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Inside The SuperDividend ETF (SDIV)November 18, 2011 | Comments : 0 Recommended this article: (0)
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Thanks to ultra low interest rates, bond investing has fallen out of favor for many and especially those looking to boost current income. This situation, along with the very real likelihood that a near zero interest rate policy is here to stay for the foreseeable future, many investors have been forced to look for current income in the equity market instead. While there are a number of high yielding stocks in the market, the risk of company specific issues is still very high, and possibly even more so in today’s shaky environment. Luckily, there are a number of ETFs on the market today that can give investors a broad dividend play across the globe, helping to minimize company specific risk in the process.
For investors looking for funds with high dividends, there are a number of products that could be useful to investors. Some, such as many products from WisdomTree, weight their portfolios by cash dividends paid while others focus in on firms that have increased payouts to investors consistently over the years. Beyond these strategies, focusing in on high dividend yielding firms is also a popular strategy, although it has generally been limited to U.S.-focused investments for quite some time. Fortunately, this looks to be changing and especially so with the launch of the Global X SuperDividend ETF (SDIV - ETF report). This new fund could give investors a different way to play the dividend market, helping investors to diversify portfolios while simultaneously capturing a robust yield at the same time.
However, because the fund is so new, many investors are unfamiliar with the product and its pros and cons. As a result, we recently took a closer look at SDIV in order to highlight some of the key points of this interesting ETF. Hopefully, with the outline below, many will have a better idea if this ‘super’ fund is right for them and if the Global X product could make for an interesting addition to yield-starved portfolios:
SDIV looks to track, before fees and expenses, the Solactive Global SuperDividend Index which is a benchmark that follows 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. This methodology ensures that no one security dominates the holdings profile of the fund and gives investors solid diversification levels; less than 15% of the fund’s total assets are currently in the top ten holdings (also read Top Three Highest Yielding ETFs).
In terms of sectors, REITs take the top spot at just over 22% while telecom, consumer discretionary, and financials also make up double digit allocations as well. For country exposure, developed, Western markets dominate, as the U.S. makes up just over one-third of total assets while Australia takes up close to 24% as well. The top six is rounded out by the UK, Canada, Singapore, and New Zealand, but these four nations combine to make up just 21% of total assets.
This interesting methodology and global focus, while somewhat unorthodox, has certainly paid off for investors in terms of yield. According to the Global X website, the most recent 30-Day SEC Yield came in at an impressive 9.4%. This figure is nearly twice as much as most other products in the space and thoroughly crushes U.S. Treasury bond yields across the entire yield curve. In other words, SDIV, if it is able to keep up these robust yields, could certainly help investors boost their income in these otherwise yield-starved times.
However, investors should note that this method does come at a relatively high cost, as expenses run at roughly 0.58% a year. This is far higher than many other dividend-focused ETFs in the space and suggests that for those seeking to keep costs low a better option may be out there. Yet, with that being said, SDIV offers investors a global focus that few products can match and the nearly double digit yield more than makes up for the higher fees that the fund charges. So for those seeking a new option in the space, SDIV could definitely make for a very intriguing choice for income-focused investors.
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