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Right Time to Buy New Global Dividend Income ETF (GDVD)?
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The year 2022 is shaping up as a crucial one for income strategies on the global level, with low interest rate policies phasing out.
The Federal Reserve raised interest rates by a quarter of a percentage point this month and projected that its policy rate would be in the range of 1.75% to 2% by the year's end in a newly aggressive stance to fight the red-hot inflation. Hence, new Federal Reserve projections indicate six more rate hikes this year, per CNBC.
The Bank of Canada increased its target for the overnight rate by 25 bps to 0.5% in early March, marking the first hike since October 2018. Now, big Canadian Banks also expect a 50-point rate hike next week. The Bank of England also raised its key interest rate for the third successive meeting this month, taking borrowing costs back to their pre-pandemic levels. Several hikes are likely as BoE is also worried about sky-high inflation.
Though the ECB has not hiked rates, it expedited its QE tapering. All such moves make the case for dividend investing stronger as the search of stronger current income, which are at least benchmark-beating, will definitely be on.
In fact, many issuers actually rolled out new products in the current income space, beefing up the number of options at investors’ disposal in this key market segment. One such new product is The R3 Global Dividend Growth ETFGDVD, which entered the market recently.
Let’s take a look at what makes this fund time-sensitive.
Inside GDVD
This is an actively managed ETF that looks to invest at least 80% of its net assets, plus any borrowings for investment purposes, in global dividend-paying equity securities. The fund picks stocks deploying quantitative screens (such as dividend yield, return on invested capital, free cash flow and revenue growth metrics), followed by qualitative, bottom-up research on industry and company levels.
The chosen companies are deemed to have capacity to pay dividends and their potential growth of capital is expected to be above average. The portfolio includes common stock, preferred stock, convertible stocks, rights, warrants and depositary receipts such as ADRs, EDRs, GDRs and REITs. The fund charges 88 bps in fees.
Mitsubishi Ufj Financial Gro, Ambev Sa-Adr and Blackrock Inc. are the top holdings of the fund. No stock makes up more than 3.2% of the fund. The fund is evenly spread across various countries with the United States taking the largest share of 52.4%, followed by Canada (5.2%) and United Kingdom (5.8%).
How Does It Fit in a Portfolio?
The ETF could be well-suited for investors looking for safety. One of the goals of GDVD is long-term growth of income. This is because of the fact that the fund actively pursues companies that the advisor believes has the willingness and ability to pay and grow their dividend over time.
The companies that grow their dividends over time are called dividend aristocrats. These always offer quality exposure.
Seeking higher returns from global all-cap stocks with dividend distribution is a great approach at present. This is especially true given that global funds are up have added more than the S&P 500 past month. All world ETF iShares MSCI ACWI ETF (ACWI - Free Report) has gained 6.5% past month (as of Apr 4, 2022) versus 8.1% gains in the developed market ETF iShares MSCI EAFE ETF ((EFA - Free Report) and 5.9% gains in the S&P 500.
The fund has a diversified nature. GDVD’s investment will not exceed more than 25% in any one industry. There are diversifications from the stock and country point of view as well. Under normal circumstances, the fund invests at least 40% of its net assets in foreign and emerging market securities. The fund will consider stocks of any size and style.
Can It See Success?
There are dividend growth ETFs likeiShares International Dividend Growth ETF (IGRO - Free Report) , which charges 15 bps in fees and yields about 2.27% annually. The fund has no exposure to the United States. U.S.-based dividend growth ETFs include SPDR S&P Dividend ETF (SDY - Free Report) , which charges 35 bps in fees and yields 2.61% annually. Global X SuperDividend ETF (SDIV - Free Report) gives true global exposure, while charging 59 bps in fees and yielding about 9.78% annually.
Hence, to remain in the game over the long run, the newbie GDVD should yield handsomely along with decent capital protection. The fund GDVD costs more than some of its apparent peers, but active management always calls for high charges.
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Right Time to Buy New Global Dividend Income ETF (GDVD)?
The year 2022 is shaping up as a crucial one for income strategies on the global level, with low interest rate policies phasing out.
The Federal Reserve raised interest rates by a quarter of a percentage point this month and projected that its policy rate would be in the range of 1.75% to 2% by the year's end in a newly aggressive stance to fight the red-hot inflation. Hence, new Federal Reserve projections indicate six more rate hikes this year, per CNBC.
The Bank of Canada increased its target for the overnight rate by 25 bps to 0.5% in early March, marking the first hike since October 2018. Now, big Canadian Banks also expect a 50-point rate hike next week. The Bank of England also raised its key interest rate for the third successive meeting this month, taking borrowing costs back to their pre-pandemic levels. Several hikes are likely as BoE is also worried about sky-high inflation.
Though the ECB has not hiked rates, it expedited its QE tapering. All such moves make the case for dividend investing stronger as the search of stronger current income, which are at least benchmark-beating, will definitely be on.
In fact, many issuers actually rolled out new products in the current income space, beefing up the number of options at investors’ disposal in this key market segment. One such new product is The R3 Global Dividend Growth ETF GDVD, which entered the market recently.
Let’s take a look at what makes this fund time-sensitive.
Inside GDVD
This is an actively managed ETF that looks to invest at least 80% of its net assets, plus any borrowings for investment purposes, in global dividend-paying equity securities. The fund picks stocks deploying quantitative screens (such as dividend yield, return on invested capital, free cash flow and revenue growth metrics), followed by qualitative, bottom-up research on industry and company levels.
The chosen companies are deemed to have capacity to pay dividends and their potential growth of capital is expected to be above average. The portfolio includes common stock, preferred stock, convertible stocks, rights, warrants and depositary receipts such as ADRs, EDRs, GDRs and REITs. The fund charges 88 bps in fees.
Mitsubishi Ufj Financial Gro, Ambev Sa-Adr and Blackrock Inc. are the top holdings of the fund. No stock makes up more than 3.2% of the fund. The fund is evenly spread across various countries with the United States taking the largest share of 52.4%, followed by Canada (5.2%) and United Kingdom (5.8%).
How Does It Fit in a Portfolio?
The ETF could be well-suited for investors looking for safety. One of the goals of GDVD is long-term growth of income. This is because of the fact that the fund actively pursues companies that the advisor believes has the willingness and ability to pay and grow their dividend over time.
The companies that grow their dividends over time are called dividend aristocrats. These always offer quality exposure.
Seeking higher returns from global all-cap stocks with dividend distribution is a great approach at present. This is especially true given that global funds are up have added more than the S&P 500 past month. All world ETF iShares MSCI ACWI ETF (ACWI - Free Report) has gained 6.5% past month (as of Apr 4, 2022) versus 8.1% gains in the developed market ETF iShares MSCI EAFE ETF ((EFA - Free Report) and 5.9% gains in the S&P 500.
The fund has a diversified nature. GDVD’s investment will not exceed more than 25% in any one industry. There are diversifications from the stock and country point of view as well. Under normal circumstances, the fund invests at least 40% of its net assets in foreign and emerging market securities. The fund will consider stocks of any size and style.
Can It See Success?
There are dividend growth ETFs likeiShares International Dividend Growth ETF (IGRO - Free Report) , which charges 15 bps in fees and yields about 2.27% annually. The fund has no exposure to the United States. U.S.-based dividend growth ETFs include SPDR S&P Dividend ETF (SDY - Free Report) , which charges 35 bps in fees and yields 2.61% annually. Global X SuperDividend ETF (SDIV - Free Report) gives true global exposure, while charging 59 bps in fees and yielding about 9.78% annually.
Hence, to remain in the game over the long run, the newbie GDVD should yield handsomely along with decent capital protection. The fund GDVD costs more than some of its apparent peers, but active management always calls for high charges.