Isolating dividend growth

A possible pathway to low correlation and low volatility

In the pursuit of diversification, investors historically sought after assets classes uncorrelated to the traditional securities of stocks and bonds, such as commodities, real estate products and currencies. Investors looking for a new diversification option can take advantage of a recently developed nontraditional asset class addition to the investment universe: isolated dividend growth. Although dividends have been a staple strategy among equity investors, only recently have dividends emerged as a separate and distinct asset class with distinct advantages.

In this whitepaper we will look at isolated dividend growth, seeking to better understand its mechanism and advantages. We look at the various aspects of isolated dividend growth including characteristics, rationale and investment avenues. We look at the historical performance relative to other asset classes—equity, fixed income and commodities, and also show that the fear about extreme movements in dividends compared to equities is not backed by historical data. Finally, we compare the S&P 500 dividend growth to other major indexes: the FTSE 100, Euro Stoxx 50 and Nikkei 225.

This white paper covers the following topics:

  • What is isolated dividend growth
  • Why are dividends so attractive to investors
  • How isolated dividend growth is different from existing dividend products
  • Isolated dividend growth performance analysis
  • Sources and sustainability of dividend risk premium
  • S&P 500 dividends versus other major indexes

For some additional information on dividend growth and how to take advantage of it, get in touch with the Reality Shares team.

Learn how to access the power of dividend growth by reading our white paper below.

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Definitions:

EURO STOXX 50: Index comprised of 50 stocks in Europe, provides a representation of large companies in the Eurozone.
FTSE 100: An index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. It is used as an indicator of large companies in the United Kingdom.
Nikkei 225: Leading index of Japanese stocks comprised of Japan’s top 225 blue-chip companies listed on the Tokyo Stock Exchange.


Diversification does not ensure a profit or guarantee against loss.

DIVY does not generate dividend income, and is not appropriate for investors seeking dividend income. DIVY seeks to produce long-term capital appreciation. Unlike more traditional products, the Fund does not seek returns based on appreciation in the stock market price of equity securities. This means that the returns on your Fund investment are not intended to correlate to the returns of the overall stock market (for example, the value of your Fund investment may go down when overall equity markets go up, or vice versa).

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 clicking here. Please read the prospectus carefully before investing.

Investing involves risks, including possible loss of principal. Shares are not FDIC insured and may lose value. Past performance does not guarantee future results.

The DIVY Fund is actively managed and may fail to achieve its investment objective. There is no guarantee the Fund’s investment strategies will be successful. The Fund’s derivative investments in swaps, futures and forwards are subject to a number of risks, including correlation risk, market risk, counterparty credit risk and liquidity risk, which may negatively impact the Fund’s investment strategies and could cause the Fund to lose money. The Fund does not capture dividend payments or generate dividend income, and is not appropriate for investors seeking dividend income. The Fund uses a dividend isolation strategy whereby investment returns are based primarily on the change in expected dividend values reflected in the prices of the Fund’s portfolio holdings.

For LEAD, DFND and GARD, there is no guarantee or assurance the methodology used to create the respective 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. Each 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 that produce inferior investment returns or provide exposure to greater risk of loss. The investment portfolio for DFND includes securities sold short. The investment portfolio for GARD may include securities sold short. Securities sold short create special risks which may result in increased volatility of returns and counter-party risk. Investments in short sales may also incur dividend and borrowing expenses and may result in the Fund being less tax-efficient. Please review the prospectus for important risks regarding the Funds.

ETF shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or ‘authorized participants’ may trade directly with the Fund, typically in blocks of 25,000 shares. Brokerage commissions will reduce returns. Market Price is based on the midpoint of the bid/ask spread at the close of the market and does not represent the returns an investor would receive if shares were traded at other times.

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


Portfolio of Holdings and Fund Performance for LEAD, DFND, GARD, and DIVY.