Providing a reliable income stream is a crucial part of any company ’ s investment potential , says SAINTS manager Dominic Neary

The checklist that emerged from the study includes both quantitative and qualitative criteria that companies should satisfy to meet the team ’ s requirements .

NEARY EXPLAINS HOW HE IDENTIFIES COMPANIES that can provide investors with a reliable income stream , he turns to the board of The Scottish American Investment Company P . L . C . ( SAINTS ) as an example . For all the rigorous qualitative analysis undertaken in the search for suitable holdings , one of the most important factors for him to consider is a more subjective one – attitude .

In particular , it ’ s the attitude of a company board towards dividends that Neary is keen to gauge . SAINTS itself is a prime example .

“ What we ’ re looking for is what you can see in SAINTS , which has a board committed to dividends and nearly a year ’ s worth of reserves to support the dividend if required ,” he explains . “ So we ’ ve got the quantitative and structural necessities in place and also a board that is able and totally committed to maintaining and growing the dividend .”

All companies go through periods of difficulty . The challenge for Neary , and also for his colleagues in the Global Income Growth team , James Dow and Toby Ross , who have recently been appointed as the trust ’ s deputy managers , is to identify companies that will grow dividends in real terms , but which can also be relied upon to continue providing them during times of stress .

The SAINTS managers have studied company dividend performance over the long term to identify the characteristics of those that are most likely to offer dividend dependability and growth .

GETTING ON BOARD “ Board attitude to dividends is vitally important ,” Neary says . “ You can get an indication from the chief executive officer or the chief financial officer but it ’ s also about talking to the chair and other members of the board . There ’ s a parallel with SAINTS – if you talk to members of the board you know how sacrosanct the dividend is .”

Dividends are board decisions , which is why Neary and his colleagues invest time in getting a sense of their willingness to promote and defend a company ’ s dividend , even when earnings come under pressure . All of that must of course be allied to the ability to maintain dividends .

“ Balance sheet strength is an important aspect of this ,” Neary says , “ but it should be assessed in the context of each company ’ s business . Is the balance sheet appropriate for

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