Sure Dividend. November 2015 Edition HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN. By Ben Reynolds

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1 Sure Dividend HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN November 2015 Edition By Ben Reynolds

2 2 Table of Contents Opening Thoughts... 3 The Top 10 List... 4 Analysis of Top 10 Stocks... 5 Wal-Mart (WMT)... 5 Deere & Company (DE)... 7 W.W. Grainger (GWW)... 9 Cummins (CMI) General Mills (GIS) Abbott Laboratories (ABT) Eaton Corporation (ETN) Computer Services Inc. (CSVI) Johnson & Johnson (JNJ) United Technologies (UTX) Analysis of International Stocks List of Stocks by Sector List of Stocks by Rank Portfolio Building Guide Examples List of Past Recommendations Closing Thoughts... 33

3 3 Opening Thoughts The S&P 500 ended October up 8.5%. The market rally is interesting considering the wide range of disappointing economic news in October. Personal income grew just 0.1% in September, missing the already anemic 0.2% growth expectation. Retail sales fell 0.3%; they were expected to decline 0.1%. The consumer sentiment index fell as well. The October rally was not supported by an improving economy in the United States. The emerging market growth slowdown is expected to continue into the future. There was no improvement here to cause a market rally. The likely explanation for the rally is that fairly weak, but not terrible economic news from the United States makes an increase in interest rates from the Federal Reserve unlikely in The Federal Reserve was widely expected to increase rates in 2015, but has not done so. Now it appears this won t happen until We are in strange economic times. Bad news is still bad. Apparently good news is now bad because it will likely cause interest rates to rise which will slow growth. The stock market is responding best to either slightly bad or slightly good news. We are in a new economic era where mediocrity is rewarded. While this is going on, specific sectors in the global economy are suffering. The oil and gas and industrial goods manufacturing sectors are very likely undervalued today. Four of the Top 10 stocks this month are manufacturers (Deere & Company, United Technologies, Eaton Plc, and Cummins). These businesses all have long histories of above-average total returns and dividend increases. The Sure Dividend system is meant to find high quality businesses trading at fair or better prices. The industrial manufacturing sector is a prime candidate for or better pricing today. Note about Rankings The Sure Dividend system is meant to be a bias-free quantitative system which uses The 8 Rules of Dividend Investing to make dividend investment decisions. This month AbbVie (ABBV) made the top 10. I have removed it from the Top 10 because it generates 60% of its revenue from one drug (Humira) that goes off patent at the end of Qualitatively, the company is too risky for me to recommend.

4 4 The Top 10 List Ticker Name Score Yield Payout Growth Beta Volatility WMT Wal-Mart Stores Inc % 40% 7.6% % DE Deere & Co % 37% 12.7% % GWW W.W. Grainger Inc % 38% 14.3% % CMI Cummins % 41% 19.0% % GIS General Mills % 58% 8.4% % ABT Abbott Laboratories % 43% 10.0% % ETN Eaton % 50% 6.3% % CSVI Computer Services % 48% 9.8% N/A 24% JNJ Johnson & Johnson % 50% 6.1% % UTX United Technologies % 38% 9.4% % Note: CSVI s Beta score is not calculated because it had low trading volume for much of the last 10 years which makes Beta lower than it should be. The Score column shows how close the composite rankings are between the top 10. The highest ranked stock will always have a score of 1. The closer the score is to 1, the better. Stocks are ranked using the criteria in The 8 Rules of Dividend Investing. Caterpillar. Coca-Cola, and Baxalta fell off the Top 10 this month. They were replaced by Diesel engine leader Cummins, health care giant Johnson & Johnson, and bank servicing company Computer Services. Changes in the top 10 occur with new financial news and stock price changes. The stability of the top 10 list shows the ranking method is consistent, not based on rapid swings. An equally weighted portfolio of the top 10 has the following characteristics: Top 10 S&P500 Dividend Yield: 3.0% 2.0% Payout Ratio: 44.3% 43.0% Growth Rate: 10.4% 7.4% PE Ratio: P/E is calculated as the current price divided by trailing-twelve month earnings; lower is better - Dividend Yield is calculated as the most recent quarterly dividend x 4 divided by the current price; higher is better - Payout ratio is the most recent quarterly dividend x 4 divided by trailing-twelve month earnings; lower is better - Growth Rate is the lower of 10 year earnings per share or dividend per share compound growth; higher is better

5 5 Analysis of Top 10 Stocks Wal-Mart (WMT) Overview & Current Events Wal-Mart is the global leader in discount retail. The company generated over $485 billion in sales over the last year and is expected to hit $500 billion in annual sales in On October 14 th, Wal-Mart held its annual meeting for the investment community. The company s stock price dropped around 10% that day, as Wal-Mart announced that its margins will decline this year and next year as it focuses on increasing store-level employee pay and growing e-commerce sales. These declines have made Wal-Mart an even more attractive investment. The company is expecting 3% to 4% sales growth a year, 2% to 3% share repurchases a year, and a dividend yield of 3.4% for long-term expected total returns of around 8.5% to 10.5% a year. Wal-Mart s margins will stabilize and recover as the company s new strategic direction begins to pay off. Next Dividend Record Date: December 4 th, 2015 Next Earnings Release: November 17 th, 2015 Competitive Advantage & Recession Performance Wal-Mart s competitive advantage comes from its scale and operating efficiency. Wal-Mart is the biggest retailer in the world. Its size allows it to command the best prices from its suppliers. The company pressures suppliers to lower their prices and then passes savings on to consumers, resulting in a positive feedback loop. The Great Recession of 2007 to 2009 did not impede operations. Wal-Mart grew revenue, earnings, and dividends each year through the recession. Wal-Mart is among the most recession-proof publicly traded businesses. When the S&P 500 fell 38% in 2008, Wal-Mart gained 18%. Growth Prospects, Valuation, & Catalyst Wal-Mart s growth will be sluggish in the short-term as the company invests heavily in the future. The company s long-term competitive advantage (scale-based low prices) will continue to differentiate Wal-Mart from its smaller competitors. Wal-Mart has expected total returns of 8.5% to 10.5% a year. Wal-Mart is currently trading for an adjusted P/E ratio of just The company s P/E ratio has averaged about 15.0 over the last decade. With expected earnings next year of $4.55, Wal-Mart shares should trade for at least $68 a share and I would argue that this price is far too low given that earnings are temporarily depressed. Shares are currently priced at $57. Maximum Drawdown (starting in year 2000): -37% in October of 2000 (Current drawdown at 36%) DRIP Available: Yes, with fees Dividend Yield: 3.4% 10 Year EPS Growth Rate: 7.6% per year 10 Year Dividend Growth Rate: 12.6% per year Most Recent Dividend Increase: 2.1% Dividend History: 42 Consecutive years of dividend increases

6 6 4.0% Wal-Mart 20 Year Dividend Yield History 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%

7 7 Deere & Company (DE) Overview & Current Events Deere & Company is the world s largest farming equipment manufacturer. The company has sizeable operations in the United States, Brazil, Russia, India, China, and Europe. The company operates in 3 segments: Agriculture & Turf, Construction & Forestry, and Financial Services. Deere & Company saw net income fall 37% in its most recent quarter (8/21/15). The decline is due to continued weakness in the farming industry brought about by low crop prices. Despite weakness in the industry, Deere & Company remains highly profitable. The company generated earnings of $512 million in its most recent quarter. Compare this to the ~$200 million a quarter in dividends Deere & Company pays out. Next Dividend Record Date: Late December, 2015 Next Earnings Release: November 25 th, 2015 Competitive Advantage & Recession Performance Deere & Company s competitive advantage comes from its brand recognition and reputation for quality in the farming machinery industry. Deere & Company s competitive advantage has given it a 60% market share of the farming equipment industry in the US and Canada. Recessions and falling grain prices hamper Deere & Company s earnings. The company saw EPS fall from a high of $4.70 in 2008 to a low of $2.82 during the depths of the Great Recession in Deere & Company s earnings are cyclical and depend upon grain prices. Farmers hold off on large capital investments when their cash flows diminish due to low grain prices. Growth Prospects, Valuation, & Catalyst Deere & Company has averaged earnings-per-share growth of 12.7% a year over the last decade. Analysts are expecting earnings-per-share of around $5.35 for fiscal 2015 versus earnings-per-share of $8.63 in The company is currently in a cyclical trough. When grain prices rise, Deere & Company will see its earnings surge. I expect the company to continue to deliver double-digit earnings-per-share growth over full economic cycles. Deere & Company is deeply undervalued. The company s average dividend yield over the last decade is 2%. Based on its average dividend yield, Deere & Company s fair value is between $98 and $147 per share (wide fluctuations make precise valuation more difficult). The stock is currently trading for $78 per share. Maximum Drawdown (starting in year 2000): -73% in March of 2009 DRIP Available: Yes, with fees Dividend Yield: 3.2% 10 Year EPS Growth Rate: 12.7% 10 Year Dividend Growth Rate: 13.3% Most Recent Dividend Increase: 15.5% Dividend History: 27 consecutive years without a reduction

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9 9 W.W. Grainger (GWW) Overview & Current Events W.W Grainger is the market leader in the United States maintenance, repair, and operations (abbreviated MRO) supply industry. The company was founded in 1927 and now generates revenues of more than $10 billion a year. W.W. Grainger released its 3 rd quarter 2015 earnings on October 16 th. The company saw adjusted earnings-per-share decline 8%. Many of W.W. Grainger s customers in the oil and gas sector are laying off employees and restructuring their businesses. This is resulting in temporary earnings declines for W.W. Grainger. The company s competitive advantage and market position remains intact, however. Next Dividend Record Date: November 9 th, 2015 Next Earnings Release: Mid-January, 2016 Competitive Advantage & Recession Performance W.W. Grainger s competitive advantage comes from its excellent supply chain. The company is the largest MRO player in North America. As a result, it is able to realize economies of scale in its operations a distinct advantage W.W. Grainger has over its smaller competitors. W.W Grainger performed well during the Great Recession of 2007 to The company s EPS fell 14% in 2009 during the worst of the recession, but quickly recovered to new all-time highs the following year. I expect a similar recover from current EPS declines. Growth Prospects, Valuation, & Catalyst W.W. Grainger has compounded EPS at 15% a year over the last decade. Shareholders should expect excellent total returns going forward of 15% to 20% a year over the next 3 years. Low oil prices could potentially reduce returns somewhat but double-digit annual total returns are still very likely. W.W. Grainger is expecting 7% to 12% revenue growth over the next 5 years. The company will accomplish this by growing e-commerce operations in Japan, Western Europe, North America, and Great Britain. The company also plans to repurchase $3 billion in shares over the next 3 years which comes to 6% share count reductions a year. In addition, the company has a dividend yield of 2.2%. From 2012 through 2014 W.W. Grainger had an average price-to-earnings ratio above 20. The company currently has an adjusted price-to-earnings ratio of Given its excellent growth potential and shareholder friendly management, the company should have a price-to-earnings ratio of at least 20. This implies a fair value of $243 or more. W.W. Grainger stock is currently trading for $210. Maximum Drawdown (starting in year 2000): -56% in October of 2000 DRIP Available: Not at this time Dividend Yield: 2.2% 10 Year EPS Growth Rate: 14.3% per year 10 Year Dividend Growth Rate: 18.3% per year Most Recent Dividend Increase: 8.3% Dividend History: 44 consecutive years of dividend increases

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11 11 Cummins (CMI) Overview & Current Events Cummins is the world s largest manufacturer of diesel engines. The company was founded in 1919 in Columbus, Indiana. Cummins now employs over 54,000 people and has an $18 billion market cap. Cummins 3 rd quarter earnings (released October 27 th ) showed demand for the company s diesel products is weakening amidst an international growth slow down. Earnings-per-share fell 8% on the quarter. Cummins management has already taken action to cut costs. The company announced it will reduce its workforce by 2,000 people and adjust its manufacturing capacity downward. These shifts are expected to save ~$180 million a year. For perspective, the company generated $1,700 million in earnings over the last year. Next Dividend Record Date: November 20 th, 2015 Next Earnings Release: Late January, 2016 Competitive Advantage & Recession Performance Cummins primary competitors are Navistar (NAV), Detroit Diesel, and Caterpillar (CAT). Navistar has a market cap of just $1 billion (small versus Cummins $18.4 billion market cap). Detroit Diesel is a private company, but is also much smaller than Cummins. Caterpillar is larger than Cummins, but diesel engine manufacturing is not Caterpillar s primary business, unlike Cummins. As a result, Cummins has a well-deserved reputation for designing and manufacturing better diesel engines than its competitors. The company has spent over $2 billion in the last 3 years on research and development to support its diesel engine innovation. Cummins Earnings-per-share fell about 40% during the worst of the Great Recession. Cummins earnings fall during recessions as its customers delay purchases of diesel engines. Still, the company remains profitable during recessions. Cummins conservative payout ratio allows it to continue paying rising dividends even during recessions. Growth Prospects, Valuation, & Catalyst Cummins grew earnings-per-share at 14.3% a year over the last decade. The company should manage double-digit earnings-per-share growth over the long-run through further international expansion, purchasing and consolidating its independent distributors, and through share repurchases. Cummins P/E ratio has averaged ~15.5 over the last 2 years. The company is currently trading for a P/E ratio (using adjusted earnings) of just I estimate fair value for Cummins stock at around $146. It is currently trading for $ Cummins stock doesn t need a catalyst excellent dividend growth prospects and a current yield of 3.8% give investors plenty of reason to own this stock. Maximum Drawdown (starting in year 2000): -76% in November of 2008 DRIP Available: Yes, has fees and for current shareholders only Dividend Yield: 3.8% 10 Year EPS Growth Rate: 14.3% per year 10 Year Dividend Growth Rate: 30.3% Most Recent Dividend Increase: 25.0% Dividend History: 25 years without a reduction

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13 13 General Mills (GIS) Overview & Current Events General Mills is the leading packaged foods company in the US. The company s brands include: Annie s, Yoplait, Nature Valley, Betty Crocker, Cheerios, Lucky Charms, and Pillsbury (among others). Over 70% of the company s operating profits come from US retail. General Mills posted excellent 1 st quarter results (9/22/15). Adjusted earnings-per-share grew 30% on a constant currency basis. Strong gains were due primarily to margin improvements. Adjusted net profit margin increased from 8.9% a year ago to 11.6% (a 30% increase). Margins are rising for General Mills thanks to its cost-cutting projects. Next Dividend Record Date: Early January, 2016 Next Earnings Release: Late December, 2015 Competitive Advantage & Recession Performance General Mills is able to sell its grocery products at premium prices because of its well established brands. The company is especially dominant in cereal, where it owns the Cheerios, Lucky Charms, Chex, Trix, and Wheaties brands. General Mills large size gives it a scale advantage and the ability to acquire smaller brands and boost their margins with its efficient operations. General Mills sells staple food products. Food is one of the few items people don t cut back on during recessions. General Mills increased revenue, earnings, and dividends each year from 2007 through 2009 during the Great Recession. The company is highly insulated from the effects of economic downturns. Growth Prospects, Valuation, & Catalyst General Mills has grown earnings-per-share at 8.4% a year over the last decade. Going forward, General Mills plans to grow revenue domestically through a focus on health benefits and natural/organic food products. The company is committed to growing earnings through improving margins with its 3 margin improvement programs: Project Century, Project Catalyst, and Project Compass. Between these 3 programs, General Mills is improving its North American supply chain, and eliminating approximately 1,500 jobs. General Mills has an adjusted P/E ratio of 19.3 and a dividend yield of 3.0%. Over the last decade, General Mills dividend yield has averaged 2.8%. Based on its historical dividend yield, the fair value for General Mills stock is around $63. The stock is currently trading at $58.11 a share. Maximum Drawdown (starting in year 2000): -32% in March of 2009 DRIP Available: Yes Dividend Yield: 3.0% 10 Year EPS Growth Rate: 8.4% per year 10 Year Dividend Growth Rate: 10.8% per year Most Recent Dividend Increase: 7.3% Dividend History: 117 consecutive years without a reduction

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15 15 Abbott Laboratories (ABT) Overview & Current Events Abbott Laboratories is a diversified health care company that manufactures and sells nutrition products, medical devices, diagnostic equipment, and pharmaceuticals. Abbott Laboratories is the global leader in adult nutrition United States leader in pediatric nutrition. Abbott Laboratories posted another quarter of favorable results this month (10/21/15). The company saw constant-currency sales rise 10.9% versus the same quarter a year ago. Abbott s stock price has risen over 10% in the last month as fears about how the company will perform when emerging market growth slows have proven to be unfounded (based on Abbott s most recent quarterly report). Next Dividend Record Date: Mid-January, 2016 Next Earnings Release: Mid-January, 2016 Competitive Advantage & Recession Performance Abbott Laboratories has invested heavily in emerging markets. The company emphasizes manufacturing its products in the same country in which the products are sold. This reduces currency fluctuation risks and builds connections with communities, companies, and governments. The company also owns many of the most trusted global brands in infant, child, and elderly nutrition. Abbott Laboratories managed to grow revenue, earnings, and dividends each year through the Great Recession of 2007 to Consumers and governments typically do not cut back on health care expenditures regardless of the economic climate. Abbott Laboratories stock fell just 4.95% in 2008 while the S&P 500 declined 38%. Growth Prospects, Valuation, & Catalyst Abbott Laboratories generates 70% of its revenue in international markets. The company has large operations in several key emerging markets. This international exposure gives Abbott excellent longterm growth prospects as it benefits from faster emerging market growth and global aging populations. Abbott Laboratories is trading at a P/E ratio of 20. The company is likely trading around fair value at current prices given its strong competitive advantage, favorable growth prospects, and shareholder friendly management. Since Abbott is likely trading around fair value, the company does not have a valuation catalyst. Emerging market growth and the global trend of spending more on health care will drive growth for the company in the future. Maximum Drawdown (starting in year 2000): -46% in July of 2002 DRIP Available: Yes, no fee but must already be a shareholder Dividend Yield: 2.1% 10 Year EPS Growth Rate: N/A (due to ABBV spin-off) 10 Year Dividend Growth Rate: N/A (due to ABBV spin-off) Most Recent Dividend Increase: 9.1% Dividend History: 43 consecutive years of dividend increases (excludes reductions from ABBV spin-off in 2012) Note: 20 year dividend yield history not shown due to 2012 spin-off of AbbVie.

16 16 Eaton Corporation (ETN) Overview & Current Events Eaton is a diversified equipment manufacturer for the following industries: electrical/power management, hydraulic, vehicle, and aerospace equipment. The company was founded in 1911 and generates ~50% if its sales internationally. The company s international exposure caused adjusted earnings-per-share to decline 25% in its most recent quarter ( ). The company s management is restructuring operations due to the international pull-back. In addition, Eaton s management is committed to significant share repurchases while the company s stock price is depressed. Next Dividend Record Date: Late January, 2016 Next Earnings Release: Late January, 2016 Competitive Advantage & Recession Performance Eaton s competitive advantage comes from its broad product reach in its power management/electrical segment. The company provides products for the full spectrum of power management. In addition, the company has a reputation for being able to commercialize new technologies to reduce costs for its customers. Eaton saw earnings-per-share decline from a high of $3.42 to just $1.30 in 2009 during the worst of the Great Recession. The company s customers tend to significantly scale back purchases during recessions, resulting in reduced profits and revenues. Despite this, the company remained profitable throughout the Great Recession. Growth Prospects, Valuation, & Catalyst Eaton has grown earnings-per-share at 6.3% a year over the last decade. Going forward, Eaton plans to return around 50% of its cash flows to investors in the form of dividends and share repurchases. Shareholders should expect total returns of 10%+ from Eaton over a full economic cycle from dividends (~4%) and earnings-per-share growth (6%+). Eaton currently has a 3.9% dividend yield. The company s average dividend yield over the last decade was 2.8%. Eaton s payout ratio has not increased substantially over the last several years. Based on the company s historical and current dividend yields, fair value for Eaton is around $78 per share. The company s stock is currently trading for $ Maximum Drawdown (starting in year 2000): -69% in March of 2009 DRIP Available: Yes, no fee but must already be a shareholder Dividend Yield: 3.9% 10 Year EPS Growth Rate: 6.3% per year 10 Year Dividend Growth Rate: 13.6% per year Most Recent Dividend Increase: 12.2% Dividend History: 32 years without a reduction

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18 18 Computer Services Inc. (CSVI) Overview & Current Events Computer Services is by far the smallest company in the top 10. It has a market cap of around $550 million. Computer Services provides several services for banks including: core bank processing, payment processing, regulatory compliance, and document services. Computer Services was founded in 1965 and has paid increasing dividends for 44 consecutive years. Computer Services latest quarterly report (10/5/15) showed an earnings-per-share decline of 1.9%. The small decline was due to lower 3 rd party sales of software and hardware. Next Dividend Record Date: Mid November, 2015 Next Earnings Release: Early January, 2016 Competitive Advantage & Recession Performance Computer Services long dividend increase history shows clear evidence of a durable competitive advantage. The company s competitive advantage stems from its trusted reputation and full-service offerings to banks. The company continues to make acquisitions in the highly fragmented regional bank service industry. Computer Services posted excellent results through the Great Recession of 2007 to The company s earnings-per-share grew each year through this difficult time even while the financial sector suffered. The company s services are vital to its customers, even during recessions. Growth Prospects, Valuation, & Catalyst Computer Services has grown its earnings-per-share at 9.8% a year over the last decade. Dividends have grown even faster, at 15.4% a year over the same time period. Computer Services uses its extremely stable cash flows to repurchase shares and pay out increasing dividends to its shareholders. The company will continue to grow going forward through bolt-on acquisitions (Computer Services has no debt on its books) and organic growth. Computer Services price-to-earnings ratio over the last five years has averaged The company is currently trading for a price-to-earnings ratio of The company s stock appears to be trading around fair value at current prices. Investors should expect total returns to come from dividends and earnings-per-share growth, not valuation multiple expansion. Maximum Drawdown (starting in year 2003): -52% in May of 2010 DRIP Available: No Dividend Yield: 2.6% 10 Year EPS Growth Rate: 9.8% 10 Year Dividend Growth Rate: 15.4% Most Recent Dividend Increase: 13.6% Dividend History: 44 years of consecutive dividend increases Note: 20 year dividend history is not available as CSVI is an OTC stock and reliable daily data is not available until October of 2003

19 19 3.5% Computer Services 12 Year Dividend Yield History 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Date 8/19/1997 8/19/1998 8/19/1999 8/17/2000 8/17/2001 8/23/2002 8/25/2003 8/25/2004 8/24/2005 8/24/2006 8/27/2007

20 20 Johnson & Johnson (JNJ) Overview & Current Events Johnson & Johnson is one of the largest health care corporations in the world. The company has paid increasing adjusted earnings-per-share for 31 consecutive years, and increasing dividends for 53 consecutive years. The company operates in 3 segments: consumer, medical devices, and pharma. Johnson & Johnson owns many well-known consumer brands including Tylenol, Band-Aid, Aveeno, Listerine, Zyrtec, among others. Johnson & Johnson saw constant-currency adjusted earnings-per-share growth of 1.2% in the company s most recent quarter (10/13/15). The company saw sales increase just 0.8% on a constant currency basis. Johnson & Johnson posted relatively poor results due to new entrants into the hepatitis C drug market which are reducing sales of the company s own treatments. Next Dividend Record Date: November 24 th, 2015 Next Earnings Release: Mid-January, 2016 Competitive Advantage & Recession Performance Johnson & Johnson s 31 consecutive years of earnings-per-share increases speak to its strong competitive advantages. The company s competitive advantage comes from a mix of its well-known brands, overall positive reputation, and its excellent research and development department. Johnson & Johnson is recession resistant. The company s health care products are just as necessary during recessions as they are during times of prosperity. Johnson & Johnson managed to grow its earnings-per-share and dividends each year through the Great Recession of 2007 to Growth Prospects, Valuation, & Catalyst Johnson & Johnson s biggest growth driver going forward will be its pharmaceutical segment. The segment has grown sales at 13.1% a year from 2012 through fiscal Investors should expect total returns of between 8% and 10% a year from Johnson & Johnson from dividends (~3%) and earningsper-share growth (5% to 7%). With an adjusted price-to-earnings ratio of just 16.8, Johnson & Johnson appears undervalued relative to its tremendous competitive advantage. The company has solid total return prospects and is an extremely low risk investment. Johnson & Johnson has one of the lowest stock price standard deviations of any stock, which reflects its consistent and stable earnings. Maximum Drawdown (starting in year 2000): -36% in July of 2002 DRIP Available: Yes, no fee but must already be a shareholder Dividend Yield: 3.0% 10 Year EPS Growth Rate: 6.1% per year 10 Year Dividend Growth Rate: 8.0% per year Most Recent Dividend Increase: 7.1% Dividend History: 53 consecutive years of dividend increases.

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22 22 United Technologies (UTX) Overview & Current Events United Technologies is a large diversified manufacturer which owns the following companies: Otis elevators, Carrier air conditioning, Kidde smoke alarms, Pratt & Whitney aircraft propulsion, UTC Aerospace Systems (aircraft components), and Sikorsky helicopters. United Technologies posted mediocre 3 rd quarter results (10/20/15). The company saw constant currency adjusted earnings-per-share rise just 1%. The down quarter is likely a result of the company being in the midst of a major restructuring plan and divestiture (Sikorsky). United Technologies announced (7/20/15) it will sell its Sikorsky helicopters division to Lockheed Martin for $9 billion. The deal is expected to close in the 4 th quarter of Proceeds of the divestiture will be used to repurchase shares. Next Dividend Record Date: November 13 th, 2015 Next Earnings Release: Late January, 2016 Competitive Advantage & Recession Performance United Technologies competitive advantage comes from a mix of its size and scale combined with lean manufacturing, technological know-how, and existing contracts and relationships with large government customers. United Technologies performed well through the Great Recession of 2007 to The company saw earnings-per-share fall just 15.9% during the worst of the Great Recession. The company s long-term contracts with military and aerospace customers help to insulate it from recessions. Growth Prospects, Valuation, & Catalyst United Technologies has grown earnings-per-share at 9.4% a year over the last decade. Management is targeting 10%+ earnings-per-share growth through a mix of organic growth, share repurchases, margin expansion, and acquisitions. I expect earnings-per-share growth of 8% to 11% a year over the next several years. This growth, combined with the company s ~2.5% dividend yield gives investors expected total returns of 10.5% to 13.5% a year going forward. The company s management should be applauded for using the proceeds of the Sikorsky divestiture for share repurchases especially when the stock is undervalued. Over the last decade (excluding the Great Recession period), United Technologies P/E ratio has averaged Fair value for the company s stock is around $107. The company s stock is currently trading for $98.41 a share. Maximum Drawdown (starting in year 2000): 52.7% in March of 2009 DRIP Available: Yes, with fees Dividend Yield: 2.6% 10 Year EPS Growth Rate: 9.4% per year 10 Year Dividend Growth Rate: 10.3% per year Most Recent Dividend Increase: 8.5% Dividend History: 45 years without a reduction

23 23 4.5% United Technologies 20 Year Dividend Yield History 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5%

24 24 Analysis of International Stocks There are 5 international stocks that currently rank in the top 10 using The 8 Rules of Dividend Investing. International stocks are removed from the top 10 list above to simplify investing for U.S. based investors. Three of the international stocks in the top 10 are based in the United Kingdom, and the other two are based in Canada. The United Kingdom does not impose a dividend withholding tax on U.S. investors. Canada does have a 15% dividend withholding tax for United States investors, but does not impose a dividend withholding tax on IRA or 401k accounts of United States investors. Name Ticker (Foreign) Growth Rate Dividend Yield P/E Ratio Rank (If in Top 10) Weir Group LON:WEIR 12.5% 4.1% (before WMT) Canadian Utilities TSE:CU 7.3% 3.4% (after DE, before GWW) Rotork LON:ROR 13.7% 2.7% (after DE, before GWW) Fortis TSE:FTS 8.8% 4.0% (before GIS, after CMI) Spectris Group LON:SXS 13.0% 2.9% (before JNJ, after CSVI) Weir Group is an industrial equipment manufacturer serving the oil & gas, mineral, power, and industrial industries. The company has paid increasing dividends for 25 consecutive years. The company appears to be undervalued at current prices due to low oil prices. Canadian Utilities is a diversified construction and utilities business operating primarily in Canada, Australia, and Mexico. The company has paid increasing dividends for 43 consecutive years. Rotork is an industrial equipment manufacturer serving the oil & gas, waste water, marine, and mining industries. The company specializes in actuators and flow control equipment. Rotork has paid increasing dividends for 25 consecutive years. Like Weir Group, Rotork also appears undervalued at current prices. Fortis is a North American electric & gas utility corporation. The company offers investors solid growth and an above average dividend yield with a reasonable P/E ratio and below average stock price volatility. The company has paid increasing dividends for 42 consecutive years. Spectris Group is a leading manufacturer and supplier of productivity and measurement instruments. The company was founded in 1915 and now has a market cap of around $2 billion. The company has paid increasing dividends for 26 consecutive years.

25 25 List of Stocks by Sector Each of the 182 stocks with 25 or more years of dividend payments without a reduction is sorted by sector below. Stocks are listed in order based on The 8 Rules of Dividend Investing, with the highest ranked first. Dividend yield is included next to each stock s ticker symbol. Basic Materials 1. Valspar Corp. (VAL) - 1.5% 2. Phillips 66 (PSX) - 2.5% 3. Helmerich & Payne Inc. (HP) - 4.9% 4. Sherwin-Williams Co. (SHW) - 1% 5. Phillips 66 Partners LP (PSXP) - 2.6% 6. Enbridge, Inc. (ENB) - 2.5% 7. BHP Billiton (BHP) - 7.5% 8. PPG Industries Inc. (PPG) - 1.4% 9. NACCO Industries (NC) - 2.3% 10. Chevron Corp. (CVX) - 4.7% 11. Imperial Oil (IMO) - 1% 12. ExxonMobil Corp. (XOM) - 3.5% 13. Air Products & Chem. (APD) - 2.3% 14. RPM International Inc. (RPM) - 2.4% 15. H.B. Fuller Company (FUL) - 1.4% 16. Air Liquide (AI.E) - 2.2% 17. ConocoPhillips (COP) - 5.5% 18. National Fuel Gas (NFG) - 3% 19. Energen Corp. (EGN) - 0.1% 20. Nucor Corp. (NUE) - 3.5% 21. Murphy Oil (MUR) - 4.9% Technology 1. Computer Services Inc. (CSVI) - 2.6% 2. Verizon Wireless (VZ) - 4.8% 3. BCE, Inc. (BCE) - 3.9% 4. AT&T Inc. (T) - 5.6% 5. Automatic Data Proc. (ADP) - 2.3% 6. Vodafone Group plc (VOD) - 7.2% 7. Telephone & Data Sys. (TDS) - 2% 8. Brady Corp. (BRC) - 3.6% 9. Diebold Inc. (DBD) - 3.1% Financial 1. AFLAC Inc. (AFL) - 2.4% 2. Waddell & Reed (WDR) - 4.7% 3. Munich Re (MUV2.B) - 4.3% 4. Harleysville Savings (HARL) - 4.2% 5. Eagle Financial Services (EFSI) - 3.5% 6. T. Rowe Price Group (TROW) - 2.8% 7. Franklin Resources (BEN) - 1.5% 8. Tompkins Financial Corp. (TMP) - 3.1% 9. Eaton Vance Corp. (EV) - 2.9% 10. Torchmark Insurance (TMK) - 0.9% 11. American Express (AXP) - 1.6% 12. McGraw Hill Financial Inc. (MHFI) - 1.4% 13. Farmers & Merchants Banc. (FMCB) - 2.2% 14. Commerce Bancshares (CBSH) - 2% 15. Community Trust Banc. (CTBI) - 3.6% 16. HCP Inc. (HCP) - 6.1% 17. 1st Source Corp. (SRCE) - 2% 18. First Financial Corp. (THFF) - 2.9% 19. National Retail Properties (NNN) - 4.6% 20. First Financial Bankshares (FFIN) - 1.9% 21. M&T Bank Corporation (MTB) - 2.3% 22. Realty Income (O) - 4.6% 23. Universal Health Realty Trust (UHT) - 5.2% 24. Arthur J Gallagher (AJG) - 3.4% 25. Old Republic International (ORI) - 4.1% 26. Cincinnati Financial (CINF) - 3.1% 27. RLI Corp. (RLI) - 1.2% 28. Public Storage (PSA) - 3% 29. Northern Trust (NTRS) - 2% 30. Mercury General Corp. (MCY) - 4.6% 31. United Bankshares Inc. (UBSI) - 3.2% 32. Federal Realty Inv. Trust (FRT) - 2.6%

26 26 Consumer Goods 1. General Mills (GIS) - 3% 2. Cranswick plc (CWK.L) - 2% 3. Coca-Cola Company (KO) - 3.1% 4. PZ Cussons plc (PZC.L) - 2.6% 5. Hormel Foods Corp. (HRL) - 1.5% 6. Altria Group Inc. (MO) - 3.7% 7. Church & Dwight (CHD) - 1.6% 8. Kerry Group (KYGA.L) - 0.5% 9. Hershey (HSY) - 2.6% 10. The J.M. Smucker Co. (SJM) - 2.3% 11. Polaris Industries (PII) - 1.9% 12. Johnson Controls (JCI) - 2.3% 13. VF Corp. (VFC) - 1.9% 14. Kellogg (K) - 2.8% 15. McCormick & Co. (MKC) - 1.9% 16. Ecolab, Inc. (ECL) - 1.1% 17. Philip Morris (PM) - 4.6% 18. Procter & Gamble Co. (PG) - 3.5% 19. Nestle (NESN.V) - 2.9% 20. Diageo plc (DEO) - 3.7% 21. Nike (NKE) - 0.9% 22. Young & Co's Brewery (YNGA.L) - 1.4% 23. Universal Corp. (UVV) - 3.9% 24. Mondelez (MDLZ) - 1.5% 25. Stepan Company (SCL) - 1.4% 26. PepsiCo Inc. (PEP) - 2.7% 27. Archer Daniels Midland (ADM) - 2.5% 28. Colgate-Palmolive Co. (CL) - 2.3% 29. Flowers Foods (FLO) - 2.1% 30. Kraft-Heinz Company (KHC) - 2.8% 31. Clorox Company (CLX) - 2.5% 32. Brown-Forman Class B (BF-B) - 1.3% 33. Bemis Company (BMS) - 2.4% 34. Leggett & Platt Inc. (LEG) - 2.8% 35. Sonoco Products Co. (SON) - 3.3% 36. Carlisle Companies (CSL) - 1.4% 37. Kimberly-Clark Corp. (KMB) - 2.9% 38. Lancaster Colony Corp. (LANC) - 1.6% 39. Home Depot (HD) - 1.9% 40. Unilever (UL) - 2.9% 41. Henkel (HEN3.E) - 1.3% 42. L'Oreal (OR.E) - 1.6% 43. Weyco Group Inc. (WEYS) - 2.8% 44. Tootsie Roll Industries (TR) - 1.1% 45. Lowe's Companies (LOW) - 1.5% 46. HNI Corp (HNI) - 2.5%n Utilities 1. Canadian Utilities (CU.TO) - 3.4% 2. Fortis (FTS.TO) - 4% 3. Southern Company (SO) - 4.8% 4. SCANA Corp. (SCG) - 3.7% 5. Consolidated Edison (ED) - 4% 6. Conn. Water Service (CTWS) - 2.9% 7. Black Hills Corp. (BKH) - 3.5% 8. UGI Corp. (UGI) - 2.5% 9. Questar Corp. (STR) - 4.1% 10. Vectren Corp. (VVC) - 3.3% 11. Atmos Energy (ATO) - 2.5% 12. Northwest Natural Gas (NWN) - 3.9% 13. WGL Holdings Inc. (WGL) - 3% 14. MGEE Energy (MGEE) - 2.9% 15. American States Water (AWR) - 2.2% 16. Middlesex Water Co. (MSEX) - 3% 17. Otter Tail (OTTR) - 4.5% 18. California Water Service (CWT) - 3% 19. Piedmont Natural Gas (PNY) - 2.3% 20. SJW Corp. (SJW) - 2.5%

27 27 Industrial Goods 1. Weir Group plc (WEIR.L) - 4.1% 2. Deere & Co. (DE) - 3.2% 3. Rotork plc (ROR.L) - 2.7% 4. Cummins (CMI) - 3.8% 5. Eaton (ETN) - 3.9% 6. Spectris Group plc (SXS.L) - 2.9% 7. United Technologies (UTX) - 2.6% 8. Spirax-Sarco Engineering (SPX.L) - 2.2% 9. Cobham plc (COB.L) - 3.9% 10. Parker-Hannifin Corp. (PH) - 2.4% 11. Caterpillar (CAT) - 4.2% 12. Dover Corp. (DOV) - 2.6% 13. Donaldson Company (DCI) - 2.3% 14. Emerson Electric (EMR) - 4% 15. General Dynamics (GD) - 1.9% 16. Pentair Ltd. (PNR) - 2.3% 17. Clarcor Inc. (CLC) - 1.8% 18. Illinois Tool Works (ITW) - 2.4% 19. Nordson Corp. (NDSN) - 1.3% 20. 3M Company (MMM) - 2.6% 21. Stanley Black & Decker (SWK) - 2.1% 22. Tennant Company (TNC) - 1.4% 23. Gorman-Rupp Company (GRC) - 1.4% 24. Raven Industries (RAVN) - 2.9% Services 1. Wal-Mart Stores Inc. (WMT) - 3.4% 2. W.W. Grainger Inc. (GWW) - 2.2% 3. McDonald's Corp. (MCD) - 3% 4. Empire Co. (EMP.A.TO) - 1.5% 5. Disney (DIS) - 1.2% 6. Genuine Parts Co. (GPC) - 2.7% 7. Cardinal Health (CAH) - 1.9% 8. United Parcel Service (UPS) - 2.8% 9. Walgreens Boots Alliance (WBA) - 1.7% 10. ABM Industries Inc. (ABM) - 2.3% 11. Target Corp. (TGT) - 2.9% 12. Cintas Corp. (CTAS) - 1.1% 13. Wolters Kluwer NV (WKL.A) - 2.3% 14. RR Donnelley (RRD) - 6.2% 15. Sysco Corp. (SYY) - 2.9% 16. Mine Safety Appliances (MSA) - 2.9% 17. Bowl America (BWL.A) - 4.7% Health Care 1. AbbVie (ABBV) - 3.4% 2. Abbott Laboratories (ABT) - 2.1% 3. Johnson & Johnson (JNJ) - 3% 4. Medtronic Inc. (MDT) - 2.1% 5. Becton Dickinson & Co. (BDX) - 1.7% 6. United Health Group (UNH) - 1.7% 7. C.R. Bard Inc. (BCR) - 0.5% 8. Baxter International (BAX) - 1.2% 9. Baxalta (BXLT) - 0.8% 10. Novo Nordisk (NVO) - 1.4% 11. Merck & Co. (MRK) - 3.3% 12. Roche (ROG.V) - 3% 13. Eli Lilly & Company (LLY) - 2.5%

28 28 List of Stocks by Rank Each of the 182 stocks with 25 or more years of dividend payments without a reduction is listed below. Stocks are listed in order based on The 8 Rules of Dividend Investing, with the highest ranked first. Dividend yield is included next to each stock s ticker symbol 1. Weir Group plc (WEIR.L) - 4.1% 2. Wal-Mart Stores Inc. (WMT) - 3.4% 3. Deere & Co. (DE) - 3.2% 4. Canadian Utilities (CU.TO) - 3.4% 5. AbbVie (ABBV) - 3.4% 6. Rotork plc (ROR.L) - 2.7% 7. W.W. Grainger Inc. (GWW) - 2.2% 8. Cummins (CMI) - 3.8% 9. Fortis (FTS.TO) - 4% 10. General Mills (GIS) - 3% 11. Abbott Laboratories (ABT) - 2.1% 12. Eaton (ETN) - 3.9% 13. Computer Services (CSVI) - 2.6% 14. Spectris Group plc (SXS.L) - 2.9% 15. Johnson & Johnson (JNJ) - 3% 16. United Technologies (UTX) - 2.6% 17. Cranswick plc (CWK.L) - 2% 18. AFLAC Inc. (AFL) - 2.4% 19. Coca-Cola Company (KO) - 3.1% 20. PZ Cussons plc (PZC.L) - 2.6% 21. Waddell & Reed (WDR) - 4.7% 22. Spirax-Sarco Engine. (SPX.L) - 2.2% 23. Cobham plc (COB.L) - 3.9% 24. Verizon Wireless (VZ) - 4.8% 25. Valspar Corp. (VAL) - 1.5% 26. Phillips 66 (PSX) - 2.5% 27. Hormel Foods Corp. (HRL) - 1.5% 28. Parker-Hannifin Corp. (PH) - 2.4% 29. Altria Group Inc. (MO) - 3.7% 30. Church & Dwight (CHD) - 1.6% 31. McDonald's Corp. (MCD) - 3% 32. Caterpillar (CAT) - 4.2% 33. Helmerich & Payne Inc. (HP) - 4.9% 34. Kerry Group (KYGA.L) - 0.5% 35. Munich Re (MUV2.B) - 4.3% 36. Harleysville Savings (HARL) - 4.2% 37. Dover Corp. (DOV) - 2.6% 38. Eagle Financial Servic. (EFSI) - 3.5% 39. Hershey (HSY) - 2.6% 40. Empire Co. (EMP.A.TO) - 1.5% 41. BCE, Inc. (BCE) - 3.9% 42. Southern Company (SO) - 4.8% 43. The J.M. Smucker Co. (SJM) - 2.3% 44. Medtronic Inc. (MDT) - 2.1% 45. Polaris Industries (PII) - 1.9% 46. SCANA Corp. (SCG) - 3.7% 47. Johnson Controls (JCI) - 2.3% 48. VF Corp. (VFC) - 1.9% 49. Becton Dickinson & C. (BDX) - 1.7% 50. United Health Group (UNH) - 1.7% 51. Disney (DIS) - 1.2% 52. Kellogg (K) - 2.8% 53. McCormick & Co. (MKC) - 1.9% 54. Ecolab, Inc. (ECL) - 1.1% 55. Sherwin-Williams Co. (SHW) - 1% 56. Donaldson Company (DCI) - 2.3% 57. T. Rowe Price Group (TROW) - 2.8% 58. Genuine Parts Co. (GPC) - 2.7% 59. Franklin Resources (BEN) - 1.5% 60. Emerson Electric (EMR) - 4% 61. Cardinal Health (CAH) - 1.9% 62. Consolidated Edison (ED) - 4% 63. C.R. Bard Inc. (BCR) - 0.5% 64. Baxter International (BAX) - 1.2% 65. Philip Morris (PM) - 4.6% 66. General Dynamics (GD) - 1.9% This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

29 Procter & Gamble Co. (PG) - 3.5% 108. Community Trust Ba. (CTBI) - 3.6% 68. Pentair Ltd. (PNR) - 2.3% 109. PPG Industries Inc. (PPG) - 1.4% 69. Clarcor Inc. (CLC) - 1.8% 110. Leggett & Platt Inc. (LEG) - 2.8% 70. Nestle (NESN.V) - 2.9% 111. UGI Corp. (UGI) - 2.5% 71. Baxalta (BXLT) - 0.8% 112. Stanley Black & Dec. (SWK) - 2.1% 72. Tompkins Financial (TMP) - 3.1% 113. Target Corp. (TGT) - 2.9% 73. Diageo plc (DEO) - 3.7% 114. Questar Corp. (STR) - 4.1% 74. Eaton Vance Corp. (EV) - 2.9% 115. Sonoco Products Co. (SON) - 3.3% 75. AT&T Inc. (T) - 5.6% 116. HCP Inc. (HCP) - 6.1% 76. Nike (NKE) - 0.9% 117. Vectren Corp. (VVC) - 3.3% 77. Young & Co's Bre. (YNGA.L) - 1.4% 118. Carlisle Companies (CSL) - 1.4% 78. Universal Corp. (UVV) - 3.9% 119. Atmos Energy (ATO) - 2.5% 79. Torchmark Insurance (TMK) - 0.9% 120. Northwest Natural Gas (NWN) - 3.9% 80. Illinois Tool Works (ITW) - 2.4% 121. Cintas Corp. (CTAS) - 1.1% 81. American Express (AXP) - 1.6% 122. NACCO Industries (NC) - 2.3% 82. Novo Nordisk (NVO) - 1.4% 123. Chevron Corp. (CVX) - 4.7% 83. Mondelez (MDLZ) - 1.5% 124. Imperial Oil (IMO) - 1% 84. United Parcel Service (UPS) - 2.8% 125. Kimberly-Clark Corp. (KMB) - 2.9% 85. Stepan Company (SCL) - 1.4% 126. ExxonMobil Corp. (XOM) - 3.5% 86. Merck & Co. (MRK) - 3.3% 127. Air Products & Chem. (APD) - 2.3% 87. Nordson Corp. (NDSN) - 1.3% st Source Corp. (SRCE) - 2% 88. PepsiCo Inc. (PEP) - 2.7% 129. RPM International Inc. (RPM) - 2.4% 89. McGraw Hill Financi. (MHFI) - 1.4% 130. First Financial Corp. (THFF) - 2.9% 90. Phillips 66 Partners (PSXP) - 2.6% 131. National Retail Proper. (NNN) - 4.6% 91. Enbridge, Inc. (ENB) - 2.5% 132. First Financial Banksh. (FFIN) - 1.9% 92. Archer Daniels Midla. (ADM) - 2.5% 133. WGL Holdings Inc. (WGL) - 3% 93. Colgate-Palmolive Co. (CL) - 2.3% 134. Lancaster Colony (LANC) - 1.6% 94. 3M Company (MMM) - 2.6% 135. M&T Bank Corp. (MTB) - 2.3% 95. Flowers Foods (FLO) - 2.1% 136. Wolters Kluwer NV (WKL.A) - 2.3% 96. Farmers & Merchant. (FMCB) - 2.2% 137. RR Donnelley (RRD) - 6.2% 97. BHP Billiton (BHP) - 7.5% 138. Realty Income (O) - 4.6% 98. Commerce Bancshares (CBSH) - 2% 139. H.B. Fuller Company (FUL) - 1.4% 99. Kraft-Heinz Company (KHC) - 2.8% 140. Universal Health Realt. (UHT) - 5.2% 100. Clorox Company (CLX) - 2.5% 141. MGEE Energy (MGEE) - 2.9% 101. Brown-Forman (BF-B) - 1.3% 142. Home Depot (HD) - 1.9% 102. Conn. Water Service (CTWS) - 2.9% 143. American States Water (AWR) - 2.2% 103. Walgreens Boots Alli. (WBA) - 1.7% 144. Unilever (UL) - 2.9% 104. ABM Industries Inc. (ABM) - 2.3% 145. Automatic Data Proc. (ADP) - 2.3% 105. Bemis Company (BMS) - 2.4% 146. Henkel (HEN3.E) - 1.3% 106. Black Hills Corp. (BKH) - 3.5% 147. Vodafone Group plc (VOD) - 7.2% 107. Roche (ROG.V) - 3% 148. Tennant Company (TNC) - 1.4% This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

30 L'Oreal (OR.E) - 1.6% 150. Sysco Corp. (SYY) - 2.9% 151. Telephone & Data Sys. (TDS) - 2% 152. Mine Safety Applian. (MSA) - 2.9% 153. Weyco Group Inc. (WEYS) - 2.8% 154. Arthur J Gallagher (AJG) - 3.4% 155. Bowl America (BWL.A) - 4.7% 156. Middlesex Water Co. (MSEX) - 3% 157. Eli Lilly & Company (LLY) - 2.5% 158. Old Republic Internati. (ORI) - 4.1% 159. Cincinnati Financial (CINF) - 3.1% 160. RLI Corp. (RLI) - 1.2% 161. Tootsie Roll Industries (TR) - 1.1% 162. Public Storage (PSA) - 3% 163. Otter Tail (OTTR) - 4.5% 164. Brady Corp. (BRC) - 3.6% 165. California Water Service (CWT) - 3% 166. Lowe's Companies (LOW) - 1.5% 167. Air Liquide (AI.E) - 2.2% 168. Northern Trust (NTRS) - 2% 169. Piedmont Natural Gas (PNY) - 2.3% 170. ConocoPhillips (COP) - 5.5% 171. HNI Corp (HNI) - 2.5% 172. Gorman-Rupp Compa. (GRC) - 1.4% 173. SJW Corp. (SJW) - 2.5% 174. Mercury General (MCY) - 4.6% 175. National Fuel Gas (NFG) - 3% 176. Diebold Inc. (DBD) - 3.1% 177. United Bankshares (UBSI) - 3.2% 178. Energen Corp. (EGN) - 0.1% 179. Federal Realty Inv. Tru. (FRT) - 2.6% 180. Nucor Corp. (NUE) - 3.5% 181. Murphy Oil (MUR) - 4.9% 182. Raven Industries (RAVN) - 2.9% This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

31 31 Portfolio Building Guide The process of building a high quality dividend growth portfolio is not complicated: Each month invest in the top ranked stock in which you own the smallest dollar amount. Over time, you will build a well-diversified portfolio of great businesses purchased at attractive prices. Examples Portfolio 1 Portfolio 2 Ticker Name Amount Ticker Name Amount WMT Wal-Mart Stores Inc. $ 1,002 WMT Wal-Mart Stores Inc. $ 4,374 DE Deere & Co. $ - DE Deere & Co. $ 4,878 GWW W.W. Grainger Inc. $ - GWW W.W. Grainger Inc. $ 4,353 CMI Cummins $ - CMI Cummins $ 2,952 GIS General Mills $ - GIS General Mills $ 3,309 ABT Abbott Laboratories $ - ABT Abbott Laboratories $ 4,864 ETN Eaton $ - ETN Eaton $ 6,660 CSVI Computer Services Inc. $ - CSVI Computer Services Inc. $ 2,367 JNJ Johnson & Johnson $ - JNJ Johnson & Johnson $ 2,818 UTX United Technologies $ - UTX United Technologies $ 6,243 - If you had portfolio 1, you would buy Deere & Co., the top ranked stock you own least. - If you had portfolio 2, you would buy CSVI, the top ranked stock you own least. If you have an existing portfolio or a large lump sum to invest, switch over to the Sure Dividend strategy over a period of 20 months. Each month, take 1/20 of your initial portfolio value, and buy the top ranked stock you own the least (as per the examples above). When you sell a stock, use the proceeds to purchase the top ranked stock you own the least. Reinvest dividends in the same manner. This simple investing process will build a diversified portfolio of high quality dividend stocks over a period of less than 2 years. Further, higher ranked stocks will receive proportionately more investment dollars as they will stay on the rankings longer. You will build up large positions in the highest quality stocks over your investing career. Alternatively, the top 10 list is also useful as an idea generation tool for those with a different portfolio allocation plan. This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

32 32 List of Past Recommendations The stocks below are all of the previous recommendations of Sure Dividend that are no longer in the top 10 using The 8 Rules of Dividend Investing. The date each stock was first recommended is also shown below. Name Current Rank Status 1 st Rec. Date Sell Date Clorox (CLX) 100 Hold April 2014 N/A Target (TGT) 113 Hold April 2014 N/A Kimb.-Clark (KMB) 125 Hold April 2014 N/A ExxonMobil (XOM) 126 Hold April 2014 N/A AFLAC (AFL) 18 Hold April 2014 N/A PepsiCo (PEP) 88 Hold April 2014 N/A McDonald s (MCD) 31 Hold April 2014 N/A Coca-Cola (KO) 19 Hold April 2014 N/A Genuine Parts (GPC) 58 Hold May 2014 N/A 3M (MMM) 94 Hold May 2014 N/A AT&T (T) 75 Hold June 2014 N/A Becton, Dickins. (BDX) 49 Hold June 2014 N/A Philip Morris (PM) 65 Hold June 2014 N/A J.M. Smucker (SJM) 43 Hold August 2014 N/A EcoLab (ECL) 54 Hold October 2014 N/A ConocoPhillips (COP) 170 Hold December 2014 N/A Kellogg (K) 52 Hold December 2014 N/A Helmerich & Payne (HP) 33 Hold February 2015 N/A Altria (MO) 29 Hold April 2015 N/A Baxalta (BXLT) 71 Hold July 2015 N/A BCE, Inc. (BCE) 41 Hold August 2015 N/A Caterpillar (CAT) 32 Hold August 2015 N/A Chubb (CB) N/A Sold April 2014 July 2015 This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.