Taylor had considerable maneuverability when he took over the all-cap fund. In early 2000, for example, he bought cheap small and mid-cap stocks at a time when the valuations of quality mega-cap companies were unusually high. The move paid off in the following years when his buys held up better in a down market than the former high flyers. 

While the fund has expanded considerably since then, Taylor believes he has a fairly free hand to invest across the market capitalization spectrum. He says he has little trouble investing in companies with market capitalizations in the $5 billion to $20 billion range, which he considers mid-caps, and points out that about 15% of the fund is in companies with market capitalizations of under $10 billion. “But there’s not much flexibility on companies in the $1 billion to $3 billion market-cap range,” he admits.

With a portfolio turnover rate of less than 10%, Taylor clearly shows a willingness to hang on to his picks for the long haul, and a number of stocks that he bought in the 1990s remain in the portfolio today. One of Taylor’s first purchases—and a current top 10 holding—was Becton Dickinson, a medical device company with a long history of dividend increases that had tripled its dividends in 10 years. The stock’s dividend has grown from an annual $0.23 a share in 1996 to $2.64 today, while its price has moved from $19 to $172 a share. 

Other stocks in the portfolio tell a similar dividend growth story. In the industrial sector, Roper Technologies, a diversified industrial company that produces engineered products for global niche markets, could benefit from a modest cyclical upturn for the global economy. Roper has generated substantial cash flows for many years, using them to gradually grow its dividend and acquire smaller companies that generate a lot of cash themselves. 

The fund’s technology holdings include Microsoft, which started paying dividends in 2003. The company’s core software business has high margins and generates ample cash, which is funding its transition from packaged software to cloud-based software and services. While Microsoft has had recent earnings disappointments, Taylor expects the cloud business to mature and become a bigger part of the company. At that point, he believes, earnings will reaccelerate.

The fund’s holdings in the materials sector include Albemarle, a leading producer of lithium and other industrial chemicals. The company has increased its dividend an average of 13% annually since the stock joined the portfolio in 2011. In the health-care sector, medical technology and equipment maker Medtronic has seen 39 years of dividend increases, and its most recent year-over-year increase was 13%. Taylor believes the company’s CEO is guiding it toward improved revenue growth that will help sustain future dividend increases. 

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