As the old saying goes, it is difficult teaching an old dog
new tricks. Some psychologists might argue it is even harder to
get humans to change their ways. When it comes to investors'
, trying to change old habits can prove to be a laborious
That much is borne out in a
Wall Street Journal piece
published earlier this month about new dividend ETFs. In the
essence of fairness, that article is by no means a "hit piece."
However, it is standard fare regarding new ETFs.
Even some professionals do not like the unfamiliar and
unknown, that much is highlighted by the sources quoted in the
aforementioned piece. This goes back to the argument of letting
new ETFs age as of they barrels of single-malt scotch. The
difference is there standard time frames at which scotch becomes
No one has come up with such uniformity for ETFs. As such,
"new" is often equated with excessive levels risk. At least that
is the implication made by those that stick with older dividend
ETFs. The other side of the coin is that there is a cost for
comfort in the form of missed returns. These new-ish ETFs prove
Global X SuperDividend ETF (NYSE:
The Global X SuperDividend ETF does allocate about 29 percent of
its country weight to the U.S., but this is ETF is more
appropriately classified as an international fund. SDIV, which
made its debut in June 2011, may not qualify as new per se, but
it is part of the next generation of dividend ETF concepts.
The fund is a also a shining example of how long some
investors, even the pros, take to embrace solid new ETF ideas. It
took SDIV 14 months of trading to reach $100 million in assets
under management. Since reaching that lofty perch in August,
SDIV's AUM total has grown by
SDIV has a 30-day SEC yield of 7.72 percent and pays a monthly
dividend, but it is likely that as a "new" ETF, some pros have
passed it over in favor of the more seasoned SPDR S&P
International Dividend ETF (NYSE:
) and the PowerShares International Dividend Achievers ETF (NYSE:
With volatility of 14.3 percent, SDIV is up 9.7 percent this
year. PID has roughly the same volatility but is up just five
percent year-to-date. DWX is 50 percent more volatile than PID
and SDIV, but that fund is higher by just a tenth of a percent.
In other words, despite its age, SDIV is one of the best bets
among international ETFs.
PowerShares S&P 500 High Dividend Portfolio (NYSE:
The PowerShares S&P 500 High Dividend Portfolio is barely
more than a month old and that alone is reason enough for some
investors to ignore this ETF. SPHD has also fallen victim to bad
timing as fiscal cliff clears have punished the utilities and
telecom sectors, which combine for 31 percent of SPHD's
Still, SPHD has almost $23 million in AUM, which is not bad
for a month of work. The 30-day SEC yield is 4.74 percent. What
makes SPHD interesting, particularly after its rocky start
performance-wise, is that the ETF combines two of investors'
favorite themes: Low volatility and high dividends. Some folks
will stay on the sidelines with this ETF, but do not be surprised
if SPHD becomes another member of the $100 million in AUM club
over the next 12 months.
Market Vectors Preferred Securities ex Financials ETF
What if an asset manager told one of his or her clients not to
jump into a new dividend ETF until it has developed more of a
track record and what if that conversation was about preferred
stock funds? Well, the asset manager had better hope the client
does not find out about the Market Vectors Preferred Securities
ex Financials ETF.
For those that think dividend ETFs can only be sliced and
diced so many ways, as one source quoted in the Journal piece
does, think again. PFXF turned the world of preferred stock ETFs
on its ear by altogether shunning bank stocks that account for 80
percent to 90 percent of rival funds. PFXF is not only cheap than
its major rivals (0.40 percent expense ratio), it has
outperformed those rivals since its July debut.
First Trust NASDAQ Technology Dividend Index Fund
Like SPHD, the First Trust NASDAQ Technology Dividend Index Fund
has suffered through a case of bad timing. The fund debuted in
August and has not delivered the goods in terms of performance
because the Nasdaq has faltered.
TDIV has a bright future, though, and here is why. Not only is
technology the largest sector weight in the S&P 500, it is
also now the biggest dividend-paying sector in the U.S.
Additionally, this sector is where true dividend growth is going
to come from over the next few years (probably longer) because of
all the cash the likes of Apple (NASDAQ:
), Cisco (NASDAQ:
) and Microsoft (NASDAQ:
) have sitting on their balance sheets.
The problem with old generation dividend ETFs is that many
screen their constituents based on length of consecutive dividend
increase streaks. That leads to a lot of funds holding the usual
suspects such as Coca-Cola (NYSE:
) and Procter & Gamble (NYSE:
), but many of those ETFs skimp on technology stocks. For
example, the Vanguard Dividend Appreciation ETF, the largest U.S.
dividend ETF, allocates just 6.4 percent of its weight to
As more investors appreciate the tech sector as a dividend
haven, TDIV should flourish. As it is, the fund has $41.2 million
in AUM and that is not too shabby in just four months of
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