Kingsbarn Dividend Opportunity ETF (DVDN)
Actively Managed to Deliver an Attractive Yield
WHAT MAKES DVDN DIFFERENT?
The portfolio managers each possess unique analytic and operating expertise that allows for the development of proprietary bottom-up financial forecasts that provide earnings, dividend, and book value sensitivities to changing macroeconomic conditions.
HOW DOES THIS DIFFERENCE BENEFIT INVESTORS?
DVDN’s portfolio managers model and monitor approximately 75 companies across five subsectors providing a differentiated investment universe to take advantage of attractive companyspecific investment opportunities.
WHAT ROLE MIGHT DVDN PLAY IN YOUR PORTFOLIO?
Absent systemic events (FY08 Global Financial Crisis; 1Q20 COVID19), Mortgage REITs and Business Development Companies generally have low market correlations and have, in aggregate, consistently provided investors dividend distributions in the range of 8% – 10%.2 Given this, DVDN may serve as an attractive fund for fixed income portfolio allocations.
The DVDN Investment Universe*
NUMBER OF COMPANIES
MARKET CAP
PRICE TO BOOK
CURRENT YIELD
MORTGAGE REITS
Agency
8
$8.3 Billion
0.73x
20.6%
Hybrid/Credit
12
$19.4 Billion
0.71x
14.4%
TOTAL CREITS
17
$23.5 Billion
0.73x
13.0%
TOTAL BDCS
38
$56.3 Billion
0.95x
12.1%
Data accurate as of 10/16/23. Source: Bloomberg, JMP Securities, and BTIG.
Past performance does not guarantee future returns.
All metrics are equal-weighted by the number of stocks in each segment.
* See disclosure for definitions
As an actively managed fund, DVDN will typically have positions in
12-18 companies from three or more of the REIT and/or BDC sub-sectors.
The DVDN Investment Process
Bottom-Up Analysis
DVDN’s PMs develop proprietary financial forecasts for net income, dividends, and book value under numerous interest rate scenarios.
- Forecast forward 12-month net income, dividends, and book value.
- Via Bloomberg, mark-to-market the investment portfolio and hedging positions.
Construct the Portfolio
From the five sub-sectors, select 12-18 companies that may deliver investors an attractive dividend that is relatively resilient across various interest rate scenarios.
- The goal of DVDN’s investment process is twofold: (a) select those companies that deliver the highest aggregate “base forecast” dividend (b) with the lowest volatility in that dividend across various interest rate scenarios.
Actively Manage Portfolio Positions
Frequently “stress-testing” financial models and marking-to-market investment portfolios should benefit DVDN returns.
- Core positions in companies with resilient dividends across wide ranges of interest rates.
- Overweight “upside surprise” dividend opportunities.
- Sell positions before earnings misses/dividend cuts.
Fund Summary
INVESTMENT OBJECTIVE
ACTIVELY MANAGE INVESTMENTS TO DELIVER AN ATTRACTIVE YIELD
Investment Objective
Deliver an attractive quarterly dividend while maintaining prospects for capital appreciation.
High Income Potential
Investment universe of 75 securities paying high dividend yields.
Actively Managed Portfolio
Fund managers select 12-18 companies they believe will deliver
attractive risk-adjusted returns.
Management Fee
0.90% on invested capital.
Total Annual Fund Operating Expenses
1.72%
PERFORMANCE DATA
The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 800-242-1000.
Shares are bought and sold at market price, not net asset value (NAV). Market price returns are based upon the closing composite market price and do not represent the returns you would receive if you traded shares at other times.
Definitions
Market Cap – The “Market Cap” or market capitalization is calculated by multiplying the number of shares outstanding by the company’s stock price.
Price to Book – The “Price to Book” is the ratio of the security’s market price divided by the company’s book value, or the balance of its common equity (total equity less any preferred equity). It is also common for a company’s book value to be referred to as its Net Asset Value, or NAV, which is the difference between its assets and liabilities (and preferred equity, if any). As shown in the Exhibit, most of the stocks in DVDN’s Investment Universe were priced, on 10/16/2023, below Net Asset Value. A company’s Net Asset Value can fluctuate as the fair market value of its assets changes due to changes in interest rates, changes in market spreads, or changes in credit performance. Although there are some companies in the Investment Universe that trade at a premium to Net Asset Value, generally Net Asset Value is a reasonable proxy for the fair value of the stocks in the Investment Universe.
Current Yield – The “Current Yield” is the ratio of the company’s most recently declared dividend divided by the security’s market price wherein the most recently declared dividend is annualized by multiplying by 4 (or 12 in the case the company pays a monthly dividend). The Current Yield can fluctuate as a company’s stock price changes or if a company increases or decreases its quarterly dividend. As shown on Page 3, the Current Yield for the stocks in the Investment Universe is benefitted as the stock prices are trading at discounts to Net Asset Value, or book value (see definition for Price to Book).
Agency Mortgage REITs – Agency Mortgage REITs invest in mortgage-backed securities issued by Fannie Mae and/or Freddie Mac, otherwise known as government-sponsored enterprises (or GSEs). These securities do not expose the investor or any credit risk as that risk is borne by the GSEs. Agency Mortgage REITs also invest in mortgage-backed securities issued by Ginnie Mae with is backed by the full faith and credit of the U.S. government.
Hybrid / Credit Mortgage REITs – Hybrid Mortgage REITs invest in mortgage-backed securities that are not guaranteed by any government-sponsored enterprise and investors are exposed to credit risk related to borrower payment behavior for the mortgages underlying the mortgage-backed security.
CREITs – Commercial Mortgage REITs (“CREITs”) invest in loans that are secured by commercial real estate, including multifamily properties. Investors in commercial mortgage loans are subject to credit risk related to borrower payment behavior.
BDCs – Business Development Companies (“BDCs”) invest in loans made primarily to private companies. Investors in loans to private companies are subject to credit risk related to the payment behavior of the private companies.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 800.242.1000 or visit our website at KingsbarnCapital.com. Read the prospectus or summary prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV) and may trade at a discount or premium to NAV. Shares are not individually redeemable from the Fund and may be only be acquired or redeemed from the fund in creation units. Brokerage commissions will reduce returns.
Fund risks: As with all funds, a shareholder is subject to the risk that his or her investment could lose money. The principal risks affecting shareholders’ investments in the Fund are set forth below.
Equity Securities Risk. Equity prices may fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of equity
securities may fluctuate from day to day.
Mortgage REITs Risk. The Fund’s investments in the securities of publicly traded residential and commercial mortgage REITs will be subject to a variety of risks affecting those REITs directly. Investments in BDCs, Business Development Companies may be subject to a high degree of risk. BDCs typically invest in small and medium-sized private and certain public companies that may not have access to public equity or debt markets for capital raising. As a result, a BDC’s portfolio typically will include substantial amounts of securities purchased in private placements, and its portfolio may carry risks similar to those of a private equity or venture capital fund.
Risks of investing in VDLs. VDLs, Venture Debt Lenders, are direct lenders to private companies that are backed by private equity or venture capital investment firms. Generally, these companies have reached a stage in their business life cycle whereby their sponsors are comfortable raising debt capital to fund growth rather than investing additional equity capital.
Fixed-Income Securities Risk. Fixed-income securities can experience extended periods of price declines during periods of (a) sustained increases in market interest rates; and/or (b) persistent widening of credit spreads. The values of fixed-income securities may be affected by changes in the credit rating or financial condition of their issuers.
New Fund Risk. The Fund is a new ETF and has only recently commenced operations. As a new fund, there can be no assurance that the Fund will grow to or maintain an economically viable size, in which case it could ultimately liquidate.The Fund’s distributor does not maintain a secondary market in the Fund’s shares.
Foreside Fund Services, LLC. Distributor.
