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A N D P U R P O S E T H AT E N D U R E S F O R

GENERAT I ON S

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Kayne Anderson Rudnick Caleb “Spuds” Powell, CPWA®, Managing Director; Randall Allen, Senior Vice President; Darnel Bentz, Senior Vice President; Curt Biren, CPWA®, AIF®, Senior Vice President; Thomas Connaghan, Senior Vice President; Dustin Gale, CFP®, Senior Vice President; Diane Spirandelli, CFA®, Senior Vice President

Los Angeles—San Francisco, CA Leading Wealth Advisor

Should I supplement my fixed-income portfolio with dividend-paying stocks? By Kayne Anderson Rudnick

*Data as of March 31, 2015. Data is from BNY Mellon and is assumed to be reliable. Past performance is no guarantee of future results.

With interest rates and bond yields near all-time lows, yield-oriented investors are receiving less income from their fixed-income portfolios. This can be troubling for investors nearing retire-ment with portfolios struggling to meet their income needs and increasing dis-tribution requirements.

Eager for higher payouts and addi-tional cash flow, many have turned to stocks that return a significant portion of profits to shareholders via dividends.

Historically, dividend-paying stocks have delivered higher long-term returns than nondividend-paying stocks and other income-generating investments. Ned Davis Research found that over the 30-year period ending December 31, 2014, firms that grew or initiated div-idends experienced an average annual-ized return above 10 percent, compared to a return of less than 3 percent for nondividend-paying stocks.

While dividend-paying stocks tend to lag the overall stock market during periods of significant appreciation, their dividends can contribute signifi-cantly to total equity returns. They do this by appreciating in up-periods and mitigating losses during periods of falling stock prices and volatile returns. In fact, from January 1, 1926 to December 31, 2014, 43 percent of the S&P 500’s annualized return was derived from the payment and reinvestment of dividends, with capital appreciation/depreciation contributing the rest.

Dividend-paying stocks have

historically provided payouts similar to fixed income on an after-tax basis while offering greater potential for both an increasing income stream and capital appreciation. This can be a useful hedge against inflation because, unlike bonds, which pay a fixed amount of income, dividend pay-ments from many companies actually increase each year.

Consider the recent dividend pay-out ratio for companies within the S&P 500, which are currently sitting on a record level of cash and liquid assets. On a trailing 12-month basis, the pay-out ratio at the end of 2014 was 32.2 per-cent, compared to the 10-year median of 29.2 percent for the index.

In the current environment, recent slow economic growth and worries about deflation have forced cen-tral banks around the world to cut

interest rates. As a result, we are see-ing equity dividend yields that are sig-nificantly higher than the yields on local 10-year government bonds. As the chart shows, dividends can provide an appealing alternative to investors in need of income.

Kayne Anderson Rudnick’s global dividend yield strategy pursues attrac-tive total returns with an above-average level of income (4.6 percent dividend yield*) by investing in a diversified global portfolio of 30 to 40 high-quality, dividend-paying companies. These are companies with strong and growing free-cash flow, healthy balance sheets with reasonable debt levels and consistent earnings growth. These companies also have management teams dedicated to creating value for shareholders through consistent and rational capital-allocation policies emphasizing cash dividends.

EQUITY DIVIDEND YIELDS—MAJOR WORLD MARKETS, ANNUALIZED

Source: FactSet, MSCI, J.P. Morgan Asset Management. Yields shown are those of the appropriate MSCI index. Data as of March 31, 2015.

5%

4%

3%

2%

1%

0%

-1% U.S. AUSTRALIA SWITZERLAND CANADA FRANCE EM ACWI JAPAN U.K.

2.6% 2.4%

10-year government bond yield

2.0%

4.4%3.8%

2.9% 2.8% 2.8%

1.7%

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How to reach Kayne Anderson Rudnick

We are oriented toward quality—in our investments, in our service and in our business practices. To learn more, please contact us at 800.231.7414.

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Kayne Anderson Rudnick 1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067 800.231.7414 580 California Street, Suite 1750, San Francisco, CA 94104

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Assets Under Management$10 billion (as of 3/31/15)

Largest Client Net Worth$500 million+

Minimum Fee for Initial MeetingNone required

Minimum Net Worth Requirement $1 million

Professional Services ProvidedInvestment advisory and money management services

Compensation Method Asset-based fee (investment services)

Primary Custodian for Investor Assets Fidelity Investments

Financial Services Experience Powell, 21 years; Allen, 16 years; Bentz, 13 years; Biren, 28 years; Connaghan, 18 years; Gale, 10 years; Spirandelli, 43 years

Email spowell@kayne.com tconnaghan@kayne.com rallen@kayne.com dgale@kayne.com dbentz@kayne.com dspirandelli@kayne.com cbiren@kayne.com

Website www.kayne.com

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“Dividend-paying stocks have historically provided payouts similar to fixed income on an after-tax basis.”—Kayne Anderson Rudnick

Front row: Diane Spirandelli, Dustin Gale, Caleb “Spuds” Powell; back row, left to right: Thomas Connaghan, Randall Allen, Darnel Bentz; not pictured: Curt Biren

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spowell@kayne.com

@kayne.com dspirandelli@kayne.com@kayne.com dspirandelli@kayne.com

About Kayne Anderson Rudnick Ranked among the Top 10 of Barron’s list of Top Independent Financial Advisors for the last two years, Kayne Anderson Rudnick is a boutique investment advisory firm founded in 1984 to manage capital for its founders, including John Anderson (a Forbes 400 billionaire and the benefactor of UCLA’s Anderson School of Management). With offices in Los Angeles and San Francisco, the company manages assets for both high net worth individuals and institutions. Its advisors boast an average client relationship duration of 11 years and a retention rate of 98 percent, thanks to outstanding client service and personalized investment strategies designed around clients’ unique circumstances and objectives. Disciplined risk management and diversification are key components in helping clients achieve their goals. Accordingly, the company’s comprehensive platform offers proprietary investment strategies and a range of carefully selected, externally managed investment solutions. With 30 years of experience blending traditional and alternative investments, Kayne Anderson Rudnick is known for a commitment to high-quality business practices, investment strategies and wealth solutions.

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Kayne Anderson Rudnick is featured in Worth® 2015 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of Sandow Media LLC. See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.

Caleb “Spuds” Powell, CPWA® Managing Director

Randall Allen Senior Vice President

Darnel Bentz Senior Vice President

Curt Biren, CPWA®, AIF® Senior Vice President

Thomas Connaghan Senior Vice President

Dustin Gale, CFP® Senior Vice President

Diane Spirandelli, CFA® Senior Vice President

Kayne Anderson Rudnick 1800 Avenue of the Stars, 2nd Floor

Los Angeles, CA 90067

580 California Street, Suite 1750San Francisco, CA 94104

Tel. 800.231.7414

spowell@kayne.comrallen@kayne.com

dbentz@kayne.com cbiren@kayne.com

tconnaghan@kayne.comdgale@kayne.com

dspirandelli@kayne.com www.kayne.com