ETF Spotlight on the iShares High Dividend Equity ETF (NYSEArca: HDV), part of an ongoing series.
Assets: $1.69 billion.
Objective: The iShares High Dividend Equity Fund tries to reflect the performance of the Morningstar Dividend Yield Focus Index, which is comprised of U.S. equity securities of companies that have provided relatively high dividend yields on a consistent basis.
Holdings: AT&T (NYSE: T) 11.1%, Pfizer (NYSE: PFE) 7.8%, Johnson & Johnson (NYSE: JNJ) 6.9%, Verizon Communications (NYSE: VZ) 6.9% Philip Morris International (NYSE: PM) 6.1%.
What You Should Know:
- BlackRock‘s iShares sponsors the fund.
- HDV has an expense ratio of 0.40%.
- The fund has 75 holdings and the top ten make up 62.9% of the overall portfolio.
- The ETF has a 2.53% 12-month yield.
- Sector allocations include: health care 29.1%, consumer goods 23.6%, telecommunications 18.0%, utilities 15.8%, technology 5.2%, industrials 2.8%, oil & gas 2.7%, financials 1.3%, consumer staples 1.0%, basic materials 0.4% and other 0.3%.
- HDV is up 3.6% over the last month, up 4.3% over the last three months and up 7.7% year-to-date.
- “The main qualitative screen rests on the economic moat, an idea popularized by Warren Buffett,” according to Morningstar analyst Samuel Lee. “A moat is a structural advantage that allows a firm to reap excess returns on its invested capital. Moats prevent new entrants from overrunning unusually profitable opportunities. Since they realize their advantages over long horizons, markets have tended to underprice them.”
- “HDV excludes firms with uncertainty ratings above medium, weeding out speculative and volatile firms,” Lee added. “The [Distance to Default] score penalizes firms with thin balance sheets and volatile liabilities (such as its stock price), further winnowing the field.”
The Latest News:
- The largest U.S. companies are beating the average S&P 500 company by the most in 13 years as a result of rising dividends, valuations of 31% below the historical average and increasing fear, reports Whitney Kisling for Bloomberg.
- “The mega-caps are just cheap compared to other segments of the stock market,” Russ Koesterich, global chief investment strategist for the IShares unit of BlackRock Inc., said in the article. “There are a lot of things that are wrong in the economy, to state the obvious, and these are companies that have the wherewithal to survive.”
- In June, dividend yields in the S&P 100 hit 2.3%, the highest of 2012, while valuations have dropped to 12.7 times annual earnings, or 31% below the average since 1997.
iShares High Dividend Equity ETF
For past stories in this series, visit our ETF Spotlight 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.