BlackRock’s iShares has enhanced its existing line of dividend-focused ETFs with a new strategy that focuses on both dividends and company share buybacks as a way to help investors add value to their portfolios.
BlackRock recently launched the iShares U.S. Dividend and Buyback ETF (Cboe: DIVB), which comes with a 0.25% expense ratio.
The iShares U.S. Dividend and Buyback ETF will try to reflect the performance of the Morningstar US Dividend and Buyback Index, which is comprised of U.S. stocks with a history of dividend payments and or share buybacks. Component holdings include those with the largest dividend and buyback programs in the market measured by dollar value, according to a prospectus sheet.
“Long-term stock market returns have been largely driven by the twin engines through which companies return cash to investors, dividend income and share repurchases,” Martin Small, head of U.S. iShares at BlackRock, said in a note. “We believe all investors should seriously consider whether they are maximizing total payout exposure, and evaluate DIVB as a complement, or wholesale replacement, for the traditional high dividend or dividend growth allocation.”
While the Federal Reserve has stated its intentions of hiking interest rates, the time horizon for higher interest rates remains unclear, and investors are still in need of income opportunities. A share buyback program have also been a way to generate returns for investors over the long haul, even during troubled market conditions. With the U.S. rally pushing higher and concerns over a pullback, investors may look to steady income opportunities to increase their exposure to higher quality companies.
DIVB includes a heavy tilt toward tech names at 21.2%, followed by financials 17.3%, consumer discretionary 13.6%, health care 13.3% and industrials 12.2%. Top holdings include Apple 5.1%, Microsoft 3.1%, Johnson & Johnson 2.0%, General Electric 1.8% and JPMorgan Chase 1.8%.
For more information on new fund products, visit our new ETFs category.