Global X SuperDividend U.S. ETF (DIV), launched 3/12/13, intends to track an index of 50 equally weighted common stocks, MLPs, and REITs that rank among the highest dividend yielding equity securities in the United States. The underlying INDXX SuperDividend U.S. Low Volatility Index also restricts holdings to those that have paid dividends consistently over the last two years and have lower relative volatility than the market. However, the fund literature defines “lower volatility” as a beta of less than 0.85 using the S&P 500 as the benchmark.
Sectors have a 25% cap, and the current industry breakdown includes REITs 24.0%, Utilities 24.0%, MLPs 18.0%, Telecommunications 12.0%, and Consumer Staples 8.0%. I could not locate any yield data, but the fund will make monthly distributions and have an expense ratio of 0.45%. Additional information is located in the DIV overview, fact sheet (pdf), investment case (pdf), and prospectus (pdf).
Analysis/Opinion: The DIV marketing literature implies the ETF will hold equities paying dividends in the 6-10% range, and that they will have similar risk characteristics to those paying 0-2% and 2-6%.
If DIV intends to be a domestic version of the Global X SuperDividend ETF (SDIV), then investors should be aware of some of the hidden costs of a strategy targeting high-yield securities. SDIV has trailed the Vanguard Total World Stock Index (VT) global benchmark by more than 2.3% annually since its inception 1.8 years ago. Additionally, the payout stream from SDIV has not shown any signs of steady growth, while VT has rewarded investors with more than 10% annual growth in dividend payments over the same period.
DIV’s equal weighting should help insulate the fund from single-stock disasters. Capping sectors at 25% helps avoid the overconcentration found in many dividend-oriented ETFs and brings the added benefit of avoiding the severely damaging C-corporation structure used by funds with more than 25% allocated to MLPs.