A Better Dividend ETF?

There are several exchange traded funds (ETFs) that invest in companies that yield a dividend. The ones most people are familiar with are discussed in a previous dividend ETF post. But now there is an alternative that deserves closer inspection given that it is straying from what most would could traditional.

Claymore Securities (now Guggenheim Investments) recently filed a prospectus for the an ETF that tracks the Zacks Yield Hog Portfolio with the express intent to beat the Dow Jones US Select Dividend Index. The Yield Hog index includes US stocks and ADRs that pay dividends, as well as REITs, master limited partnerships, closed-end funds and traditional preferred stocks. These last items, REITs, MLPs, and CEFs are what typical dividend ETFs don't include.

Zacks uses a rules-based quantitative ranking methodology to select 125 to 150 securities to assemble the Yield Hog index. In terms of percentages of holdings, 50% are dividend-paying common stocks; closed-end funds are limited to 10% of the portfolio; Master limited partnerships make up no more than 25%, with the rest of the investment type (ADRs, REITs and preferred stock) other than U.S. common stock limited to a 20% maximum per investment type.

The yield for this offering from Claymore is expected to be around the 5% mark given the mix described above. Of course without appreciation in value of the holdings, this isn't much better than what one could get from a high-yield savings account. Mind you, the make up of this ETF has the potential to result in a holding that has little correlation to the US stock market.

There's a good article (a source for some of the above commentary) that mentions this new ETF along with several others from Claymore.

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3 Comments

  1. Thank you for your response. I know most of them but my problem is how to find out which of them is dividends growth compare to only dividend payers because all of them are dividend payers anyway. I thing their portfolio decide which is dividend payer only and which is dividend payer with faster dividend growth. But how to find out which portfolio is dividend growth which one is not?

  2. Darren Berardi

    JoMa, Finding dividend ETFs isn't too hard. Many of the big name ETF providers have at least one including Barclays and PowerShares. PowerShares' offerings are more actively managed. Finding ones that are growing dividends is going to be more difficult since most dividend ETFs have only been around for a short period of time and hence have no history.

  3. How about dividend paying ETFs? Which are high dividend payers, which are growing dividends? How you can find out which are high payers and which are growing dividends.

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