High Yield Equity Income List Strategy

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1 Thomas P. Christopher, Equity Sector Analyst High Yield Equity Income List Strategy Holdings by Sector January 4, 2018 High Yield Equity Income List Strategy overview: The High Yield Equity Income List Strategy emphasizes companies with notably higher dividend yields than the broader market (as measured by the S&P 500). Our objective is to offer a list of stocks for investors seeking a higher level of income and willing to accept a higher level of risk. Consensus EPS Consensus L-T EPS Growth Market Cap Date Added Symbol Price (billion) per Share Yield Pay Cycle 2 PE to List Consumer Discretionary (average) $ % 13.3x 2% Ford Motor Company F $12.76 $50.7 $ % 3,6,9,12 $ x -3% 1/23/15 Garmin Ltd. GRMN $60.27 $11.3 $ % 3,6,9,12 $ x 7% 6/9/17 Las Vegas Sands Corp. LVS $68.32 $54.0 $ % 3,6,9,12 $ x - 4/1/15 Consumer Staples $ % 21.4x 8% Altria Group, Inc. MO $70.48 $134.6 $ % 3,6,9,12 $ x 8% 7/2/12 Coca-Cola Company KO $45.44 $193.7 $ % 4,7,10,12 $ x 6% 2/5/16 Procter & Gamble Company PG $90.54 $229.7 $ % 2,5,8,11 $ x 8% 2/19/13 Energy $ % 21.2x 25% Chevron Corporation CVX $ $244.1 $ % 3,6,9,12 $ x 45% 2/5/16 Enterprise Products Partners L.P. EPD $27.63 $59.5 $ % 1,4,7,10 $ x 6% 10/7/15 Financials $ % 13.9x 10% Artisan Partners Asset Management, Inc. APAM $37.95 $1.9 $ % 2,5,8,11 $ x 10% 8/6/14 Golub Capital BDC, Inc. GBDC $17.99 $1.1 $ % 3,6,9,12 $ x 10% 7/2/12 Huntington Bancshares Incorporated HBAN $14.72 $15.9 $ % 3,6,9,12 $ x 10% 10/30/17 Thomson Reuters Corporation TRI $43.77 $31.1 $ % 3,6,9,12 $ x 9% 12/17/13 TPG Specialty Lending, Inc. TSLX $19.88 $1.2 $ % 1,4,7,10 $ x 3% 1/23/15 Health Care $ % 13.5x 6% GlaxoSmithKline plc Sponsored ADR GSK $36.79 $89.5 $ % 3,6,9,12 $ x 4% 8/20/15 Merck & Co., Inc. MRK $56.14 $153.1 $ % 1,4,7,10 $ x 7% 7/2/12 Pfizer Inc. PFE $36.71 $218.8 $ % 3,6,9,12 $ x 6% 12/5/14 Industrials $ % 24.0x 10% Emerson Electric Co. EMR $71.39 $45.8 $ % 3,6,9,12 $ x 9% 12/1/15 Lockheed Martin Corporation LMT $ $92.1 $ % 3,6,9,12 $ x 11% 7/2/12 1 Simple average for market cap, dividend yield, date added. Harmonic average for PE. Median for EPS growth estimate. 2 Months in which dividends are paid. January is 1, February 2, etc. = next twelve months EPS = earnings per share, funds from operations used for real estate investment trusts L-T = long-term Market Cap categories: large cap greater than $12.5 billion, mid cap between $12.5 billion and $3 billion, small cap less than $3 billion Please see pages 5-6 of this report for Important Disclosures, Disclaimers and Analyst Certification. Page 1 of 6

2 Consensus EPS Consensus L-T EPS Growth Market Cap Date Added Symbol Price (billion) per Share Yield Pay Cycle 2 PE to List Information Technology $ % 17.3x 8% Cisco Systems, Inc. CSCO $39.17 $193.9 $ % 1,4,7,10 $ x 6% 5/4/16 Intel Corporation INTC $45.26 $211.8 $ % 3,6,9,12 $ x 8% 9/13/12 Paychex, Inc. PAYX $68.28 $24.5 $ % 2,5,8,11 $ x 8% 7/2/12 Materials $ % 19.2x 9% DowDuPont Inc. DWDP $73.05 $170.9 $ % 1,4,7,10 $ x 9% 6/7/13 Packaging Corporation of America PKG $ $11.9 $ % 1,4,7,10 $ x 9% 7/2/12 Real Estate $ % 14.8x 4% Crown Castle International Corp. CCI $ $44.1 $ % 3,6,9,12 $ x 23% 3/14/17 Chesapeake Lodging Trust CHSP $27.28 $1.6 $ % 2,5,8,11 $ x 3% 6/7/13 Welltower, Inc. HCN $64.14 $23.8 $ % 2,5,8,11 $ x 4% 12/6/16 Lamar Advertising Company Class A LAMR $72.27 $7.1 $ % 2,5,8,11 $ x 3% 12/5/14 STAG Industrial, Inc. STAG $27.11 $2.5 $ % 2,5,8,12 $ x 5% 12/5/14 Telecommunications Services $ % 13.2x 3% AT&T Inc. T $37.65 $231.1 $ % 2,5,8,11 $ x 3% 7/2/12 Verizon Communications Inc. VZ $52.43 $213.9 $ % 2,5,8,11 $ x 2% 12/14/15 Utilities $ % 17.4x 4% Duke Energy Corporation DUK $82.97 $58.1 $ % 3,6,9,12 $ x 4% 7/22/15 Dominion Energy Inc D $77.19 $49.7 $ % 3,6,9,12 $ x 5% 5/31/16 Entergy Corporation ETR $81.69 $14.7 $ % 2,5,8,11 $ x -2% 8/22/17 High Yield Equity Income List Average 1 $ % $17.2 8% 11/3/2014 S&P 500 SP50 $2,713 $46.3 $ % $ x 12% 1 Simple average for market cap, dividend yield, date added. Harmonic average for PE. Median for EPS growth estimate. 2 Months in which dividends are paid. January is 1, February 2, etc. = next twelve months EPS = earnings per share, funds from operations used for real estate investment trusts L-T = long-term Market Cap categories: large cap greater than $12.5 billion, mid cap between $12.5 billion and $3 billion, small cap less than $3 billion Page 2 of 6

3 High Yield Equity Income List Strategy Statistics Symbol Sub-Industry Price Low High End per Share CAGR Payout Ratio per Share Yield PE Relative PE Sales Capital Consumer Discretionary (average) 5% 73% 11% 0.8x 0.8x 57% 26% F Automobile Manufacturers $12.76 $10.47 $13.27 Dec $ % $ % 0.4x 0.5x 38% 61% BBB GRMN Consumer Electronics $60.27 $47.03 $63.15 Dec $2.04 5% 56% $2.87 5% 1.1x 1.1x 50% -31% - LVS Casinos & Gaming $68.32 $51.35 $72.20 Dec $ % $4.48 7% 1.2x 1.2x 82% 49% BBB- Consumer Staples 7% 81% 3% 1.1x 1.2x 37% 31% KO Soft Drinks $45.44 $40.22 $47.48 Dec $1.48 8% 139% $1.41 3% 1.2x 1.3x 52% 31% AA- MO Tobacco $70.48 $60.01 $77.79 Dec $2.64 8% 31% $2.22 3% 1.0x 1.1x 0% 43% A- PG Household Products $90.54 $83.24 $94.67 Jun $2.76 5% 73% $3.54 4% 1.1x 1.2x 58% 20% AA- Energy 6% 129% 2% 1.1x 1.3x 29% 35% CVX Integrated Oil & Gas $ $ $ Dec $4.32 7% 126% $2.33 2% 1.3x 1.3x 58% 19% AA- EPD Oil & Gas Storage & Transportation $27.63 $23.59 $30.25 Dec $1.69 6% 132% $0.72 3% 1.0x 1.2x 0% 52% BBB+ Financials 9% 86% 9% 0.7x 0.8x 19% 30% APAM Asset Management & Custody Banks $37.95 $26.30 $40.65 Dec $ % $ % 0.8x 0.9x 0% -6% - GBDC Asset Management & Custody Banks $17.99 $18.06 $20.50 Sep $1.28 0% 89% $1.05 6% 0.8x 0.8x 0% 41% - HBAN Regional Banks $14.72 $12.14 $14.93 Dec $ % 39% $ % 0.7x 0.8x 0% 45% BBB TRI Financial Exchanges & Data $43.77 $42.22 $48.61 Dec $1.38 2% 96% $1.81 4% 0.9x 1.1x 97% 31% BBB+ TSLX Asset Management & Custody Banks $19.88 $18.20 $21.74 Dec $ % x 0.6x 0% 36% BBB- Health Care 3% 143% 5% 0.7x 0.9x 66% 40% GSK Pharmaceuticals $36.79 $34.52 $44.54 Dec $2.05-3% 168% $2.48 7% 0.7x 0.9x 95% 69% A+ MRK Pharmaceuticals $56.14 $53.63 $66.80 Dec $1.92 3% 183% $1.59 3% 0.8x 1.0x 54% 24% AA PFE Pharmaceuticals $36.71 $30.90 $37.35 Dec $1.36 8% 79% $2.28 6% 0.7x 0.8x 50% 26% AA 1 Simple average for dividend CAGR, payout, free cash flow yield, international sales, net debt/capital, credit rating. Harmonic average for PE. CAGR = compound annual growth rate TTM = trailing twelve months = next twelve months Fiscal Year 5-Yr TTM Relative 5-Yr Avg Int'l Net Debt / S&P Credit Rating Page 3 of 6

4 High Yield Equity Income List Strategy Statistics Symbol Sub-Industry Price Industrials 10% 73% 4% 1.3x 1.1x 40% 41% EMR Electrical Components & Equipment $71.39 $55.40 $71.46 Sep $1.94 4% 88% $2.24 3% 1.3x 1.1x 52% 12% A LMT Aerospace & Defense $ $ $ Dec $ % 59% $ % 1.3x 1.1x 27% 69% BBB+ Information Technology 15% 59% 5% 0.9x 0.9x 42% -10% CSCO Communications Equipment $39.17 $29.80 $39.29 Jul $ % 59% $2.68 7% 0.8x 0.8x 48% -35% AA- INTC Semiconductors $45.26 $33.23 $47.64 Dec $1.09 6% 37% $2.44 5% 0.8x 0.8x 78% 14% A+ PAYX Data Processing & Outsourced Services $68.28 $54.20 $70.39 May $2.00 8% 82% $2.56 4% 1.4x 1.5x 0% -10% - Materials 20% 47% 3% 1.0x 0.9x 35% 40% PKG Paper Packaging $ $84.01 $ Dec $ % 47% $5.16 4% 1.0x 0.9x 5% 49% BBB DWDP Diversified Chemicals $73.05 $56.52 $73.85 Dec $ % - $1.17 2% 1.0x 0.9x 65% 31% BBB Real Estate 10% 233% 4% 2.1x 2.5x 4% 46% CCI Specialized REITs $ $83.96 $ Dec $ % $1.97 2% 5.0x 4.1x 0% 30% BBB- CHSP Hotel & Resort REITs $27.28 $22.55 $29.36 Dec $ % 182% $1.49 5% 1.3x 1.4x 0% 42% - HCN Health Care REITs $64.14 $63.06 $78.17 Dec $3.48 4% 303% $2.05 3% 1.8x 2.5x 19% 43% BBB+ LAMR Specialized REITs $72.27 $62.45 $79.17 Dec $ % $4.08 6% 1.2x 1.6x 2% 68% BB- STAG Industrial REITs $27.11 $22.70 $28.95 Dec $ % 259% x 776.4x 0% 46% - Telecommunication Services 3% 77% 5% 0.7x 0.8x 3% 59% T Integrated Telecommunication Services $37.65 $32.55 $43.00 Dec $2.00 2% 95% $2.67 7% 0.7x 0.8x 6% 40% BBB+ VZ Integrated Telecommunication Services $52.43 $42.80 $54.83 Dec $2.36 3% 60% $1.31 3% 0.7x 0.8x 0% 78% BBB+ Utilities 3% 101% -5% 0.9x 1.0x 0% 62% DUK Electric Utilities $82.97 $76.14 $91.80 Dec $3.56 2% 114% -$3.26-4% 0.9x 1.0x 0% 56% A- D Multi-Utilities $77.19 $70.87 $85.30 Dec $3.08 7% 87% -$2.53-3% 1.0x 1.2x 0% 69% BBB+ ETR Electric Utilities $81.69 $69.63 $87.95 Dec $3.56 1% - -$7.32-9% 0.9x 0.9x 0% 62% BBB+ High Yield Equity Income List Average 1 8% 112% 4% 1.0x 1.0x 28% 36% A- S&P 500 SP50 $2,713 $2,254 $2,714 $ % 40% $99 4% 1.0x 1.0x 32% 31% BBB+ 1 Simple average for dividend CAGR, payout, free cash flow yield, international sales, net debt/capital, credit rating. Harmonic average for PE. CAGR = compound annual growth rate TTM = trailing twelve months = next twelve months Low High Fiscal Year End per Share 5-Yr CAGR TTM Payout Ratio per Share Yield Relative PE 5-Yr Avg Relative PE Int'l Sales Net Debt / Capital S&P Credit Rating Page 4 of 6

5 IMPORTANT DISCLOSURES Disclosure information... For important disclosure information, please contact: Wells Fargo Advisors Attn: Advisory Services (Disclosure Information) One North Jefferson, St. Louis, MO Or call phone (888) Please remember to specify the issuer(s) with respect to which you would like to receive disclosure information. ANALYST CERTIFICATION: The Analyst who prepared this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject companies and their securities. The Analyst also certifies that he/she has not been, is not, and will not be receiving direct or indirect compensation for expressing the specific recommendation(s) or view(s) in this report. Disclaimers Prices and estimates are as of January 3, 2018 unless indicated otherwise. s can be increased, decreased or totally eliminated at any point without notice. Technology and Internet-related stocks, especially of smaller, less-seasoned companies, tend to be more volatile than the overall market. The prices of small and mid-cap company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and political and economic changes. This may result in greater share price volatility. These risks are heightened in emerging markets. American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage. If the home currency is devalued, this can result in a loss to the ADR holder, even if the company had been performing well. Due to currency exchange rate fluctuations, dividends can also vary significantly period to period. For example, a company may increase its dividend on a euro basis, but U.S. ADR holders may see their dividend decrease. Bear in mind that outside the U.S., the attitude toward dividends is different. There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner s tax bracket. Investments in the energy sector are subject to the adverse economic events within that industry. A downturn in the energy sector of the economy, adverse political, legislative or regulatory developments or other events could have a large impact on a portfolio s investments in this sector. Business Development Company or Registered Investment Company (BDC/RIC) is a type of closed-end mutual fund designed to lend to private middle-market businesses. The BDC/RIC model was created in 1980, when Congress modified the 1940 Investment Company Act to facilitate private finance investment. Standard and Poor s ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Earnings per share (EPS) is the portion of a company s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company s profitability. Price to earnings ratio (PE ratio) is a valuation ratio of company s current share price compared to its per-share earnings. PE = market value per share/eps. Wells Fargo Advisors publishes several theme-based lists of recommended equity securities. Each list is based on a specific investment objective and time horizon which may be different from the other lists. This may cause Wells Fargo Advisors to recommend an equity security to be added to one list and removed from another list. Thus, one list may contain different recommendations or conclusions that could result in short-term price movements contrary to the recommendations in another list. Page 5 of 6

6 Wells Fargo Advisors research analysts receive no compensation in connection with the firm s investment banking, sales and trading, or principal trading revenues. Analysts may be eligible for annual bonus compensation based on the overall profitability of the firm, which takes into account revenues derived from all the firm s business activities, including its investment banking business, sales and trading, and principal trading. The Advisory Services Group ( ASG ) of Wells Fargo Advisors works with information received from various resources including, but not limited to, research from affiliated and unaffiliated research correspondents as well as other sources. ASG research analysts provide investment advice based on their own observations and analysis (both fundamental and quantitative) for the clients of Wells Fargo Advisors and its affiliates. ASG does not assign ratings to or project target prices for any of the securities mentioned in this report. ASG receives research from affiliated and unaffiliated correspondent research providers with which Wells Fargo Advisors has an agreement to obtain research reports. Each correspondent research report reflects the different assumptions, opinions, and the methods of the analysts who prepare them. Any opinions, prices or estimates contained in this report is as of the date of this publication and is subject to change without notice. Additional information available upon request. Past performance is not a guide to future performance. The material contained herein has been prepared from sources and data we believe to be reliable but we make no guarantee as to its accuracy or completeness. This material is published solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or investment product. Opinions and estimates are as of a certain date and subject to change without notice. Wells Fargo Advisors is registered with the U.S. Securities Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company Wells Fargo Clearing Services, LLC. All rights reserved. Page 6 of 6