LEAD – Fund Strategy

Reality Shares DIVCON Leaders Dividend ETF

Investment Objective Fund Strategy Fund Characteristics Fund Risks
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Fund Strategy

The Fund seeks to invest in the large-cap U.S. companies with the highest probability of increasing their dividends within a year based on their DIVCON Scores, a dividend health rating methodology which systematically ranks companies’ future dividend growth prospects based on a weighted average of seven quality factors correlated to dividend growth.

The Fund’s Benchmark Index is designed to capitalize on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above the overall market. The Benchmark Index is designed to select the companies that have the highest probability of increasing their dividend in a 12-month period. These probabilities are determined by Reality Shares’ DIVCON Scoring system, which is a proprietary, rules-based scoring and weighting methodology, and are expressed as a DIVCON Score and DIVCON Rating for each company.

The DIVCON Scoring system begins by identifying the 500 largest U.S. companies based on market capitalization as of the Benchmark Index reconstitution date and then narrows this universe to those companies that paid an ordinary dividend and announced a future dividend payment during the 12 months preceding such date. The DIVCON Scoring system analyzes quantitative factors that Reality Shares has determined to be correlated to a company’s likelihood to increase or decrease future dividends, and weights each factor based on its effectiveness in predicting dividend changes to produce a company’s DIVCON Score. After a DIVCON Score is calculated for each company, it is assigned a rating from 1 to 5 according to the DIVCON Rating system. Companies in the DIVCON 1 category are those determined most likely to decrease their dividend in the next twelve months. Companies in the DIVCON 5 category are those determined most likely to increase their dividend in the next twelve months. All DIVCON 5 stocks or the 30 stocks with the highest DIVCON Scores, whichever is greater, are selected for inclusion in the Benchmark Index. Companies are weighted in the index based on their DIVCON Scores, with higher DIVCON Scores weighted more heavily. The Benchmark Index is reconstituted annually.

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