SMA Story: Focused Dividend Growth Strategy

[Pages:3]SMA STORY | 2021

Focused Dividend Growth Strategy

It's not all about the income

This concentrated portfolio of quality U.S. stocks seeks to deliver higher than market yield and total return through consistent growth of dividends.

Experience Portfolio Results

? Portfolio manager Jack Caffrey has over 30 years of industry experience and has managed the Strategy since 2010.

? Access to full J.P. Morgan resources and third-party research to make investment decisions.

? Bottom-up fundamental research drives U.S. stock selection based on a portfolio yield above market, dividend and earnings growth potential and underappreciated but relevant companies.

? Companies that tend to pay and consistently grow dividends and earnings are typically longer-term focused and of higher quality, regardless of market sentiment.

DRIVERS OF PORTFOLIO RETURN

YIELD GROWTH

SENTIMENT

THREE DRIVERS OF PORTFOLIO RETURN

1

2

3

YIELD Average portfolio yield consistently above the market

(S&P 500).

GROWTH Businesses growing earnings and growing

dividends 7?10% annually.

SENTIMENT High-quality businesses the market may currently underappreciate.

Companies that tend to pay and consistently grow dividends and earnings are typically longer-term focused and of higher quality, regardless of market sentiment.

INVESTING IN QUALITY DIVIDENDS TO ADD STABILITY

Dividends may provide a stable source of return and more stability in volatile markets and as the market cycle matures. Lower market volatility allows for faster compounding of returns and greater peace of mind in challenging markets.

Dividends contribute significantly to total returns n Dividends n Capital appreciation

13.9%

13.6%

12.6% 15.3%

10.6%

3.0%

4.7%

5.4%

6.0%

5.1%

4.4% 3.3%

1.6% 4.2% 4.4%

2.5%

1.8%

2.1%

3.3% 3.9%

-5.3%

-2.7%

1926-29 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's 2010s 1926 to 12/20

Chart source: Morningstar, Shiller data Yale University, data as of 12/31/20.

A DEMONSTRATED INVESTMENT APPROACH AND PROCESS

A multi-step approach to identify high-quality companies with attractive dividend growth potential through bottom-up fundamental research.

Jack believes in dividend growers: ? Dividends are "real cash" and illustrate companies' true, quality

earnings versus creative accounting. ? A commitment to a dividend forces discipline, especially on investment

(capital allocation). ? Dividends demonstrate that management views investors as partners,

increasing investor rewards as the business becomes more valuable.

When and what to sell is just as important as when and what to buy: ? Companies that cut dividends would be sold.1 ? Disruptions in the dividend increase cycle or significant increases in

payout ratios are monitored closely. ? Companies that reach price targets are monitored to realize gains.

1 These companies would be sold at the discretion of the Portfolio Manager as appropriate.

SCREENING PROCESS U.S. Stocks Liquidity

Dividend yield Dividend growth

Valuation The Portfolio

Average daily trading volume > $100 million

Pays a dividend

Track record of dividend growth

Attractive valuations

"

It's more than maximizing dividend income today. It's also about potential for earnings growth and dividend growth. -- JACK CAFFREY

EXPERIENCED PORTFOLIO MANAGEMENT

? Three decades of valuation and market experience, as well as an extensive background in investment research

? Appears regularly on CNBC, Bloomberg and in The Wall Street Journal, Financial Times, Forbes and more

Jack Caffrey

Portfolio Manager

? Over 30 years of industry experience, 17 at J.P. Morgan

RISK SUMMARY

Since the Strategy is intended to invest in a concentrated Portfolio of equity securities including depositary receipts, investors in the Strategy should have a higher tolerance for risk of loss of capital. In addition to those risks, investors in the Strategy should be prepared to accept higher volatility and greater concentration in the Strategy compared to investing in a more diversified Portfolio.

The following risks could cause the Strategy's portfolio to lose money or perform more poorly than other investments.

Equities. The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to "stock market risk" meaning that stock prices in general may decline over short or extended periods of time. Companies that have a small or mid-market capitalization typically carry a higher degree of market volatility than most large cap companies. Investments in emerging and international equity markets involve a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies in different countries can raise or lower returns. Most overseas markets are not as politically and economically stable as the U.S. market.

Fixed Income. Investments in fixed income securities, such as bonds, are subject to interest rate risk. As the prevailing level of bond interest rates rise, the value of bonds already held in a portfolio declines. Portfolios that hold bonds are subject to declines and increases in value due to general changes in interest rates. Portfolios that invest in lower-rated debt securities (commonly referred to as junk bonds) involve additional risks because of the lower credit quality of the securities in the portfolio, and could experience higher levels of volatility and increased risk of default. The credit quality of a security does not guarantee that the issuer will not default. Credit quality ratings generally range from AAA, Aaa, or AAA (highest) to D, C, or C (lowest) for S&P, Moody's, and Fitch, respectively. The rating shown is the highest among S&P, Moody's and Fitch and is shown using J.P. Morgan Asset Management's internal rating terminology, which is similar to S&P and Fitch. If an issue or issuer is unrated it is assigned an equivalent rating by the J.P. Morgan Asset Management Credit Team. The intention is to standardize the rating terminology, for example AA+ versus Aa1, and not to judge the methodology used by S&P, Moody's or Fitch. Any High Yield bonds are speculative, non-investment grade bonds that have higher risk of default or other adverse credit events which are appropriate for high risk investors only.

Alternatives. Investments in alternative investments, such as hedge funds, involve specialized risks that depend on the type of strategies undertaken by the manager. These can include distressed or event-driven strategies, long/short strategies, using arbitrage (exploiting price inefficiencies), international investing, and using leverage, options or derivatives. Although hedge fund managers may aim to reduce volatility and produce positive absolute return under a variety of market conditions, hedge funds may involve a high degree of risk and are suitable only for investors of substantial financial means who could bear the entire loss of their investment. So-called "liquid alternative funds" are registered funds that use some of the strategies and investments used by hedge funds, but they differ significantly from both hedge funds and traditional mutual funds. Because they can be redeemed on any business day, they are said to be "liquid." Such funds do not follow the typical buy and hold strategy of a traditional mutual fund and generally hold more non-traditional investments and use more complex trading strategies than a traditional mutual fund, which may make an investment in a liquid alternative fund riskier.

DISCLAIMER

This material is not an offer or solicitation for the purchase or sale of any financial instrument in any jurisdiction, nor is it a commitment by JPMorgan Asset Management or any of its subsidiaries (collectively "JPMAM") to enter into any transaction referenced herein. All information provided by JPMAM herein is indicative, is based on certain assumptions and current market conditions and is subject to change without notice. Accordingly, no reliance should be placed on the information herein. In deciding whether to enter into any transaction or strategy referenced herein, the recipient should rely solely on the final documentation which will contain the definitive terms and conditions relating to any referenced transaction or strategy.

These materials have been provided for illustrative purposes only and should not be relied upon by you in evaluating the merits of investing in any securities or strategies mentioned herein. Past performance is not a guide to the future. Any forecasts, opinions and statements of financial market trends expressed are JPMAM's own at the date of this document and may be subject to change without notice. Any research in this document has been obtained and may have been acted upon by JPMAM for its own purpose. The results of such research are being made available as additional information only and do not constitute investment advice. They do not reflect the views of JPMorgan Chase Group. The value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to current and future performance. Changes in exchange rates may have an adverse effect on the value, price or income of the product or underlying overseas investments. JPMAM makes no representation or warranty regarding the accuracy or completeness of the information herein. JPMAM is not an advisor to any person who receives information on any referenced transaction.

The recipient must make an independent assessment of a legal, credit, tax, regulatory and accounting issues and determine with its own professional advisors any suitability or appropriateness implications of any transaction referenced herein in the context of its particular circumstances. JPMAM assumes no responsibility or liability whatsoever to any person in respect of such matters. JPMAM, or any connected or associated person, may hold long or short positions or derivative interest in or act as market maker in the financial instruments of any issuer referred to herein or act as underwriter, distributor, advisor or lender to any such issuer. JPMAM may conduct trading activities, including hedging, in connection with any transaction referenced herein which may have an adverse impact on the recipient.

This material is meant to be distributed by Intermediaries where Advisory Portfolios are available.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

Issued in the United States by J.P. Morgan Investment Management Inc.

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? JPMorgan Chase & Co. April 2021

STO-FDG-MA-JPMS | 4/21

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