2 of the best new dividend ETFs
Despite all the new exchange-traded products hitting the market, investors remain in love with income-oriented funds. Here are a couple of new ones worth a look.
Prior to this week, roughly 60 new exchange-traded products had come to market on the year. But several new products are debuting this week, with investors treated to new leveraged plays on Japan, a second Israel ETF, and, later in the week, the expected introduction of some new currency hedged products.
But even with the raft of new international ETFs that have debuted recently, investors still love yield: They poured $3.7 billion into dividend ETFs last month, bringing the year-to-date total to almost $15 billion, according to BlackRock. Throw in the $6.9 billion that has flowed into real estate funds and the $3.3 billion that went to preferred stock funds and income-oriented ETFs have seen year-to-date inflows of $24.7 billion.
With those factoids in mind, it's probably not surprising that six of the top asset-gathering ETFs to debut this year are funds with bond or income biases. Investors should note that proficiency in asset-gathering is not always a harbinger of returns, so we have decided to offer up a list of what we think are some of the best new dividend ETFs.
Here they are, in no particular order:
Cambria Shareholder Yield ETF (SYLD)
Courtesy of Mebane Faber, the Cambria Shareholder Yield ETF represents one of the more unique spins on an income ETF investors will encounter. This five-week old fund is about much more than dividends.
"SYLD invests in 100 stocks with market caps greater than $200 million that rank among the highest in (a) paying cash dividends, (b) engaging in net share repurchases, and (c) paying down debt on their balance sheets," according to the fund's website.
The result is a reasonably priced actively managed ETF (annual fee of just 0.59%) that gives investors exposure to both dividends and buybacks via 100 companies that care about having strong balance sheets. SYLD is an equal-weight ETF, and its top-10 holdings include Boston Scientific (BSX), State Street (STT) and GameStop (GME).
WisdomTree U.S. Dividend Growth Fund (DGRW)
The WisdomTree U.S. Dividend Growth Fund is a week younger than SYLD, but both funds belong on income investors' radar screens. In terms of equity-based income ETFs, there is an old guard and a new guard. The old guard is comprised of large, highly popular ETFs that have been solid performers over long time frames.
Those ETFs are usually heavy on staples, health care and/or utilities stocks. Some of those funds are built on backward-looking dividend increase streaks. ETFs such as DGRW represent the new guard of dividend ETFs. Technology is now the largest U.S. dividend-paying sector, a fact dividend investors cannot afford to ignore.
DGRW makes sure that will not happen with 20.5% weight to tech. But do not worry: Staples and health care combine for 27.1% of DGRW's weight.
Don't forget bonds
Rising Treasury yields are pressuring bond investors, but there are a few new bond ETFs that are worth a look. The actively managed AdvisorShares Newfleet Multi-Sector Income ETF (MINC) debuted in mid-March and already has almost $83.2 million in assets under management. The fund features a mix of Treasurys, investment-grade and junk corporate bonds and mortgage-backed securities, among others. Most importantly, MINC's duration is just 2.71 years, according to AdvisorShares data.
Another new, international short-duration play is the Global Short-Term High-Yield Bond Portfolio (PGHY). That ETF, which is just a week old, has an effective duration of 1.76 years. Adventurous investors may want to keep an eye out for a possible rebound in emerging markets debt and use the Vanguard Emerging Markets Government Bond ETF (VWOB) to play that rebound. With an expense ratio of 0.35%, the newly minted VWOB is cheaper than 72% of comparable funds, according to Vanguard.
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