March 24, 2015

The NASDAQ Composite index’s round-trip roller-coaster journey has been well-chronicled, and for good reason. The tech-heavy index first surpassed the 5,000 mark on March 9, 2000 at the height of dot-com euphoria before collapsing to the depths of despair in 2002, when it reached its nadir of 1,108. From peak to peak, it would be almost exactly 15 years before the index would re-pierce that symbolic 5,000 threshold again, closing above that level on March 2, 2015.

When analyzing the Nasdaq, we think it’s also important to look at the NASDAQ-100, a sub-set of the broader index that includes the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. The NASDAQ-100 index recently turned 30 years old and serves as the benchmark to approximately $50 billion in exchange traded products, with the PowerShares QQQ™ ETF1 launched in 1999 the most recognized of the group.

Like the broader NASDAQ Composite index, the NASDAQ-100 bled some 80% of its value in 31 volatile months, from the high point reached in year 2000 to the low in 2002. Passing through the dot-com turmoil of 2001-2002 and the melt-down of 2008-2009 along the way, it has also taken some 15 years for the price of the NASDAQ-100 index to return to the vicinity of that high-water mark. What a long, strange investment trip it’s been, even for very patient investors.

Past performance does not guarantee future results. Source: Bloomberg, Reality Shares Research

What hasn’t made headlines, however, is that over that same approximate time period, Reality Shares Research shows dividends paid by NASDAQ-100 companies increased at an annualized rate of 27%. As the underlying companies increased their dividends, or began paying dividends for the first time, a new source of shareholder value was being created amid the severe market volatility, and these dividends became an increasingly important component of total returns. According to Reality Shares Research, from 2000-2014, the annualized total return of the NASDAQ-100 Index was 1.7%, with share price gains accounting for 0.9%. Dividends accounted for the remaining 0.8% of the total return per annum, representing a sizeable 47% contribution to total return. Even more remarkable is that actual NASDAQ-100 dividends grew 3,524% over the period.

Many investors look to dividends as a proxy for free cash flow generation and, in turn, the fundamental health of companies. And for the NASDAQ-100, dividend growth has proven to be an increasingly important driver of shareholder returns, even through the volatile price swings of the last 15 years. In fact, as illustrated in the chart below, dividend growth is what you really need to know.

* Indicated dividend represents the market cap-weighted aggregate dividends paid by the index constituents divided by the number of shares outstanding for the Index. The NASDAQ-100 Index is an index made up of stocks issued by 100 of the largest non-financial companies listed on the NASDAQ index. It is a modified capitalization-weighted index. Past performance does not guarantee future results. Source: Bloomberg, Reality Shares Research

1 ALPS is the distributor of this product. PowerShares QQQ™ ETF is a Unit Investment Trust. Reality Shares, Inc. is not offering this product.

Reality Shares does not make any representations, endorsements or promotions to any company, security, or trading strategy as may be held or represented in Reality Shares Funds. For a complete list of all portfolio holdings held by Funds advised by Reality Shares, please click here.

NASDAQ-100: An index made up of stocks issued by 100 of the largest non-financial companies listed on the NASDAQ index. It is a modified capitalization-weighted index.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, please call 1-855-595-0240 or click here to view or download a prospectus online. Read the prospectus carefully before you invest.

Investing involves risks, including possible loss of principal. Past performance does not guarantee future results. There is no assurance the stated objective(s) will be met. Not FDIC insured. See the section “Principal Risks” in the prospectus for important risk disclosures.

Investments in options, swaps, forward contracts and futures contracts are subject to a number of risks, including correlation risk, interest rate risk, market risk, leverage risk, and liquidity risk. Each of these risks could cause the Fund to vary from its stated objective, could cause the Fund to lose money and may have a negative impact on the value of your investment. Please refer to the Fund Risks for further explanation of individual risks.

This material contains the opinions of the author, which are subject to change, and should not to be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such.

Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.

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Reality Shares Advisors, LLC is the Investment Advisor. ALPS Distributors, Inc. is the Distributor for the Fund. Reality Shares Advisors, LLC and ALPS Distributors, Inc. are not affiliated.

The Fund is newly organized and the Adviser has not previously managed an ETF registered under the 1940 Act.

Shares of the Fund are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market Price is based on the midpoint of the bid/ask spread at 4:15pm ET on business days and does not represent the returns an investor would receive if shares were traded at other times.