2025 has arrived, and with it come myriad opportunities and risks. While investors should spend significant amounts of time analyzing opportunities and parsing the various risks facing portfolios, adding current income could also help mitigate the impact of volatility. Following a strong year for active ETFs in 2024, 2025 could provide a strong platform for an active equity income ETF to help.
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The T. Rowe Price Equity Income ETF (TEQI) may provide a strong option therein. The fund, which launched in 2020, actively invests in large-cap firms poised to outperform the Russell 1000 Value index. Specifically, the ETF seeks out large-cap firms believed to be undervalued based on factors like price/earnings ratio, above-average dividend yield, and low price relative to a firm’s fundamentals.
In doing so, the strategy has gathered more than a quarter billion dollars in AUM since its launch. Charging 54 basis points, TEQI has returned 16.4% since launch, beating its benchmark by 1% annualized, per T. Rowe Price data. With the above approach, the strategy has offered a steady dividend payout, with its Q3 2024 dividend from net income hitting just under $0.20.
By combining a slight value lean with its ability to offer current income, TEQI could provide a helpful active ETF option to start 2025. The active equity income ETF provides not only exposure to those themes — helpful amid concentration risk — but also flexibility. Should, for example, lagging rate cuts juice value names, the fund can pursue that upside. At the same time, its focus on value, actively leaning on T. Rowe Price’s fundamental research capabilities, can help it find firms with less exposure to market froth.
TEQI’s focus on dividend yield and certain value metrics can combine to provide a different market view. For those looking for an active equity income ETF, TEQI can appeal.
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