Among the dividend-oriented exchange traded funds that trailing the broader market this year, there is the iShares Core High Dividend ETF (NYSEArca: HDV). HDV is up just 3.6% year-to-date, but this ETF offers rebound potential.
HDV has a 3.25% 12-month yield. The Core High Dividend ETF tracks the Morningstar Dividend Yield Focus Index, which follows 75 dividend payers screened for qualified dividend income, excluding real estate investment trusts and master limited partnerships. Additionally, the underlying index screens for companies with wide economic moats, or competitive advantages, low default rating and high-yields.
HDV’s underlying index “looks for businesses that possess at least some measure of an economic moat, the ability of a company to generate above average returns on capital over an extended period of time with limited disruption from competitors. Companies are then tested for balance sheet strength by looking at factors such as cash flows, asset/liability ratios and ROE to assess flexibility and the ability to sustain their dividends,” reports ETF Daily News.
Spotting reasons for HDV’s 2017 laggard status is easy. The ETF allocates almost 16% of its weight to the energy sector, the worst-performing group in the S&P 500. That is HDV’s second-largest sector allocation behind consumer staples and more than double the energy weight found in the S&P 500. HDV allocates almost 28% of its combined weight to healthcare and telecom stocks. Telecom is another lagging sector this year.
On the bright side, HDV charges just 0.08% per year, or $8 on a $10,000 investment, making it one of the least expensive dividend ETFs on the market.