With dividend exchange traded funds remaining a popular avenue for income investors and a growth driver for the ETF industry at large, issuers are bringing more refined dividend products to market.
That includes the Hedged Dividend Income ETF (NYSEArca: DIVA), which debuted Thursday courtesy of QuantShares. With its easy-to-remember ticker, DIVA tracks the INDXX Hedged Dividend Income Index, which is designed to deliver to investors a strong current yield capital appreciation potential with a risk profile similar to a corporate bond index, according to QuantShares.
Although DIVA strives for a risk profile comparable to corporate bonds, the new ETF delivers a higher after-tax yield.
“DIVA has two main objectives: income and capital appreciation. In order to achieve these objectives, the fund will purchase 100 equally weighted securities within the universe of the largest 1000 US stocks that have paid consistent or growing dividends and which have the highest dividend yields. The fund will short approximately 200 stocks, within the same universe, that have the lowest-to-no dividend history and low yields,” according to a statement issued by Boston-based QuantShares.
DIVA caps maximum sector weights for the long portion of its portfolio at 25% and industry weights at 15%. DIVA’s long positions include stakes in Dow components General Electric (NYSE: GE), McDonald’s (NYSE: MCD), Pfizer (NYSE: PFE) and Verizon (NYSE: VZ).
The new ETF’s short positions currently include Amazon (NasdaqGS: AMZN), Bank of America (NYSE: BAC), Netflix (NasdaqGS: NFLX) and Valero (NYSE: VLO).
DIVA’s underlying index “invests in stocks with stable or growing dividends that trade at high yields; to reduce risk the Index shorts stocks in each sector which have unstable or low dividends,” according to QuantShares.
The new ETF features another compelling feature for income investors: A monthly dividend, a trait not feature by many of the largest U.S. dividend ETFs. [Even More Monthly Dividend ETFs]
ETF Trends editorial team 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.