A Commitment to Quality
Not all high-dividend stocks make good investments. It is important to differentiate companies with deteriorating financial strength and increased risk of reducing or eliminating dividends from quality companies that are financially strong and committed to maintaining or growing dividends. We believe that the characteristics of quality companies are as follows:
- Large and established businesses
- Strong balance sheets
- Growing sales, earnings, and cash flow
- Dividend history and management commitment to a stated dividend policy
- Lower than average stock price volatility
Portfolio Management Team
Richard E. Cripps, CFA
Richard Cripps, the Chief Investment Officer of EquityCompass Strategies, has more than 30 years of experience in developing and monitoring investment opinions, as well as providing market commentary, strategy, and portfolio advice to individual and institutional clients. Previously, Mr. Cripps served as the Managing Director of Portfolio Strategy at Stifel, Nicolaus & Company, Incorporated and Chief Market Strategist and Co-Chairman of the investment committee at Legg Mason Wood Walker. The EquityCompass investment philosophy and process were developed and refined under Mr. Cripps’ leadership while at Legg Mason and were utilized in a variety of programs. Mr. Cripps has a B.S. in Finance from James Madison University.
Larry Baker, CFA
Larry Baker joined EquityCompass in 2010 and is currently the Senior Portfolio Manager of the EquityCompass Quality Dividend and Select Quality portfolios. He has more than 30 years of investment experience, including 15 years (1990–2005) at Legg Mason, where he was a Managing Director and award-winning securities analyst in the Industrials sector (1990–2005). Prior to joining Legg Mason, he was a Vice President and securities analyst at Dillon, Read & Co. Mr. Baker began his career as a securities analyst with E. F. Hutton, where he spent 10 years. Larry has been named a three-time member of Institutional Investor’s All-American Research Team (1985–1987), and was recognized as an All-Star analyst by The Wall Street Journal Best on the Street (2002 and 2003) and Forbes/StarMine (2004). He received a B.S. from the United States Military Academy and a Masters in Finance from the Sloan School of Management at the Massachusetts Institute of Technology.
Michael S. Scherer
Mike Scherer, the Portfolio Manager of the EquityCompass Quality Dividend and Select Quality portfolios, is a senior member of the team responsible for developing and researching EquityCompass’ quantitative portfolio strategies. He has written extensively on market strategy and works closely with Stifel’s financial advisors, educating them on EquityCompass investment portfolios and products. With over 13 years of investment experience, Mr. Scherer has been involved in quantitative model maintenance and portfolio construction for the EquityCompass portfolios and quantitative models since their inception. Mr. Scherer has a B.A. from the College of William & Mary and an MBA in Finance from Loyola University Maryland.
Choice Financial Partners Inc., d/b/a EquityCompass Strategies (“EquityCompass”) is a registered investment adviser and a wholly owned subsidiary of Stifel Financial Corp. (NYSE: SF). EquityCompass offers a broad range of portfolio strategies based on its research-driven, rules-based investment process, which merges traditional investment theory with quantitative techniques. SMA portfolios and equity-linked instruments based on EquityCompass model portfolios are available primarily through affiliated broker-dealer, Stifel, Nicolaus & Company, Incorporated. As of April 30, 2013, EquityCompass provided portfolio strategies with respect to assets in excess of $1.3 billion. As a Stifel company, EquityCompass is able to leverage Stifel’s resources and infrastructure as one of the leading full-service financial services firms in the U.S., for risk management oversight and a global infrastructure for trading, record keeping, reporting, and risk control, while maintaining the autonomy and service of a pure investment firm. The information contained herein has been prepared from sources believed to be reliable but is not guaranteed and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein.
Quality Dividend Fund
The Quality Dividend Fund (“Fund”) is registered under the Investment Company Act of 1940 as a diversified open-end management investment company, commonly known as a mutual fund.
The Fund seeks to achieve current income and long-term growth of capital.
The Fund primarily invests in a diversified portfolio of dividend-paying common stocks of U.S. and foreign companies. The Fund may invest in companies of any size but will typically focus on larger companies. Its equity investments may also include real estate investment trusts (“REITs”), other mutual funds, and exchange-traded funds (“ETFs”). Up to 20% of the Fund’s net assets may be invested in master limited partnerships (“MLPs”).
The Fund seeks to limit risk from any one stock or sector by attempting to hold equal-weighted positions and exposing no more than 20% of its net assets to any one economic sector (as defined by Standard & Poor’s).
As with any mutual fund, it is possible to lose money by investing in the Fund.
The Fund is new, with a limited operating history upon which to rely in determining whether to invest.
The Fund cannot guarantee the amount or frequency of distributions to its shareholders because the Fund’s dividend income probably will vary. Companies that have paid regular dividends may reduce or eliminate payments in the future. Further, the value of an issuer’s stock may decrease because it reduced its dividends. A fund pursuing a dividend-oriented investment strategy may at times underperform other funds that invest more broadly or that have different investment styles.
The Fund’s dividend income from foreign (non-U.S.) stocks may lose value due to adverse currency fluctuations, and may be reduced by foreign taxes. The value of foreign stocks may decrease as a result of special risks that affect some foreign countries, such as social and political instability, lax regulatory and financial reporting standards, and government restrictions on investment and capital mobility.
Master Limited Partnerships (“MLPs”) are publicly traded partnerships listed on a national securities exchange. MLPs primarily are engaged in energy and natural resource sectors, which makes their income and market value sensitive to negative developments in those sectors. Their market value also may be sensitive to interest rates. Consequently, the prices of MLP units may fluctuate abruptly. Trading volume for MLP units may be low, which may make it difficult for the Fund to sell its units at a favorable price. MLP general partners have the power to take actions that adversely affect the interests of unit holders. MLPs do not pay U.S. federal income tax at the partnership level, but an adverse change in tax laws could result in MLPs being treated as corporations for federal income tax purposes, which could reduce or eliminate distributions paid by MLPs to the Fund.
The dividends paid to the Fund by a Real Estate Investment Trust (“REIT”) may be lower than expected if the REIT’s net operating income is adversely impacted tenant defaults, declining occupancy rates, changes in environmental and zoning regulations, or falling property values and rents due to deteriorating local or national economic conditions. Some REITs are highly leveraged, which may increase their risk of loss. A REIT that does not qualify as such under the Internal Revenue Code will pay federal income taxes on its earnings, which will reduce the dividends paid by the REIT to the Fund. The prices of REIT stocks listed on a securities exchange may fluctuate erratically because of interest rate changes and other factors. Non-listed REIT securities may lack sufficient liquidity to enable the Fund to sell them at an advantageous time or to minimize a loss.
Index Description(s): The S&P 500 Index is a broad market index that tracks the performance of 500 leading stocks from major industries of the U.S. economy. The index is generally considered representative of the U.S. large capitalization market. Barclays Capital U.S. Investment Grade Corporate Bond Total Return Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. corporate investment grade fixed income bond market. Indices are unmanaged, and it is not possible to invest directly in the indices.
Investors should consider the investment objective, risks, charges, and expenses of the Quality Dividend Fund carefully before investing. A prospectus with this and other information about the Fund may be obtained by calling (888) 201-5799. Read the prospectus carefully before investing. The investment return and principal value of an investment will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original cost.
Quality Dividend Fund is distributed by Foreside Funds Distributors LLC, not an affiliate of EquityCompass.
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