on the investment side of the business and in the markets. And the training program was extraordinary. I learned so much, it was so formative and Goldman was just a cool experience. I actually went, they move you around there. So I started as an analyst in PCs, Private client services. Now it's called wealth management, I think. And then they moved me into an internal strategy group that sat on top of the Chinese wall and it tried to cross market the investment banking divisions, the IPO and M& a pipeline with private wealth management that was in late 99 into 2001. And it was a very interesting thing for me to see for two reasons. One, I saw an enormous, enormous, like hundreds of billions of dollars dry up overnight as the dot com crash took hold. So all of these potential deals just simply didn't happen. It didn't seem like that would be possible. The other thing that I learned that was completely extraordinary, there was that there were, I mean especially in the late 90s at Goldman, the investment bankers were on an enormous pedestal and everyone thought they were the masters of the universe and the smartest people. And they were, they were really smart, really talented. They'd all graduated from Harvard Business School and Stanford Business School and they would quietly say to me, jenny, can you help me allocate my portfolio? I have absolutely no idea what to do and I'm so embarrassed don't tell anyone. And I realized then what a unique and frankly, useful skill investing was. And just because it's called investment banking doesn't mean that it teaches you investing. I don't think I'd appreciated what a unique skill I'd been learning in the years before.

[B]

Can I ask you something? You leave the Internet bubble and burst at Goldman. What kind of lesson do you draw from that experience? What is that you learn about the market? Can you tell us a little bit about that before we move into your next career move?

[C]

Absolutely. So I learned what overconfidence looks like and the stupidity of extreme valuations, the stupidity of groupthink. It was very formative on a personal level. My first bonus was $8,000. I graduated with a pile of student debt. And I remember the $8,000 absolutely blew my mind. I had no money. I had nothing but student debt. And I turned that 8,000 into about $400,000 in about two years trading options. I think even I got confused for a moment in time with being wealthy and being smart. I was not smart. You know, I just got lucky. And I saw that $400,000 collapse down to 100 in the matter of weeks. And it was really bad timing for me when that happened too, because we were about to buy a house. And actually this goes into 911 also. But I was sitting in bed on the morning of 9 11, waiting to sell my stocks for the down payment on the house. And so it really taught me a lot about risk control. I will never not be skeptical of lofty valuations. I think one of the things I've really been formulating in my head is people say it's value versus growth investing, but I think it's really valuation investing versus speculation investing. And the ideas of speculation really caught up with me. So going into 2021, when we had the meme stock explosion, that was a lot of flashbacks to that time period. I was on cnbc, and I was on TV a month or two ago, and someone was talking about Palantir, you know, and they're like, well, the earnings grew by 38%. I'm like, yeah, but it's trading at 300 times earnings. I think back to dot com, and what I learned from that 300 times is 300 times doesn't matter if it's growing at 38%. So it was super, super formative for me. This is something I haven't talked about too much. But there was just an older woman there who had asked me to help her a little bit with her retirement account. And I think I told her, oh, you should buy value. Click and double click. I didn't know what I was talking about. I didn't really understand those things, you know. And I still feel horrible for the positions that I suggested she buy without really knowing what I was doing. I keep one position in my portfolio. I keep Sienna in my portfolio, which is still nowhere near. It's probably still down like 80% or 90% since I bought it in probably 1999 or 2000. And it's a good reminder of how long it can take for a stock to return to its previous valuation.

[B]

Yeah, this is very important. I think the Internet bubble is such a formative experience for so many people. So then you move from Goldman to Neuberger and Berman. What led to that move? What is that you wanted to accomplish? And what do you do at New Berber?

[C]

Yeah, well, I was there. It went public and they really changed things around and the private client service business really just became more investment advisory and sales. There was no portfolio management left in that back then. The portfolio management was down in Florida. Truly, when I was at Keith Managers, I was very clear that when I grew up I wanted to be a portfolio manager and at Neuberger I could do that. So I joined a team at Neuberger that was managing what in retrospect is a very plain vanilla, large cap core kind of U.S. portfolio. But I knew that it would be an extraordinary experience there. And it was. There were so many different portfolio managers that you could watch different people, different analysts. You had broad exposure. We had incredible access. Every day multiple research analysts would come in, multiple CEOs would come in and you could just pop in and talk to them. And you could pop into other portfolio managers offices and have a conversation and say, I know that you use cash as a strategic position. Why do you do that? I know that you never hold cash. Why do you do that? It was really cool. Moving to Neuberger was to become a portfolio manager for me.

[B]

Obviously we need to start talking a little bit about your investment philosophy. So let me pivot a little bit and maybe you can tell us also about your professional transition after Neuberger, which is there's a line that I really want to bring early in our conversation in your book, which I loved and I recommend to everyone.

[C]

Oh, thanks.

[B]

That says I see portfolio management as the pursuit of a utilitarian outcomes, be they tangible and or psychological, for real people. Why don't you tell us a little bit about that line and then we'll go into More specifics. But why did you feel that you needed to say that early in the book? And what do you mean by that exactly?

[C]

Yeah. So that statement and that philosophy is a triangulation of my experience at Goldman, my experience at Neuberger, and my experience at Columbia Business School. What happened at Goldman was everyone was chasing returns, and returns were revered. So if you were up 80 and 90% in 98 and 99, you were the best. Didn't matter how you got there. Then I got to Neuberger Berman, and I was on this team, like I said, that managed a large cap core kind of U.S. portfolio. And in 2001, I had one client call this guy named Craig, who I mentioned in the book, too. Sorry, I shouldn't say. That's his real name. Whatever. There's a lot of people named that. And he said, I'm 50, 55. I'm getting ready to retire. I know I'm too young to retire, so I need income, but I also need growth. What can you do for me? And I didn't know then what I was stumbling on, but what I did was I took his US Core portfolio and I transitioned it to still be US Core, but have a 5% or better dividend income yield with growth potential on top of that. And it was incredibly useful for him, and it became incredibly useful for so many more people. And Neuberger had this great sales force, and I would tell them, oh, I'm doing this. And they, one after the next, hey, I have a client who needs that. I have a client who needs that. I saw how helpful it was to have this dividend stream where people could just live their lives and the income would pour in. And then I got to Columbia Business School, which was two of the best years of my life. I loved every minute of it. And I'm not saying this just because I'm on this podcast. If it took six years, I'd redo it if I could do it again.

[B]

It's wonderful to hear. It's wonderful to hear.

[C]

It was the best years. I did the executive program, too. So I was working while I was doing that, which I think was an interesting way. And frankly, when I was reviewing some notes, I would see that I would have business notes almost on the same pages as my business school notes. But I remember getting to business school, and I very much felt like as I was learning about more and more portfolio managers and learning more and more about returns and the way things are measured, that it was all about beating the S and P. It was all about beating the S and P. It was all about trying to get 1% or 2% or 3% better than the S and P. And somewhere along the lines, too, I heard this story, which I think is actually true. I need to call him up someday and ask him. But I heard this story that Peter lynch was once told by his marketing department. Something like 70 or 80% of the people who've been in the Magellan Fund have lost money. And Peter lynch said, hey, that's not even possible. I know how good my returns are. Please go back and restudy that. And the marketing department went back and they restudied and they said, that's true. The average time is 10 months. And this gets into investor behavior, individual investor behavior. And so what happened for me at both Goldman and Neuberger is I always knew the end client. So even though I was more on the institutional side, I knew the end client. Even it was through the salesforce. I knew the end client, and I knew that it didn't matter if you had the best returns in the whole world. If the client couldn't stay in the strategy, couldn't have the emotional comfort to stay in the strategy, couldn't have some speed bump or barrier to keep them in the strategy and to keep them invested. When times got tough, great returns were for nothing. And so that's where I come to. And that's why I love this dividend strategy that I stumbled onto because it's very pragmatic and it encourages excellent emotional behavior. If you've got a million dollars invested and you're getting $50,000 a year, and you need that 50,000 plus your Social Security, there's a very strong incentive not to cash out when the market's going south because you're cutting off your income, Right? And you need to say, I'm going to go from 50,000 a year to nothing. And by the way, I still might realize capital gains. It's very pragmatic. That's where I come to. It's just a lot of little things adding up to one big realization. And by the way, I didn't even get to that realization until I'd been managing it for probably almost 10 years.

[A]

So, Jenny, can you explain very specifically how your strategy works? You've alluded to it, but talking about the types of clients that are well suited for it, because one thing you said in your book that I found surprising is it's not just retirees or older people, but you're actually. You have some clients who are actually younger people who take Advantage of this. So tell us what you do, exactly what you're trying to do, and then what kinds of folks this works for sure.

[C]

So what the portfolio does, what the equity income strategy that I manage does, is it creates a portfolio of 30 to 40 stocks with an average dividend yield of 5% or better. So something can go in there with a 4% yield as long as it's got decent capital appreciation potential. On top of that, something can go in with an 8% yield and have very little capital appreciation potential. But the objective is to create a nearly indelible income stream so that we can go through a great financial crisis. And I can be on the phone and tell my clients, don't worry, your income's safe. Same for the pandemic. Same for frankly, April of last year, Liberation Day, oddly, I thought was more psychologically alarming and anxiety provoking for my clients than even some of the worst parts of the pandemic. It was wild. That's the goal, is to be able to say that income is safe. And you know what, 30 to 40 stocks, one or two of them is going to cut their dividend, either trim it or cut it a year. And to me it's no different than managing a business. You have an employer to quit, you just sell the stock and you replace it, so be it. But by and large the income stays the same. So the way I go about that is we run a screen every week. This is one of the many things I learned in business school was the value of objectivity. And I think running a screen keeps you very, very objective. And it shows you when certain sectors or certain industries start to light up. Like right now, consumer staples is lit up. Some of the large cap healthcare companies are just lit up. There's yields where five and 10 years ago, not to save my life, did I have any exposure in those areas and now I do. But it keeps you objective and it keeps you focused. And I've been running the same screen now 2001 and it tends to be about 300 or so companies, you know, And I say show me everything in the US with above a 3 1/2% dividend yield and above a $100 million market cap. It's not that complicated a strategy. You don't need to get deep into pension obligations or get deep with the salvage value of old plants are they tend to be mature, transparent, high free cash flow, reasonably easy to understand companies. I immediately rule things out like royalty trusts because they're generally depleting assets. I rule out mortgage rates Because I cannot tell you what they're going to do in a disrupted interest rate environment. And then I end up with about 90 potential investable companies. And of that we have a portfolio of 30 to 40. I think right now we're at 34. The other thing about doing it for so long is there's not a lot of change when something pops onto the screen that's new. It's pretty exciting. It gives me a love hate relationship with bad markets. With bad markets, suddenly I get opportunities to buy things that I never could have touched before. Like I was able to add IBM in 2018. This past year I've been able to add some really, really high quality dividend Aristocrats, which I almost never can have. Dividend Aristocrats, which I know we'll get into later. But they generally have a premium valuation which precludes them from having a high dividend yield. Here's who this dividend income strategy appeals to. It obviously appeals to the retiree like the original investor or the original one who sparked the idea of this strategy. It also surprisingly appeals to a more risk averse investor who needs some certainty, who's just uncomfortable with the concept of the market. The market's spooky to people and this gets into why have a fund or an ETF versus why have a portfolio of individually managed stocks? Some people are just more comfortable saying, I can look at these 30 companies and I can know that I'm using my cell phone right now, I'm on Verizon, I know that I'm going to buy a couch at Ethan Allen tomorrow. Some people are just comfortable knowing the companies and that dividend income, even when the markets are wild, seeing the cash pour into their account month after month, quarter after quarter brings incredible comfort. But one of the things that surprises me is that I have a surprising number of young clients. And I'm not really sure if this is tale as old of time or it's more a reflection on the current world that we're living in where the post college graduate, maybe the, let's call it 21 to 30 something year olds, are having a really hard time getting a job and they have been in an investment market that has had massive disruptions. Many of them have lost money in NFTs and the crypto world and they're kind of battered and abused and distrusting. But it also can provide a really nice source of supplemental income. So some of that crowd had a good little stretch after college and now is having a hard time. They can turn a $300,000 account into $15,000 a year of supplemental income. That's not bad. There's a wealth disparity. The older generation, the boomers, and whatever's just behind the boomers, they have more money than their kids. A lot of these kids have inherited a trust fund. And it doesn't need to be crazy. It can be 500,000, 600,000. Yeah, I know those are big numbers. But that trust fund can be an incredible source of supplemental income when dividends are used. And so you can be a teacher, have an account that throws off an extra 15, 20, $30,000 that is dramatically meaningful and helps you cover your costs. So I'm surprised by how many young people like this certainty of dividends. In fact, there was an interesting article in Bloomberg earlier this year that talked about how hot the dividend space has been for the younger generation. It also talked about the pitfalls that there's been an explosion in dividend funds that actually it's like return of principal. So they're not really dividend. So it's a pitfall. So if people are listening and they want to dive in, be sure that you're investing in a fund that can actually generate future dividends isn't just returning principal to you and giving you your money back over time.

[B]

Yeah. And in particular, I mean, this thing of young people, given the numerous uncertainty they're going to be facing going forward on account of technological disruption in the labor market. And what is this going to mean? I can see why this is going to be very appealing to people to give them some type of income downside protection given these kind of shocks in the labor market that are coming our way. Can I go back a little bit to this issue of the dividend aristocrats and think a little bit about those companies in the S&P 500 that have raised their dividend over the last more than two decades. Very few of them. And tell us a little bit about how you think about dividend growth and those who are returning more and more and those who have a stable dividend yield. Perhaps growth is not the issue, but just simply returning on a steady way is the difference between dividend growers and dividend yielders.

[C]

Huge difference. And this gets back a little bit to funds. If you're thinking, oh, I want income, I'm going to buy a dividend fund. You need to be very careful to differentiate between dividend income and dividend growth. A lot of things are called like the equity income fund, and then they have a yield of 1.4%. So to me, dividend income is either a stock or a fund with a yield above 3 1/2 percent. The S&P 500 right now has a yield of 1.4% and that's great. So if we look at the dividend aristocrats, it's 69 different companies. And I will cherry pick. Well, no, I'll start with telling you we only own. You would think this would be a right picking ground for me to choose from. Out of those 69, we only own four. In general, the yields of the dividend aristocrats aren't that high. I think if you want to look at the dividend aristocrats, really what you're getting from that list is quality, quality, quality. So this gets us into dividend growth. You can look at a company like Caterpillar. Caterpillar has grown their dividend by an annualized rate of 7% a year for the last five years. And it has a 0.86% dividend, even lower than the S&P 500. Another one, Cintas, which they make business uniforms and facility services like cleaning and restroom products stuff. It's an old school company. That one's grown their dividend by 20% a year for the last five years as a 1.07% dividend. So those are dividend growth companies where the dividend is growing dramatically. They are extremely high quality. They frequently trade at premium valuations and have low yields. For me, where the opportunity is is in things like Amcor, which is packaging. So if you think of pullen spring water bottles or when you go to the grocery store and you buy Bell and Evans chicken, the plastic packaging around that, that's only grown the dividend by 2% a year, but it's got a 6.5% yield. Things like Clorox, one of my newest additions, only a 3% dividend growth rate, but a nearly 5% dividend yield. Then Kimberly Clark and Stanley, Black and Decker are to others. By the way, if the market hadn't focused almost, and I know I'm exaggerating here, if the market hadn't focused almost entirely on AI centric plays over the past several years, I wouldn't be able to touch any of those companies. But the old school free cash flow orienting dividend companies, they've been neglected and so suddenly the share prices have come down. Some of them had major pandemic disruption, the share prices have come down and finally I'm able to invest in them. But there is a huge discrepancy between dividend Income and dividend growth. So don't just assume dividend means high yield.

[A]

So Jenny, you mentioned a moment ago this long time screening process you've been using and in your book you describe that there are both qualitative and quantitative elements to that. Could you just give us a quick overview of the kinds of things that are on your checklist as you think about winnowing down that 300 plus names to what will be ultimately in the portfolio?

[C]

Yeah, the quantitative side is super easy. It's basically like how long have they paid the dividend for, how often have they raised it, how well covered is the dividend, what's the multiple? Is it extreme? It's easy. The qualitative side, that's a lot harder. Although I will tell you, AI is making the qualitative side a lot easier in a really wonderful like no, I'm not cheating, I'm just making things more efficient kind of way. So the qualitative side is to go in and say, what's management and the board's philosophy behind paying this? How do they think about this? And it used to be that you had to read five years of earnings transcripts, call the company, call the analyst and ask. You can now in about two minutes download five years of earnings transcripts, you know, five years of webcasts. Pop it into. This is a new one that we started playing with is Notebook LLM, which is pretty nice for this stuff. Pop it into Notebook LLM and say what have they said about the dividend over the past few years and how has that language changed? And you'll get something where they'll say, and this goes to like Lyondale Basil, which is one of the companies where they were super hardcore on the dividend. And then last quarter, oh, it just softened, it just tweaked and you get triggered. Okay, so probably a term or a cut's coming and sure enough it is, or the language is completely consistent. And every single year they say one of our, a number one objectives is to have a major part of our total shareholder return come from the dividend. We are committed to that dividend and continuing to raise it in line with earnings over the next several years. So you can suss that out very, very efficiently now in what used to take probably 10, 15, 20 hours. You can do it in about 10 minutes now. And I don't think that's a cheat. I think that's just an efficiency.

[B]

This is fascinating stuff. I want to discuss a little bit. When companies change their dividend policy because they argue that they have better reinvestment opportunities and they want to retain a little bit. I want to understand how you incorporate that into your investment process, how you actually assess whether the company indeed has good reinvestment opportunities and needs to change its dividend policy. Tell us a little bit about that.

[C]

I know that over the course of the 20 plus years managing this, maybe once or twice when a company's cut its dividend, I've continued or trimmed. When I say cut, it implies it went to zero. It's more often just a trim. Frequently they'll trim. I can only think of one or two times. And frankly, off the top of my head, I can't even think of which ones it was where I continued to hold the stock. But you do not cut or trim the dividend from a point of strength. And so, for example, one of the ones that sticks out most in my head was Pitney Bowes. And this is probably eight or nine years ago. And they were saying, like, look, we're getting no credit for paying an 8% dividend yield, none. So we're just going to take that money, we're going to buy back shares, we're going to pay down debt. As an unbiased bystander, I'd be like, hey, good for you, Good capital prioritization. I'm with you. But for me as a dividend holder, I'm like, well, now I have no yield, I'm out. But it really generally doesn't happen from a point of strength because generally if the company is doing well, the share price is up, the dividend's not that high. So it happens occasionally. There was another company called Farmland Partners fpi. It was interesting. They were the victim of a super predatory short sale situation. They said, look, we need this money now to pay our legal bills. Fair enough. But I'm out as a shareholder. So it's a tricky one. But I would say the bottom line is if you're cutting or trimming, it's generally not from a place of strength. It's probably not a business that is going to be able to grow their earnings the way you wanted them to or expected them to. And it's probably just a signal or a red flag to get out.

[A]

And kind of a related question, Jenny, our own Ben Graham popularized the concept of margin of safety. And you've said cash flow is basically risk management. So can you explain how you think about margin of safety and how you manage risk in the portfolio?

[C]

Yeah, sure. A lot of times I'll get the question, how do you manage risk? Do you use stop limits. Do you use this? Do you use that? And I say no. Margin of safety, when I look at it generally has to do with valuation. It generally doesn't have to do with the cash flow. So when I'm thinking about risk, I've got two different things. I've got the dividend yield creating this buffer, and then I've got the margin of safety coming from, hey, I paid 10 times for a company that historically has traded at 15 versus the market that's at 22, and I've got decent earnings growth ahead. So margin of safety to me comes from valuation. The risk management comes from, okay, market's down 30%. But if I can tell that these companies are still good for their dividends because the cash flow is there, I have no risk of bankruptcy ahead. All I'm waiting for is the multiple to expand again when sensibility returns to the market. And my clients are fine. They're getting what they need from their portfolio. And so that is the risk mitigator. They're not forced to sell at the bottom. And. And this gets a little bit into the emotional comfort that dividends provide. And I'll digress for one sec. A lot of times I get the question, couldn't I just have a portfolio of a million dollars and if I need 50,000 a year, I just sell $50,000 worth of stocks? Absolutely, you can. That works well for a lot of people. But if you need that 50,000 and it's April of 2025 and the market's down, you've got a problem. If you know that what you need from that portfolio is coming to you regardless of the market being down 20% or up 20% or wherever it's coming to you in the form of the dividend income. Huge risk mitigator. You're never forced to sell at the wrong time.

[B]

That's interesting about how to think about the margin of safety and the decision to how you want to think about selling. Can you tell us a little bit about how you construct your portfolio? How do you size your positions? How do you think about the mix of securities? As you know, this is one of those things that we don't talk perhaps as much as we should. What are your thoughts on this?

[C]

Okay, I love this question. I really struggled with position sizing coming out of Columbia Business School because that's where it got a little academic. And I knew that I wasn't doing it in an optimal way. And early on at Gilman Hill, we were interviewed by the Ohio Public Employee Retirement System. And the consultant who was interviewing us was really nice. And I knew the question was coming on, how do you size your positions? And I knew that I wasn't going to have a sophisticated answer because I basically put everything in at 3%. If it's really small cap, maybe I'd do two in it or two and a half. And if it was really large cap, like maybe I'd get crazy and do like three and a half percent. So I asked the consultant, I said, I'm embarrassed to ask you this, but I feel comfortable asking all the same. How do the big guys do it? How do the really best portfolio managers do it? And he said, the same way you do. And I thought that was so interesting. You know, he's like, yeah, everyone kind of starts at 3% now. Interestingly, the Columbia Investment conference that you guys had had last month, I think it was February. Yeah, yeah, my analyst Jake was there and you had Dan Rasmussen as a speaker and Dan touched on portfolio sizing and Jake followed up with him and said, can we talk about that more? And it was a very similar answer to what we're already doing. But this gets into then quantity of portfolio holdings and this goes back to Columbia Business School too. And I remember sitting in the classroom, I remember everything other than the professor's name, which I'm blanking on. But I remember him talking about modern portfolio theory and getting into the work that basically showed risk reduction through portfolio size by number of stocks. Showed that Alton and Gruber chart, that's

[B]

the variance of the portfolio as a function of the number of stocks in that famous plot.

[C]

Yeah, that famous plot. And I remember, and this is when everything again was triangulating for me and I was coming together as an independent professional and not under the Neuberger wing and figuring out who I was as a portfolio manager. But I remember the work they're basically saying if you own over 50 stocks, you kind of might as well own the market. You're not getting that much standard deviation reduction from over 50. And I thought, oh, okay. I guess that's why people gravitate to under 50 and they are paying me to do something different. So if I own over 50, they probably might as well own the market. If I own in this 30 to 40 range, I'm able to add value. It's a number of stocks that I can actually monitor in a functional way. I think you also need to know how many you can keep up with and what you can do in a professional and well researched, what quantity you can actually handle When I was at Neuberger, it was interesting, too, because there was a very successful team that I think had a very concentrated portfolio of maybe 12 or 15 stocks that worked for them that would not have worked for me. And so I found this comfort spot in 30 to 40, and then I sized them at about 3% each. But it's not academic.

[B]

You know, I was looking at your 13F in preparation for the podcast. So your top position now is about 2%, 3%, if I remember correctly.

[C]

Oh, sorry. No, the 13F is the whole firm. So it's super diluted. Yeah. Because there's also our discipline growth strategy, our international income strategy. Yeah. So our top position right now in the equity income strategy is Clearway Energy, which kind of crept up there.

[B]

Okay.

[A]

So, Jenny, I wonder if we can perhaps discuss a couple of companies to reveal how your thinking works in reality. So I wonder if we could start with, I think, a relatively new holding, which is close. Clorox, you mentioned, sort of what's going on in AI land has created a lot of opportunities in consumer staples. Clorox might be a good example to illustrate that.

[C]

I think it's perfect. And thanks. So here's another one that has not been on my screen. I mean, there's stocks that are on my screen for 20 years straight. Here's one that's relatively new. So Clorox had a wild ride during the pandemic, and we saw the shares pop to over $250. Earnings exploded, the valuation got super rich. And as we know, the pendulum swings too far in both directions. So it's now swung, I think, way too far in the oversold direction. So it pops up on our screen. And I'm like, let's start looking at Clorox. This is probably nine months ago. In the context of looking at Clorox, I actually ended up finding and investing in Kimberly Clark. And don't worry, I come back around to Clorox in a sec. But what I found then was that Kimberly, same thing had happened, and Kimberly had modestly less economic sensitivity. Because one of the things I'm really worried about is massive job loss from AI. Real significant, problematic recession that could pop up. I don't think there's particularly low odds of that. I don't know that it's high, but I think it's a real risk. So economic sensitivity has been very, very much in my research process. How sensitive is it? And in that process, Kimberly was cheaper, Kimberly had better earnings, Kimberly had a better dividend yield, and Kimberly had less economic sensitivity. Because if the world goes to hell, you're still buying toilet paper, but you may clean your windows less. Okay, so I buy Kimberly, blah, blah, blah. And then Clorox continues to come down and down and down and down, and it's still on my radar. And I'm like, whoa. At $100 a share, which is where it ended. 2025, that was a very significant margin of safety. So now, even if Clorox has a little more economic sensitivity than Kimberly, it's very compelling. This is a dividend aristocrat, you know, And I'd already done most of the work earlier. I understood what the product mix was and understood what the earnings distortion was. And it does echo a little bit of Bruce Greenwald's, like, earnings power valuation in there and say, like, okay, how do you get to normalize earnings? I don't know anymore on this. The pandemic distorted it so much that it's hard. You can start to think, what should normal earnings be? What could they be again, even with that huge distortion? Okay, so end of 2025, Clorox starts to percolate back up and become interesting again. And I think it was trading at about 15 times as we went into the end of 2025. So 25 ends. I'm still researching it. 26 starts. Market rotation, goes bananas. Clorox finds itself in about three weeks up 26%. It went from 100 to about $126. And I'm like, all right, well, the research process is done, done. I'm comfortable buying it at 16 times or under. Now all I need to do is wait patiently for something crazy in the market to happen. Sure enough, a couple months later, the war with Iran breaks out, petrochemical prices skyrocket, and the shares plunge back down to under $110, leaving me with the margin of safety that I needed to get comfortable to step in. Historically, it's traded at 18 to 20 times. That's a decent margin of safety. I see that earnings look like they're regaining a normal regression of like, 6 to 8%. Earnings growth. Growth. We're in a special moment, I think, where we actually have incredibly useful past periods of disruption to look towards. It's awesome to be able to say what happened during a massive, prolonged global financial crisis with a recession. What happened to their earnings then? What happened during complete global economic shutdown of the pandemic. So when you're stress testing and when you're looking for worst case scenarios, it's amazing to be able to actually look to those and we were able to say, what happened to Clorox during the GFC pandemic was different. That wasn't that useful. What happened to Clorox back when oil prices were 150 for a moment in time? What happened when they were 100? And so you can look back to these periods and see what margins actually did. So I'm like, all right, I know what I want to pay for Clorox. I'll pay under $110 a share. Ish. I want to pay under 16 times. That's safe enough for me. I see where the earnings trajectory is going to. I don't think humanity is going to end because of AI job loss. If they do, we're also screwed anyway. But I can look at it, and I can see that they've got like, $6 of earnings this year, expected, $7 next year, seven and a quarter the year after that. They've got $5 of dividend this year, 5, 20 next year. They expect to grow the dividend right in line with where they've been at, which is this 2 to 3 to 4% growth rate. And you're like, all right, I've got decent coverage. I can load all the transcripts into Notebook llc. I can see how consistent that is. I know it's a dividend aristocrat. I know they're committed to it, and it's not that hard. It's Clorox, so you've got to put the economic overlay on it. But the numbers are there, and the numbers are pretty easy. And then on this one, you'll like this. I used a dividend discount model, and it's kind of fun. I know, I know. They're so sensitive, and you can tweak the beta a little bit and everything changes. But it's kind of fun to use a dividend discount model. And that goes into your earlier comments of like, everything is the future value of the cash flows. But I like doing that. And you run a dividend discount model, and you're like, hey, you know what? It's probably worth $146 a share. But even if it doesn't get there, and I'm getting a 4.5% yield and earnings are growing at 6%. And if the shares just expand in line with earnings, and I'm getting a 4.5% yield plus share appreciation in line with earnings, that's a 10% return. That's pretty decent.

[B]

One of the things that is striking about this company is that it saw this operating margin collapse. So post Pandemic for a variety of reasons that are a little bit outside the control of this company. Operating margins have been expanding since 2022. They're back a little bit where they were before the pandemic. The price is taking its time to recover, which is kind of interesting in a way that the market is being. Obviously, those valuations that it got during the pandemic were a little bit wild when we were cleaning our house with Clorox left and right, right, they're distorted.

[C]

But now you've got another distortion. What if this Iran war does send oil prices back to. But that's where you could go back to 2015 and say, all right, oil was at 100 not that long ago. It wasn't a 26% hit to earnings. It's a little bit.

[B]

So the other company that is a recent addition is Best Buy. What is the story with that one?

[C]

You guys will love how I came up with Best Buy. So Best Buy has been on the screen for a long time. Time. We all know what they do. And I ignored it because I was like, what if there's a lot of consumer pain? What if there is job loss? What if there's recession? Blah, blah, blah, blah, blah. I think I want to avoid the retailers. Well, our mutual friend Jenny Wallace mentioned Hewlett Packard to me. And Hewlett Packard has unbelievable free cash flow and an unbelievable dividend. So I started researching Hewlett Packard. And the problem for me was, as I was in the middle of that research process, the CEO stepped down and went to. Where'd he go? To payp, pal. This goes into the qualitative part of the dividend. I am telling you, all right? Now, if there's a new CEO, be wary of the dividend, right? He might be fine. He might slash that thing. But I've had one too many new CEO change the dividend. So even though a lot looked pretty good about Hewitt Packard to me from a dividend investment perspective, I put the brakes on it. But then I started thinking about the idea that an AI boom doesn't work work without consumer electronics. I started thinking about how distorted and disrupted everything is because of memory. That's the problem with Hewlett Packard right now, is that memory prices are through the roof and there's supply issues and blah, blah, blah. And I thought, I do want to have exposure to that, because as memory prices come down, all of this stuff will normalize. All of it will mean revert. We've seen the roller coaster of memory prices for decades. It's extreme. Right now. But we know that they'll sort themselves down out. And I do want exposure there. And I was thinking, what if people do get laid off? Well, you know what they're going to need? They're going to need laptops. And laptops in a way are almost like razor blades. It might be a longer cycle, but you can't have a laptop forever. You can't have consumer electronics forever. None of this works without it. So I thought, okay, maybe I'll take a peek at Best Buy. And it was pretty amazing. The numbers are really, really compelling. So here you've got $6.30 of earnings this year, 666 next year, 721, the average after that. You've got $3.84 dividend, $4 dividend. So you have huge dividend coverage. You have a company that consistently pays down their debt. Their interest expense just plunges consistently. They consistently buy back their shares. And again, when you listen to the management, time after time after time, the dividend is a huge part of their total shareholder return. It's a very well run company, has an excellent culture. Earnings growth is, is minimal, 1, 2, 3%. But they do a lot with the free cash flow generation. And so I think to myself, wow, I can buy something trading at 10 times earnings with a 6 and change percent dividend yield with that level of management commitment where they're buying back shares, paying down debt. It's just incredible. And so on that one again at 10 times earnings. That's a margin of safety that I'm comfortable with.

[B]

What is interesting about this company, as you said, Best Buy is a company, if you look at the revenues, they flat over the last year, totally, effectively. Yeah, interesting. But you have to be very disciplined when you have a business with this. Bit of a headwinds on that, but you're right, it's a very well run company with a very good free cash flow policy. In a way it's a sensible thing.

[C]

Yeah.

[A]

So, Jenny, we're winding down a little bit, but before we get to our final questions, I want to ask you something. I mean, you sprinkled some answers throughout your discussion today, but I wonder if you could share. Share how your experience at Columbia Business School shaped your investment philosophy. And I also want to know, is there anything you didn't learn at business school that you wish you had or things that you use today that were sort of not part of the curriculum? I think you've mentioned part of your career development. Learning about communication, for instance, might be an example of something that is not explicitly focused on. So business school.

[C]

Yeah. So when you ask me if there's anything I didn't learn, the answer is not that I can think of. And I've had 20 years now to think about it. We've got my 20th reunion coming up soon, so I've had 20 years to think of it, and there's nothing that I can think of that I would have thought was left out. One of the nice things for me was because I did the EMBA program and I was working, and I was, like, really coming into my own. I was there 2004 to 2006. So I was in my late 20s. I went from, like, age 29 to 31. It's a pretty important time in life. And I was really figuring out who I was as a portfolio manager. But Columbia, I've always had a very strong spine. I look at it like Columbia Business school fused the rods of steel in my spine. And it gave me confidence and conviction in a way that there's no other place. And I'm not saying this to be a kiss up. There's no other way or no other place that I possibly could have gotten that. I was telling Tano. Just before we started, I took Bruce Greenwald's it was called Back then seminar on Value investors thing. And these are the speakers we had. I mean, this is unbelievable that as I'm figuring out this dividend income portfolio and as I'm working through this with clients like, these are who our speakers were. Li Liu, Bill Nygren, Andrew Weiss, Bob Bruce, Tom Russo, Chris Brown, Mario Gabelli, Lou Sanders, Mason Hawkins, Michael Price, and Paul Sonkin. The stuff I learned was unbelievable. And it was so much fun prepping for this because I got all excited and I went back through my notes. Notes. And I found things that I realized from that class that are the fabric of who I am. One of them, I couldn't believe this was from Paul, but this is from Paul Sonken. I've got my handwritten notes from 2006 here. And he says that he tells people, I won't give you just my best ideas. That's a concentrated portfolio. You're buying the investment process. I didn't remember that it was Paul who said that. But I say that all the time. 20 times a year I get, why don't you just tell me your best stocks? And I got something from Tom Russo that I thought was amazing when I look back on these notes. And I used to have much better handwriting, thank goodness. But he talked about the stupid idiot phenomenon when Clients catch on to what you're doing isn't working. It's very difficult to combat as an investor. You become a social outcast and it's hard to deal with and maintain your investment discipline. But he was talking about that as the cycles in between value investing and growth investing. That is just ingrained in me. Andrew Weiss, who said value investing is all about doing unpopular things. You're always alone. And knowing that I'm actually not always alone because it's just the nature of it is so important. And here's another Andrew Weiss thing that I wrote down. The sell decision is as hard as the buy decision. And I've always thought that too. And something that bothers me is that nobody ever asks about things you sold and why you sold them and how they've done since. But there is just tons from it. I remember that negotiations class and the Batna, right? The better alternative to a negotiated agreement. I refer to the. That constantly, like, it drives everyone around me nuts because I'm always like, batna, Batna, batna. But even with what's going on in the Middle east right now, I think about Batna and I'm like, all right, China and India, they are screwed. If the Strait of Hormuz doesn't open up, the US doesn't really matter. Like, there's going to be pressure. And so when I buy Clorox, which has high exposure to petrochemicals, do you know what's in my head? Batna. And when I bought my partners out at Gilman Hill, I used my negotiations tactics, right? It was just incredible. And then I think about, I don't remember which class it was, but where we did one of the case studies and they did it as a racing thing, but it was really about the space shuttle blowing up because people didn't check the O ring.

[A]

Carter Racing.

[C]

Carter Racing. I just don't remember which professor it was that taught that. But I think about, and I've taught my kids this over the years. I'm like, guys, this is the most important thing. Like, you have to ask more questions. You can never take just what's given to you. You and say, that's all the information I have. You need to just keep digging and digging and asking and you need to overlay everything with logic. And I remember the behavioral classes, which were so Kahneman heavy. And all the group think. And that goes back to the early conversation about the dot com. And what I learned from that. The group think is just unbelievable how pervasive it is. But if I didn't learn those things, then I wouldn't have the conviction to know that I'm right and to know that it's right to stand up to groupthink and to push back and ask more questions.

[B]

This is great because I'm teaching right now that class, the Legends class. You are absolutely right. It's a treat. I've been doing my co teaching with Bruce and teaching the Legends class by myself. It's just remarkable the exposure to these great investment minds. Can I ask you a little bit about thinking about my students now? What advice would you then give them today? Things have changed a little bit over the last couple of decades. So what do you think is going to be the future for the young graduate from the value investing program going forward? What is that advice that you would give them now?

[C]

They have to be able to communicate in a human, tangible one on one way because everything else is going to be commoditized. And this goes a little bit back to it doesn't matter if you beat the market by 1% if the end client even it's a mutual fund and it's you portfolio manager to the salesperson, to the other salesperson to the client. Like if the client can't stay in, it's not worth it, you're going to lose money. All we have right now as humans is our ability to be human. And that comes down to communication. I think so much will be be automated and to be able to explain here's what's going on, to be able to humanize it, to be able to keep people comfortable. This is something I learned at Neuberger Berman too, which was me, the portfolio manager to the salesperson, the end client. And the salespeople are salespeople. They have a skill I don't have and it's a very valuable skill, but I don't have it. But what I did have was I could tell them here's why I bought Best Buy and they could say that in a human way to their clients. Client and the client then was comfortable and they knew what they were investing in. They understood the strategy. If you can pass that through the chain. Because you need to remember that there is a human at the end of it. Even if you're managing pension money, there are humans at the end of it. And it is deeply personal. Deeply, deeply personal. And this goes into people making bad decisions at the wrong time. Their whole lives depend on this. It doesn't matter if it's cowpers or opers or nysters, it's humans at the end of everything. And you have to take your own humanity and pass it down the chain.

[B]

I think by the way, this point that you make about the ability to communicate, I always tell the students that it's part of risk management, the ability to communicate with your clients because you want that stability on the liability side. And you will have to communicate with them well, tell them where you are, where you think the portfolio is heading and just simply hold their hand. And that's going to take a lot of communication skills and empathy and be aware that your clients may be stressed out about what they see in the market. So Jenny, the final segment of this wonderful conversation and we always ask the same two questions. Let me ask mine. Which is what worries you? What excites you about the future? When your mind has that amount of free time, where does it go to with worry or with excitement?

[C]

It's a generic answer that I'm going to give and it comes back to AI. My mind is totally consumed with AI. I have a 17 year old and an 18 year old child and I'm curious what they're going to do. And I really, really worry about not job loss from AI permanently, but a hard interim period where people aren't going to adjust. And this gets back to me saying like you've got to bring humanity, you've got to bring emotion. You need to stumble over your words. You need to be authentic. I think the world is craving and will crave even more authenticity. And I think that there could be a period of very, very difficult job loss when this generation of call it 18 to 30 year old, they're all comfortable working quietly in a climate controlled location with just their computer. They don't need to deal with people they don't like. They don't need to touch people like nurses or doctors do. They don't need to deal with people like teachers do. They don't need to talk to clients like I do all those really hard things. I think there could be a hard period for that group in between when they adjust to you don't get your lovely, quiet, perfect sphere of life. So that really worries me. I think there could be really ugly knock on effects from that that as 401k contributions slow down or stop, as maybe early retirement money is taken out as people need to pay for their own healthcare. So I worry a lot about that. But then the flip side's true too. It's amazing to not need to read nine years of earnings transcripts just to figure out what the dividend language is. I think technology throughout my life. And this goes back to starting in the dot com boom. It's done incredible things for us and it's made life interesting and robust and fun and enjoyable. And it's gotten a lot of the monotony out so you can think more creatively. I like using AI as a conversation partner. It's really interesting. And getting back to me running the dividend discount model, like I like saying, hey, do you agree with this? And it says you've got the wrong beta. And I think why, you know, that's cool to be able to ask that. So what worries me and what excites me is two sides of the same coin.

[A]

Jenny, what are you reading or listening to these days? And is there a book or are there some books that you would recommend to our listeners?

[C]

Before I get to the books, there's something called News Items by a guy named John Ellis that is is excellent, excellent, excellent, excellent. He's a journalist and he puts out a newsletter every morning that's between 10 and 20 articles and he summarizes them brilliantly and then links to them. What I love about this so much is that it makes me read from Nature magazine, from Council for Foreign Relations. It hones me in on things from the Washington Post. I'll read about Alzheimer's and I'll read fascinating takes on the war and I'll read economic stuff. But it really keeps my brain broad. That is nowadays my a number one followed by vital knowledge, which is this guy, Adam Crisafulli, and that's more market related, but he is excellent. So those are my two morning reads and then books. You know what I listened to recently is Poor Charlie's Almanac. And I told my partner Greg Stanek, I said, greg, it's like chicken soup for my battered soul. Anyone who's in the value space or dividend space, we've all been beaten and abused over the last few years and it gets a little redundant. So maybe you don't want to read all 11 on stories because they repeat, but man, it's so great to read right now. And then I actually re listened to David Swenson's pioneering portfolio management and that also is to me an extremely good reminder. You can see where some things are dated and probably don't apply as much now, but it's still incredibly thoughtful and thought provoking. So that was a good re listen. And then this is a year or two old, but it's one of these things that I refer back to over and over, which may surprise you both, but I really really loved the Walter Isaacson Elon Musk biography. And I think given the time we're living in, what makes me angry is when people are like, oh, I hate Elon Musk. I'm not going to read that. That's not the point. It is a smart, insightful, illustrative book and it's not just about Elon. It really to me is more about the world we're living in and the way things work and policies and regulations and politics. So those would be my three reads right now. A lot of light hearted stuff from me.

[A]

Jenny Harrington, thank you very much for joining the Value Investing with Legends podcast. And to all of you, thank you for tuning in and we look forward to seeing you for our next episode.

[B]

Absolutely. Thank you so much, Jenny.

[C]

Thanks guys.

[A]

Thank you for listening to this episode of the Value Investing with Legends podcast. To subscribe to the show or learn more about the Halbron center for Graham and Don Investing at Columbia Business School, please visit Graham and Don't thank you.