PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD) is changing the game as it blends the most popular investment themes of 2012 – low volatility and dividends. The timing of the fund launch is perfect as stock markets are facing uncertainty with the U.S. Presidential rapidly approaching.

“ETFs that simply reach for higher yields often include companies with business fundamentals that don’t inspire a lot of confidence,” financial advisor Andrew Ahrens said in a recent Wall Street Journal report. “This new ETF should avoid much of those ‘value traps’ by weeding out higher volatility stocks from the mix.” The PowerShares combo fund “kills two birds with one stone,” he suggested. [Why Dividend ETFs Remain Popular]

Low volatility stocks are selected using a trailing 12-month basis. Some analysts say this can be a flaw for the design of the fund as it doesn’t allow for quick changes in different market directions.

As far as constraining portfolio volatility, the concern is that adding a secondary set of screens to the fund’s primary dividend-searching process could amount to little more than a “watered-down” approach to limiting risk, reports Murray Coleman for The WSJ. [Low Volatility, High Dividend ETF Has Great Sales Hook]

“Given how quickly market volatility can change, we see that as a real design flaw,” Mark Eshman, CIO of ClearRock Capital said. “The highest volatility names over the past 12 months aren’t necessarily going to be the same as in the next 12 months.”[Low Volatility ETFs Help Limit Downside Risk]

The idea of combining high dividend payouts in this low yield environment is clever, and adding in low-volatility is catchy. The trick is that controlling volatility is not always conducive to high dividend payouts.

Tisha Guerrero 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.