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SPHD has yield of around 3.5%. Investors seeking low volatility and dividends should consider the fund. The fund makes distributions monthly. Recently I’ve been looking through numerous dividend focused ETFs to decide which one(s) I would be happy to add to my portfolio. In general, there are a lot of funds that focus on dividends and a lot to like about most of them. However, there are a few specific funds in this space that I like personally. One of these is the PowerShares S&P 500 High Dividend Low Volatility Portfolio ETF (NYSEARCA: SPHD ). The fund tracks the S&P 500 Low Volatility High Dividend Index, which is comprised of 50 of the least-volatile high dividend-yielding stocks in the S&P 500. This makes the funds portfolio fairly distinct compared with some of the other typical higher dividend funds. It is rebalanced twice a year, and distributions are paid to holders on a monthly basis. The expense ratio is 0.30%, which isn’t necessarily low, but isn’t necessarily too high either. The current 12 month distribution rate (yield) is 3.49%. So the real question to answer is, what is the appeal of this fund? Of course the upfront appeal would be the dividends and higher yield. Getting down to what I’m looking for, the appeal to me is how boring this investment is. By boring I’m talking about the consistent distributions and low volatility. At this point you might be thinking about the dozens of other investments that have both of these characteristics. I’m not about to say that there are not plenty of others out there. Sticking with the equity side of investments one such example might be AT&T (NYSE: T ) (AT&T is the 10th largest holding for the fund). However, the fund offers a totally different element; diversification. Diversification is obviously something all investors want in their portfolios, and this would be one of the key reasons behind my consideration of dividend ETFs. It’s pretty easy to see what makes this ETF boring by just glancing at the holdings. Utilities and financials make up a significant portion of the holdings. Upon closer look a majority of the financials are REITs, though. Both the utilities and REITs are obviously a key to what makes this a higher yielding fund. Getting even more specific into why the fund is boring, other than the low volatility, we can see that a lot of these companies, especially these utilities and REITs, have steady and simple reoccurring income (in some cases regulated). This makes a good portion of the holdings defensive in nature and in turn quite boring. This is where the near-term outlook gets a little more complicated. Keeping in mind that a large portion of the holdings are utilities and REITs things may get a little less boring heading into December. If the Fed raises rates these holdings in particular may be effected negatively to some degree making the value of the fund drop. This may present a better opportunity for investors and more than likely a slightly higher yield. Considering part of my long-term strategy is to grow my portfolio utilizing dividends, I believe the fund connects well with my goals. The fact that distributions are made on a monthly basis is also an added plus for my strategy as I choose other investments to add to my portfolio on a regular basis. In conclusion, I find the PowerShares S&P 500 High Dividend Low Volatility Portfolio ETF to be boring in a good way. While it may not be for all investors, those seeking things such as easy security and diversification should consider it. With what seems to be a Fed rate hike finally coming, I believe it would probably be best to wait and see how the more sensitive holdings react to the actual hike before considering the fund currently. I will be keeping a close eye on the fund for now. Scalper1 News
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