VanEck has launched two new ETFs, VanEck Vectors Morningstar Durable Dividend ETF DURA and VanEck Vectors Morningstar Global Wide Moat ETF GOAT. This launch comes at a time when markets are going through a sharp fall caused due to global growth slowdown and geopolitical risks (read: Invest Like Warren Buffett with These Stocks & ETF).
The fund tracks the Morningstar US Dividend Valuation Index. The index captures Morningstar’s forward-looking fair value assessment alongside its proprietary quantitative Distance to Default (DD) score, which targets financially strong companies that would be able to sustain dividend payments. Ed Lopez, Head of ETF Product with VanEck highlights the use of DD score to identify companies with the lowest likelihood of future dividend cuts. DD metric is a structural or contingent claim taking advantage of both market and accounting information to assess whether any default will occur.
The fund comprises 89 holdings and doesn’t suffer from high concentration risk as none of the stocks have a weight above 5.37% held by Verizon Communications (VZ - Free Report) . Healthcare (21%), Consumer Staples (19.6%) and Energy (14.6%) occupy double-digit weights sector wise (read: Global X Plans New E-Commerce ETF Rollout)
Since its inception on Oct 30, the fund has amassed $2.5 million and has an expense ratio of 0.29%.
The fund tracks the Morningstar Global Wide Moat Focus Index. It offers exposure to global companies which are likely to provide competitive advantages for a sustained duration of time. Also known as “wide moats,” these securities are supposed to be lucratively priced according to Morningstar’s estimate of fair value.
It comprises 63 holdings with Express Scripts Holdings Co (2.4%) occupying the top position. U.S. is major country in focus having nearly 65% allocation. Sector wise, Healthcare (21.7%), Financials (14.9%), Industrials (14.8%), Information Technology (12.5%), Communication Services (11%) and Consumer Staples (10.1%) have double-digit weights.
Since its inception on Oct 30, the fund has amassed $2.6 million and has an expense ratio of 0.52%.
How Do They Fit Into a Portfolio?
Wall Street experienced widespread sell-off in October due to rising rate concerns, political turbulence in Italy, escalating trade tensions between Washington and Beijing, Iranian sanctions and the midterm election uncertainty. The S&P 500 saw its worst monthly performance since September 2011 (falling 6.9%), Nasdaq suffered its worst month since Recession of 2008 and Dow Jones had its biggest monthly fall since January 2016. Recently, IMF also revised global growth estimates downward by 0.2% percentage points for this and next year, blaming U.S.-Sino trade tensions which are curbing economic activity worldwide (read: Further Selloffs Ahead? ETF Strategies to Follow).
Amid this heightened volatility, a fund like DURA could help investors secure steady and sustainable returns, while GOAT could also generate investor interest due to its promise to identify stocks at competitive prices.
These launches are an addition to Vaneck’s lineup of ETFs which use stock selection and valuation methodologies by Morningstar Equity Research. It joins VanEck Vectors Morningstar Wide Moat ETF (MOAT - Free Report) and VanEck Vectors Morningstar International Moat ETF (MOTI - Free Report) having expense ratios of 0.48% and 0.56%, respectively. GOAT faces competition from its own issuer’s ETF MOAT, totally catered to the U.S. market.
DURA could face competition from SPDR S&P Dividend ETF (SDY - Free Report) and iShares Select Dividend ETF DYV having a higher expense ratio of 0.35% an 0.39%, respectively. ETFs like Vanguard Dividend Appreciation ETF (VIG - Free Report) and Vanguard High Dividend Yield ETF (VYM - Free Report) having same expense ratio of 0.08% are also threats to it.
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