Geopolitical risk on top of concerns regarding rising rates and Fed tightening have advisors and investors searching for alternative sources of income within U.S. markets outside of the traditional fixed-income allocations. Dividend funds have seen a big uptick in interest and investment by advisors as they seek income-generating options for their clients, and two dividend funds offered by KFA Funds provide investors with the benefits of smart beta as well as equal weighting.
The KraneShares Large Cap Quality Dividend Index ETF (KLCD) offers investment in U.S. large cap companies providing reliable dividend payments. The fund is benchmarked to the Russell 1000 Dividend Select Equal Weight Index and utilizes smart beta to invest in large-cap companies within the U.S.
The KFA Small Cap Quality Dividend Index ETF (KSCD) offers value investing with an eye toward reliable growth. The fund is benchmarked to the Russell 2000 Dividend Select Equal Weight Index, which utilizes smart beta to invest in small-cap companies within the U.S.
The funds offer exposure to companies that have demonstrated steady dividend growth over the course of 10 years with no decrease in quarter-to-quarter dividends per share and also have an established record of stable cash flow and a robust business model. These characteristics together demonstrate what the funds deem as “quality.”
KLCD and KSCD utilize a smart beta strategy that seeks to deliver alpha at a price point that is cost-effective for investors. The funds are positioned to potentially perform well in a down-market environment, as strategies that focus on dividend growth can potentially offer improved performance in said environments.
The funds also stand to benefit from being equal-weighted, which is a strategy that can potentially mitigate volatility to a degree during times of market movement and changes.
KLCD carries an expense ratio of 0.41% and KSCD carries an expense ratio of 0.51%; KFA Funds is a KraneShares company.
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