Scalper1 News
There have been some concerns over dividend ETFs lately, thanks to the Fed liftoff in December and the possibility at least four more hikes throughout 2016. Yet is still plenty of interest in income ETFs. And with the long-term U.S. treasury yields not budging much even after the Fed rate hike, some have started to believe that lower rates are here for a bit longer, suggesting that dividend ETFs may be solid plays. There is surely a plethora of options in the dividend field, but newer approaches are always welcomed. Probably, this is why Guggenheim recently launched a new income fund, namely the Guggenheim Dow Jones Industrial Average Dividend ETF (NYSEARCA: DJD ). DJD In Focus This new ETF looks to give investors a way to target higher-income-producing securities in the U.S. market. This is done by tracking the Dow Jones Industrial Average Yield Weighted index, which is price weighted. The ETF will charge 30 basis points a year in fees for the exposure. In total, the ETF will hold 30 stocks in its basket. The stocks are selected on a yield-weighted technique. Only companies having a history of steady dividend payment in the last 12 months get an entry into the index. The portfolio of the ETF is focused on industrials (18.4%), information technology (18.1%), healthcare (12.89%), consumer staples (1211.59%) and energy (10.7%) while the top holdings include Chevron (NYSE: CVX ) (6.44%), Verizon (NYSE: VZ ) (5.11%) and General Electric (NYSE: GE ) (4.79%). The index also has a pretty decent yield of 3.01% and so looks to be a good income destination. How Does It Fit In A Portfolio? This ETF is an intriguing choice for investors seeking a new take on income investing. Investors should note that the Dow Jones index is under pressure lately on oil price worries. The only silver lining in the index is its dividend-rich nature. Plus, among the dividend-loaded stocks, a focus on the top-yielding could be better trading options. This technique is often known as the Dogs of the Dow investing theme, which considers the top 10 dividend-paying blue-chip stocks of the Dow Jones Industrial Average (DJIA). Investors should also note that the “Dogs of the Dow” technique has historically outpaced DJIA several times. ETF Competition Needless to say, the divided ETF investing area is packed with products. So, from that perspective, the newbie is likely to face tough times ahead. However, we believe that the Guggenheim Dow Jones Industrial Average Dividend ETF’s real competition will be with other ETFs following the Dow Jones Industrial Average index. There is already an exchange-traded product revolving around the “Dogs of the Dow” theme, namely ELEMENTS DJ High Yield Select 10 ETN (NYSEARCA: DOD ) . The product provides investors pure play to the 10 highest dividend-yielding securities in DJIA in equal proportions and charges 75 bps in annual fees. So, from the expense ratio point of view, the newly launched fund enjoys greater advantage. Notably, the regular Dow-based fund SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) lost 1.2% in the last one year (as of January 4, 2015) and 3.1% in the last six months while the yield-heavy fund DOD advanced over 1.5% in the last one year and over 2.1% in the last six months. These data clearly explain the need and the expected success of the newly launched ETF. Original post Scalper1 News
Scalper1 News