portfolio solutions
Transcription
portfolio solutions
YOUR BUSINESS 0 YOUR BUSINESS ADVISORY SERVICES SERVICES ADVISORY PORTFOLIO SOLUTIONS PORTFOLIO SERVICES Teaching an OldADVISORY Dog a New Trick PORTFOLIO SOLUTIONS 1 Agenda § Overview of Current Equity Income Indices § ALPS Sector Dividend Dogs Series (NYSE: SDOG, IDOG & EDOG) § The Importance of a Starting Universe § 3 Key Potential Benefits § § Yield § Diversification § Mean Reversion ETF Facts (SDOG, IDOG & EDOG) There are risks involved with investing in ETFs including the loss of money. Diversification does not eliminate the risk of experiencing investment losses. IDOG is subject to foreign investing risks including currency fluctuations and political uncertainty. 2 Equity Dividend Index Themes Most of the popular dividend indices typically have the following themes: § Beginning Universe of 1000+ securities § Screens, along with a yield component, are based on combination of one, two or all of the following: § Consistency – must have paid a dividend for 5, 10, 15 or even 20 years § Growth – can not have had a dividend decrease in 5, 10, 15, or even 20 years § Sustainability – screen to “estimate” likely hood of company sustaining its dividend 3 Potential Drawbacks of Dividend-Weighted Indices Using these standard screens we believe leads to one, two or all of the following potential drawbacks: § Modest Yield – Many dividend indexes only provide moderate yield relative to the overall market § Stock concentration – Despite accessing a basket of numerous stocks, many dividend-weighted indices are heavily concentrated in much smaller group of individual securities § Sector concentration – Many dividend indices tend to be heavily weighted toward defensive, higher yielding sectors 4 A Dividend Trade-Off? YIELD High Yield + Low Diversifica5on Sub-‐OPTIMAL OPTIMAL Modest Yield + High Diversifica5on DIVERSIFICATION YOUR BUSINESS 5 ADVISORY SERVICES PORTFOLIO SOLUTIONS ALPS Sector Dividend Dogs Series [SDOG, IDOG & EDOG] Index Construction 'Dogs Of The Dow’ Theory with a Twist SDOG follows the S-Net Sector Dividend Dogs Index (SDOGX) while IDOG follows the S-Net International Sector Dividend Dogs Index and employ the following index construction methodology: § All constituents of SDOGX must be members of the S&P 500, all constituents of IDOGX must be members of the S-Net Developed Markets Index (ex-Americas) while all constituents of EDOGX must be members of the S-Net Emerging Markets Index. § Individual securities included in SDOGX, IDOGX & EDOGX are selected using ranking system on a sector-by-sector basis: § Stock Selection - Selects the 5 stocks in each GICS sector with the highest dividend yield as of the last trading of November and rebalances quarterly § Dividend yield - Computed based on regular cash dividends paid by the company over the previous twelve months, divided by share price (special dividends not included) ‘Dogs Of The Dow’ - An investing strategy that consists of buying the 10 Dow Jones Industrial Average (DJIA) stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks. 6 7 Sector Dividend Dogs Advantage § The ALPS Sector Dividend Dogs Series (SDOG. IDOG & EDOG) can potentially overcome shortcomings of other dividend indices by providing the following: § Quality Universe / Pure Yield – SDOG, IDOG & EDOG begin with smaller, quality starting universes which allows yield to be the primary screen on a sector-by-sector basis § Sector & Stock Diversification* – SDOG, IDOG & EDOG equally weight the Top 5 yielding securities from each of the 10 sectors from their respective starting universe providing sector and stock diversification (2% per Stock and 10% per Sector) § ALPHA Potential – SDOG, IDOG & EDOG are designed to be deep value portfolios but unlike many other dividend indices recognize the importance of screening on a sector-by-sector basis to provide the potential for identifying value in every sector while still participating in all economic cycles *Diversification does not eliminate the risk of experiencing investment losses Alpha: a measure of performance on a risk-adjusted basis. 8 Importance of a Starting Universe (SDOG) SDOGX Index uses the S&P 500 as it’s starting universe. Potential benefits of beginning with the S&P 500 include: § Often referred to as the leading large-cap US equity Benchmark Index § Stringent screens on size, liquidity and quality § Liquid, well-capitalized companies tend to have better access to financing allowing them to maintain more consistent dividend policies Source: S&P Indices as of December 31th 2012. Non S&P 500 companies consist of all US listed stocks outside of the S&P 500 9 Importance of a Starting Universe (SDOG) continued S&P 500 DIVIDEND PAYERS BY SECTOR 90 80 70 60 50 40 30 20 10 0 Source: S&P Indices as of March 31st 2014. Total Stocks Dividend Paying Stocks 10 Importance of a Starting Universe (IDOG) IDOGX Index uses the S-Net Developed Markets Index (ex-Americas) as it’s starting universe. S-Net DMI uses the following screens to identify qualifying securities: § § § § Must be a member of the World Bank High Income Countries* 70% - 73% of each stock market capitalization of qualifying countries Eliminate countries with idiosyncratic dividend policies Stock price must be > $1 and must have Average Daily Trading Volume (ADTV) > $10 million Applying these screens provides a starting universe that currently has 445 liquid across 22 developed markets. Similar to SDOGX starting with S&P 500 we believe IDOGX starting with S-Net DMI provides similar benefits: § § Stringent screens on size and liquidity Liquid, well-capitalized companies tend to have better access to financing allowing them to maintain more consistent dividend policies Source: S-Network Global Indexes as of 11/30/2012 *Economies whose gross national income averages $12,616 or more. 11 Importance of a Starting Universe (IDOG) continued S-NET DMI DIVIDEND PAYERS BY SECTOR 120 100 80 60 40 Total Stocks Dividend Paying Stocks 20 0 Source: S-Network Global Indexes as of March 31st 2014. 12 Importance of a Starting Universe (EDOG) EDOGX Index uses the S-Net Emerging Markets Index (ex Taiwan and South Korea) as its starting universe. S-Net EMI uses the following screens to identify qualifying securities: § § § Approx. 85% of each stock market capitalization of qualifying countries Eliminate countries with idiosyncratic dividend policies Liquidity screen (must have ADTV > $1 million) Applying these screens provides a starting universe that currently has 527 liquid companies across 19 emerging markets. Source: S&P Indices as of December 31th 2012. Non S&P 500 companies consist of all US listed stocks outside of the S&P 500 13 Importance of a Starting Universe (EDOG) continued S-NET EMI DIVIDEND PAYERS BY SECTOR 160 140 120 100 80 60 40 20 0 Source: S&P Indices as of March 31st 2014. Total Stocks Dividend Paying Stocks 14 Dividends SDOG, IDOG & EDOG apply a pure yield methodology to a liquid, well capitalized universe of stocks on a sector-by-sector basis. In our opinion the potential benefits of having yield as a primary screen may include:* § Yield has been a significant portion of most major large-cap indices over the past 50 + years § Companies that pay dividends tend to be more mature and stable than those companies that don’t. In addition, the need to pay dividends tends to make management more accountable and less likely to reinvest free cash flow into non-core business lines. § Liquid companies with larger market capitalization are more likely to be able to secure financing when needed making it easier for them to maintain consistent dividend policies. * Source: S&P Indices as of December 31th 2012. Non S&P 500 companies consist of all US listed stocks outside of the S&P 500 Diversification does not eliminate the risk of experiencing investment losses 15 Diversification By isolating ‘Dogs Theory’ to a quality starting universe on a sector-by-sector basis SDOG, IDOG & EDOG provide excellent diversification at both the stock and sector level. Potential benefits of this strategy include: § Unlike many dividend indices that are heavily weighted toward defensive sectors, SDOG, IDOG & EDOG provide exposure to dividend opportunities in every sector of the market § Exposure to all sectors may provide better participation in market rallies, particularly if they are lead by non-traditional dividend sectors § Limiting exposure to any one sector helps avoid over allocation to sectors that have potentially over appreciated * Diversification does not eliminate the risk of experiencing investment losses 16 Mean Reversion (Dogs Theory) Annual reconstitution and quarterly rebalances provide several potential benefits including: § § Annual Reconstitution § ‘Dogs’ theory uses a deep-value approach which may result in mean reversion for stocks that are temporarily undervalued § Isolating the screens on a sector-by-sector basis allows potential value to be identified on a peer level rather than across an entire universe which would likely result in certain sector biases Quarterly Rebalancing § Resetting each stock to 2% and each sector to 10% on a quarterly basis ensures the portfolio does not become too overweight any one sector or stock § Using an ETF to apply this type of strategy allows for more efficient tax management through the use of custom creation and redemption baskets * Diversification does not eliminate the risk of experiencing investment losses 17 SDOG Index Characteristics S-Net Sector Dividend Dogs Index (SDOGXTR) Characteristics Yield 4.71% # of Securities 49 Top 10 Holdings 8.13% 21.75% 10.72% 9.68% Utilities 10.49% Consumer Discretionary Industrials Energy 9.97% Health Care 10.25% Consumer Staples Information Technology Financials 10.14% 10.24% 10.15% Materials Telecommunication Services 10.23% Source: S-Network – as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents – subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results. 18 IDOG Index Characteristics S-Net International Sector Dividend Dogs Index (IDOGXTR) Characteristics Yield 5.49% # of Securities 50 Top 10 Holdings 9.68% 21.18% 10.24% 9.84% Consumer Staples 10.15% 9.86% 10.11% 10.10% 10.03% 10.08% Allocation United Kingdom 25.77% Australia 22.55% France 8.00% Japan 7.82% Spain 7.70% Sweden 4.19% Finland 4.02% Singapore Materials 4.01% Norway 3.87% Financials Portugal 2.08% Utilities Hong Kong 2.02% Health Care Netherlands 2.01% Telecommunication Services Switzerland 2.01% Germany 1.99% Italy 1.96% Energy 9.91% Country Consumer Discretionary Information Technology Industrials Source: S-Network – as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents – subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results. 19 EDOG Index Characteristics S-Net Emerging Markets Sector Dividend Dogs Index (EDOGXTR) Characteristics Yield 6.43% # of Securities 50 Top 10 Holdings 9.11% 22.02% 10.71% 9.46% 9.74% 10.59% 9.81% 9.95% 11.02% Poland 10.70% South Africa 10.67% China 10.19% Thailand 8.89% Brazil 8.82% Turkey 7.89% Russia 7.55% Chile 4.16% Utilities Columbia 4.11% Materials India 4.06% Consumer Discretionary Czech Republic 2.00% Industrials Health Care Information Technology 10.25% Indonesia 9.94% Energy 9.77% Allocation Malaysia Financials 10.61% Country Consumer Staples Telecommunication Services Source: S-Network – as of 12/31/2015 ** Trailing twelve months (TTM) weighted average underlying constituents – subject to change * Diversification does not eliminate the risk of experiencing investment losses Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Past performance does not guarantee future results. 20 SDOG Constituents Consumer Discretionary Yield – 4.74% Consumer Staples Yield – 3.58% Energy Yield – 7.78% Financials Yield – 3.93% Health Care Yield – 3.30% COH US Coach Inc MO US Altria Group Inc COP US ConocoPhillips CINF US Cincinnati Financial Corp ABBV US AbbVie Inc F US Ford Motor Co KO US Coca-Cola Co/The ESV US Ensco plc-Cl A IVZ US Invesco Ltd BAX US Baxter International Inc GRMN US Garmin Ltd PM US Philip Morris International KMI US Kinder Morgan Inc MET US MetLife Inc JNJ US Johnson & Johnson MAT US PG US Procter & Gamble Co/The OKE US Oneok Inc NAVI US Navient Corp MRK US Merck & Co. Inc. Mattel Inc WYNN US Wynn Resorts Ltd Industrials Yield – 4.02% WMT US Wal-Mart Stores Inc Information Technology Yield – 4.45% SE US Spectra Energy Corp Materials Yield – 3.83% PBCT People's United US Financial Telecommunication Services Yield – 6.94% PFE US Pfizer Inc Utilities Yield – 4.87% CAT US Caterpillar Inc CA US CA Inc DOW US Dow Chemical Co/The T US AT&T Inc CNP US CenterPoint Energy Inc CMI US Cummins Inc HPQ US HP Inc FCX US Freeport-McMoRan Inc CTL US CenturyLink Inc DUK US Duke Energy Corp ETN US Eaton Corp Plc IBM US Intl Business Machines Corp IP US International Paper Co FTR US Frontier Communications Corp ETR US Entergy Corp EMR US Emerson Electric Co QCOM US Qualcomm Inc MOS US Mosaic Co/The Verizon VZ US Communications Inc NRG US NRG Energy Inc STX US NUE US Nucor Corp PBI US Pitney Bowes Inc Seagate Technology Source: Bloomberg – as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. SO US Southern Co/The 21 IDOG Constituents Consumer Discretionary Yield – 6.42% Consumer Staples Yield – 4.32% Energy Yield – 7.95% Financials Yield – 6.54% Health Care Yield – 3.86% JCNC SP BATS British American LN Tobacco plc BP/ LN BP Plc ANZ AU Aust and NZ Banking Group AZN LN AstraZeneca plc Marks & Spencer MKS LN Group plc IMT LN Imperial Tobacco Group plc ENI IM Eni SpA SAN SM Banco Santander SA GSK LN GlaxoSmithKline plc PSON LN Pearson PLC ORK NO Orkla ASA REP SM NAB AU National Australia Bank Ltd NOVN VX Novartis AG-Reg 1928 HK Sands China Ltd WES AU Wesfarmers Ltd RDSA Royal Dutch NA Shell plc-A Shs SUN AU Suncorp Group Ltd SAN FP Jardine Cycle & Carriage Ltd Repsol SA Sanofi VIV FP Vivendi Industrials Yield – 4.97% WOW AU Woolworths Ltd Information Technology Yield – 3.30% WPL AU Woodside Petroleum Ltd Materials Yield – 5.68% WBC AU Westpac Banking Corp Telecommunication Services Yield – 5.69% 4502 Takeda Pharmaceutical JP Co Ltd Utilities Yield – 6.18% Abertis ABE SM Infraestructuras SA 7751 JP Canon Inc AMC AU Amcor Limited TEF SM Telefonica SA CNA LN Aurizon AZJ AU Holdings Ltd ERICB SS Ericsson LM-B Shs BAS GR BASF SE TEL NO Telenor ASA EDP-Energias de EDP PL Portugal SA BA/ LN BAE Systems plc 7752 JP Ricoh Co Ltd BHP AU BHP Billiton Limited TLSN SS TeliaSonera AB ENGI FP EN FP SGE LN Sage Group plc/The RIO AU Rio Tinto Ltd TLS AU Telstra Corp Ltd FUM1V FH Fortum Oyj 8035 JP Tokyo Electron Ltd UPM1 V FH UPM-Kymmene Oyj VOD LN SSE LN Bouygues SA KEP SP Keppel Corp Ltd Source: Bloomberg – as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. Vodafone Group plc Centrica plc Engie SSE plc 22 EDOG Constituents Consumer Discretionary Yield – 5.00% Consumer Staples Yield – 4.72% Energy Yield – 7.86% Financials Yield – 8.86% Health Care Yield – 2.02% ASTRO Astro Malaysia MK Holdings Bhd EXITO CB Almacenes Exito SA 2883 HK China Oilfield Services-H BHW PW Bank Handlowy w Warszawie SA BDMS Bangkok Dusit TB Med Service BEC World Public BEC TB Co Ltd ROTH British American MK Tobacco Bhd 1088 HK China Shenhua Energy Co-H PEO PW Bank Pekao SA RDY US Doctor Reddy's Lab-ADR CBD US Cia Brasileira de Dis-Sp Prf Ecopetrol EC US SA-Sponsored ADR CML SJ Coronation Fund Managers Ltd KLBF IJ Kalbe Farma Tbk PT TOASO Tofas Turk TI Otomobil Fabrika INDF IJ Indofood Sukses Makmur Tbk P OGZD Gazprom LI PAO-Spon ADR 2007 HK Country Garden Holdings Co LHC SJ Life Healthcare Group Holdin UMWH UMW MK Holdings Bhd Industrials Yield – 5.14% NATU3 Natura BZ Cosmeticos SA Information Technology Yield – 2.95% LKOD LI Lukoil Pjsc-Spon ADR Materials Yield – 9.39% PZU Powszechny PW Zaklad Ubezpiecze Telecommunication Services Yield – 12.23% BTS Group BTS TB Holdings pcl DELTA Delta Electronics TB Thai PCL CSNA3 Cia Siderurgica BZ Nacional SA MBT US Mobile Telesystems-Sp ADR NTC SJ Netcare Ltd Utilities Yield – 6.62% AESG ENER CI AES Gener SA SIME MK INFY US Infosys Ltd-Sp ADR EREG Eregli Demir ve L TI Celik Fabrik MTN SJ MTN Group Ltd CEZ CP 992 HK Lenovo Group Ltd INTP Indocement IJ Tunggal Prakarsa VIV US Telefonica Brasil-ADR PGAS Perusahaan Gas IJ Negara Perser IPL SJ 2386 HK Imperial Holdings Ltd Sime Darby Berhad Sinopec Engineering Group-H CEZ AS TTRAK Turk Traktor ve TI Ziraat Makin SOND A CI Sonda SA MNOD MMC Norilsk Nickel LI PJSC-ADR DTAC Total Access TB Communication PGE PW PGE SA UNTR IJ TOTS3 BZ Totvs SA SNS PW TCELL Turkcell Iletisim TI Hizmet AS YTLP MK YTL Power International Bhd United Tractors Tbk PT Synthos SA Source: Bloomberg – as of 12/31/2015. Holdings subject to change. Sector yield is the average yield of the 5 holdings in each sector. Sector yields subject to change. 23 Summary § Equity income oriented investors shouldn’t have to choose between potential yield and diversification § The ALPS Sector Dividend Dogs Series seeks to provide investors with the three key potential benefits: § Potential Yield § Sector & Stock Diversification § Alpha Potential There are risks involved with investing in ETFs including the loss of money. Diversification does not eliminate the risk of experiencing investment losses. IDOG is subject to foreign investing risks including currency fluctuations and political uncertainty. 24 SDOG, IDOG & EDOG ETF Facts SDOG IDOG EDOG Ticker: SDOG IDOG EDOG Underlying Index: SDOGXTR IDOGXTR EDOGXTR Total Expense Ratio: 0.40% 0.50% 0.60% Dividends Paid: Quarterly Quarterly Quarterly Rebalance Schedule: Quarterly Quarterly Quarterly Website: www.alpssectordividenddogs.com Phone: 866.675.2639 Email: sdog@alpsinc.com 25 SDOG, IDOG & EDOG Disclosures Risks An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call 866.675.2639 or visit www.alpsfunds.com. Read the prospectus carefully before investing. There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus. The ALPS International Sector Dividend Dogs and ALPS Emerging Sector Dividend Dogs ETF are new products with a limited operating history. IDOG and EDOG are subject to foreign investing risks including currency fluctuations and political uncertainty. Investments in Emerging Markets accentuate these risks. ALPS Sector Dividend Dogs Series Shares are not individually redeemable. Investors buy and sell shares of the ALPS Sector Dividend Dogs Series on a secondary market. Only market makers or "authorized participants" may trade directly with the Fund, typically in blocks of 50,000 shares. Dividends are not guaranteed and a company's future abilities to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping among other factors. ALPS Portfolio Solutions Distributor, Inc. is the Distributor of the ALPS Sector Dividend Dogs ETFs. DOG000365 4/30/2016 26 Contact Information Jeremy Held, CFA* – Director of Investment Strategy & Research 1290 Broadway, Suite 1100 Denver, CO 80203 720-917-0633 303-881-6135 jeremy.held@alpsinc.com Jennifer Levesque* – Institutional Client Relations 1290 Broadway, Suite 1100 Denver, CO 80203 720-917-0633 jennifer.levesque@alpsinc.com *Registered Representatives of ALPS Portfolio Solutions Distributor, Inc.