Tag Archives: etf

The iShares Select Dividend ETF: Not Your Traditional Dividend ETF

Summary Compared with other dividend ETFs DVY is quite unique. Its portfolio is a lot different than some would expect. It is higher yielding than both VYM and SCHD. In my last article I highlighted the PowerShares S&P 500 High Dividend Low Volatility ETF (NYSEARCA: SPHD ) which I believe is a very solid dividend ETF. Of course, I also highlighted that there are also plenty of other good dividend ETFs available to investors. One other dividend fund I personally like is the iShares Select Dividend ETF (NYSEARCA: DVY ). I believe that DVY is unique in the sense that it is a more like a traditional dividend ETF, however, is not your typical one. Having said that, I believe DVY is an excellent compliment to a more traditional dividend ETF. To really highlight DVY, and why I believe it is uniquely good, I thought it would be prudent to compare it to two other high quality dividend ETFs. The two that I chose are the Vanguard High Dividend Yield ETF (NYSEARCA: VYM ) and the Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ). A couple of basics are laid out in the table below to get a quick glance at each of the funds before getting to their holdings. Fund Yield Expense Ratio Price/Earnings Beta DVY 3.32% 0.39% 17.01 0.52 SCHD 2.94% 0.07% 19.59 ~1.0 VYM 3.02% 0.10% 19.30 0.93 From the higher yield and lower P/E ratio we can see right away that DVY is different than these other two. What might stand out the most for some is DVY’s expense ratio, though. This higher expense ratio compared with the other two is an obvious downside. However, while the expense ratio seems very high compared to these two, it is actually is below the average of 0.44% for ETFs in general. A big plus for DVY would be the low beta. It is definitely a fund that experiences less volatility than some of the other dividend focused ETFs. Taking a quick look at the top 10 holdings it is easy to see how the basics above come together. Looking at the above list it doesn’t really seem like this is by any means your more traditional dividend ETF. AT&T (NYSE: T ) doesn’t even cut into the top 25 holdings. Johnson & Johnson (NYSE: JNJ ) isn’t even in the 100 name portfolio. To really exemplify what I’m getting at, below are the top 10 holdings for the other two funds. SCHD VYM Comparing the top 10 holdings is great and all, but the real comparison comes with looking at the overall holdings based on sector. This is where DVY looks immensely different than other dividend ETFs. Similar to SPHD, DVY is heavily weighted toward utilities. The difference would be that DVY is not weighted with REITs at all. It is fairly obvious why there is such a great weight dedicated to utilities seeing as they are some of the best dividend payers in the market. Having regulated and reoccurring businesses offers for the most part consistent safety for dividends. In comparison take a look at the sector weights for the other two. (SCHD left, VYM right) As can be seen, both have very few utilities in their portfolios. This is what I believe makes DVY such a good compliment to either of these solid funds. Since both SCHD and VYM are lacking in exposure to utilities, one could easily make up with this by adding DVY. DVY is clearly a lot different than traditional dividend focused ETFs in the sense that one is getting such large exposure to utilities. For those seeking income this is a good thing considering utilities are such solid dividend payers. Same as my previous article I will give a fair warning to investors as to where the funds value is. With a rate hike looming on the horizon it may be prudent to wait on the purchase of DVY. Since utilities is one of the larger sectors most affected by a rate hike, it may be prudent to wait and see if there is any further downside post-hike. In conclusion, DVY is very unique dividend ETF. Since it gives a much different exposure to investors I see it as an excellent compliment to those who own other traditional dividend ETFs. Overall, the fund is a solid pick for any dividend investor seeking attractive distributions and relatively low volatility.

From Overbought To Neutral: U.S. Index And Style ETFs

After two days of declines to start the week, just one of the U.S. equity index and style ETFs that we track in our daily ETF Trends report remains in overbought territory. One week ago, only one ETF was NOT overbought. You can see the “mean reversion” trade that has occurred in our trading range screen below. If you’ve never seen this screen from Bespoke before, please refer to the “Trading Range” description at the very bottom of this post. (click to enlarge)

3 Mutual Funds To Defy 4-Week Outflows In The U.S.

Cash draining out from the pocket is always hard to accept. On that note, spare a thought for the U.S. stock and taxable-bond mutual funds that have witnessed outflows for four consecutive weeks. For the week ended Dec 2, U.S. stock and taxable-bond mutual funds saw outflows of $6.6 billion, according to Lipper data. Amid this, the 1-month category return of funds is equally dismal. While the U.S. stock and taxable-bond mutual funds are witnessing continuous outflows, stock ETFs attracted $3.8 billion in the week ended Dec 2. Some may believe that this sector might be in for a Santa Claus rally. However, mutual fund investors need not lose heart. Some low-cost mutual funds, each carrying a favorable Zacks Mutual Fund Rank, have emerged out of the weakness over the past four weeks, and are expected to continue their uptrend. Before we pick these funds, let’s look at the recent fund flows and key events. What’s Taking the Cash Out? The outflows from the U.S. stock and taxable-bond mutual funds started from the week ending Nov 11. For that week itself, taxable bond funds in the U.S. saw outflows of $3.7 billion. This was the worst outflow of taxable bond funds from the week ended Sep 30. U.S. stock funds recorded $1 billion of outflows in the week ended Nov 11, reversing the five-week run of inflows. Since then, the rate hike expectations primarily caused investors to pull money out of these mutual funds. To add to the confusion about the direction of the Fed’s policy, geopolitical concerns and mixed economic data further kept the cash from flowing in. Investors hunted for clues on the Fed’s policy move throughout November. The markets remained hopeful that the U.S. central bank may finally embark on a rate hike in December. Backing this belief were multiple comments from key Fed officials and the FOMC minutes. Last Friday, a strong U.S. jobs report affirmed chances of the Fed raising rates in two weeks. Markets were also exposed to certain geopolitical concerns. Multiple terrorist attacks in Paris, heightened violence in the Middle East, news of the shooting down of a Russian fighter jet near the border of Syria and concerns about China’s economic situation dampened investor sentiment. The 1-Month Performance The broader markets struggled over the past one month. The Dow Jones Industrial Average lost 1.9% over the last 4 weeks, while the Standard & Poor’s 500 (.INX) and Nasdaq Composite Index are down 1.7% and 1%, respectively. Among the 12 S&P industry groups, only three have positive one-month return. While Consumer Staples (NYSEARCA: XLP ) leads with a one-month gain of 2.58%, Real Estate (NYSEARCA: XLRE ) is up 2.57%. Utilities (NYSEARCA: XLU ) scored a 0.8% gain. In comparison, the one-month losses are significantly higher. Energy (NYSEARCA: XLE ) slumped 10.8%, followed by a 2.5% loss in Financial Services (NYSEARCA: XLFS ). Coming to the mutual funds category performances, Equity Precious Metals currently leads the one-month gains and is up 3.1%. All the other sectors in the green have sub 2% gain. Here too, the one-month losses are sufficiently higher. Energy Limited Partnership and Equity Energy categories have lost 19.8% and 9.8%, respectively. Below we present the best and worst performing mutual fund categories over the past one month: 1-Month Fund Category Performance (as of Dec 8) Best Gainers 1-M Total Return Worst Performers 1-M Total Return Equity Precious Metals 3.11 Energy Limited Partnership -19.78 Long Government 1.81 Equity Energy -9.75 Foreign Small/Mid Growth 1.64 Natural Resources -6.96 Bear Market 1.64 Commodities Broad Basket -5.11 Japan Stock 1.56 Latin America Stock -4.56 Source: Morningstar 3 Funds Beating the 4-week Gloom Remember it is always not true that fund inflows or outflows will decide the performance of the funds. In certain cases, there is more arts than science. Fund flows may be just a fraction of a factor to help a fund’s uptrend. Inflows may not translate into gains for mutual funds. Investors do not necessarily have to buy funds that are seeing strong inflows and vice versa. However, amid the declining trend in broader markets, it is often tough for individual funds to outperform. So those managing gains even in a tough environment are worth the appreciation. Below we highlight 3 funds that have thrived, each from the best three performing fund categories, over the trailing 4 weeks. These funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on its likely future success. Equity Precious Metals American Century Quantitative Equity Funds Global Gold Fund A (MUTF: ACGGX ) seeks total return that is consistent with investments in companies related to mining, processing, fabricating or distributing gold or other precious metals across the world. ACGGX has gained 5.8% over the past 4 weeks. ACGGX carries a Zacks Mutual Fund Rank #2. However, ACGGX has lost 21.2% and 22.6% over year to date and the last 1 year, respectively. Annual expense ratio of 0.92% is lower than the category average of 1.43%. Long Government Vanguard Long-Term Treasury Fund Inv (MUTF: VUSTX ) invests a major portion of its assets in long-term bonds whose interest and principal payments are backed by the full faith and credit of the U.S. government. At least 65% of VUSTX’s assets will always be invested in U.S. Treasury securities. VUSTX has gained 2.3% over the past 4 weeks. VUSTX carries a Zacks Mutual Fund Rank #1. However, VUSTX has lost 0.8% year to date and gained just 2.9% over the last 1 year, respectively. Annual expense ratio of 0.20% is lower than the category average of 0.62%. Foreign Small/Mid Growth Oberweis International Opportunities Fund (MUTF: OBIOX ) seeks to maximize capital gains over the long term. Most of its assets are invested in companies located outside the U.S. OBIOX has gained 2.9% over the past 4 weeks. OBIOX carries a Zacks Mutual Fund Rank #1. OBIOX has jumped 14.7% year to date and gained 13.8% over the last 1-year period. The 3- and 5-year annualized returns are respectively 20.1% and 14.7%. Annual expense ratio of 1.60% is higher than the category average of 1.53%. Original Post