Despite an often checkered past that includes some rough years and a reverse split, the Guggenheim Solar ETF (NYSEArca: TAN) is once again piecing together an impressive performance.
TAN, the largest of the two dedicated solar ETFs, is turning in another impressive showing this year after ranking as 2013’s top-performing non-leveraged ETF. Last year, TAN more than doubled. Of course, TAN’s stellar showing over the past 18 months or so is the result of soaring solar stocks such as First Solar (NasdaqGS: FSLR) and Elon Musk’s SolarCity (NasdaqGS: SCTY). Those stocks currently combine for 15.4% of the ETF’s weight. [Solar ETFs Brighten Again]
However, there is more to TAN’s recent upside than meets the eyes. That includes a well-oiled securities lending operation that has enabled the fund to top the MAC Global Solar Energy Index, its underlying index.
“But over the past few years, the ETF has beaten the MAC Global Solar Energy Index by a median of 3.6 percentage points a year,” reports Ari Weinberg for the Wall Street Journal. “That’s because like many funds, Guggenheim Solar, lends some of its holdings to other investors, often short sellers looking to bet that prices will fall. The fund collects a fee, which can balloon when demand is high.”
Two TAN holdings – SolarCity and GT Advanced Technologies (NasdaqGS: GTAT) – currently rank among the most shorted stocks on Wall Street with short interests of 29.2% and 34.3%, respectively, according to Business Insider. Those stocks combine for 13.5% of TAN’s weight.
Securities lending has, at times, benefited TAN in another way: Juicing the dividend yield on an ETF tracking an industry not known for being home to many dividend stocks. At one point in August 2013, based on its 2012 distribution, TAN was sporting a dividend yield of 5.3%. [Solar ETF’s Holdings See Surge in Short Interest]
That said, TAN’s dividend yield has come in a bit. Based on the 2013 distribution of just over 45 cents per share and last Thursday’s closing price at $44.70, TAN currently yields just 1%.
Guggenheim Solar ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.