YOUR BUSINESS ADVISORY SERVICES PORTFOLIO SOLUTIONS. Teaching an Old Dog a New Trick

Transcription

1 0 YOUR BINESS ADVISORY SERVICES PORTFOLIO SOLUTIONS Teaching an Old Dog a New Trick

2 Agenda 1 Overview of Current Equity Income Indices ALPS Sector Dividend Dogs Series (NYSE: SDOG, IDOG & EDOG) The Importance of a Starting Universe 3 Key Potential Benefits Yield Diversification Mean Reversion ETF Facts (SDOG, IDOG & EDOG) There are risks involved with investing in ETFs including the loss of money. Diversification does not eliminate the risk of experiencing investment losses. IDOG is subject to foreign investing risks including currency fluctuations and political uncertainty.

3 Equity Dividend Index Themes 2 Most of the popular dividend indices typically have the following themes: Beginning Universe of securities Screens, along with a yield component, are based on combination of one, two or all of the following: Consistency must have paid a dividend for 5, 10, 15 or even 20 years Growth can not have had a dividend decrease in 5, 10, 15, or even 20 years Sustainability screen to estimate likely hood of company sustaining its dividend

4 Potential Drawbacks of Dividend-Weighted Indices 3 Using these standard screens we believe leads to one, two or all of the following potential drawbacks: Modest Yield Many dividend indexes only provide moderate yield relative to the overall market Stock concentration Despite accessing a basket of numerous stocks, many dividend-weighted indices are heavily concentrated in much smaller group of individual securities Sector concentration Many dividend indices tend to be heavily weighted toward defensive, higher yielding sectors

5 A Dividend Trade-Off? 4 High Yield + Low Diversifica5on OPTIMAL YIELD Sub- OPTIMAL Modest Yield + High Diversifica5on DIVERSIFICATION

6 5 YOUR BINESS ADVISORY SERVICES PORTFOLIO SOLUTIONS ALPS Sector Dividend Dogs Series [SDOG, IDOG & EDOG]

7 Index Construction 'Dogs Of The Dow Theory with a Twist 6 SDOG follows the S-Net Sector Dividend Dogs Index (SDOGX) while IDOG follows the S-Net International Sector Dividend Dogs Index and employ the following index construction methodology: All constituents of SDOGX must be members of the S&P 500, all constituents of IDOGX must be members of the S-Net Developed Markets Index (ex-americas) while all constituents of EDOGX must be members of the S-Net Emerging Markets Index. Individual securities included in SDOGX, IDOGX & EDOGX are selected using ranking system on a sector-by-sector basis: Stock Selection - Selects the 5 stocks in each GICS sector with the highest dividend yield as of the last trading of November and rebalances quarterly Dividend yield - Computed based on regular cash dividends paid by the company over the previous twelve months, divided by share price (special dividends not included) Dogs Of The Dow - An investing strategy that consists of buying the 10 Dow Jones Industrial Average (DJIA) stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks.

8 Sector Dividend Dogs Advantage 7 The ALPS Sector Dividend Dogs Series (SDOG. IDOG & EDOG) can potentially overcome shortcomings of other dividend indices by providing the following: Quality Universe / Pure Yield SDOG, IDOG & EDOG begin with smaller, quality starting universes which allows yield to be the primary screen on a sector-by-sector basis Sector & Stock Diversification* SDOG, IDOG & EDOG equally weight the Top 5 yielding securities from each of the 10 sectors from their respective starting universe providing sector and stock diversification (2% per Stock and 10% per Sector) ALPHA Potential SDOG, IDOG & EDOG are designed to be deep value portfolios but unlike many other dividend indices recognize the importance of screening on a sector-by-sector basis to provide the potential for identifying value in every sector while still participating in all economic cycles *Diversification does not eliminate the risk of experiencing investment losses Alpha: a measure of performance on a risk-adjusted basis.

9 Importance of a Starting Universe (SDOG) 8 SDOGX Index uses the S&P 500 as it s starting universe. Potential benefits of beginning with the S&P 500 include: Often referred to as the leading large-cap equity Benchmark Index Stringent screens on size, liquidity and quality Liquid, well-capitalized companies tend to have better access to financing allowing them to maintain more consistent dividend policies Source: S&P Indices as of December 31 th Non S&P 500 companies consist of all listed stocks outside of the S&P 500

10 Importance of a Starting Universe (SDOG) continued 9 S&P 500 DIVIDEND PAYERS BY SECTOR Total Stocks Dividend Paying Stocks 10 0 Source: S&P Indices as of March 31 st 2014.

11 Importance of a Starting Universe (IDOG) 10 IDOGX Index uses the S-Net Developed Markets Index (ex-americas) as it s starting universe. S-Net DMI uses the following screens to identify qualifying securities: Must be a member of the World Bank High Income Countries* 70% - 73% of each stock market capitalization of qualifying countries Eliminate countries with idiosyncratic dividend policies Stock price must be > $1 and must have Average Daily Trading Volume (ADTV) > $10 million Applying these screens provides a starting universe that currently has 445 liquid across 22 developed markets. Similar to SDOGX starting with S&P 500 we believe IDOGX starting with S-Net DMI provides similar benefits: Stringent screens on size and liquidity Liquid, well-capitalized companies tend to have better access to financing allowing them to maintain more consistent dividend policies Source: S-Network Global Indexes as of 11/30/2012 *Economies whose gross national income averages $12,616 or more.

12 Importance of a Starting Universe (IDOG) continued 11 S-NET DMI DIVIDEND PAYERS BY SECTOR Total Stocks Dividend Paying Stocks 20 0 Source: S-Network Global Indexes as of March 31 st 2014.

13 Importance of a Starting Universe (EDOG) 12 EDOGX Index uses the S-Net Emerging Markets Index (ex Taiwan and South Korea) as its starting universe. S-Net EMI uses the following screens to identify qualifying securities: Approx. 85% of each stock market capitalization of qualifying countries Eliminate countries with idiosyncratic dividend policies Liquidity screen (must have ADTV > $1 million) Applying these screens provides a starting universe that currently has 527 liquid companies across 19 emerging markets. Source: S&P Indices as of December 31 th Non S&P 500 companies consist of all listed stocks outside of the S&P 500

14 Importance of a Starting Universe (EDOG) continued 13 S-NET EMI DIVIDEND PAYERS BY SECTOR Total Stocks Dividend Paying Stocks 20 0 Source: S&P Indices as of March 31 st 2014.

15 Dividends 14 SDOG, IDOG & EDOG apply a pure yield methodology to a liquid, well capitalized universe of stocks on a sector-by-sector basis. In our opinion the potential benefits of having yield as a primary screen may include:* Yield has been a significant portion of most major large-cap indices over the past 50 + years Companies that pay dividends tend to be more mature and stable than those companies that don t. In addition, the need to pay dividends tends to make management more accountable and less likely to reinvest free cash flow into non-core business lines. Liquid companies with larger market capitalization are more likely to be able to secure financing when needed making it easier for them to maintain consistent dividend policies. * Source: S&P Indices as of December 31 th Non S&P 500 companies consist of all listed stocks outside of the S&P 500 Diversification does not eliminate the risk of experiencing investment losses

16 Diversification 15 By isolating Dogs Theory to a quality starting universe on a sector-by-sector basis SDOG, IDOG & EDOG provide excellent diversification at both the stock and sector level. Potential benefits of this strategy include: Unlike many dividend indices that are heavily weighted toward defensive sectors, SDOG, IDOG & EDOG provide exposure to dividend opportunities in every sector of the market Exposure to all sectors may provide better participation in market rallies, particularly if they are lead by non-traditional dividend sectors Limiting exposure to any one sector helps avoid over allocation to sectors that have potentially over appreciated * Diversification does not eliminate the risk of experiencing investment losses

17 Mean Reversion (Dogs Theory) 16 Annual reconstitution and quarterly rebalances provide several potential benefits including: Annual Reconstitution Dogs theory uses a deep-value approach which may result in mean reversion for stocks that are temporarily undervalued Isolating the screens on a sector-by-sector basis allows potential value to be identified on a peer level rather than across an entire universe which would likely result in certain sector biases Quarterly Rebalancing Resetting each stock to 2% and each sector to 10% on a quarterly basis ensures the portfolio does not become too overweight any one sector or stock Using an ETF to apply this type of strategy allows for more efficient tax management through the use of custom creation and redemption baskets * Diversification does not eliminate the risk of experiencing investment losses

18 SDOG Index Characteristics 17 Characteristics S-Net Sector Dividend Dogs Index (SDOGXTR) Yield 4.71% # of Securities 49 Top 10 Holdings 21.75% 9.68% 8.13% 10.72% 10.49% Utilities Consumer Discretionary Industrials Energy 9.97% Health Care 10.25% Consumer Staples Information Technology 10.14% 10.15% 10.23% 10.24% Financials Materials Telecommunication Services Source: S-Network as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results.

19 IDOG Index Characteristics 18 Characteristics S-Net International Sector Dividend Dogs Index (IDOGXTR) Yield 5.49% # of Securities 50 Top 10 Holdings 21.18% 9.86% 9.84% 9.91% 9.68% 10.03% 10.24% 10.08% 10.15% 10.11% 10.10% Consumer Staples Materials Financials Utilities Health Care Telecommunication Services Energy Consumer Discretionary Information Technology Industrials Country Allocation United Kingdom 25.77% Australia 22.55% France 8.00% Japan 7.82% Spain 7.70% Sweden 4.19% Finland 4.02% Singapore 4.01% Norway 3.87% Portugal 2.08% Hong Kong 2.02% Netherlands 2.01% Switzerland 2.01% Germany 1.99% Italy 1.96% Source: S-Network as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results.

20 EDOG Index Characteristics 19 Characteristics S-Net Emerging Markets Sector Dividend Dogs Index (EDOGXTR) Yield 6.43% # of Securities 50 Top 10 Holdings 22.02% 9.74% 9.46% 9.77% 9.11% 9.81% 10.71% 9.95% 10.61% 10.25% 10.59% Financials Industrials Health Care Utilities Materials Consumer Discretionary Energy Information Technology Consumer Staples Telecommunication Services Country Allocation Indonesia 11.02% Poland 10.70% South Africa 10.67% China 10.19% Malaysia 9.94% Thailand 8.89% Brazil 8.82% Turkey 7.89% Russia 7.55% Chile 4.16% Columbia 4.11% India 4.06% Czech Republic 2.00% Source: S-Network as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results.

21 SDOG Constituents 20 Consumer Discretionary Consumer Staples Energy Financials Health Care Yield 4.74% Yield 3.58% Yield 7.78% Yield 3.93% Yield 3.30% COH Coach Inc MO Altria Group Inc COP ConocoPhillips CINF Cincinnati Financial Corp ABBV AbbVie Inc F Ford Motor Co KO Coca-Cola Co/The ESV Ensco plc-cl A IVZ Invesco Ltd BAX Baxter International Inc GRMN Garmin Ltd PM Philip Morris International KMI Kinder Morgan Inc MET MetLife Inc JNJ Johnson & Johnson MAT Mattel Inc PG Procter & Gamble Co/The OKE Oneok Inc NAVI Navient Corp MRK Merck & Co. Inc. WYNN WMT Wal-Mart Stores Inc SE Spectra Energy Corp PBCT People's United Financial Wynn Resorts Ltd Industrials Information Technology Materials Telecommunication Services Utilities Yield 4.02% Yield 4.45% Yield 3.83% Yield 6.94% Yield 4.87% CAT Caterpillar Inc CA CA Inc DOW Dow Chemical Co/The T AT&T Inc PFE CNP Pfizer Inc CenterPoint Energy Inc CMI Cummins Inc HPQ HP Inc FCX Freeport-McMoRan Inc CTL CenturyLink Inc DUK Duke Energy Corp ETN EMR Eaton Corp Plc Emerson Electric Co PBI Pitney Bowes Inc IBM QCOM STX Intl Business Machines Corp IP International Paper Co Qualcomm Inc Seagate Technology FTR Frontier Communications Corp MOS Verizon Mosaic Co/The VZ Communications Inc ETR NRG Entergy Corp NRG Energy Inc NUE Nucor Corp SO Southern Co/The Source: Bloomberg as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change.

22 IDOG Constituents 21 Consumer Discretionary Consumer Staples Energy Financials Health Care Yield 6.42% Yield 4.32% Yield 7.95% Yield 6.54% Yield 3.86% JCNC SP Jardine Cycle & Carriage Ltd BATS LN British American Tobacco plc BP/ LN BP Plc ANZ AU Aust and NZ Banking Group AZN LN AstraZeneca plc Marks & Spencer MKS LN Group plc IMT LN Imperial Tobacco Group plc ENI IM Eni SpA SAN SM Banco Santander SA GSK LN GlaxoSmithKline plc PSON LN Pearson PLC ORK NO Orkla ASA REP SM Repsol SA NAB AU National Australia Bank Ltd NOVN VX Novartis AG-Reg 1928 HK Sands China Ltd WES AU Wesfarmers Ltd RDSA NA Royal Dutch Shell plc-a Shs SUN AU Suncorp Group Ltd SAN FP Sanofi WOW AU WPL AU VIV FP Vivendi Woolworths Ltd Woodside Petroleum Ltd Westpac Banking Corp Industrials Information Technology Materials Telecommunication Services Utilities Yield 4.97% Yield 3.30% Yield 5.68% Yield 5.69% Yield 6.18% Abertis ABE SM Infraestructuras SA 7751 JP Canon Inc AMC AU Amcor Limited WBC AU TEF SM Telefonica SA 4502 JP CNA LN Takeda Pharmaceutical Co Ltd Centrica plc AZJ AU Aurizon Holdings Ltd ERICB SS Ericsson LM-B Shs BAS GR BASF SE TEL EDP-Energias de NO Telenor ASA EDP PLPortugal SA BA/ LN BAE Systems plc 7752 JP Ricoh Co Ltd BHP AU BHP Billiton Limited TLSN SS TeliaSonera AB ENGI FP Engie EN FP Bouygues SA SGE LN Sage Group plc/the RIO AU Rio Tinto Ltd TLS AU Telstra Corp Ltd FUM1V FH Fortum Oyj KEP SP Keppel Corp Ltd 8035 JP Tokyo Electron Ltd UPM1 V FH UPM-Kymmene Oyj VOD LN Vodafone Group plc SSE LN SSE plc Source: Bloomberg as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change.

23 EDOG Constituents 22 Consumer Discretionary Consumer Staples Energy Financials Health Care Yield 5.00% Yield 4.72% Yield 7.86% Yield 8.86% Yield 2.02% ASTRO MK Astro Malaysia Holdings Bhd EXITO CB Almacenes Exito SA 2883 HK China Oilfield Services-H BHW PW Bank Handlowy w Warszawie SA BDMS TB Bangkok Dusit Med Service BEC TB BEC World Public Co Ltd ROTH MK British American Tobacco Bhd 1088 HK China Shenhua Energy Co-H PEO PW Bank Pekao SA RDY Doctor Reddy's Lab-ADR IPL SJ Imperial Holdings Ltd CBD Cia Brasileira de Dis-Sp Prf EC Ecopetrol SA-Sponsored ADR CML SJ Coronation Fund Managers Ltd KLBF IJ Kalbe Farma Tbk PT TOASO TI Tofas Turk Otomobil Fabrika INDF IJ Indofood Sukses Makmur Tbk P OGZD LI Gazprom PAO-Spon ADR 2007 HK Country Garden Holdings Co LHC SJ Life Healthcare Group Holdin UMWH UMW NATU3 Natura LKOD PZU Powszechny NTC MK Holdings Bhd BZ Cosmeticos SA LI Lukoil Pjsc-Spon ADR PW Zaklad Ubezpiecze SJ Netcare Ltd Industrials Information Technology Materials Telecommunication Services Utilities Yield 5.14% Yield 2.95% Yield 9.39% Yield 12.23% Yield 6.62% BTS TB BTS Group Holdings pcl DELTA TB Delta Electronics Thai PCL CSNA3 Cia Siderurgica BZ Nacional SA MBT Mobile Telesystems-Sp ADR AESG ENER CI AES Gener SA SIME MK 2386 HK Sime Darby Berhad Sinopec Engineering Group-H INFY 992 HK Infosys Ltd-Sp ADR Lenovo Group Ltd EREG L TI INTP IJ Eregli Demir ve Celik Fabrik Indocement Tunggal Prakarsa MTN SJ VIV MTN Group Ltd Telefonica Brasil-ADR CEZ CP PGAS IJ CEZ AS Perusahaan Gas Negara Perser TTRAK TI Turk Traktor ve Ziraat Makin SOND A CI Sonda SA MNOD LI MMC Norilsk Nickel PJSC-ADR DTAC TB Total Access Communication PGE PW PGE SA UNTR IJ United Tractors Tbk PT TOTS3 BZ Totvs SA SNS PW Synthos SA TCELL Turkcell Iletisim TI Hizmet AS YTLP MK YTL Power International Bhd Source: Bloomberg as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change.

24 Summary 23 Equity income oriented investors shouldn t have to choose between potential yield and diversification The ALPS Sector Dividend Dogs Series seeks to provide investors with the three key potential benefits: Potential Yield Sector & Stock Diversification Alpha Potential There are risks involved with investing in ETFs including the loss of money. Diversification does not eliminate the risk of experiencing investment losses. IDOG is subject to foreign investing risks including currency fluctuations and political uncertainty.

25 SDOG, IDOG & EDOG ETF Facts 24 SDOG IDOG EDOG Ticker: SDOG IDOG EDOG Underlying Index: SDOGXTR IDOGXTR EDOGXTR Total Expense Ratio: 0.40% 0.50% 0.60% Dividends Paid: Quarterly Quarterly Quarterly Rebalance Schedule: Quarterly Quarterly Quarterly Website: Phone:

26 SDOG, IDOG & EDOG Disclosures 25 Risks An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call or visit Read the prospectus carefully before investing. There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus. The ALPS International Sector Dividend Dogs and ALPS Emerging Sector Dividend Dogs ETF are new products with a limited operating history. IDOG and EDOG are subject to foreign investing risks including currency fluctuations and political uncertainty. Investments in Emerging Markets accentuate these risks. ALPS Sector Dividend Dogs Series Shares are not individually redeemable. Investors buy and sell shares of the ALPS Sector Dividend Dogs Series on a secondary market. Only market makers or "authorized participants" may trade directly with the Fund, typically in blocks of 50,000 shares. Dividends are not guaranteed and a company's future abilities to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping among other factors. ALPS Portfolio Solutions Distributor, Inc. is the Distributor of the ALPS Sector Dividend Dogs ETFs. DOG /30/2016

27 Contact Information 26 Jeremy Held, CFA* Director of Investment Strategy & Research 1290 Broadway, Suite 1100 Denver, CO Jennifer Levesque* Institutional Client Relations 1290 Broadway, Suite 1100 Denver, CO *Registered Representatives of ALPS Portfolio Solutions Distributor, Inc.