Tag Archives: etf

DWX: High Yield International Allocations With Falling Share Prices

Summary The dividend of 5.69% looks incredible until investors take a look at the total return. The individual holdings have fairly high weights which suggest higher volatility. The sector allocations for utilities look great, but the lack of other defensive sectors is fairly strange. Looking at historical performance confirms the higher volatility of the fund and a negative total return over a long time period. The SPDR S&P International Dividend ETF (NYSEARCA: DWX ) is a weird fund that doesn’t quite seem to go together for me. I’ve seen quite a few good dividend ETFs lately and started to wonder if my standards were simply slipping. It seems I was just due for finding one that didn’t work for me. Expenses The expense ratio is a .45%. This is quite a bit too high for my tastes. Dividend Yield The dividend yield is currently running 5.69% according to Yahoo Finance. This is just a beastly dividend yield and looks very attractive, though investors should expect weak trailing returns for most international ETFs. Over the last several years the domestic market has substantially outperformed the international markets. Holdings I put grabbed the following chart to demonstrate the weight of the top 10 holdings: The first thing to notice about the international allocations here is that the weightings are fairly heavy near the top of the chart. Around 25 to 30% of the portfolio is allocated to the top 10 holdings. This isn’t what I would consider extreme, but it is a little heavy for investors hoping for substantial international diversification to lower their risk since international stocks can be especially volatile. Sectors It’s fairly normal to see the financial sector receive a heavy allocation in dividend ETFs and I’ve found international allocations are also prone to placing a higher weight on the financial sector. With both factors in place here, it is no surprise that the financial sector is receiving such a heavy weight. On the other hand the heavy allocation to utilities is what I would consider fairly attractive since utilities have a great position in negotiating on price. The sector is generally going to be less competitive and investors can expect the companies to be fairly stable in being able to generate some profits. It is interesting to see that the health care sector and the consumer staples sector, which are the other two defensive sectors, have received very low weights after the heavy weight given to utilities. That’s a little strange and dampens my excitement about the fund. Geography I put together the following chart to demonstrate the allocations by country: (click to enlarge) The majority of these allocations are to developed countries, but there is a mix of emerging markets being included. I don’t mind using a mix like this as part of an international allocation, but it is interesting to see Japan being entirely absent from the country allocations when they have a fairly heavy weighting in many international portfolios. Volatility I ran a regression on the returns for DWX compared to the S&P 500 going all the way back to February of 2008. The annualized volatility for DWX was materially higher at 27.8% compared to 22.3% for the S&P 500. On top of much higher values for annualized volatility, the total return was a negative 21.0% compared to the S&P 500 being up 82%. I expect international allocations to have suffered quite materially relative to domestic equity, but the this is a long period in for a total return of negative 21%. Conclusion The allocations looked a little interesting as we got into the sector allocations, but the weaker allocations to two of the three defensive sectors was enough to give me cause for concern. The country allocation seemed interesting, but I didn’t see any problems that couldn’t be rectified by combining the fund with other funds that put heavier allocations into the missing markets such as Japan. The real problem came when I decided to look at the returns since 2008 and saw that despite a strong yield the fund has been struggling on total returns. International funds have generally had a rough go since the last recession but that is remarkably weak over a prolonged period.

FANG Gets Sharp As Two Member Stocks Hit New Highs

Two members of Internet foursome FANG — i.e. Facebook (FB), Amazon (AMZN), Netflix (NFLX) and the stock formerly known as Google, Alphabet (GOOGL) — hit new highs Monday, with the other two hovering near new peaks themselves. Amazon shares finished the regular session up 1.6% at a new closing peak of 678.99 in the stock market today, after climbing as high as 682.77 intraday. The e-commerce heavyweight is the go-to destination for over half of all

High Yields Generated From Surprising ETFs

Private equity ETFs have around $500 million in total assets. Some yield as much as 8%. Private equity ETFs have lagged the broader market over the past 5 years. Private equity is often viewed as an investment reserved for the ultra-rich but, thanks to the ETF issuers like PowerShares, investment in small privately held companies is increasingly available to the smaller investor too. The PowerShares Listed Private Equity Portfolio ETF (NYSEARCA: PSP ) doesn’t invest directly in privately held companies but does invest in business development and venture capital firms that often invest in and attempt to bring these companies public. This ETF and the ProShares Global Listed Private Equity ETF (BATS: PEX ) are the only ones listed by the ETF Database that target private equity as an investment objective. The ProShares ETF currently has roughly $436 million in assets under management. While private equity is likely missing from many investors’ portfolios, it’s an asset class that comes with high risk, high return potential and, perhaps surprisingly, high yields. The inherent riskiness that comes with an investment in boom-or-bust privately held small companies is coupled with the fact that this ETF maintains a large allocation to overseas investments, including emerging markets in both Europe and Asia. The Listed Private Equity ETF is also fairly sector concentrated with over half of assets currently in financials, making this ETF vulnerable to changes in interest rates and broad economic activity. An expense ratio of over 2% makes this a costly investment that will eat directly into investor returns. One of the great benefits of this product, however, is its yield. This fund currently sports a trailing 12-month dividend yield of 8%. It’s not necessarily a great product for those looking for regular predictable income from their portfolios as the dividends are very cyclical and can vary significantly on a quarter to quarter basis. This dividend yield has been the saving grace for this ETF lately. The share price has been virtually flat over the past 5-year period, but the big yield has pushed the fund to a 44% total return over the past 5 years. That works out to an average annual return of about 7% per year. That number trails the S&P 500’s average annual return of 11%.