Tag Archives: lightbox

NOBL: An ETF For Dividend Growth And The Quest For Yield

By Max Chen and Tom Lydon Investors seeking a steady yield-generating exchange traded fund to help diversify their portfolios in a volatile year can look to the ProShares S&P 500 Aristocrats ETF ( NOBL ) for quality stock market exposure and sustainable dividends. “By investing in dividend growth strategies, you not only get high-quality companies that have delivered strong total returns, you also get the potential for attractive yield,” according to ProShares . “If you look at effective yield, you’ll see dividend growth strategies have significantly outperformed the broader market.” NOBL, which has accumulated $1.39 billion in assets under management, shows a 2.03% 12-month yield and a 0.35% expense ratio. The dividend ETF has been outperforming the broader equities market. Year-to-date, NOBL rose 5.5% while the S&P 500 index was only 0.9% higher. Over the past year, NOBL increased 4.3% as the S&P 500 dipped 0.6%. NOBL’s 17.2% tilt toward industrials and 10.4% position in materials helped the ETF capitalize on the recent rally in more undervalued sectors of the market. Additionally, the fund holds large positions in more conservative or defensive sectors, including 12.9% in health care and 25.5% in consumer staples. The recent selling pressure in the equities market has also made dividend stock plays more attractive , especially as the Federal Reserve projects only two interest rate hikes this year, compared to previous expectations for four rate hikes. As the S&P 500 index experiences its worst start to a new year since 2009, yield spread between the benchmark and 10-year Treasuries widened to their largest spread in a year. The difference between U.S. equity dividend yields and government bonds can be used as a proxy for valuation comparison between the two assets. On average over the past year, the yield on 10-year Treasuries exceeded that of the S&P 500 dividends by 7.7 basis points. However, the recent volatility helped push yields on 10-year Treasury notes below 2%. NOBL, which tracks the S&P 500 Dividend Aristocrats Index, targets the cream of the crop, only selecting components that have increased their dividends for at least 25 consecutive years. Consequently, investors are left with a portfolio of high-quality, sustainable dividend payers as opposed to more high-yield focused funds that may contain companies on more precarious financial positions. High-yield equity funds can be enticing to income-seeking investors, but the higher yields come with higher the risks and are often unstable, writes Kevin McDevitt, a senior analyst for Morningstar . Alternatively, McDevitt argues that dividend growth is a more important factor for long-term dividend investors. “Dividend growth plays a big role in determining total income over the life of an investment,” McDevitt said. “As a general guideline, the higher a company’s, and by extension a fund’s, yield, the less quickly it will grow over time. Over the short run, this initial yield matters more than dividend growth. But as the time horizon grows, dividend growth has a greater impact on the overall payout.” ProShares S&P 500 Aristocrats ETF Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Hedged And Inverse Bond ETFs To The Rescue If Rates Rise

The behavior of the fixed income market is different this week from the last. This is because a few hawkish comments from some Fed officials completely ruled out the dovish mood felt last week after the Fed announced no rate hike in its latest meeting and cut the number of projected rate hikes for this year (read: Buy Ranked Dividend Growth ETFs in Focus after Fed Meeting ). In any case, the recent data points corroborated sturdy U.S. economic growth. Plus, comments from Atlanta Fed president Dennis Lockhart, San Francisco Fed president John Williams and Richmond Fed president Jeffrey Lacker once again stirred up the rate hike talks, going by Reuters . As per these officials, the reduced rate hike projection mainly reflected the tantrums thrown by the global financial market, which are now showing signs of cooling off. The two important indicators to measure the timing of another rate hike – labor market and inflation – are both stabilizing. San Francisco Fed president even said that he would promote a hike as early as April. Against this backdrop, speculation of a sooner-than-expected hike in the Fed interest rates is rife again. As a result, U.S. treasury yields recorded the biggest single-day rise in over a week on March 21, 2016. On March 21, yields on 10-year Treasury notes jumped 4 bps to 1.92% while yields on two-year Treasury notes rose 3 bps to 0.87%. Investors should note that fixed-income investing has enjoyed a great show so far in 2016, especially in the longer part of the yield curve, as risk-off trade sentiments have brightened the appeal for safer assets. However, the prospect of rising rates and risks to capital gains of the bond holdings have left investors jittery about the safety of their portfolio. Given the situation, many investors may pull their money out of the bond market. At a time like this, investments in U.S. bonds with significant protection from potential rising rates can be good bets. Some opportunistic investors could capitalize on this backdrop in the form of inverse ETFs too. Market Vectors Treasury-Hedged High Yield Bond ETF (NYSEARCA: THHY ) The fund seeks to replicate the price and yield performance of the Market Vectors U.S. Treasury-Hedged High Yield Bond Index. THHY has a weighted average maturity of 9.83 years while its effective duration is at negative 0.50 years. The product is high yield in nature as evident from its 30-day SEC yield of 6.04% (as of March 21, 2016). THHY charges 0.50% of expense ratio. The fund added about 5.5% in the last one month (as of March 21, 2016) (see all the junk bond ETFs here ). ProShares High Yield Interest Rate Hedged ETF (BATS: HYHG ) HYHG is another ETF which has an interest rate hedge built into its strategy as it takes a duration-matched short position in U.S. Treasury futures. Like HYGH, it also has a pretty high yield (and a modest expense ratio of just 50 basis points) of 8.77% in 30 Day SEC terms (as of February 29, 2016), indicating that this could be a safer bond and yield play for investors anxious about rising rates. This $85.1 million ETF was up 8.1% in the last one-month frame (as of March 21, 2016). ProShares Investment Grade-Interest Rate Hedged ETF (BATS: IGHG ) This investment grade fund too offers interest-hedge benefit to investors. The fund looks to track the Citi Corporate Investment Grade (Treasury Rate-Hedged) Index which comprises long positions in USD-denominated investment grade corporate bonds issued by both U.S. & foreign domiciled companies while adopting short positions in US Treasury notes or bonds of approximate equivalent duration to the investment grade bonds. The index seeks to achieve an overall effective duration of zero. Its 30-Day SEC yield stands at 3.93% (as of February 29, 2016) while it charges 30 bps in annual fees. The $135.4-million fund was up 4.4% in the last one month (as of March 21, 2016). Barclays Inverse US Treasury Aggregate ETN (NASDAQ: TAPR ) The note provides investors a unique strategy to hedge against or benefit from the rising U.S. dollar interest rates by tracking the Barclays Inverse US Treasury Futures Aggregate Index. This benchmark employs a strategy, which follows the sum of the returns of the periodically rebalanced short positions in equal face values of each of the 2-year, 5-year, 10-year, long-bond and ultra-long U.S. Treasury futures contracts. If the price of each Treasury futures contract increases or decreases by 1% of its face value, the value of index would decrease or increase by 5% over the same period. The $15.5-million fund charges 43 bps in annual fees. It added about 4.4% in the last one month (as of March 21, 2016). Link to the original post on Zacks.com

ETF Update: March Came In Like A Lion, Will It End Like A Lamb?

Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.). Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. This was a relatively slow couple of week for launches, or maybe it was just the first time in a while that closures outnumbered launches. I’m starting to worry that my prediction from October of 2000 trading ETFs by June was maybe a bit of a reach. My March Madness bracket is already shot as well, so it wouldn’t be the first time I made an outlandish call. There is still time, but if we are going to have more than a 100 launches in the next two months, I might need to start stockpiling coffee. Fund launches for the week of March 7th, 2016 SSgA launches a gender diversity fund (3/8): On International Women’s Day, we saw the launch of the SPDR SSgA Gender Diversity Index ETF (NYSEARCA: SHE ), a well-timed launch if ever there was. This fund the largest 1,000 U.S. listed companies that have significant gender diversity in the ranks of their senior leadership. “This fund empowers investors to encourage more gender diverse leadership and support better long-term social and economic outcomes in support of gender diversity,” said Kristi Mitchem, executive vice president and head of the Americas Institutional Client Group for SSGA in a press release . PureFunds introduces 2 niche technology funds (3/9): The PureFunds Drone Economy Strategy ETF (NYSEARCA: IFLY ) tracks the Reality Shares Drone Index, which includes companies that manufacture, supply and/or utilize drone technology. The PureFunds Video Game Tech ETF (NYSEARCA: GAMR ) will focus on tracking companies that provide the software and hardware for the video gaming industry, including firms that are not directly related to the industry, but do play a role in its success. This is not PureFunds’ first step into a sub-sector technology fund, as the PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) has gained 733.96M in assets under management since its launch in November 2014. Invesco PowerShares rolls out a new fund of funds ETF (3/10): The PowerShares DWA Tactical Multi-Asset Income Portfolio (NASDAQ: DWIN ) is an income-focused fund that will track other ETFs (mainly PowerShares funds) utilizing an index from Dorsey Wright. According to the DWIN homepage, “the Index is designed to select investments from a universe of income strategies with the criteria for inclusion based on a combination of relative strength and current yield.” The current holdings are the PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEARCA: PEY ), the PowerShares Preferred Portfolio (NYSEARCA: PGX ), the PowerShares Build America Bond Portfolio (NYSEARCA: BAB ), the PowerShares Global Short Term High Yield Bond Portfolio and the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEARCA: PCY ). Fund launches for the week of March 14th, 2016 First Trust launches a follow-up fund for FV (3/18): The First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) has gained over $4.5B in assets under management since launching in March 2014, so it comes as no surprise that First Trust decided to launch a similar fund with a twist. Like the first fund, the First Trust Dorsey Wright Dynamic Focus 5 ETF (NASDAQ: FVC ) is designed to provide targeted exposure to the five First Trust sector and industry-based ETFs that DWA believes offer the greatest potential to outperform the other ETFs in the selection universe. However, the fund also has the option for risk management via cash equivalents represented by 1- to 3-month U.S. At its launch, roughly 50% of the fund was made of equity ETF holdings. Fund closures for the weeks of March 7th and 14th, 2016 Recon Capital FTSE 100 ETF (NASDAQ: UK ) Precidian MAXIS Nikkei 225 Index ETF (NYSEARCA: NKY ) ProShares Managed Futures Strategy ETF (NYSEARCA: FUTS ) PowerShares KBW Capital Markets Portfolio ETF (NYSEARCA: KBWC ) PowerShares KBW Insurance Portfolio ETF (NYSEARCA: KBWI ) PowerShares China A – Share Portfolio ETF (NYSEARCA: CHNA ) PowerShares Fundamental Emerging Markets Local Debt Portfolio ETF (NYSEARCA: PFEM ) Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor, I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.