Reality Shares DIVS ETF
The Fund’s investment advisor, Reality Shares Advisors, LLC (the “Advisor”), believes the level of a company’s dividend payments provides a more accurate measure of a company’s potential long-term value than its current stock market price.
The Advisor’s research shows large cap companies have historically returned profits to their shareholders through dividend distributions and have tended to increase the value of those dividend payments over time as economic conditions warrant and business profits expand. Additionally, companies with expanding balance sheets that have previously not paid dividends may also over time return free cash flow to their shareholders in the form of scheduled dividend payments. Largely as a result of these factors and subject to market conditions, the overall level of dividends paid by large cap companies has, in general, trended upward over time.
The Advisor therefore believes investment strategies producing returns primarily based on the level of a company’s expected dividend payments, and not the trading price of a company’s stock, can provide attractive long-term results. These investment strategies are referred to as “isolated dividend growth” strategies because they “isolate” the value of a company’s expected dividend payments from the trading price of its stock and produce investment returns based on this value. Furthermore, since these strategies are based on an expected level of dividend growth, and not the trading price of equity securities, the performance of such strategies should not be directly correlated to broad equity market returns which are based on the trading prices of equity securities.
The Fund’s principal investment strategy is designed to provide exposure to the aggregate value of ordinary dividends expected to be paid on a portfolio of large capitalization equity securities listed for trading in the U.S. (“Large Cap Securities”). These are sometimes referred to as the “expected dividend values” of the Large Cap Securities. While the Adviser’s research indicates the value of actual dividend payments has historically been highly correlated to expected dividend values, there can be no guarantee that this correlation will continue or that the Fund’s investment returns will be highly correlated to the value of actual dividends paid on the Large Cap Securities over short or even long periods.