Low-Volatility, High-Dividend ETF Has Great Sales Hook
October 25th, 2012 at 12:59pm by John Spence
An ETF launched earlier this month combines two powerful investment themes with risk-averse investors in the current market: low volatility and dividends.
PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD) follows an index of 50 stocks taken from the S&P 500 index that have historically provided high yields and exhibited lower relative volatility. The benchmark also has a modified cap-weighting methodology that weights securities based on dividend yields.
“You’ve got to give a tip of the hat to the marketing department,” writes Kyle Woodley at InvestorPlace.
“I probably don’t have to tell you, but dividend yield is the absolute hotness of the markets this year. Investors have piled into junk bonds, REITs, MLPs — you name it — amid fears of volatility and economic uncertainty across the globe,” he says.
Those worries have also made low-volatility ETFs extremely popular in 2012. [Low-Volatility ETFs Help Limit Downside Risk]
For example, Invesco PowerShares — the firm behind SPHD — also manages the largest low-volatility ETF, PowerShares S&P 500 Low Volatility (NYSEArca: SPLV).
The fund holds assets of $2.5 billion and is one of the most successful ETF launches in recent years. SPLV’s tracking index consists of the 100 stocks from the S&P 500 with the lowest realized volatility over the past 12 months.
The new fund, PowerShares S&P 500 High Dividend Portfolio, “hits the mark on marketing, no question,” InvestorPlace notes.
The ETF “combines two key objectives that are important to many investors today: an emphasis on high dividend equities with the well-documented benefits of low-volatility securities,” Ben Fulton, Invesco PowerShares managing director of global ETFs, said.
PowerShares S&P 500 High Dividend Portfolio
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.