Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Business intelligence wikipedia , lookup
Land banking wikipedia , lookup
Pensions crisis wikipedia , lookup
Business valuation wikipedia , lookup
Modified Dietz method wikipedia , lookup
Stock trader wikipedia , lookup
Rate of return wikipedia , lookup
Public finance wikipedia , lookup
Investment fund wikipedia , lookup
Financial economics wikipedia , lookup
Beta (finance) wikipedia , lookup
Short (finance) wikipedia , lookup
2017 An Economic Perspective on Dividends Table of Contents Corporate Outlook........................... 1 – 2 Market Environment........................ 3 – 7 Payout Ratio................................... 8 – 9 Long-term View............................10 – 12 Global View................................ 13 – 16 Active Management........................... 17 Risk Considerations & Endnotes.... 18 – 19 This material must be presented in its entirety and the disclosures presented may apply to one or more charts. Information contained herein has been taken from third party sources, which we believe Data shown in this report reflects historical performance which is no guarantee to be reliable, but not guaranteed as to accuracy or completeness. All indices shown are of future results. Dividend yield is one component of performance and should not be unmanaged and unavailable for direct investment. Index returns do not reflect investment the only consideration for investment. Dividends are not guaranteed and will fluctuate. advisory and other fees or expenses that would reduce performance in an actual client Investing entails risk, including the possible loss of principal. Any performance or account. Please see Endnotes for index definitions and glossary. information shown on the charts throughout this presentation are for illustrative purposes only and not intended to represent any Santa Barbara Asset Management portfolio’s For charts that illustrate S&P 500® and MSCI EAFE stocks grouped by dividend policy, the investment strategy or predict future investment performance. Other methods may stock’s dividend policy is determined on a rolling 12-month basis. For example, a stock is produce different results and the results for individual portfolios and for different time classified as dividend-paying if it paid a cash dividend at any time during the previous 12 periods will vary depending on market conditions and the composition of the portfolio. months. A stock is reclassified only if its dividend policies change. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE Corporate Cash Levels and Dividend Payouts (September 30, 2006 – September 30, 2016) ■ Corporate Cash Levels ($Millions) Dividends Paid ($Millions) $120 $150,000 $100 $120,000 $80 $90,000 $60 $60,000 Dividends Paid ($Millions) Corporate Cash Levels ($Millions) $180,000 $40 $30,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. non-farm, non-financial companies are currently sitting on a record pile of cash and liquid assets, but they are increasingly putting that cash back into the hands of investors in the form of dividends. Data sources: FactSet and S&P Dow Jones Indices, 9/30/06 – 9/30/16. Past performance is no guarantee of future results. The chart illustrated the quarterly total liquid assets at market value, ending September 30, 2016. Most recent quarter-end data available based on individual company earnings releases. Corporate cash levels and dividends paid are 1 | Corporate Outlook represented by nonfinancial companies in the S&P 500 Index. Special dividends were issued by Time Warner Inc. in March 2009. It is not possible to invest in an index. Santa Barbara Asset Management Dividend Growers vs. Cutters (January 31, 1972 – December 31, 2016) Dividend Growers & Initiators Dividend Cutters or Eliminators ■ Recession 500 Number of S&P 500 Index Companies 450 400 350 300 250 200 150 100 50 0 1973 1978 1983 1988 1993 1998 2003 2008 2013 2016 As indicated by the chart above, historically after a recession, the number of S&P 500 Index companies that grew or initiated their dividend generally increased and the number of companies that cut or eliminated their dividend decreased. ® Data source: Ned Davis Research, Inc., 1/31/72 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. The chart illustrates the number of dividend growers/initiators and dividend cutters/ eliminators over rolling 12 month periods from 1972-2016. Dividend growers & initiators include companies that raised their existing dividend or initiated a new 2 | Corporate Outlook dividend during the preceding 12 months. Dividend cutters or eliminators include companies that lowered their existing dividend or stopped paying regular dividends during the preceding 12 months. The periods shown do not represent the full history of the S&P 500 Index; it is the history maintained by the source. Shaded areas represent recession periods as identified by the National Bureau of Economic Research. Santa Barbara Asset Management Dividends and Market Volatility (January 1, 2007 – December 31, 2016) Dividend Growers vs. Non-Payers Performance During Months when VIX Increased CBOE Volatility Index VIX Index Closing Value 90 VIX Monthly Increase 60 30 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average Excess Return of Dividend Growers >40% 1.6% 20-40% 0.4% 10-20% 1.2% <10% Average (Across All Months When VIX Increased) 0.2% 0.8% 2016 Companies with persistent dividend growth have provided excess returns during periods of market volatility. Data sources: FactSet and Ned Davis Research, Inc.,1/1/07 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. These charts illustrate the average historical performance of S&P 500 stocks, grouped as shown according to their dividend policies. Periods greater than one year have been annualized. The returns do not 3 | Market Environment reflect the deduction of any fees, expenses or taxes. Returns for stocks that paid dividends assume reinvestment of all income. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the S&P 500 Index; it is the history maintained by the source. It is not possible to invest directly in an index. Santa Barbara Asset Management High-Quality Companies and Market Volatility Relative Performance vs. S&P 500® Index During Drawdown Periods Underperformed S&P 500 Outperformed S&P 500 ROE Top Quintile (High Quality) ROE Bottom Quintile (Low Quality) 9.5 5.1 6.2 3.2 2.8 1.4 -0.5 -3.1 -2.0 -2.9 -4.3 -2.6 1.2 1.4 -0.4 -1.5 -3.4 -5.8 -8.2 -10.6 12/31/07 – 11/20/08 1/6/09 – 3/9/09 1/19/10 – 2/8/10 4/23/10 – 7/2/10 4/29/11 – 10/3/11 4/2/12 – 6/1/12 9/14/12 – 11/15/12 9/18/14 – 10/15/14 7/20/15 – 8/25/15 12/31/15 – 2/11/16 High-quality companies tend to have strong balance sheets, revenue growth potential, consistent earnings generation and high return on equity (ROE) – the fundamentals for sustainable dividend growth over the long term. Companies with high ROE have performed favorably during previous market declines. Data sources: Morningstar Direct and FactSet as of 12/31/16. Past performance is no guarantee of future results. Chart shows relative performance of the highest quintile (1) and lowest quintile (5) by return on equity versus the S&P 500® Index during drawdown periods of 7% or greater. 4 | Market Environment Different benchmarks, economic periods, methodologies and market conditions will produce different results. There is no assurance that any asset class or index will provide positive performance over time. It is not possible to invest directly in an index. Santa Barbara Asset Management The Valuation of Dividends (February 28, 1983 - December 31, 2016) 100% Dividend Growth Premium (%) 80% Dividend Growth More Expensive 60% 40% Average = 23% 20% 0% Dividend Yield More Expensive -20% Dividend Growers 9% Discount -40% '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Valuations of dividend growers are currently attractive. On average for the period shown, dividend growers have traded at a 23% premium to high dividend yielders, but traded at a 9% discount as of 12/31/16. Data source: Ned Davis Research, Inc., 2/28/83 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. Based on top quintile of median forward P/E. Dividend Growth Premium = (Dividend Growth/Dividend Yield) − 1. 5 | Market Environment Dividend growers include those companies that comprise the top 20% of dividend growth in the S&P 500 Index. Dividend yielders include those companies that comprise the top 20% of dividend yield in the S&P 500 Index. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Performance After the Federal Reserve Increased Rates (Subset of S&P 500 Index; All Rate Hikes Since 1972) Payers with No Change in Dividends Dividend Growers Non-Dividend Payers Dividend Cutters 140 130 Index Returns 120 110 100 90 80 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Elapsed Months Dividend payers, particularly those that have grown or initiated a dividend, have outperformed after the Fed increased rates. Data source: Ned Davis Research, Inc. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. Data shown is based on the average performance after all rate hikes since 1972 which occurred on the following dates: 6 | Market Environment 1/15/73, 8/31/80, 4/9/84, 9/4/87, 2/4/94, 3/25/97, 6/30/99, 6/30/04. The returns do not reflect the deduction of any fees, expenses or taxes. Returns for stocks that paid dividends assume reinvestment of all income. It is not possible to invest directly in an index. Santa Barbara Asset Management Sector Performance During Rising Rate Months S&P 500 Index Sector Excess Return (December 31, 2006 - December 31, 2016) 1.0% Excess Return (%) 0.5% 0.0% -0.5% -1.0% Energy Information Technology Materials Consumer Discretionary Health Care Telecom. Services Industrials Financials Consumer Staples Utilities Not all sectors respond the same way to rising interest rates, with the higher yielding segments of the market historically being more interest rate sensitive. Data source: FactSet, 12/31/06 – 12/31/16. Past performance is no guarantee of future results. Rising rate environment is represented by the months when the 10-Year U.S. Treasury return is less than 0.0%. Returns assume the reinvestment of income and no transaction costs or taxes. It is not possible to invest directly in an index. 7 | Market Environment The Real Estate sector has been excluded from the chart as sector was created in September 2016 and historical data is not available. Santa Barbara Asset Management Dividend Payout Ratio (December 31, 1996 – December 31, 2016) Quintile 1 Quintile 2 Quintile 3 Quintile 5 Quintile 4 Lowest Payout Ratio Highest Payout Ratio Returns Relative to the S&P 500 Index 100 50 0 -50 -100 -150 -200 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Over the past 20 years, stocks with the highest payout ratio (Quintile 5) were not the best performers over time — stocks with medium and medium-high payout ratios (Quintiles 3 and 4) have outperformed. Firms that pay higher dividends but use a smaller percentage of earnings to do so may have the capacity to raise their dividends over time. Data source: FactSet Fundamentals via FactSet Alpha Testing, 12/31/96 – 12/31/16. Past performance is no guarantee of future results. The chart illustrates the dividend payout ratio of S&P 500 companies grouped by Quintiles with Quintile 1 representing the lowest payout ratio and Quintile 5 representing the highest payout ratio. The performance shown 8 | Payout Ratio is for illustrative purposes only. The chart illustrates the historical performance of S&P 500 dividend-paying stocks relative to the Index. The returns do not reflect the deduction of any fees, expenses or taxes, and assume reinvestment of all income. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Payout Ratio and Earnings Per Share (as of December 31, 2016) 12% Consumer Discretionary S&P 500 Index 3-Year Estimated EPS CAGR (%) 10% Financials Health Care 8% Materials 6% Information Technology Consumer Staples Industrials 4% Utilities 2% Telecom. Services 0% 20% 30% 40% 50% 60% 70% 80% S&P 500 Index Dividend Payout Ratio (%) Sectors with low payout ratios and high future earnings growth represent potential future dividend growth opportunities. Data source: FactSet as of 12/31/16. Past performance is no guarantee of future results. The energy sector and real estate sectors have been excluded: energy due to depressed oil prices and earnings resulting in an analysis that is not meaningful, real 9 | Payout Ratio estate due to the unavailability of payout ratio information. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Income as a Percentage of Total Return (January 1, 1930 – December 31, 2016) ■ Dividend Income Return ■ Total Return N/A 18% of total return 2000S** 2010S* 1/1/2000 12/31/2009 1/1/2010 12/31/2016 15% of total return 1990S 1/1/1990 12/31/1999 28% of total return 73% of total return 30% of total return 67% of total return 43% of total return 5% N/A 10% 43% of total return 15% 1930-2016 1930** 1940S 1950S 1960S 1970S 1980S 1/1/1940 12/31/1949 1/1/1950 12/31/1959 1/1/1960 12/31/1969 1/1/1970 12/31/1979 1/1/1980 12/31/1989 -5% 1/1/1930 12/31/1939 0% 1/1/1930 12/31/2016 S&P 500 Index Annualized Total Return 20% Over the last 86 years, 43% of the average annual total return of the S&P 500 was derived from the payment and reinvestment of dividend income, while capital appreciation/depreciation has contributed the rest. * Represents a partial period and not a full decade. **The analysis provided by Ned Davis indicates that the data is not applicable because the Dividend Income Return data for the 1930s and 2000s is disproportionately high versus the other decades due to the low or negative Total Returns during these periods. The information provided in this analysis may not represent the full value of reinvested dividends. 10 | Long-Term View Data source: Ned Davis Research, Inc., 1/1/30 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. Periods greater than one year are annualized. Return performance is based on equal-weighted geometric average, computed monthly. Dividend income return is based on the return percentage of all dividend-paying companies in the S&P 500. The returns do not reflect the deduction of any fees, expenses or taxes, and assume reinvestment of all income. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividends: Risk vs. Return (January 31, 1972 – December 31, 2016) Higher Return Dividend Growers & Initiators 9% Dividend Payers w/ No Change 6% 3% Non-Dividend Paying Stocks Lower Return Average Annualized Total Return 12% 0% Dividend Cutters or Eliminators -3% 10% Lower Risk 15% 20% Annualized Standard Deviation 25% 30% Higher Risk Historically, companies in the S&P 500 Index that grew or initiated dividends have produced higher returns with lower risk than companies that did not increase their dividend, reduced their dividend, or did not pay a dividend. Data source: Ned Davis Research, Inc., 1/31/72 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. This chart illustrates the average annualized historical performance of S&P 500 stocks, grouped as shown according to their dividend policies. The performance of each group is based on the equal-weighted geometric average return of dividend-paying and non-dividend paying historical S&P 500 stocks, rebalanced monthly. The performance 11 | Long-Term View shown represents the risk-return characteristics of each of the categories. The returns do not reflect the deduction of any fees, expenses or taxes. Returns for stocks that paid dividends assume reinvestment of all income. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the S&P 500 Index; it is the history maintained by the source. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividends: Historical Rolling Returns 15-Year Rolling Returns (January 31, 1987 – December 31, 2016) Dividend Growers & Initiators Dividend Payers w/ No Change in Dividends Non Dividend-Paying Stocks Dividend Cutters or Eliminators 20% Return by Dividend Policy (%) 15% 10% 5% 0% -5% -10% -15% 1990 1995 2000 2005 2010 2015 Since 1987, Dividend Growers & Initiators have outperformed other dividend segments 100% of the time. Data source: Ned Davis Research, Inc., 1/31/87 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. Data represents a 15-year rolling performance of S&P 500 stocks at the end of each month grouped as shown according to their dividend policies. The returns do not reflect the deduction of any fees, expenses 12 | Long-Term View or taxes. Returns for stocks that paid dividends assume reinvestment of all income. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the S&P 500 Index; it is the history maintained by the source. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividends: Risk vs. Return in International Markets (MSCI EAFE Index) Higher Return 10% Dividend Growers & Initiators 5% Dividend Payers w/ No Change 0% Non-Dividend Paying Stocks Lower Return Average Annualized Total Return (August 31, 1994 – December 31, 2016) -5% Dividend Cutters or Eliminators -10% 15% Lower Risk 20% 25% Annualized Standard Deviation 30% Higher Risk Historically, companies in the MSCI EAFE Index that grew or initiated dividends have produced higher returns with lower risk than companies that did not increase their dividend, reduced their dividend, or did not pay a dividend. Data source: Ned Davis Research, Inc., 8/31/94 – 12/31/16. Further distribution prohibited without prior permission. Copyright 2017 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. The chart illustrates the average annualized historical performance of the MSCI EAFE Index stocks, grouped as shown according to their dividend policies, using Worldscope data based on the financial statements of reportable companies. (No. Dividend Growers: 331; No. of Dividend No-Change: 171; No. of Dividend Non-Payers: 18; No. of Dividend Cutters: 90). The performance of each group is based on the equal-weighted geometric average of 13 | Global View dividend-paying and non-dividend paying historical MSCI EAFE Index stocks, rebalanced monthly. The performance shown represents the risk-return characteristics of each of the categories. The returns do not reflect the deduction of any fees, expenses or taxes. Returns for stocks that paid dividends assume reinvestment of all income. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the MSCI EAFE Index; it is the history maintained by the data source. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Growth is Important in Most Markets (January 31, 1970 – December 31, 2016) ■ Dividend Yield ■ Dividend Growth ■ Multiple Expansion ■ Total Annualized Returns 11.2 12% 9.5 10.1 9.6 10.0 9% 10.0 8.1 6.4 6% 3% 0% -3% World U.S. U.K. Japan Canada France Germany Australia Looking at the returns’ subcomponents (dividend yield, dividend growth and multiple expansion), dividends have contributed to both current and total return. Historically dividend growth has been the largest component of total annualized return. Data source: Société Générale Quantitative Research, 1/31/70 – 12/31/16. Past performance is no guarantee of future results. Used with permission. Data provided by the source for the World returns included Sweden since 1/1/93 and Asia ex-Japan since 7/1/87. These countries have not been included individually in the chart above because the data did not cover the 1/31/70 – 12/31/16 time period; the data for Sweden began in 1993 and Asia ex-Japan Q2 1987. Periods greater than one year are annualized. For each individual country represented, the representative MSCI country index is used to calculate the total annualized return components: dividend yield, dividend growth and multiple 14 | Global View expansion. Local currency is used for each representative MSCI country index. To construct an MSCI country index, every listed securities in the market is identified. Securities are free float adjusted, classified in accordance with the Global Industry Classification Standard (GICS), and screened by size, liquidity and minimum free float. Index performance shown is for illustrative purposes only and does not predict or depict the performance of any Santa Barbara portfolio investment strategy. Index returns include reinvestment of income and do not reflect investment advisory and other fees that would reduce performance in an actual client account. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Yields of International vs. U.S. Stocks (December 31, 2006 – December 31, 2016) MSCI EAFE Index S&P 500 Index 6% Dividend Yield (%) 5% 4% 3% 2% 1% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividend yields of international stocks have on average been more than 50% higher than dividend yields of U.S. stocks since 2005. Data source: FactSet, 12/31/06 – 12/31/16. Past performance is no guarantee of future results. Dividend Yield (Annual Dividend Rate) of the MSCI EAFE Index vs. S&P 500® Index. It is not possible to invest directly in an index. 15 | Global View Santa Barbara Asset Management Global Stocks and Dividend Yield (as of December 31, 2016) ■ 20-Year Range 20-Year Average ● Current (12/31/16) 7% 6% Dividend Yield (%) 5% 4% 3% 2% 1% 0% U.S. U.K. Japan Canada France Germany Australia Dividend yields in all major developed markets are above their long-term averages with yields of some countries being nearly 15% higher than their 20-year average. Data sources: Standard & Poor’s and FactSet as of 12/31/16. Past performance is no guarantee of future results. For illustrative purposes only. Other methods and market conditions may result in significantly different outcomes. For the U.S., the S&P 500 Index is used to calculate the range, average and current dividend yield, while for all other countries represented, the representative MSCI country index is used. To construct an 16 | Global View MSCI country index, every listed security in the market is identified. Securities are free float adjusted, classified in accordance with the Global Industry Classification Standard (GICS®), and screened by size, liquidity and minimum free float. It is not possible to invest directly in an index. Santa Barbara Asset Management Dividend Investing and Active Management Dividend-paying stocks offer periodic cash flow, which may help mitigate the impact of capital losses. But not all dividend paying companies will perform equally over the long-term. Santa Barbara believes that companies with superior business models have the potential for sustainable dividend policies. An actively managed portfolio that holds the best of the Dividend Growers & Initiators has the potential for higher long-term total return with lower standard deviation. Santa Barbara believes that investing in companies with sustainable dividend policies and strong fundamentals for capital appreciation are important factors to achieving attractive returns. We seek to invest in companies with defendable competitive advantages, strong management, and low dependence on capital markets. Santa Barbara Asset Management is distinguished by our singular team, process and philosophical focus on dividend growth investing. We manage U.S., international and global based mutual funds and managed accounts that seek current income and capital appreciation by investing primarily in dividend-paying stocks.* ▪▪ Targets dividend growth greater than the index ▪▪ Is constructed with a beta lower than the index as a means to mitigate systematic risk and minimize volatility ▪▪ Targets a dividend yield equal to or greater than the index ▪▪ Is diversified across all sectors * Managed accounts may differ from mutual funds. Client holdings, sector weights and portfolio characteristics may vary depending upon the size of the account, investment objectives and restrictions, inception date, related fees and costs. This strategy may hold American Depositary Receipts (ADRs). ADRs are the receipts for the shares of a foreign-based company traded on U.S. exchanges. ADRs do not eliminate the 17 | Active Management The Dividend Growth Strategy: currency and economic risks for the underlying shares in another country. In addition, the strategy invests at least 80% of its net assets in dividend paying common and preferred stocks under normal market conditions. Managed accounts do not hold preferred stocks. All investments carry a certain degree of risk including the loss of principal and there is no assurance that an investment will provide positive performance over any period of time. Dividends are not guaranteed and will fluctuate. Santa Barbara Asset Management Risks and Other Important Considerations Investing involves risk; principal loss is possible. Dividend-paying stocks are subject to market risk, concentration or sector risk, preferred security risk, and equity securities risk. Small or mid-cap stocks are subject to greater volatility. Foreign investments involve additional risks including currency fluctuations, political and economic instability, and lack of liquidity. These risks are magnified in emerging markets. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. This presentation contains the most recent data available at the time of printing. The statements contained herein are based upon applicable data and the opinions of Santa Barbara Asset Management, LLC and are subject to change at any time. Nuveen does not verify nor guarantee the accuracy or completeness of the information presented. This information should not be relied upon as investment advice or recommendations, and is not intended to predict or depict performance of any investment. This presentation should not be regarded by recipients as a substitute for the exercise of their own judgment. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different outcomes. Neither Nuveen nor any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this presentation. Since no one manager is suitable for all investors, it is important to review investment objectives, risk tolerance, tax liability and liquidity needs before choosing a suitable investment style or manager. Santa Barbara Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen Investments, Inc. 18 | Risk Considerations & Endnotes Santa Barbara Asset Management Endnotes INDEX DEFINITIONS The S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic stock market. The MSCI EAFE Index is a free float-adjusted market capitalization weighted index designed to measure developed market equity performance, excluding the U.S. and Canada. 19 | Risk Considerations & Endnotes GLOSSARY Beta: A measure of the volatility of a portfolio relative to the overall market. Dividend yield: For a company’s stock, the ratio of the dividends paid out by the company each year per share to the share’s current market price. Drawdown: The peak to trough decline during a specific record period of an investment. Multiple expansion: An increase in the price-earnings ratio, or multiple, of a stock or group of stocks. Nominal returns: The rate of return on an investment without adjustment for inflation. Payout ratio: Measures the percentage of a company’s earnings paid out to shareholders in the form of dividends. Return on Equity (ROE): The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Standard deviation: A measure of the degree to which returns varied from the average return over a certain period. It is a common measure of volatility and risk. GBR-BDGFLIP-1216D 22551-INV-Y-01/18 Each stock’s dividend policy is determined on a rolling 12-month basis. For example, a stock is classified as dividend-paying if it paid a cash dividend at any time during the previous 12 months. Dividend growers and initiators include stocks that raised their existing dividend or initiated a new dividend during the preceding 12 months. Dividend cutters or eliminators include stocks that lowered their existing dividend or stopped paying regular dividends during the preceding 12 months. A stock is reclassified only if its dividend policies change. Dividend yield is one component of performance and should not be the only consideration for investment. Dividends are not guaranteed and will fluctuate. The returns shown do not reflect the deduction of any fees, expenses or taxes. Returns for stocks that paid dividends assume reinvestment of all income. Other methods and benchmarks may produce different results, and the results for individual portfolios and for different periods may vary depending on market conditions and the composition of the portfolio. Santa Barbara Asset Management