Sure Dividend. December 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 December 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 Cummins (CMI)... 7 W.W. Grainger (GWW)... 9 Verizon (VZ) United Technologies (UTX) Deere & Company (DE) General Mills (GIS) Abbott Laboratories (ABT) Procter & Gamble (PG) Computer Services Inc. (CSVI) 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 United States economy gained 211,000 jobs in November. We are in strange economic times; good news brings the possibility of bad news. The better the United States economy does, the more likely the Federal Reserve is to increase interest rates. Rising rates will slow economic growth as it makes expansion more difficult due to the cost of borrowing being higher. The mix of economic growth and fear left the market nearly flat in November. Artificially low interest rates are the crutch that has been propping up the global economy (Europe and Japan have taken similar approaches) since the Great Recession. Eventually, the crutch of low interest rates will be removed. The global economy may stumble rather than continue walking. What will rising rates mean for dividend stocks? Stocks with low growth rates and high dividend yields (think most utilities and REITs) will likely see worse stock price declines than faster growing stocks. That s because their value comes primarily from current income rather than growth. When a yield of 5.0% and no growth no longer looks attractive, the yield must rise (and price fall) to entice new buyers. Dividend growth stocks will likely perform better (though will probably still see temporary price declines). The bulk of value in companies like General Mills and Abbott Laboratories does not come from their current dividend payments. It comes from their long-term growth prospects. Update & Note about Rankings I am always looking to make the Sure Dividend system better. This month, the growth numbers on much of the Sure Dividend database were updated to reflect my own future growth estimates rather than historical growth numbers. This corrects for companies that have had an unusually bad decade, but have more favorable growth prospects ahead (or the opposite). The biggest benefactors (in the Sure Dividend system) from this change are Procter & Gamble and Verizon, which both made the Top 10 this month. This month AbbVie (ABBV) made the top 10 (it would have ranked 3 rd ). I have removed it from the Top 10 because it generates 61% 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 in good conscience.

4 4 The Top 10 List Ticker Name Score Months Yield Payout Growth Beta Volatility WMT Wal-Mart % 41% 6.0% % CMI Cummins % 41% 14.0% % GWW W.W. Grainger % 38% 12.5% % VZ Verizon Wireless % 59% 6.0% % UTX United Technologies % 38% 8.5% % DE Deere & Co % 42% 13.3% % GIS General Mills % 58% 8.0% % ABT Abbott Labs % 43% 10.0% % PG Procter & Gamble % 67% 8.0% % CSVI Computer Services % 48% 9.6% N/A 24% 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. The Months column shows the number of consecutive months a stock has been in the Top 10. Eaton and Johnson & Johnson were replaced by Procter & Gamble and Verizon in the Top 10 this month. Both remain excellent long-term holdings. 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: 3.2% 2.0% Payout Ratio: 48.0% 44.7% Growth Rate: 9.6% 7.4% PE Ratio:

5 5 Analysis of Top 10 Stocks Wal-Mart (WMT) Overview & Current Events Wal-Mart is the global leader in discount retail. The company has revenues of more than $480 billion over the last 12 months. If Wal-Mart were a country (assuming revenue is about equal to GDP), it would be the 28 th largest in the world. Wal-Mart released its 3 rd quarter results on November 17 th. Constant currency revenue grew 2.8% for the company. Comparable store sales in United States Wal-Mart stores grew 1.5%, the 5 th consecutive quarter of increases. Operating income declined 8.8% versus the same quarter a year ago due to wages hikes and investments in digital sales. Next Dividend Record Date: Mid March, 2016 Next Earnings Release: Late February, 2016 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. Investors should expect total returns of 8.3% to 10.3% a year over the long run. Total returns will come from: 3% to 4% sales growth a year, 2% to 3% share repurchases a year, and a dividend yield of 3.3%. 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. Additionally, the company s shares are trading near all time dividend yield highs. Based on its historical dividend yield and price-to-earnings ratio, fair value for Wal-Mart shares is likely around $80. The stock is currently trading for under $60. Maximum Drawdown (starting in year 2000): -37% in October of 2000 (hit 36% in November 2015) DRIP Available: Yes, with fees Dividend Yield: 3.3% 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

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7 7 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 50,000 people and has a $16 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 as Earnings-per-share fell 8%. Cummins management responded by announcing workforce reductions of 2,000 people and reducing manufacturing capacity. These shifts are expected to save ~$180 million a year. The company s stock was recently (12/1/15) downgraded by Bank of America Merrill Lynch, further reducing the stock s price (and increasing the dividend yield). 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 $16 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 will likely 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 9.8. 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 4.2% 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: 4.2% 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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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%. The following headwinds are causing the company s slow-down (by affecting W.W. Grainger s customer base): Economic slowdown in China, Strong United States dollar, and oil and gas price declines. The company s competitive advantage and market position remains intact, however. Next Dividend Record Date: Mid February, 2016 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 2.3%. 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 around $201. Maximum Drawdown (starting in year 2000): -56% in October of 2000 DRIP Available: Not at this time Dividend Yield: 2.3% 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 Verizon (VZ) Overview & Current Events Verizon is the 2 nd largest telecommunications company in North America, based on its $186 billion market cap. Verizon is the largest wireless carrier in the United States based on its ~44% market share. AT&T is second with around a 40% market share. Verizon posted favorable results in its most recent quarter (10/20/15). The company saw adjusted earnings-per-share grow 17%. Margins increased 33%, and revenue grew 5.4% versus the same quarter a year ago. Next Dividend Record Date: Early January, 2016 Next Earnings Release: Late January, 2016 Competitive Advantage & Recession Performance Verizon and AT&T together control over 80% of the wireless market in the United States. The telecommunications market has high barriers to entry which inhibit competition due to the large upfront costs of building a network. Additionally, spectrum auctions prohibit competition. Verizon spent $10 billion in the latest spectrum auction (which raised $44 billion total for the government). Verizon performs well during recessions. The company s contract based subscriptions lock in customers. Verizon s wireless network provides a vital service that the company s customers (in general) do not cut back on even during difficult economic times. Growth Prospects, Valuation, & Catalyst I expect Verizon to generate earnings-per-share growth of around 6% a year going forward. The company s wireless service business continues to grow organically. Verizon recently acquired AOL to build a digital and video growth platform centered on mobile users. The company plans to monetize this channel through advertising. Verizon offers investors total returns of around 11% a year from its large dividend yield of 4.9% and expected 6% earnings-per-share growth rates. Verizon is currently trading for a price-to-earnings ratio of just The company s average price-toearnings ratio over the last decade is Verizon shares are currently trading for $46 a share. Based on its historical average price-to-earnings ratio, shares should be trading for around $56 a share. Maximum Drawdown (starting in year 2000): -55% in July of 2002 DRIP Available: Yes, with fees Dividend Yield: 4.9% 10 Year EPS Growth Rate: 5.0% 10 Year Dividend Growth Rate: 5.0% Most Recent Dividend Increase: 2.7% Dividend History: 31 consecutive years without a reduction

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13 13 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, and UTC Aerospace Systems (aircraft components). 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 closed its sale of Sikorsky helicopters to Lockheed Martin on November 6 th. The company will use the $6 billion in after-tax proceeds from the sale for share repurchases. Next Dividend Record Date: Mid February, 2016 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 $96 a share. Maximum Drawdown (starting in year 2000): 52.7% in March of 2009 DRIP Available: Yes, with fees Dividend Yield: 2.7% 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

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15 15 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. Deere & Company operates in 3 segments: Agriculture & Turf, Construction & Forestry, and Financial Services. Deere & Company released its fiscal 2015 results on November 25 th. The company saw earnings-pershare decline 33% on the year. The company has done well reducing costs to increase profits during the current down cycle in agricultural prices. Growth slowdowns in emerging markets have also affected the company s profitability. Total earnings were $1.9 billion in earnings are expected to be around $1.4 billion as weakness continues. Despite weakness in the industry, Deere & Company remains a safe long-term investment. The company pays out about $800 million a year in dividends. Even during industry lows, the company expects to make around $1.4 billion in profits in 2016 for a dividend payout ratio of 57%. Next Dividend Record Date: December 31 st, 2015 Next Earnings Release: Late February, 2016 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 12.8% a year from earnings lows in 2009 to earnings lows in Peak-to-peak (2008 to 2013) earnings-per-share grew at 14.1% a year for the company. 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 around $117 a share. The stock is currently trading for $80 a share. Maximum Drawdown (starting in year 2000): -73% in March of 2009 DRIP Available: Yes, with fees Dividend Yield: 3.0% 10 Year EPS Growth Rate: 12.8% (used trough-to-trough growth) 10 Year Dividend Growth Rate: 13.3% Most Recent Dividend Increase: No Increase in last 12 months Dividend History: 27 consecutive years without a reduction

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17 17 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 to 11.6%, up from 8.9% a year ago (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: December 17 th, 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 an advertising spending advantage as well as the ability to acquire and scale smaller, promising brands (like Annie s). 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 19.4 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 $58.52 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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19 19 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% from temporary lows set in October 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 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.

20 20 Procter & Gamble (PG) Overview & Current Events Procter & Gamble is the largest personal products company in the world based on its market cap of over $200 billion. The company s key brands include: Crest, Pampers, Charmin, Always, Gillette, Tide, Nyquil, Olay, Dawn, and Pantene (among many others). In total, the company has 21 brands that generate over $1 billion a year in sales. Procter & Gamble realized 12% constant-currency adjusted earnings-per-share growth in its most recent quarter (10/23/15). The company s earnings growth is a result of margin improvements from efficiency gains rather than sales growth. Next Dividend Record Date: Late January, 2016 Next Earnings Release: Late January, 2016 Competitive Advantage & Recession Performance Procter & Gamble has increased its dividend payments for 59 consecutive years. The company s durable competitive advantage comes from its well-known brands and tremendous size. Procter & Gamble s massive size allows it to outspend its rivals on advertising, buying greater awareness and value for its brands. Procter & Gamble sells relatively inexpensive consumer goods products that are used and repurchased. As a result, the company tends to do well during recessions. Procter & Gamble saw its earnings-pershare fall just 1% during the worst year of the Great Recession. Growth Prospects, Valuation, & Catalyst From 1999 through 2008, Procter & Gamble grew its earnings-per-share at 10% a year. From 2009 through 2015, the company has grown earnings-per-share at 2% a year. Recent results show that Procter & Gamble is returning to its faster growth ways. The company has shed non-core brands and is undertaking sizeable cost cutting and restructuring programs to become more efficient. I expect the company to generate earnings-per-share growth of around 8% a year from these efforts, organic growth, and share repurchases. Procter & Gamble is currently trading for a price-to-earnings ratio of 19.7 (using adjusted earnings). The company s fair price-to-earnings ratio is around 20 given its strong competitive advantage and 8% expected earnings-per-share growth. Procter & Gamble is trading around fair value at this time. Shareholders should expect total returns of around 11% a year from earnings-per-share growth and the stock s 3%+ dividend yield. Maximum Drawdown (starting in year 2000): 54% in March of 2000 DRIP Available: Yes, with sales fee Dividend Yield: 3.4% 10 Year EPS Growth Rate: 4.8% 10 Year Dividend Growth Rate: 8.8% Most Recent Dividend Increase: 3.0% Dividend History: 59 consecutive years of dividend increases

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22 22 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 $530 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 February, 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 9.6% 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: 2.7% 10 Year EPS Growth Rate: 9.6% 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

23 23 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

24 24 Analysis of International Stocks There are 4 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 is 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% 3.7% (after CMI, before GWW) Rotork LON:ROR 13.7% 2.8% (after CMI, before GWW) Fortis TSE:FTS 8.8% 4.0% (after CMI, before GWW) 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.

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. Phillips 66 (PSX) - 2.5% 2. Valspar Corp. (VAL) - 1.6% 3. PPG Industries Inc. (PPG) - 1.4% 4. Enbridge, Inc. (ENB) - 3.1% 5. Phillips 66 Partners LP (PSXP) - 3.3% 6. ExxonMobil Corp. (XOM) - 3.7% 7. Sherwin-Williams Co. (SHW) - 1% 8. Helmerich & Payne Inc. (HP) - 5.2% 9. Chevron Corp. (CVX) - 4.8% 10. National Fuel Gas (NFG) - 3.8% 11. NACCO Industries (NC) - 2.5% 12. Imperial Oil (IMO) - 1% 13. BHP Billiton (BBL) % 14. Air Products & Chem. (APD) - 2.3% 15. RPM International Inc. (RPM) - 2.3% 16. H.B. Fuller Company (FUL) - 1.3% 17. Air Liquide (AI.E) - 2.4% 18. Energen Corp. (EGN) - 0.1% 19. Nucor Corp. (NUE) - 3.6% 20. ConocoPhillips (COP) - 5.8% 21. Murphy Oil (MUR) - 5.5% Technology 1. Verizon Wireless (VZ) - 4.9% 2. Computer Services Inc. (CSVI) - 2.7% 3. AT&T Inc. (T) - 5.5% 4. BCE, Inc. (BCE) - 3.9% 5. Automatic Data Proc. (ADP) - 2.4% 6. Telephone & Data Sys. (TDS) - 2% 7. Vodafone Group plc (VOD) - 5.3% 8. Brady Corp. (BRC) - 3.2% 9. Diebold Inc. (DBD) - 3.4% Financial 1. Waddell & Reed (WDR) - 5.1% 2. Harleysville Savings (HARL) - 4.3% 3. Munich Re (MUV2.B) - 4.2% 4. Eagle Financial Services (EFSI) - 3.5% 5. T. Rowe Price Group (TROW) - 2.7% 6. Franklin Resources (BEN) - 1.5% 7. AFLAC Inc. (AFL) - 2.6% 8. Farmers & Merchants Banc. (FMCB) - 2.4% 9. Cincinnati Financial (CINF) - 3% 10. McGraw Hill Financial Inc. (MHFI) - 1.3% 11. Torchmark Insurance (TMK) - 0.9% 12. Eaton Vance Corp. (EV) - 2.9% 13. American Express (AXP) - 1.6% 14. Tompkins Financial Corp. (TMP) - 2.8% 15. Commerce Bancshares (CBSH) - 2% 16. Community Trust Banc. (CTBI) - 3.4% 17. HCP Inc. (HCP) - 6.3% 18. National Retail Properties (NNN) - 4.5% 19. 1st Source Corp. (SRCE) - 2.1% 20. Realty Income (O) - 4.6% 21. First Financial Bankshares (FFIN) - 1.8% 22. Universal Health Realty Trust (UHT) - 5% 23. M&T Bank Corporation (MTB) - 2.2% 24. First Financial Corp. (THFF) - 2.7% 25. Arthur J Gallagher (AJG) - 3.4% 26. RLI Corp. (RLI) - 1.2% 27. Old Republic International (ORI) - 3.9% 28. Public Storage (PSA) - 2.8% 29. Mercury General Corp. (MCY) - 4.8% 30. Northern Trust (NTRS) - 1.9% 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. Procter & Gamble Co. (PG) - 3.4% 3. Coca-Cola Company (KO) - 3% 4. PZ Cussons plc (PZC.L) - 2.6% 5. Altria Group Inc. (MO) - 3.9% 6. Church & Dwight (CHD) - 1.5% 7. Polaris Industries (PII) - 2.1% 8. Cranswick plc (CWK.L) - 1.9% 9. Kerry Group (KYGA.L) - 0.5% 10. Johnson Controls (JCI) - 2.7% 11. Hershey (HSY) - 2.7% 12. Philip Morris (PM) - 4.5% 13. Archer Daniels Midland (ADM) - 3.1% 14. Ecolab, Inc. (ECL) - 1.1% 15. Hormel Foods Corp. (HRL) - 1.3% 16. PepsiCo Inc. (PEP) - 2.8% 17. Kellogg (K) - 2.8% 18. Flowers Foods (FLO) - 2.6% 19. VF Corp. (VFC) - 2.3% 20. The J.M. Smucker Co. (SJM) - 2.2% 21. McCormick & Co. (MKC) - 1.9% 22. Home Depot (HD) - 1.8% 23. Nestle (NESN.V) - 2.9% 24. Universal Corp. (UVV) - 3.8% 25. Nike (NKE) - 1% 26. Young & Co's Brewery (YNGA.L) - 1.3% 27. Stepan Company (SCL) - 1.5% 28. Mondelez (MDLZ) - 1.5% 29. Kraft-Heinz Company (KHC) - 3% 30. Colgate-Palmolive Co. (CL) - 2.3% 31. Brown-Forman Class B (BF-B) - 1.3% 32. Clorox Company (CLX) - 2.4% 33. Diageo plc (DEO) - 3.7% 34. Bemis Company (BMS) - 2.4% 35. Sonoco Products Co. (SON) - 3.3% 36. Unilever (UL) - 3.2% 37. Leggett & Platt Inc. (LEG) - 2.8% 38. Carlisle Companies (CSL) - 1.3% 39. Kimberly-Clark Corp. (KMB) - 2.9% 40. Weyco Group Inc. (WEYS) - 3% 41. Lancaster Colony Corp. (LANC) - 1.7% 42. L'Oreal (OR.E) - 1.7% 43. Henkel (HEN3.E) - 1.3% 44. Tootsie Roll Industries (TR) - 1.1% 45. Lowe's Companies (LOW) - 1.5% 46. HNI Corp (HNI) - 2.5% Utilities 1. Canadian Utilities (CU.TO) - 3.7% 2. Fortis (FTS.TO) - 4% 3. Consolidated Edison (ED) - 4.2% 4. Southern Company (SO) - 4.8% 5. Northwest Natural Gas (NWN) - 3.8% 6. UGI Corp. (UGI) - 2.7% 7. Black Hills Corp. (BKH) - 3.9% 8. Questar Corp. (STR) - 4.5% 9. SCANA Corp. (SCG) - 3.7% 10. Conn. Water Service (CTWS) - 3% 11. Vectren Corp. (VVC) - 3.8% 12. WGL Holdings Inc. (WGL) - 3% 13. Atmos Energy (ATO) - 2.7% 14. MGEE Energy (MGEE) - 2.7% 15. American States Water (AWR) - 2.1% 16. Otter Tail (OTTR) - 4.7% 17. Middlesex Water Co. (MSEX) - 3.1% 18. California Water Service (CWT) - 2.9% 19. SJW Corp. (SJW) - 2.6% 20. Piedmont Natural Gas (PNY) - 2.3%

27 27 Industrial Goods 1. Weir Group plc (WEIR.L) - 4.1% 2. Cummins (CMI) - 4.2% 3. Rotork plc (ROR.L) - 2.8% 4. United Technologies (UTX) - 2.7% 5. Deere & Co. (DE) - 3% 6. Spectris Group plc (SXS.L) - 2.8% 7. Parker-Hannifin Corp. (PH) - 2.5% 8. Spirax-Sarco Engineering (SPX.L) - 2.2% 9. Emerson Electric (EMR) - 3.9% 10. Cobham plc (COB.L) - 3.6% 11. Caterpillar (CAT) - 4.4% 12. Pentair Ltd. (PNR) - 2.3% 13. Dover Corp. (DOV) - 2.6% 14. Eaton (ETN) - 3.9% 15. Donaldson Company (DCI) - 2.3% 16. Clarcor Inc. (CLC) - 1.8% 17. General Dynamics (GD) - 1.9% 18. Nordson Corp. (NDSN) - 1.3% 19. Illinois Tool Works (ITW) - 2.3% 20. Stanley Black & Decker (SWK) - 2% 21. 3M Company (MMM) - 2.6% 22. Tennant Company (TNC) - 1.3% 23. Gorman-Rupp Company (GRC) - 1.4% 24. Raven Industries (RAVN) - 3.1% Services 1. Wal-Mart Stores Inc. (WMT) - 3.3% 2. W.W. Grainger Inc. (GWW) - 2.3% 3. Empire Co. (EMP.A.TO) - 1.6% 4. Disney (DIS) - 1.2% 5. Target Corp. (TGT) - 3% 6. Genuine Parts Co. (GPC) - 2.8% 7. McDonald's Corp. (MCD) - 3.1% 8. Cardinal Health (CAH) - 1.8% 9. United Parcel Service (UPS) - 2.8% 10. Walgreens Boots Alliance (WBA) - 1.7% 11. ABM Industries Inc. (ABM) - 2.2% 12. Cintas Corp. (CTAS) - 1.1% 13. RR Donnelley (RRD) - 6.6% 14. Wolters Kluwer NV (WKL.A) - 2.3% 15. Bowl America (BWL.A) - 5% 16. Sysco Corp. (SYY) - 3% 17. Mine Safety Appliances (MSA) - 2.8% Health Care 1. AbbVie (ABBV) - 4% 2. Abbott Laboratories (ABT) - 2.1% 3. Johnson & Johnson (JNJ) - 2.9% 4. Becton Dickinson & Co. (BDX) - 1.7% 5. C.R. Bard Inc. (BCR) - 0.5% 6. Medtronic Inc. (MDT) - 1.9% 7. Baxalta (BXLT) - 0.8% 8. United Health Group (UNH) - 1.7% 9. Novo Nordisk (NVO) - 1.3% 10. Baxter International (BAX) - 1.2% 11. Merck & Co. (MRK) - 3.4% 12. Roche (ROG.V) - 2.9% 13. Eli Lilly & Company (LLY) - 2.3%

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. The Score of each stock is listed as well. The top ranked stock has a score of 1. The closer to 1, the better. 1. Weir Group plc (WEIR.L) PPG Industries Inc. (PPG) Wal-Mart Stores Inc. (WMT) Kerry Group (KYGA.L) Cummins (CMI) Enbridge, Inc. (ENB) Canadian Utilities (CU.TO) Medtronic Inc. (MDT) Rotork plc (ROR.L) Johnson Controls (JCI) Fortis (FTS.TO) Caterpillar (CAT) AbbVie (ABBV) Empire Co. (EMP.A.TO) W.W. Grainger Inc. (GWW) Hershey (HSY) Verizon Wireless (VZ) Philip Morris (PM) United Technologies (UTX) Deere & Co. (DE) General Mills (GIS) Abbott Laboratories (ABT) Procter & Gamble Co. (PG) Archer Daniels Midl. (ADM) Disney (DIS) Harleysville Savings (HARL) Ecolab, Inc. (ECL) Baxalta (BXLT) Computer Services Inc. (CSVI) Hormel Foods Corp. (HRL) Phillips 66 (PSX) Spectris Group plc (SXS.L) Johnson & Johnson (JNJ) Becton Dickinson (BDX) Waddell & Reed (WDR) Valspar Corp. (VAL) Parker-Hannifin Corp. (PH) C.R. Bard Inc. (BCR) Coca-Cola Company (KO) PepsiCo Inc. (PEP) Pentair Ltd. (PNR) United Health Group (UNH) Kellogg (K) Southern Company (SO) Dover Corp. (DOV) Target Corp. (TGT) Munich Re (MUV2.B) Eagle Financial Services (EFSI) Spirax-Sarco Enginee. (SPX.L) Genuine Parts Co. (GPC) Consolidated Edison (ED) Emerson Electric (EMR) PZ Cussons plc (PZC.L) Altria Group Inc. (MO) Church & Dwight (CHD) Polaris Industries (PII) Cranswick plc (CWK.L) Cobham plc (COB.L) T. Rowe Price Group (TROW) Franklin Resources (BEN) Eaton (ETN) Phillips 66 Partners LP (PSXP) Flowers Foods (FLO) Donaldson Company (DCI) VF Corp. (VFC) The J.M. Smucker Co. (SJM) This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

29 McCormick & Co. (MKC) Novo Nordisk (NVO) AFLAC Inc. (AFL) ExxonMobil Corp. (XOM) Clarcor Inc. (CLC) Sherwin-Williams Co. (SHW) General Dynamics (GD) Baxter International (BAX) Home Depot (HD) Helmerich & Payne Inc. (HP) Farmers & Merchants (FMCB) McDonald's Corp. (MCD) Chevron Corp. (CVX) AT&T Inc. (T) Northwest Natural Gas (NWN) Nestle (NESN.V) Universal Corp. (UVV) Nike (NKE) Nordson Corp. (NDSN) Young & Co's Bre. (YNGA.L) Cincinnati Financial (CINF) Cardinal Health (CAH) McGraw Hill Financial (MHFI) Stepan Company (SCL) Torchmark Insurance (TMK) Eaton Vance Corp. (EV) BCE, Inc. (BCE) American Express (AXP) UGI Corp. (UGI) Black Hills Corp. (BKH) Mondelez (MDLZ) Illinois Tool Works (ITW) Questar Corp. (STR) Stanley Black & Deck. (SWK) Merck & Co. (MRK) United Parcel Service (UPS) Kraft-Heinz Company (KHC) SCANA Corp. (SCG) Colgate-Palmolive Co. (CL) Brown-Forman Class B (BF-B) National Fuel Gas (NFG) Conn. Water Service (CTWS) Clorox Company (CLX) M Company (MMM) Walgreens Boots Alli. (WBA) Tompkins Financial (TMP) Diageo plc (DEO) Commerce Bancshares (CBSH) Community Trust Ban. (CTBI) Vectren Corp. (VVC) Roche (ROG.V) Bemis Company (BMS) WGL Holdings Inc. (WGL) HCP Inc. (HCP) ABM Industries Inc. (ABM) Sonoco Products Co. (SON) Atmos Energy (ATO) Unilever (UL) NACCO Industries (NC) Imperial Oil (IMO) Leggett & Platt Inc. (LEG) Cintas Corp. (CTAS) Carlisle Companies (CSL) BHP Billiton (BBL) MGEE Energy (MGEE) RR Donnelley (RRD) National Retail Propert. (NNN) Kimberly-Clark Corp. (KMB) st Source Corp. (SRCE) Air Products & Chem. (APD) Realty Income (O) Weyco Group Inc. (WEYS) Lancaster Colony (LANC) RPM International Inc. (RPM) American States Water (AWR) Wolters Kluwer NV (WKL.A) Automatic Data Proc. (ADP) H.B. Fuller Company (FUL) First Financial Banksh. (FFIN) Universal Health Realty (UHT) M&T Bank Corporation (MTB) First Financial Corp. (THFF) This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.

30 Telephone & Data Sys. (TDS) L'Oreal (OR.E) Bowl America (BWL.A) Otter Tail (OTTR) Sysco Corp. (SYY) Vodafone Group plc (VOD) Henkel (HEN3.E) Arthur J Gallagher (AJG) Tennant Company (TNC) Middlesex Water Co. (MSEX) RLI Corp. (RLI) Air Liquide (AI.E) Energen Corp. (EGN) Tootsie Roll Industries (TR) Lowe's Companies (LOW) Old Republic Internatio. (ORI) Eli Lilly & Company (LLY) Mine Safety Appliances (MSA) Public Storage (PSA) California Water Servi. (CWT) Nucor Corp. (NUE) ConocoPhillips (COP) Mercury General Corp. (MCY) HNI Corp (HNI) Brady Corp. (BRC) Northern Trust (NTRS) SJW Corp. (SJW) Diebold Inc. (DBD) Piedmont Natural Gas (PNY) Gorman-Rupp (GRC) United Bankshares Inc. (UBSI) Federal Realty Inv. Trust (FRT) Murphy Oil (MUR) Raven Industries (RAVN) 0.00 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 CMI Cummins $ - CMI Cummins $ 4,878 GWW W.W. Grainger Inc. $ - GWW W.W. Grainger Inc. $ 4,353 VZ Verizon Wireless $ - VZ Verizon Wireless $ 2,952 UTX United Technologies $ - UTX United Technologies $ 3,309 DE Deere & Co. $ - DE Deere & Co. $ 4,864 GIS General Mills $ - GIS General Mills $ 6,660 ABT Abbott Laboratories $ - ABT Abbott Laboratories $ 2,367 PG Procter & Gamble Co. $ - PG Procter & Gamble Co. $ 2,818 CSVI Computer Services Inc. $ - CSVI Computer Services Inc. $ 6,243 - If you had portfolio 1, you would buy Cummins, the top ranked stock you own least. - If you had portfolio 2, you would buy Abbott Labs, 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) 110 Hold April 2014 N/A Target (TGT) 55 Hold April 2014 N/A Kimb.-Clark (KMB) 134 Hold April 2014 N/A ExxonMobil (XOM) 70 Hold April 2014 N/A AFLAC (AFL) 69 Hold April 2014 N/A PepsiCo (PEP) 49 Hold April 2014 N/A McDonald s (MCD) 78 Hold April 2014 N/A Coca-Cola (KO) 24 Hold April 2014 N/A Genuine Parts (GPC) 58 Hold May 2014 N/A 3M (MMM) 110 Hold May 2014 N/A AT&T (T) 80 Hold June 2014 N/A Becton, Dickins. (BDX) 19 Hold June 2014 N/A Philip Morris (PM) 42 Hold June 2014 N/A J.M. Smucker (SJM) 66 Hold August 2014 N/A EcoLab (ECL) 46 Hold October 2014 N/A ConocoPhillips (COP) 170 Hold December 2014 N/A Kellogg (K) 52 Hold December 2014 N/A Helmerich & Payne (HP) 76 Hold February 2015 N/A Altria (MO) 29 Hold April 2015 N/A Baxalta (BXLT) 47 Hold July 2015 N/A BCE, Inc. (BCE) 93 Hold August 2015 N/A Caterpillar (CAT) 39 Hold August 2015 N/A Eaton (ETN) 61 Hold September 2015 N/A Johnson & Johnson (JNJ) 18 Hold November 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.