A New High-Dividend, Low-Volatility ETF
March 12th 2013 at 6:30am by Tom Lydon
Global X is trying to capitalize on two popular themes in the investment world with its new exchange traded fund that tracks U.S. dividend payers with low share-price volatility.
On Tuesday, the Global X Superdividend U.S. ETF (NYSEArc: DIV) will begin trading. The new fund will try to reflect the performance of the INDXX SuperDividend U.S. Low Volatility Index, which is comprised of 50 U.S. companies with the highest dividend yields. DIV has a 0.45% expense ratio.
To be included in the underlying index, each constituent must have paid dividends consistently over the last two years, and the index also includes filters that excludes companies that are likely to reduce dividends. Additionally, securities will be required to have a beta less than 0.85 relative to the S&P 500 on the rebalance date – anything less than 1 suggests lower volatility than the overall market. [Low-Volatility ETFs are ‘The New Black’]
The fund’s holdings are equally weighted, with components such as Altria Group 2.0%, Ameren Corp 2.0%, American Capital Agency 2.0%, Annaly Capital Management 2.0% and Anworth Mortgage Asset 2.0%.
Sector allocations include REITs 24.0%, Utilities 24.0%, MLPs 18.0%, Telecom 12.0%, Consumer Staples 8.0%, Health Care 6.0%, Consumer Discretionary 4.0%, Industrials 2.0% and Technology 2.0%.
The fund is expected to pay out monthly dividends.
“Recent research suggests that investors may be overlooking significant opportunities in high dividend-paying equities,” according to a Global X note. “A study of global stocks for the period between 2003-2012 shows that dividend paying stocks have, over time and based on numerous metrics, performed well versus non-dividend paying stocks.” [Dividend ETFs: Examining Yields, Returns and Risk]
The company also offers the Global X SuperDividend ETF (NYSEArca: SDIV), which is a similar offering that provides access to global high-yield stocks, except no volatility filter is applied. SDIV has a 6.88% 30-day SEC yield.
The new DIV ETF will be competing with other low-volatility, high dividend ETFs currently on the markets, including the PowerShares S&P 500 High Dividend Portfolio (SPHD), which has a 3.82% 30-day SEC yield, and the iShares High Dividend Equity Fund (NYSEArca: HDV), which has a 3.38% 30-day SEC yield. [High Dividends and Low Volatility: Can it Work in an ETF?]
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.