Download An Economic Perspective on Dividends

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