Informed Dividend Investor – Second Quarter 2026

DAC STRATEGY

The DAC Equity Strategy is a diversified portfolio focused on investing in high-quality companies with a proven record of dividend growth. The strategy is driven by DAC’s proprietary “3D – Double Digits for a Decade or More ” investment discipline, which seeks to invest in companies that have increased their dividends by an average of at least 10% annually for 10 or more consecutive years.

This differentiated approach identifies leading domestic and international businesses characterized by consistent earnings growth, strong and sustainable free cash flow, conservative balance sheets, and a demonstrated commitment to rewarding shareholders through rising dividends.

The strategy is designed for investors seeking attractive long term, risk-adjusted returns while benefiting from a growing stream of income. By focusing on companies that consistently increase dividends, the DAC Equity Strategy aims to deliver a combination of capital appreciation, downside resilience, and increasing cash flow over time.

IMPORTANCE OF DIVIDEND GROWTH

• Dividend-growing stocks have outperformed over time.
• Since 1926, dividends have accounted for approximately one third of the total return of the stock market, while capital appreciation contributed two-thirds.
• Dividend yield, as a component of total return, is historically less volatile than price appreciation. “Good companies pay dividends. Great companies grow dividends.” (C. Troy Shaver, Jr.)

THE SIGNAL IN THE RAISE

As the name 3D Dividend Growth suggests, one of the key characteristics DAC evaluates when analyzing a company is its ability to consistently grow its dividend over time. We believe the dividend is among the most important indicators of a company’s financial strength because it represents a tangible return generated from real cash flow.

Unlike earnings, which can be influenced by accounting methods and assumptions, a dividend requires actual cash and cannot be easily manipulated. For this reason, dividends serve as a cornerstone of our investment philosophy and play a central role in how we manage portfolios on your behalf.

Importantly, only a company’s Board of Directors can authorize and declare a dividend. As a result, the decision to pay—and increase—a dividend reflects both the company’s ability to generate sustainable earnings and cash flow and management’s confidence in the future health of the business.

Every company has five primary ways to allocate its cash flow: (1) reinvestment in the business, (2) acquisitions, (3) debt reduction, (4) share repurchases, and (5) dividend payments. Of these alternatives, dividends are unique because they represent the only direct transfer of cash from the company to its shareholders. While each capital allocation decision can create value, dividends provide the clearest, most measurable, and most direct form of shareholder return.

This is why DAC places such a high emphasis on companies with a demonstrated commitment to growing dividends—an indicator of financial discipline, business quality, and long-term shareholder alignment.

DIVIDEND SPOTLIGHT: KLA CORPORATION (KLAC)

There was good dividend news for your portfolios this quarter.

One of your long-term holdings, KLA Corporation (NASDAQ: KLAC), recently announced a 21% increase in its dividend, underscoring the company’s strong financial position and commitment to returning capital to shareholders. KLA is a leading provider of process control and yield management solutions to the semiconductor industry and has built an impressive track record of operational excellence and innovation.

Over the past decade, KLA has increased its dividend at an annualized rate of approximately 13%, reflecting consistent earnings growth and disciplined capital allocation. As semiconductor demand continues to accelerate—driven in large part by the rapid expansion of artificial intelligence, advanced computing, and data intensive technologies—KLA’s products and services have become increasingly critical to chip manufacturers. This favorable industry backdrop has strengthened the company’s cash flow generation and provided management with the confidence to further accelerate dividend growth, benefiting long-term shareholders.

INVESTMENT TEAM

Marc D. Saurborn, CFA®
CEO and Chief Investment Officer
Evan Carpenter, CFA®
Senior Analyst
William Ford, CFP®
Portfolio Manager
Managing Director, Institutional Asset
Management
Mike Davidoff, CFA®, CFP®
Senior Adviso