Russell Investments, the indexing firm that began launching its
own ETFs last May, today joined a crowded field of dividend-focused
equity ETFs with the rollout of a pair of high-payout funds
designed to offer investors another source of income outside of
The Russell High Dividend Yield ETF (NYSEArca:HDIV) is a U.S.
large-cap portfolio comprising high-payout names from the Russell
1000 Index. The fund costs 0.33 percent a year. That's a tad lower
than its small-cap counterpart going live today, the Russell Small
Cap High Dividend Yield ETF (NYSEArca:DIVS). DIVS' portfolio is a
high-dividend subset of the Russell 2000 Index. It costs 0.38
Seattle-based Russell is a bit of a latecomer to the space. HDIV
will face some stiff competition from at least a dozen other U.S.
high-dividend-yield ETFs that serve up similar exposure. It will
also face stiff competition on price from the likes of Vanguard and
Charles Schwab funds. The $10.2 billion Vanguard Dividend
Appreciation ETF (NYSEArca:VIG), for instance, costs only 0.18
percent a year, while the Schwab U.S. Dividend Equity ETF
(NYSEArca:SCHD) costs 0.17 percent.
DIVS appears to be the market's first U.S. high-dividend equity
fund to focus solely on U.S. small-cap companies, according to data
compiled by IndexUniverse. However, the fund would join a
broad-based WisdomTree small cap dividend ETF (NYSEArca:DES) that
is not necessarily characterized as a high-payout fund. DES has
gathered $316.4 million since 2006 and costs 0.38 percent.
Overall, investors have embraced ETFs that offer high payouts,
especially at a time of global economic uncertainty-even if these
funds aren't always the best-performing ones. Dividend-yield ETFs
can often fall victim to volatility, which has a negative effect on
total returns, if not the actual dividend stream.
Still, dividend-yield ETFs can be particularly attractive in an
environment where official interest rates might rise, something
that looms largely after more than three years of ultra-loose
monetary policies the Federal Reserve put in place to stoke growth
following the 2008 market crash.
Successful Dividend ETFs
Apart from Vanguard's VIG, a number of other dividend ETFs have
attracted serious assets, which speaks volumes about investor
appetite for such strategies.
Funds like the iShares Dow Jones Select Dividend Index Fund
(NYSEArca:DVY), one of the market's largest and oldest U.S.
dividend ETFs, boasts more than $10 billion in assets, and is one
of only two iShares U.S. dividend ETFs. The $9 billion SPDR S&P
Dividend ETF (NYSEArca:SDY) is another giant in the segment, and
that's just to name a few.
An International Dividend ETF Still To Come
Both of Russell's strategies, each following a respective
Russell index through full replication, invest only in the stocks
with the highest payouts relative to their peers, but the funds
also screen for a company's dividend growth, its earnings stability
and for the sustainability of its profits.
HDIV and DIVS should soon be joined by an international dividend
ETF that was originally included in paperwork Russell filed with
U.S. regulators prior to launch.
The Russell International High Dividend Yield ETF will
eventually be listed on the NYSE Arca platform under the ticker
"IDIV," and cost 0.48 percent in expense ratio, the company said in
its latest filing.
The money management and indexing firm already offers a roster
of factor-based funds such as volatility, beta and momentum-focused
ETFs, but the new ETFs are the company's first U.S. dividend
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