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JP Morgan has launched a new fund focused on providing exposure to the U.S. equity space. It invests in companies offering high dividends.


JPMorgan U.S. Dividend ETF JDIV tracks the JP Morgan US Dividend Index.


Fund Characteristics


The fund utilizes a rules-based methodology to select stocks based on volatility and yield. It has AUM of $25.2 million and seeks to provide exposure to higher-yielding equities, while minimizing unsystematic risk. It charges 12 basis points as fee per year and has top holdings in Dowdupont Inc DWDP, Hollyfrontier Corp (HFC - Free Report) and Digital Realty Trust Inc DLR, with 1.1%, 0.8% and 0.7% exposure, respectively (as of Nov 20, 2017). It bears less concentration risk as all just a little over 7.5% is allocated to the top 10 holdings.


From a sector look, the fund has high exposure to Utilities, Financials and Consumer Goods, with 15.9%, 15.0% and 14.2% exposure, respectively (as of Nov 20, 2017).


Market Impact


Moreover, markets anticipate an interest rate hike in the December meeting of the Fed. Per the CME Fed Watch tool, there is a 91.5% chance of a 25 basis point rate hike and 8.5% chance of a 50 basis point rate hike in December. This fund is expected to be significantly impacted because higher interest rates reduce the appeal of dividend-focused funds. However, Janet Yellen has warned that faster rate hikes might cause inflation to go below the Fed’s 2% target. Moreover, newly elected Fed chair, Jerome Powell, is seen as a dovish lead, who will not steer much from the current policy.


There is increased uncertainty with regard to Trump’s tax reform and deregulation plans. This might increase investors’ appeal for safety and in turn make them shift to dividend-focused funds.


Competition


The fund faces high competition from other funds focused on providing exposure to the same space. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Total Market (U.S.) ETFs here).


Vanguard Dividend Appreciation ETF (VIG - Free Report)


This fund seeks to provide exposure to U.S. companies providing high dividends.


It has AUM of $26.1 billion and charges a fee of 8 basis points a year. From a sector look, the fund has high exposures to Industrials, Health Care and Consumer Services with 33.1%, 13.7% and 13.5% allocation, respectively (as of Oct 31, 2017). The fund’s top three holdings are Microsoft Corp. (MSFT - Free Report) , Johnson & Johnson (JNJ - Free Report) and PepsiCo Inc. (PEP - Free Report) with 4.8%, 4.2% and 3.7% allocation, respectively. The fund has returned 16.8% in a year and 15.6% year to date (as of Nov 21, 2017). It has a dividend yield of 2.0%. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.


iShares Select Dividend ETF (DVY - Free Report)


This fund seeks to provide exposure to U.S. companies with a track record of paying dividends for 5 consecutive years.


It has AUM of $17.2 billion and charges a fee of 39 basis points a year. From a sector look, the fund has high exposures to Utilities, Consumer Discretionary and Financials with 30.0%, 14.4% and 14.1% allocation, respectively (as of Nov 20, 2017). The fund’s top three holdings are Lockheed Martin Corp (LMT - Free Report) , CME Group Inc Class A CME and MC Donalds Corp (MCD - Free Report) with 4.2%, 3.4% and 2.4% allocation, respectively (as of Nov 20, 2017). The fund has returned 11.0% in a year and 8.0% year to date (as of Nov 21, 2017). It has a dividend yield of 3.0%. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


SPDR S&P Dividend ETF (SDY - Free Report)


This fund seeks to provide exposure to U.S. companies providing high dividends.


It has AUM of $16.1 billion and charges a fee of 35 basis points a year. From a sector look, the fund has high exposures to Consumer Staples, Industrials and Financials with 15.7%, 14.6% and 14.5% allocation, respectively (as of Nov 20, 2017). The fund’s top three holdings are Tanger Factory Outlet Centers Inc. (SKT - Free Report) , AT&T Inc. (T - Free Report) and National Retail Properties Inc. (NNN - Free Report) with 2.3%, 2.1% and 2.0% allocation, respectively (as of Nov 20, 2017). The fund has returned 11.2% in a year and 9.3% year to date (as of Nov 21, 2017). It has a dividend yield of 2.4%. It has a Zacks ETF Rank #3 with a Medium risk outlook.


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