Quarterly Update

Oct. 2019

David J. Abella, Managing Director, Senior Portfolio Manager | Oct. 2019

Dividend-Growing Stocks Help Investors Seeking Income

Most major stock indexes were positive for the first three quarters as the market recovered from a tough 2018 and the U.S. economy continued to perform well.

Our response is our familiar High Dividend theme: a strategy for solid income that can grow along with the economy.

Our view is that strong cash flows, coupled with solid growth rates, should continue to drive the attractive total returns the City National Rochdale Dividend Strategy has achieved in the past.

Most major stock indexes were positive for the first three quarters as the market recovered from a tough 2018 and the U.S. economy continued to perform well. However, the environment for investors seeking income has been challenging as interest rates have been falling. Our response is our familiar High Dividend theme: a strategy for solid income that can grow along with the economy.

For the past couple of years, we have focused on worries over rising rates or a falling market prompted by recession concerns (which we are still carefully monitoring). Currently, we are focused on our solid yield strategy, which has income projected to grow between 3% and 6% annually in aggregate, backed by companies with cash flow-driven businesses our fundamental research team feels are well positioned for the current economic environment. These are companies able to grow earnings and dividends with defensive business operations.

The graph below looks more closely at how income helps drive returns, highlighting the power of compounded interest (or dividends). We start with the current yield of a typical High Dividend portfolio (roughly 4%), then grow the portfolio at 3% per year over 20 years — at the bottom of our 3-6% expected dividend growth rate. Given an initial $1 million portfolio, we would expect the portfolio to be generating roughly $145,000 in income annually at year 20, up from $40,000 at the start, assuming all dividends are reinvested and using portfolio growth of 3% (along with dividend growth). Total dividends received over the 20 years would be roughly $1.64 million, a bit more than double what would be received with no dividend growth or compounded growth. Given the power of compounded dividends, we believe the strategy is attractive to income investors with either long or short time horizons.

Our view is that strong cash flows, coupled with solid growth rates, should continue to drive the attractive total returns the City National Rochdale Dividend Strategy has achieved in the past.

Key Points

Most major stock indexes were positive for the first three quarters as the market recovered from a tough 2018 and the U.S. economy continued to perform well.

Our response is our familiar High Dividend theme: a strategy for solid income that can grow along with the economy.

Our view is that strong cash flows, coupled with solid growth rates, should continue to drive the attractive total returns the City National Rochdale Dividend Strategy has achieved in the past.

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Important Disclosures

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this document and are subject to change.

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This presentation is not an offer to buy or sell, or a solicitation of any offer to buy or sell, any of the securities mentioned herein.

Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results and are based primarily upon a hypothetical set of assumptions applied to certain historical financial information. Certain information has been provided by third-party sources, and, although believed to be reliable, it has not been independently verified, and its accuracy or completeness cannot be guaranteed.

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this document and are subject to change.

Concentrating assets in a particular industry, sector of the economy, or markets may increase volatility because the investment will be more susceptible to the impact of market, economic, regulatory, and other factors affecting that industry or sector compared with a more broadly diversified asset allocation.

Private investments often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, and may involve complex tax structures and delays in distributing important tax information.

Alternative investments are speculative, entail substantial risks, offer limited or no liquidity, and are not suitable for all investors. These investments have limited transparency to the funds’ investments and may involve leverage which magnifies both losses and gains, including the risk of loss of the entire investment. Alternative investments have varying and lengthy lockup provisions. Please see the Offering Memorandum for more complete information regarding the Fund’s investment objectives, risks, fees, and other expenses.

There are inherent risks with equity investing. These risks include, but are not limited to, stock market, manager, or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Investing in international markets carries risks such as currency fluctuation, regulatory risks, and economic and political instability. Emerging markets involve heightened risks related to the same factors, as well as increased volatility, lower trading volume, and less liquidity. Emerging markets can have greater custodial and operational risks and less developed legal and accounting systems than developed markets.

There are inherent risks with fixed-income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer-duration fixed-income securities and during periods when prevailing interest rates are low or negative. The yields and market values of municipal securities may be more affected by changes in tax rates and policies than similar income-bearing taxable securities. Certain investors’ incomes may be subject to the Federal Alternative Minimum Tax (AMT), and taxable gains are also possible. Investments in below-investment-grade debt securities, which are usually called “high yield” or “junk bonds,” are typically in weaker financial health and such securities can be harder to value and sell, and their prices can be more volatile than more highly rated securities. While these securities generally have higher rates of interest, they also involve greater risk of default than do securities of a higher-quality rating.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.

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