Institutions and advisors, click here for the institutional dividend growth white paper.
Dividend growth investing delivers access to what are often the healthiest of the large-cap established companies, potentially rewarding investors in the form of growing dividends and delivering historically better overall performance. As displayed in the next chart, dividend growers and initiators have far outpaced other market segments. Dividends provide a naturally stabilizing element of total return as a steady income stream reduces the longer-term impact of price movements, and dividend growth also provides a natural hedge against rising prices.1
Reality Shares sought to develop an analytical tool utilizing a forward-looking dividend growth-based security selection. We created an entirely new corporate dividend health rating system called DIVCON. The DIVCON methodology allows Reality Shares to evaluate dividend health in the pursuit of more intelligent and predictive security selection. DIVCON forecasts and ranks a company’s ability to increase or decrease their future dividends by evaluating each firm on seven quantitative factors. It seeks to deliver a more accurate picture of a company’s fiscal health and better predict the probability of an increase or decrease in a company’s dividend over the next 12 months. These factors give DIVCON a picture that is more consistent with future prospects rather than past dividend changes.
DIVCON evaluates and assigns a rating from 1 to 5 to each stock based on its assessment of financial health relative to prospects for future dividend growth. The healthiest companies earn the highest DIVCON scores and a rating of DIVCON 5, which means they exhibit the strongest likelihood of increasing their dividends in the next 12 months. The least financially stable companies are given the lowest DIVCON scores and are rated DIVCON 1, indicating their future dividend prospects are at risk. This presents to investors an easy to understand forward-looking ranking of dividend paying stocks, much like the buy-hold-sell ratings other ratings agencies might issue on securities.
Reality Shares offers the Dividend Leaders ETF (Ticker: LEAD) to deliver access to the potential benefits of dividend growth investing. LEAD systematically weights and invests in only the healthiest large-cap companies as identified by DIVCON. The Fund utilizes this rules-based approach to deliver diversified market exposure to future dividend growers.
At Reality Shares, we focus solely on dividend growth investing and offer a range of ETFs pinpointing and capitalizing on investments in the stocks most likely to increase their dividends. Our proprietary DIVCON® model systematically ranks companies’ future dividend growth prospects based on seven quality factors that are correlated to dividend growth. DIVCON® was designed to also help avoid the stocks more likely to cut their dividends. Our rules-based, forward-looking methodology sets us apart in the market and allows investors to access and harness the power of dividend growth investing.
Diversification does not ensure a profit or guarantee against loss.
For LEAD, there is no guarantee or assurance the methodology used to create the Benchmark Index will result in the Fund achieving positive returns. The Fund may be more susceptible to a single adverse economic or other occurrence and may therefore be more volatile than a more diversified fund. The Benchmark Index is constructed using a rules-based methodology based on quantitative models developed by Reality Shares. These quantitative models may be incomplete, flawed or based on inaccurate assumptions and, therefore, may lead to the selection of assets for inclusion in the Benchmark Index that produce inferior investment returns or provide exposure to greater risk of loss.
LEAD seeks long-term capital appreciation by tracking the performance, before fees and expenses, of the Reality Shares DIVCON Leaders Dividend Index (the “Benchmark Index”).
S&P 500: A broad stock market index of 500 large companies based on market capitalization.
1 Data from 1/31/72 – 3/31/17 Source: Ned Davis Research, Inc. and Reality Shares. Past performance does not guarantee future results. Indexes are unmanaged and one cannot invest directly in an index. All stocks were categorized by the following methodology for total return of each 12-month period since 1972 period ended March 31, 2017. Dividend Cutters and Eliminators represents stocks in the S&P 500 that have lowered or eliminated their dividend; Non-Dividend-Paying Stocks represents non-dividend-paying stocks of the S&P 500; Dividend Payers with No Change represents all dividend-paying stocks of the S&P 500 that have maintained their existing dividend rate; and Dividend Growers and Initiators represents all dividend-paying stocks of the S&P 500 that raised their existing dividend or initiated a new dividend. Performance does not represent any unit trust or strategy.
© 2017 Reality Shares®
Carefully consider the investment objective, risks, charges and expenses before investing in Reality Shares ETFs. This and other important information can be found in the Fund's prospectus, which may be obtained by calling 855-595-0240 or by visiting us at realityshares.com. Please read the prospectus carefully before investing.