As the search for income stretches on, issuers of exchange traded funds are coming up with new ways of spinning the previously bland concept of the dividend ETF.
One of the newest entrants to the dividend ETF fray is the First Trust RBA Quality Income ETF (NasaqGM: QINC), which debuted earlier this month. QINC tracks “the Richard Bernstein Advisors Quality Income Index. “The index attempts to control the risks associated with investing in higher-yielding stocks, yet maintain attractive current income. RBA believes stocks with extremely high dividend yields should be viewed cautiously,” according to First Trust.
Home to 52 stocks, QINC is essentially an equal weight fund as no single holding accounts for more than 2.46% of the ETF’s weight. The new ETF eschews an emphasis on dividend increase streaks and other methodologies employed by payout funds in favor of risk control in an effort to avoid dividend cuts. [Dividend Growth Via ETFs]
Richard Bernstein Advisors screens for debt levels and for consistency of earnings/cash flow to lower the chances of potential dividend cutters finding their way into QINC’s lineup. With a median market cap of $3.91 billion, QINC differs from standard dividend ETFs that are typically large- and mega-cap heavy.
As a result, the new ETF is not excessively allocated to many of the stocks, such as Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG), investors are accustomed to seeing in dividend ETFs. That said, P&G, PepsiCo (NYSE: PEP) and Johnson & Johnson (NYSE: JNJ) are found in the fund’s lineup. [Not Your Grandad’s Dividend ETF]