LVHD “first screens for companies that have been profitable over the last year and are projected to remain profitable over the next year according to consensus analyst forecasts. Companies dividends must also be sustainable, namely their past and predicted earnings must fully support their dividends. The yield on the remaining stocks is adjusted upward or downward based on both stock price and earnings volatility,” according to a Seeking Alpha analysis.
Like rival ETFs that combine dividends and the low volatility factor, LVHD’s roster is not particularly large. The ETF holds 81 stocks, most of which are large-caps as highlighted by the weighted average market value of $76.9 billion at the end of the first quarter. LVHD’s sector weights are, at least at the top, are not surpising.
At the end of the first quarter, LVHD allocated nearly 39% of its combined weight to utilities and staples stocks, two of the hallmarks of dividend/low volatility strategies. The ETF’s 10.5% weight to tech stocks is something of a surprise in this type of fund, but the technology sector has been bolstering payouts in recent years.
“Combining fundamental measures of volatility (earnings) with statistical measures (price) should improve the performance of LVHD’s risk controls,” according to Seeking Alpha.
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