Want to Beat Inflation? Consider a Dividend Strategy

October 19, 2021 EDT

The phrase, caught between a rock and a hard place might describe many investors in the market today. The CPI[1] has been over 5% since May and now the federal reserve is potentially looking at slowing down bond purchases, reducing the amount of stimulus in the market. Market sectors are up and down each week and the VIX[2] chart looks like waves on a choppy ocean. With such a tricky market, investors are taking a cautious approach.

Many times, investors might seek to find refuge in the bond market. However, the federal reserve is keeping rates low, which can make that an unattractive move. With low interest rates, but higher than usual inflation, investors cannot be too cautious, and many may be searching for answers in equities.

Dividend investing is one strategy that can be employed in this type of environment.  A dividend is a payout of a portion of a company's profit to eligible stockholders, typically issued by a publicly traded company. Investing in these stocks allows the investor to get a cash payout at different times throughout the year. If inflation continues to rise or stay higher than usual in the future, it would be good to get cash today at the lower inflation rate. While it is possible to keep that cash, that would not solve the issue of beating inflation since, if the inflation rate goes up after you get it, your purchasing power with those dollars goes down. Therefore, many dividend investors reinvest their dividends by purchasing more stock of the company that gave them the dividend.

This all seems like a great deal. However, dividend investing is not without its risks and drawbacks. Simply chasing after dividend yield may not suit an investor’s overall goal. It is important to remember that any funds given out as dividends are funds that are not being invested back into the company for possible future returns. In the past, we can find several examples of companies giving out high divided to compensate for bad performance.

The hope of reinvesting dividends is that the stock price will eventually increase in price, allowing investors to increase their total return. Thus, the crux of this strategy is to find companies that pay a dividend, but also have the potential to grow in the future as well. This can be challenging and time consuming for investors as many companies that pay out dividends tend to be mature companies that are not on a high growth trajectory.

Qraft AI-Enhanced U.S. High Dividend ETF (HDIV) is Qraft’s answer to this challenging and time-consuming problem. Using AI technology, it seeks to invests in large cap U.S. stocks that have the right balance of price returns and high dividend yield. Our AI technology searches for patterns of companies that exhibit these characteristics and then finds the stocks it feels will perform that way in the future.

Although investors may feel the squeeze of the current market, there are strategies and options out there to help them achieve their goals. While there is research to be done on how to execute this strategy, investors can utilize ETFs and AI technology to help them find the companies that may suit their investment goals. 

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 the original cost. Current performance may be lower or higher than the original cost. Returns for periods of less than one year are not annualized. Returns are determined based on the midpoint of the bid/ask spread at 4:00pm Eastern time, when the NAV is typically calculated. Market returns does not represent the returns you would receive if you traded shares at other times.

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Investors cannot directly invest in an index.


[1] CPI: The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

[2] VIX: The Cboe Volatility Index (VIX) is a real-time index that represents the market's expectations for the relative strength of near-term price changes of the S&P 500 index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility.

MSCI USA High Dividend Yield Index: The MSCI USA High Dividend Yield Index is based on the MSCI USA Index, its parent index, and includes large and mid cap stocks. The index is designed to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent.

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 1-855-973-7880 or visit our website at www.qraftaietf.com. Read the prospectus or summary prospectus carefully before investing.

The Funds are distributed by Foreside Fund Services, LLC

Investing involves risk, including loss of principal. The Funds are subject to numerous risks including but not limited to: Equity Risk, Sector Risk, Large Cap Risk, Management Risk, and Trading Risk. The Funds rely heavily on a proprietary artificial intelligence selection model as well as data and information supplied by third parties that are utilized by such model. To the extent the model does not perform as designed or as intended, the Fund’s strategy may not be successfully implemented and the Funds may lose value. Additionally, the funds are non-diversified, which means that they may invest more of their assets in the securities of a single issuer or a smaller number of issuers than if they were a diversified fund. As a result, each Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more widely. A new or smaller fund's performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. Read the prospectus for additional details regarding risks.

While it is anticipated that the Adviser will purchase and sell securities based on recommendations by the U.S. Large Cap Database, the Adviser has full discretion over investment decisions for the Fund. Therefore, the Adviser has full decisionmaking power not only if it identifies a potential technical issue or error with the U.S. Large Cap Database, but also if it believes that the recommended portfolio does not further the Fund’s investment objective or fails to take into account company events such as corporate actions, mergers and spin-offs.

QRAFT AI-Enhanced U.S. Large Cap ETF: Companies in the health care sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of health care through outpatient services.

QRAFT AI-Enhanced U.S. Large Cap Momentum ETF: The Fund is subject to the risk that market or economic factors impacting technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund’s investments. The value of stocks of technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, the loss of patent, copyright and trademark protections, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs. Technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.

QRAFT AI-Enhanced US High Dividend ETF: Securities that pay dividends, as a group, may be out of favor with the market and underperform the overall equity market or stocks of companies that do not pay dividends. In addition, changes in the dividend policies of the companies held by the Fund or the capital resources available for such company’s dividend payments may adversely affect the Fund. In the event a company reduces or eliminates its dividend, the Fund may not only lose the dividend payout but the stock price of the company may also fall.

QRAFT AI-Enhanced U.S. Next Value ETF: The value approach to investing involves the risk that stocks may remain undervalued, undervaluation may become more severe, or perceived undervaluation may actually represent intrinsic value. Value stocks may underperform the overall equity market while the market concentrates on growth stocks. The small- and mid-capitalization companies in which the Fund invests may be more vulnerable to adverse business or economic evens than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Securities of small- and mid-capitalization companies generally trade in lower volumes, are often more vulnerable to market volatility, and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.

Alpha – Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.

AutoML – Short for Automated Machine Learning, AutoML is the automation of the machine learning process to make machine learning jobs simpler, easier, and faster.

Kirin API - Developed by Qraft’s data scientists, integrates multiple vendors to provide both macroeconomic and company fundamentals with the correct point-in-time data.