BMO Global Dividend September 2015 Sri Iyer, Managing Director, - - PowerPoint PPT Presentation

SLIDE 1

BMO Global Dividend

September 2015

Sri Iyer, Managing Director, Systematic Strategies

SLIDE 2

1

Stability, Vision, Results

• Trust and stewardship
• Long-term investors
• Client focused

At Guardian Capital, we value our clients’ trust and view stewardship of their assets as

• ur primary responsibility.

We invest with the confidence that comes from a highly disciplined investment process and a constant awareness of risk and fiduciary responsibility. Our strength is our culture, enabling our stability and a long- term focus.

• Servicing Investors Since 1962

Guardian Capital Profile

• 129 Institutional clients
• $23.2 Billion*

Clients

• Equity Strategies
• Fixed Income Strategies
• Income Strategies
• Direct** / Indirect Real Estate

Strategies

• 28 Investment Professionals
• 38 Management and Administrative Associates

Team

* Guardian Capital LP as at June 30th, 2015 ** Through Guardian Capital Real Estate Inc.

SLIDE 3

2

Sources: MSCI World - Morgan Stanley

Top-Down Architecture: What it means to you

• Region, country, size and style has diminished as alpha sources
• Industry groups and sectors now at the forefront of alpha generation
• Bottom-up stock selection is key

0% 5% 10% 15% 20% 25% 30% 35% 40% Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Monthly Top-Down Dispersion as Fraction of Total Dispersion

Industry Group Sector Style Size Country Region

SLIDE 4

3

Dividends: The Largest Contributor to

Total Return

• Long-term trend
• Dividends have been the

largest contributor to total returns and ERP over the long- term

• This secular trend is expected

to continue

• Dividend as an asset class calls

for a routine quality assessment of cash flow sustainability of a company

MSCI Total Return Indices are calculated With Gross Dividends: Gross total return indices reinvest as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country

• f the dividend-paying company. Gross total return

indices do not, however, include any tax credits.

MSCI World, Figures provided are in USD Date Range: 31/12/1969 – 09/03/2015

66%

MSCI Country Indexes: MSCI Canada, MSCI UK, MSCI US, MSCI Japan, MSCI Germany MSCI Australia Date Range: 31/12/1969 - 09/03/2015, Base Currency

SLIDE 5

4

Comparing Fundamentals Globally: Relative

 Common factors across 10 global sectors  Applied to over 3000 stocks  Rates of Change of Fundamentals (Delta)

• By using a set of common factors, we focus on sectors regardless of geography.
• Each of 10 sectors has its own model, allowing Guardian to buy best-in-class stocks within each sector.
• By comparing rates-of-change in company fundamentals we are able to see through the differences in

accounting standards globally.

SLIDE 6

5

GPS: Empirical evidence

• Top Quintile Dividend Growers (red) out performed

Top quintile Earnings growers (green)

• investors reward a growing and stable payout
• f earnings
• strategies ( Orange and Blue) that combine

top quartile dividend and earnings growth significantly out perform single factor approaches

Performance of dividend payers within Broad U.S Market Index

• Companies with high payout ratios

almost uniformly underperform

• avoiding payout tails is important for

sustainability of dividends

Cumulative performance Factor Rank IC

Earnings growth coupled with Dividends performs best

SLIDE 7

6

Our main thesis – stock prices revert around a Beta captured by:

• consistent cash flow
• reduced estimation error
• and a risk adjusted forward looking discount rate

Equity Duration

• Intrinsic Value
• Cash flow Value
• Terminal Value
• Market to Model Ratio
• Cash flow weight

Intrinsic: Cash Flow

Comparing Fundamentals Globally: Intrinsic

Unlike bonds, the cash flows that equity investors anticipate receiving must be estimated and thus are less certain.

SLIDE 8

7

rowth

Dividend growth is a significant factor for long term returns and depends on consistent earnings growth

ayout

Quality over Quantity through balance sheet management

ustainability

A Globally competitive revenue stream and margin efficiency to sustain strong ROE and dividends

• Yield carry and stock

selection as alpha drivers

• Emphasis on dividend

growth and sustainability through a combination of relative and intrinsic valuations across different Global factor buckets

• Avoid yield for yield sake

by looking at a stocks cash flow visibility and estimation risk of terminal value

Early Stage Rapidly Increasing Growth Steady Growth Mature Growth

GPS Traditional

Investable Universe: All stocks in MSCI ACWI and REITs that pay dividends regardless of where they are on the evolutionary chart

Philosophy: How to capture the jump from bonds to stocks

SLIDE 9

8

High Yield

Dividend Payers Dividend Growers Dividend Achievers

Low Yield High Growth

Three Primary Dividend Classes

• 1. Dividend

Payers

⁻ High yield, stable cash flow, modest dividend growth ⁻ Cash flow allocated primarily to dividends and balance for debt re-placement and capex

• 2. Dividend

Growers

⁻ Low to Median yield, good cash flow growth, solid dividend growth ⁻ Cash flow allocated evenly to dividends and re-investment for further growth, uses buybacks also.

• 3. Dividend

Achievers

⁻ Lower yields, steady cash flow growth, residual policy for dividends ⁻ Cash flow allocated primarily to re-investment for growth and meet payout targets, uses buybacks significantly

Low Growth

SLIDE 10

9

Portfolio Review – BMO Global Dividend

As at August 31st, 2015

*Benchmark: 100% MSCI World

GICS SECTOR Weight Dividend Yield Portfolio Benchmark* Portfolio Benchmark* Financials

16.33% 20.82% 3.76% 3.10%

Consumer Staples

14.63% 9.92% 3.53% 2.78%

Health Care

13.63% 13.64% 2.86% 1.89%

Industrials

13.10% 10.72% 2.91% 2.60%

Consumer Discretionary

10.27% 13.16% 2.63% 1.83%

Telecomm Service

9.64% 3.38% 4.44% 4.20%

Information Technology

7.54% 13.31% 2.73% 1.65%

Energy

5.50% 6.82% 5.71% 4.09%

Materials

4.53% 4.67% 3.33% 2.99%

Utilities

4.77% 3.16% 5.22% 4.43% Overall 3.52% 2.62%

Source: Thomson Eikon

SLIDE 11

10

Portfolio Review – BMO Global Dividend

As at August 31st, 2015

Energy Weight Yield

Portfolio 5.5% 5.7% Benchmark 6.8% 4.1%

Financials Weight Yield

Portfolio 16.3% 3.8% Benchmark 20.8% 3.1%

Healthcare Weight Yield

Portfolio 13.6% 2.9% Benchmark 13.6% 1.9%

Industrials Weight Yield

Portfolio 13.1% 2.9% Benchmark 10.7% 2.6%

Consumer Discr. Weight Yield

Portfolio 10.3% 2.6% Benchmark 13.2% 1.8%

Williams Companies Total Royal Dutch Shell Pembina Pipeline Corp Kinder Morgan Keyera Corp Eni Spa Conocophillips Chevron Corp BP Westpac Banking Corp Wells Fargo & Co Swedbank Sumitomo Mitsui Financial Group Spirit Realty Capital Skandinaviska Enskilda Banken Royal Bank Of Canada Prudential Munich RE Mitsubishi UFJ Financial Group Legal & General Group Plc JPMorgan Chase & Co Goldman Sachs Daiwa Securities Biomed Realty Trust AXA ANZ Banking Group Ltd Teva Pharmaceutical Sonic Healthcare Ltd Pfizer Novartis Merck & Co Inc Medtronic Johnson & Johnson Glaxosmithkline Gilead Sciences Inc Bayer Astrazeneca Amgen Abbvie Waste Management Sydney Airport Holdings Ltd Republic Services Inc Raytheon Co Lockheed Martin Corp Illinois Tool Works General Dynamics Corp Ferrovial FANUC Corp CSX Corp BAE Systems Walt Disney Co VF Corp Starbucks Corp Six Flags Entertainment Corp Prosiebensat 1 Media Newell Rubbermaid McDonald's Corp Macys Genuine Parts Co Fuji Heavy Industries Ltd Daimler Ag

Utilities Weight Yield

Portfolio 4.8% 5.2% Benchmark 3.2% 4.4%

Telecom Weight Yield

Portfolio 9.6% 4.4% Benchmark 3.4% 4.2%

Materials Weight Yield

Portfolio 4.5% 3.3% Benchmark 4.7% 3.0%

Information Tech Weight Yield

Portfolio 7.5% 2.7% Benchmark 13.3% 1.7%

Consumer Staples Weight Yield

Portfolio 14.6% 3.5% Benchmark 9.9% 2.8%

SSE National Grid Duke Energy Corp Ameren Corp Verizon Communications Telstra Corporation Swisscom Proximus Deutsche Telekom AT&T Lyondellbasell Industries Dow Chemical BASF SE Air Products And Chemicals Texas Instruments STMicroelectronics Seagate Technology Microsoft Corp Intel Corp DH Corp ADP Apple Inc Unilever Reynolds American Procter & Gamble Co Philip Morris International Nestle Kimberly-Clark Corp Imperial Tobacco Group Dr Pepper Snapple Group British American Tobacco Plc Anheuser-Busch InBev Altria Group

Source: Thomson Eikon

SLIDE 12

11

Quality Redefined: European Focus

Source: UBS and GCLP based upon Local Shares Composite As of July 21st, 2015

Name RIC Dividend Yield Equity Duration Bond issuer Bond Maturity Credit rating (Moody's / S&P) Bond Yield to Maturity Bond Duration

Nestle NESN.VX

3.0 30.55

NESTLE FINANCE INTL LTD 7/19/2019 Aa2 /N/A

0.44 3.9

Royal Dutch Shell RDSa.AS

6.7 18.80

SHELL INTERNATIONAL FIN 03/24/2021 Aa1 / AA

0.87 5.4

TOTAL TOTF.PA

5.5 15.26

TOTAL CAPITAL CANADA LTD 09/07/2020 Aa1 / AA

0.72 4.8

BASF SE BASFn.DE

3.4 18.24

BASF SE 01/22/2019 A1 / A+

0.32 3.2

GlaxoSmithKline GSK.L

5.9 17.79

GLAXOSMITHKLINE CAPITAL 12/13/2017 A2 / A+

0.29 2.2

Unilever NV Unc.AS

2.8 14.46

UNILEVER NV 05/08/2020 A1 / A+

0.67 4.8

EDF EDF.PA

5.9 9.75

ELECTRICITE DE FRANCE SA 01/18/2022 Aa3 / A+

1.12 5.8

Eni ENI.MI

7.1 10.63

ENI SPA 11/22/2021 A3 / A /*

1.11 5.8

Daimler DAIGN.DE

2.9 22.43

DAIMLER AG 06/25/2021 A3 / A

0.88 5.6

Bayer BAYGn.DE

1.7 25.84

BAYER AG 01/25/2021 A3 / A

0.77 5.0

National Grid NG.L

5.1 27.07

NATIONAL GRID PLC 10/03/2020 Baa1 / BBB+

0.84 4.2

Deutsche Telekom DTEGn.DE

.30 24.39

DEUTSCHE TELEKOM INT FIN 07/13/2022 Baa1 / BBB+

1.25 6.2

BAE SYSTEMS BAES.L

4.4 13.31

BAE SYSTEMS PLC 11/10/2021 Baa2 / BBB+

3.38 5.3

Imperial Tobacco IMT.L

4.0 13.83

IMPERIAL TOBACCO FINANCE 02/26/2021 Baa3 / BBB

1.48 5.0 4.4 18.74 1.01 4.8

SLIDE 13

12

Portfolio Composition

Source: Thomson Eikon

SLIDE 14

13

Buybacks – BMO Global Dividend

Company Buyback Yield

LYONDELLBASELL INDUSTRIES NV 11.08 ILLINOIS TOOL WORKS INCORPORATED 8.92 INTEL CORPORATION 5.97 APPLE INC. 5.84 ABBVIE INC 5.52 MCDONALD'S CORPORATION 4.59 GILEAD SCIENCES, INC. 4.56 GOLDMAN SACHS GROUP INC 4.41 PFIZER INC. 4.15 SIX FLAGS ENTERTAINMENT CORPORATION 4.08

% of portfolio with positive buyback yield: 48%

Source: Thomson QAD 12-Months Ending June 30, 2015

SLIDE 15

14

Dividend Growers – BMO Global Dividend

% of portfolio that raised dividends: 60%

Source: Thomson QAD 12-Months Ending June 30, 2015

Company Current DPS Previous DPS % Change

AVAGO TECHNOLOGIES LIMITED 2.114 1.42 48.79 WILLIAMS COMPANIES INC 2.38 1.768 34.65 LYONDELLBASELL INDUSTRIES NV 2.577 1.915 34.56 AMGEN INC. 2.98 2.3 29.57 SEAGATE TECHNOLOGY 2.16 1.72 25.58 STARBUCKS CORPORATION 0.64 0.52 23.08 VF CORP 1.28 1.05 21.9 ROYAL DUTCH SHELL PLC 1.661 1.363 21.8 ABBVIE INC 2.02 1.66 21.69 LEGAL & GENERAL GROUP PLC 0.118 0.098 20.41

SLIDE 16

15

Global Dividend Composite Performance

Annual Rates of Return (%) $CAD Annualized Rates of Return (%) $CAD for Periods Ending August 31st, 2015

* Inception Date: January 1, 2007 Past Performance may not be indicative of future performance. Returns are gross of fees

2014 2013 2012 2011 2010 2009 2008 2007 Guardian Global Dividend 16.16 23.52 7.05 5.75 9.50 16.30

• 18.08
• 4.20

MSCI World 14.46 35.42 13.61

• 5.26

7.07 15.06

• 28.36
• 8.47

MSCI ACWI 13.61 31.28 13.31

• 3.41

6.21 11.09

• 26.52
• 6.43

1 Month 3 Months YTD 1 Year 3 Year 5 Year 7 Year Since Inception* Guardian Global Dividend

• 4.73
• 0.70

9.46 16.64 17.32 14.69 10.16 6.86 MSCI World

• 5.36
• 1.51

11.20 16.75 22.34 16.00 8.48 4.89 MSCI ACWI

• 5.60
• 2.68

10.80 14.13 20.63 14.47 7.89 4.59

SLIDE 17

16

Quality: Hedge against equity volatility

Source: BofA Merrill Lynch US Equity & US Quant Strategy, CBOE, S&P

Correlation of BofAML Quality Indices 12-month returns to 12-month changes in VIX

SLIDE 18

17

A Fundamental Mispricing of Risk

Source: BofA Merrill Lynch US Equity & US Quant Strategy. As of 6/30/15)

Price Beta vs. Earnings risk for S&P 500 Sectors

SLIDE 19

18

Demographics

Source: UN

SLIDE 20

19

Sri Iyer, MBA

Managing Director - Head of Systematic Strategies Sri joined Guardian Capital in 2001 to help lead the development and implementation of our proprietary systematic equity portfolio management strategy. Prior to joining Guardian, Sri was with Global Value Investors in Princeton, New Jersey responsible for a variety of portfolio management and financial engineering roles. Sri graduated with a Bachelor of Commerce from the University of Bombay in 1989, earned his Chartered Cost and Works Accountant (India) designation in 1990 and his MBA (Applied Finance) from Rutgers Graduate School of Management in 1994.

Systematic Strategies Team

Adam Cilio, MMF, CFA, FRM

Senior Portfolio Engineer - Systematic Strategies Adam joined Guardian Capital LP in 2008 as a portfolio engineer with responsibility for research and modeling in our systematic strategies team. Prior to joining Guardian Capital, he was a Market Risk Analyst with TD Securities. Adam graduated with a Bachelor of Applied Science (Industrial Engineering) from the University of Toronto in 2004 and he

• btained his Masters of Mathematical Finance from the University of Toronto in 2005 and is a CFA Charterholder. He
• btained his Financial Risk Manager designation from Global Associations of Risk Professionals in 2012.

Fiona Wilson, MBA, CFA

Portfolio Manager - Systematic Strategies Fiona Wilson joined Guardian Capital LP in 2011 as a Portfolio Manager in our systematic strategies team. Fiona began her career as an options trader at CIBC and progressed to become Head of Currency Options Marketing, South East Asia for Societe Generale with postings in Tokyo, Singapore and London. Her experiences included structuring classical and exotic

• ption trading and hedging strategies for central banks, corporate and institutional clients throughout Asia. She subsequently

took on the role of Portfolio Manager, Global Derivative Instruments with Ontario Municipal Employees Retirement System (OMERS). Fiona graduated with a Bachelor of Arts from the University of Western Ontario and obtained her Honours Bachelor of Commerce and MBA from the University of Windsor. Fiona is also a CFA Charterholder.

SLIDE 21

20

Systematic Strategies Team

Harpreet Singh, MBA, CFA

Director of Research and Portfolio Management - Systematic Strategies Harpreet joined Guardian Capital LP in 2012 as Director of Research and Portfolio Management with responsibility for research and portfolio management in our systematic strategies team. Harpreet Singh is a proven senior investment professional in portfolio management and construction, risk analysis and quantitative modeling. Previously, he was the Head

• f US Equities at Manulife Asset Management in Toronto, where he successfully guided fundamental as well as quantitative

analysts and portfolio managers in a disciplined portfolio construction process established by him. Before that, Harpreet was a Quantitative Associate at Standish, Ayer & Wood, Inc., a leading asset management firm in Boston. Harpreet earned a B.Tech. in Chemical Engineering from The Indian Institute of Technology in New Delhi in 1989 and his MBA in Finance in 1992 from Bentley Graduate School of Business in Massachusetts. Harpreet is a CFA Charterholder.

Elgin Chau, B.Sc

Quantitative Analyst – Systematic Strategies Elgin joined Guardian Capital LP in 2014 as a Quantitative Analyst with responsibility for assisting in research and modeling in our systematic strategies team. Prior to joining Guardian, Elgin was a Business Intelligence consultant with Hitachi Corp. as well as a programmer analyst with Capital one. As a Software Engineer, Elgin’s work experience has centered around using innovative computer and financial technology to provide financial information. Elgin has a Bachelor’s Degree in Computer Science from the University of Toronto (2008). He is pursuing his CFA designation.

Peter Michaels, M.Eng, CFA

Portfolio Engineer - Systematic Strategies Peter joined Guardian Capital LP in 2012 as a senior Quantitative Analyst with responsibility for research and modeling in

• ur systematic strategies team. Peter has worked with some of the largest institutions in Canada that include Scotia

Capital, Symcor and Honeywell Aerospace. As a Software Engineer, Peter’s work experience has centered around using innovative computer and financial technology to provide financial information to portfolio managers and financial institutions. Peter has a Masters Degree in Computer Engineering from the University of Toronto (2008).

SLIDE 22

21

• This presentation may include information and commentary concerning financial markets that was developed at a particular point in time.

This information and commentary are subject to change at any time, without notice, and without update. This commentary may also include forward looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward looking statements will not prove to be accurate. Investing involves risk. Equity markets are volatile and will increase and decrease in response to economic, political, regulatory and other developments. The risks and potential rewards are usually greater for small companies and companies located in emerging markets. Bond markets and fixed-income securities are sensitive to interest rate movements. Inflation, credit and default risks are also associated with fixed income securities. Diversification may not protect against market risk and loss of principal may result.

• Performance for Guardian Capital LP (Institutional Division) Composites has been calculated on a trade basis, time weighted, valued

monthly, with geometric linking of period returns. Performance is calculated gross of investment fees and net of transactions costs. Index

• r benchmark performance is shown for comparison purposes. Index returns do not reflect fees, transaction costs or expenses. Please

consult the applicable Composite disclosure page for further details on performance and performance calculation.

• The information provided in this presentation should not be considered a recommendation to purchase or sell any particular security.

There can be no assurance that the portfolio will continue to hold the same position in companies referenced here, and the portfolio may change any position at any time. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable, or will equal the investment performance of the securities discussed.

• Certain information contained in this document has been obtained from external sources which Guardian believes to be reliable, however

we cannot guarantee its accuracy.

• This presentation is for educational purposes only and does not constitute investment, legal, accounting, tax advice or a recommendation

to buy, sell or hold a security. It is only intended for the audience to whom it has been distributed and may not be reproduced or redistributed without the consent of Guardian Capital LP.

• Guardian Capital LP manages portfolios for defined benefit and defined contribution pension plans, insurance companies, foundations,

endowments and third-party mutual funds. Guardian Capital LP is an indirect, wholly-owned subsidiary of Guardian Capital Group Limited, a publicly traded firm, the shares of which are listed on the Toronto Stock Exchange. For further information on Guardian Capital LP, please visit www.guardiancapital.com.

Disclosure