January 27, 2014

As we enter the second year of the presidential cycle, one of many potential catalysts for a significant market correction in 2014, analysts and investors are bracing for a relatively volatile and disruptive year. According to consensus forecasts, we should not expect a repeat of the nearly 30% market gains we experienced during a very prosperous 2013. However, we believe investors looking to generate income this year could turn to dividend growth as a potential beacon of continuing prosperity.

Based on analysis and estimates from Markit, the percentage of companies expected to reward shareholders with dividends should hit a 17-year high in 2014. In addition, regular cash dividend payments from S&P 500 constituents are projected to hit $352 billion this year, easily eclipsing the 2013 record of $311.8 billion, with 422 companies (84%) anticipated to participate, marking the highest rate since 1997. Apple will most likely set the pace for top dividend payers in 2014 with an estimated $11.8 billion payout:

According to a statement from Howard Silverblatt of S&P Dow Jones Indices, “Dividends continue to be one of the few income-generating alternatives available to investors. Interest rates have risen significantly but are still historically low, with alternative income-producing instruments also low.” Although interest rates have been steadily climbing up this year, they are still historically low. We believe this situation leaves dividend payers as a possible option for investors seeking yield. As long as shareholders continue to expect companies to return the $1.9 trillion in collective cash reserves, we conclude investing in dividend growth is here to stay.

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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.

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