After a slight name change and noticeable fee reduction, the iShares Core High Dividend ETF (NYSEArca: HDV) recently became one of the newest members of the iShares suite of low-cost core ETFs.
HDV’s new expense ratio is 0.12%, down from 0.4%, and the ETF has a trailing 12-month dividend yield of 3%, but there is more to HDV than just those numbers.
“We believe Quality Rank, Risk Assessment, and Credit Rating, along with Standard Deviation, are important risk measures, and we view HDV’s Risk Considerations as Overweight compared to other ETFs in its asset class. Finally, our assessments for cost factors such as expense ratio and Price to NAV lead to an Overweight ranking,” said S&P Capital IQ in a new research note.
This year’s retrenchment in Treasury yields has encouraged investors to reconsider some high yield dividend ETFs, including some with either substantial staples or utilities exposure or both. That theme has bolstered HDV to a year-to-date pop of 7.4% and a series of new all-time highs.
The ETF’s sector lineup shows why investors are once again evaluating the ETF is Treasury yields decline. Utilities, telecom and staples combine for about 45% of the ETF’s weight. [Investors are Flocking to This Dividend ETF]
“The focus is not just on dividend growth but rather financial health. Meanwhile, Financials make up just 1% of the ETF. Not surprisingly, the beta is much lower than the Vanguard Dividend Appreciation (NYSEArca: VIG) at 0.49,” said S&P Capital IQ.
HDV tracks the Morningstar Dividend Yield Focus Index, which is comprised of the 75 highest-yielding companies that meet Morningstar’s quality and financial health standards. The annualized performance difference, or tracking error, between HDV and its index has been 0.5%, according to issuer data.
HDV’s top-10 holdings include eight members of the Dow Jones Industrial Average with Wells Fargo (NYSE: WFC) and Philip Morris (NYSE: PM) the outliers. Although HDV is framed as a yield play, the ETF does expose investors to consistent dividend growth. [Big Dividend Growth With ETFs]
For example, Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG) and Coca-Cola (NYSE: KO) combine for about 17% of the ETF’s weight and those companies of have three of the longest dividend increase streaks among U.S. dividend payers.
Bolstered by utilities’ status as the top-performing S&P 500 sector this year, HDV is up 8.4% compared to a 4% gain for VIG and a 7.2% gain for the Vanguard High Dividend Yield ETF (NYSEArca: VYM).
iShares Core High Dividend ETF
