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Solactive US Quality Dividend Low Volatility Index
US dividend strategy: it's all about the selection
Financial Products, Advisory & Distribution April 2016
Performance creates trust
For institutional investors only / not for public presentation or sharing
US stocks with considerable potential
40% of global dividend payments
Global dividends – 20151
Dividends by region – 20151
 North American companies are the driving force
behind global dividends.
5%
 North American companies account for 40% of
dividend payments worldwide.
 Reported dividends increased by 21.1% in 2015 to
around USD 440 billion.
10%
11%
43%
14%
20%
 Dividend income was an important component of
total shareholder return in 2015. (www.henderson.com)
1: Source: Henderson Global Investors – Henderson Global Dividend Index, Edition 9, February 2016
Historical data do not provide any indication of future developments.
North America
Europe ex UK
UK
Asia-Pacific ex Japan
Emerging markets
Japan
Slide 2
For institutional investors only / not for public presentation or sharing
Stable dividend payments also possible in current market environment
Two reasons in favour of US stocks
Two reasons for US-Titel
1.
Ratio of dividends paid to P/E1
Scope for further dividend increases in the US:
The ratio of dividends paid to earnings per share is
currently a modest 38% in the US, while Europe is back
at pre-crisis levels with a figure around 60% (see chart
on the right).
1.
US corporate net cash flows near record highs:
Companies in the US currently have net cash flows of
around USD 1,960 billion. This corresponds to more
than 12% of US gross domestic product (GDP) and is
close to the record set in 1980.
1: Price/earnings ratio
Source: Allianz Global Investors, Dividends instead of low interest rates, January 2016
Historical data do not provide any indication of future developments.
Slide 3
For institutional investors only / not for public presentation or sharing
Dividend stocks delivering more stability in portfolios
Inflation – real value growth with dividend strategy
Outperforming the US equity market despite inflation
US dividend strategy vs US stock market
1950-2015
 Equities with good prospects and strong dividend
payments can…
a)
b)
make a greater contribution to returns than equities
without dividend payments
ensure greater stability in a portfolio with regard to
income
 Equities making dividend payments have lower volatility
than those that do not distribute income.
 US dividend strategies have outperformed the US stock
market in periods of both rising inflation (up to 10%) and
deflation (see chart on the right).
Source: Allianz Global Investors, Dividends instead of low interest rates, January 2016
Historical data do not provide any indication of future developments.
Slide 4
For institutional investors only / not for public presentation or sharing
Theme investment
Solactive US Quality Dividend Low Volatility Index
Selection process
Selection pool
Selection
Selection
500 companies
of 40 companies
of 30 companies
Key criteria:
Criterion:
Criterion:
 In the current selection of the
Solactive US Large & Mid Cap Index
 Highest expected dividend yield
 Highest average dividend growth
over five years
 Listed on a recognized and regulated
US exchange.
 Market capitalization of at least USD
750 million
 Average daily share trading volume of
at least USD 1 million (in the past
three months)
 No sales restrictions for investors and
freely traded
 No negative earnings per share (EPS) in
the past 12 months
Final selection
of 20 companies
Criterion:
 Lowest volatility
Source: Solactive.com Index Guidelines
Slide 5
For institutional investors only / not for public presentation or sharing
Solactive US Quality Dividend Low Volatility Index
Initial index composition
Initial basket composition2 – stocks
Expected
ø Hist. Dividend
dividend yield growth (5 years)
Volatility
260 Days
Stock
Sector
Alliant Energy Corporation
UTILITIES
5%
4.11%
6.34%
18.58%
Altria Group, Inc.
CONSUMER GOODS
5%
4.20%
8.67%
17.78%
CBL & Associates Properties, Inc.
FINANCIALS
5%
7.37%
11.51%
22.06%
CenterPoint Energy, Inc.
UTILITIES
5%
5.71%
4.56%
22.28%
Digital Realty Trust, Inc.
FINANCIALS
5%
5.57%
17.70%
19.57%
Eaton Corp. Plc
INDUSTRIE
5%
4.17%
14.41%
24.13%
Emerson Electric Co.
INDUSTRIE
5%
4.21%
7.01%
21.84%
HCP, Inc.
FINANCIALS
5%
6.14%
3.45%
20.38%
International Paper Company
INDUSTRIE
5%
4.16%
34.86%
22.55%
LaSalle Hotel Properties
FINANCIALS
5%
5.82%
103.76%
25.99%
OGE Energy Corp.
UTILITIES
5%
4.05%
5.89%
20.13%
Omega Healthcare Investors, Inc.
FINANCIALS
5%
6.76%
10.98%
21.21%
Philip Morris International Inc.
CONSUMER GOODS
5%
5.10%
11.61%
19.11%
Questar Corporation
UTILITIES
5%
4.57%
8.23%
20.48%
Realty Income Corporation
FINANCIALS
5%
5.06%
5.13%
19.12%
Southern Company
UTILITIES
5%
5.16%
3.75%
16.80%
Ventas, Inc.
FINANCIALS
5%
5.55%
7.66%
20.18%
FINANCIAL
UTILITIES
Waddell & Reed Financial, Inc. Class A FINANCIALS
5%
4.68%
13.79%
26.21%
Welltower, Inc.
FINANCIALS
5%
5.30%
3.17%
19.43%
INDUSTRY
CONSUMER GOODS
W.P. Carey Inc.
FINANCIALS
5%
6.80%
13.05%
17.09%
Weighting
All information is indicative and subject to change.
1: Source: Solactive 2: At initial fixing (indicative) Source: Bloomberg, 21.10.2015
10%
15%
50%
25%
Slide 6
For institutional investors only / not for public presentation or sharing
Backtest: Solactive US Quality Dividend Low Volatility Index
Over 12% outperformance
Backtesting: 20 October 2010 to 25 January 2016
 Backtesting shows an excess return of more than 12% versus the benchmark.
Slide 7
For institutional investors only / not for public presentation or sharing
Key product data
Solactive US Quality Dividend Low Volatility Index
Key product data – VONCERT Open End
VONCERT Open End
SSPA product type
Tracker certificate (1300)
Underlying
Solactive US Quality Dividend Low Volatility Index
Initial fixing / payment date
22 April 2016 / 23 April 2016
Term
Open end
Management fee
1.00% p.a.
Issuer
Vontobel Financial Products Ltd., DIFC Dubai (is not subject to any prudential supervision and has no rating)
Guarantor
Vontobel Holding AG, Zurich (Moody's A3)
Currencies
Valor / symbol
Issue price
VONCERT reference price
CHF
USD
3161 2760 / ZSLAFV
3161 2761 / ZSLAEV
CHF 101.50
USD 101.50
(CHF 1.50 front-load fee included)
(USD 1.50 front-load fee included)
CHF 100.00
USD 100.00
Termsheets with the legally binding information and other details can be downloaded at any time from www.derinet.ch. All information is indicative and subject to change.
Slide 8
For institutional investors only / not for public presentation or sharing
Summary & risks
Solactive US Quality Dividend Low Volatility Performance Index
Overview of key points
Significant risks for investors
 The Solactive US Quality Dividend Low Volatility
Performance Index represents a rules-based and thus
transparent benchmark for US companies with high
dividend yields, a stable dividend track record and low
volatility.
 Economic crises and changes could have a detrimental
impact on the shares underlying the participation
certificate.
 With its innovative and systematic approach, the index
certificate makes it possible to tap into the potential of
high dividends geared towards sustainability.
 The index provides access to a source of returns that is
both traditional and important.
 Political and regulatory risks that influence dividend
payout policy could have a negative impact on
performance.
 New competitors could engage the established firms in the
index in a fight for market share, thus jeopardizing their
sustainable dividend policy.
 Issuer risk
 Net dividends are reinvested
 Currency risk
 The Solactive US Quality Dividend Low Volatility
Performance Index is adjusted annually and has 20
members
 No capital protection
 No term restriction
 Management fee: 1.0% p.a.
 .
Slide 9
For institutional investors only / not for public presentation or sharing
January 2016
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