Although there have been some concerns over dividend ETFs as of
late, there is still plenty of interest in income ETFs. And with
the Fed's decision to hold off on the taper, some are starting to
believe that lower rates may be here for a bit longer, suggesting
that dividend ETFs may be a solid play.
There are certainly plenty of options in this space too, as a
number of providers have launched new dividend ETFs over the past
few months. While the dividend ETF world is definitely crowded,
RevenueShares clearly believes that there is some room left for
competitors as the company has just launched a new income fund of
its own, the
Ultra Dividend ETF (RDIV)
RDIV in Focus
This new ETF looks to give investors a way to target income
producing securities in the U.S. market, with a focus on weighting
by revenue instead of market capitalization levels. This is done by
tracking the Ultra Dividend Index, while the ETF will charge 49
basis points a year in fees for the exposure (also read
3 Excellent ETFs for Growing Dividends
In total, the ETF will hold 60 stocks in its basket, all of which
are in the S&P 900. The stocks are selected based on which 60
have the highest average 12 month trailing dividend yield in each
of the previous trailing four quarters.
These 60 stocks are then weighted based on top line revenues
instead of market capitalization, putting a focus on companies that
do a great level of sales as opposed to those that have a big cap.
This can skew a portfolio towards firms that have low
profit-margins, and also away from momentum stocks that have moved
sharply higher without a big change in their underlying
The portfolio of the ETF is focused on utilities (40%), telecoms
(16.8%), and consumer staples (12.3%), while the top holdings
include Lockheed Martin, AT&T, and Duke Energy. The portfolio
also pays out a pretty solid yield of 4.9%, so it does look to be a
good income destination as well (read
Are There Really High-Dividend, Low Risk ETFs?
How does it fit in a portfolio?
This ETF is an intriguing choice for investors seeking a new take
on income investing. It also could be appropriate for investors
seeking to apply the revenue-weighted model with an income focus,
something that hasn't really been available until now.
On the other hand, the ETF does look to be a little pricier when
compared to other large cap-focused options, while it could be a
bit more volatile. And as we discussed earlier, the fund could skew
away from several key sectors-health care and technology combine to
account for less than 10% of the total-so it may be a poor broad
market play for some (read
11 Great Dividend ETFs
Competition and Bottom Line
Investors should also note that the product has a large amount of
competition, from a number of funds. While there isn't much in the
way of revenue-weighted foes, there are several dividend-centric
products out there to consider.
These include the
Vanguard High Dividend Yield ETF (
iShares High Dividend ETF (
, and the
WisdomTree LargeCap Dividend ETF (
, just to name a few. All of these funds have more than $1.5
billion in AUM, and plenty of volume too, so they could make RDIV's
quest for adding assets quite difficult (see
4 Excellent Dividend ETFs for Income and
However, investors continue to embrace high yield products,
especially if they offer up a new take on the space. RDIV does just
that so this fund-should it show some level of outperformance and
keep its yield near 5%-- should have a decent shot at becoming a
popular ETF as well.
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