A Different Type of Dividend Growth ETF | ETF Trends

Investors who rely on a steady income stream may be interested in a new Reality Shares exchange traded fund focusing on U.S. companies that are expected to increase dividends ahead.

The new Reality Shares DIVCON Leaders Dividend ETF (BATS: LEAD) begins trading tomorrow. The ETF has a 0.43% expense ratio and a dividend yield of 1.59%.

LEAD will try to reflect the performance of the Reality Shares DIVCON Leaders Dividend Index, which is comprised of high-quality large-cap U.S. companies with the highest probability of increasing dividends within a year, based on Reality Shares’ proprietary DIVCON dividend health scoring system.

“DIVCON Indexes are designed to capitalize on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above the overall market,” according to Reality Shares.

The underlying index also employs a type of smart-beta strategy, focusing on seven quality factors including earnings, cash flow, dividend history, buybacks, growth, analyst forecasts and ratings to predict future dividend growth.

The DIVCON dividend scoring system is also a forward looking mechanism, as opposed to other dividend index funds that target company stocks based on trailing yields.