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Isolating Dividend Growth

A possible pathway to low correlation and low volatility

In the pursuit of diversification, investors historically sought after assets classes uncorrelated to the traditional securities of stocks and bonds, such as commodities, real estate products and currencies. Investors looking for a new diversification option can take advantage of a recently developed nontraditional asset class addition to the investment universe: isolated dividend growth. Although dividends have been a staple strategy among equity investors, only recently have dividends emerged as a separate and distinct asset class with distinct advantages.

In this whitepaper we will look at isolated dividend growth, seeking to better understand its mechanism and advantages. We look at the various aspects of isolated dividend growth including characteristics, rationale and investment avenues. We look at the historical performance relative to other asset classes – equity, fixed income and commodities, and also show that the fear about extreme movements in dividends compared to equities is not backed by historical data. Finally, we compare the S&P 500 dividend growth to other major indexes: the FTSE 100, Euro Stoxx 50 and Nikkei 225.

This white paper covers the following topics:

For some additional information on dividend growth and how to take advantage of it, get in touch with the Reality Shares team.

Diversification does not ensure a profit or guarantee against loss.

DIVY does not generate dividend income, and is not appropriate for investors seeking dividend income. DIVY seeks to produce long-term capital appreciation.  Unlike more traditional products, the Fund does not seek returns based on appreciation in the stock market price of equity securities. This means that the returns on your Fund investment are not intended to correlate to the returns of the overall stock market (for example, the value of your Fund investment may go down when overall equity markets go up, or vice versa).

S&P 500: A broad stock market index of 500 large companies based on market capitalization.
Nikkei 225: Leading index of Japanese stocks comprised of Japan’s top 225 blue-chip companies listed on the Tokyo Stock Exchange.
FTSE 100: An index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. It is used as an indicator of large companies in the United Kingdom.
EURO STOXX 50: Index comprised of 50 stocks in Europe, provides a representation of large companies in the Eurozone.
Correlation: A statistic which measures the relationship between two securities, and how closely their fluctuations coincide with one another.
Volatility: The degree of variation in the trading price of a security over time.
Dividend Risk Premium (DRP): Is the return demanded by investors for the fundamental risks taken and the liquidity or mark-to-market risks resulting from supply–demand imbalances during the holding period (Manley and Mueller-Glissman, 2008).

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