3 Russell Dividend ETFs Nearing Launch

By
Alex Ulam
March 13, 2012
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Russell to soon join parade of high-dividend ETFs being brought to market.

Russell Investments, the indexing company that began launching its own ETFs last May, filed amended paperwork with the Securities and Exchange Commission indicating it is close to bringing to market three high-dividend ETFs that it originally filed for last December.

It had previously named the tickers, but the expense ratios for the proposed funds was new information. The ETFs are:

  • Russell High Dividend Yield ETF (NYSEArca: HDIV), 0.33 total expense ratio
  • Russell Small Cap High Dividend Yield ETF (NYSEArca: DVIS), 0.38 percent total expense ratio
  • Russell International High Dividend Yield ETF (NYSEArca: IDIV), 0.48 percent total expense ratio

 

High-dividend ETFs are all the rage these days due to uncertainty in the global economy. Fund sponsors big and small are rushing to bring such funds to market. Even in a volatile economy, such high-payout funds typically provide investors with an income cushion during periods of heightened volatility.

However, ETFs that have the highest dividend yields aren’t necessarily the best-performing ones. While collecting distributions from a dividend-oriented ETF, the share price moves up and down. In some cases, a falling share price is enough to offset payout, and investors end up with overall negative returns on investment.

Under normal circumstances, the three Russell funds will invest at least 80 percent of their total assets in securities comprising their underlying indexes. However, in instances where it may become difficult to purchase all the stocks in their representative weightings, Russell reserves the right to purchase samplings of stocks in the respective indexes or to overweight other stocks.

The funds are based on Russell indexes that take into account factors such as the financial stability of the companies they track. All three funds utilize a passive replication strategy to track their underlying indexes, which rebalance quarterly.

Russell noted in the filing that one of the risks in investing in high-dividend yield funds is that companies currently paying high dividends may reduce or discontinue their dividends. That, in turn, could have a significant impact upon the yield of these funds.

In addition to the risks of investing in high-dividend yield funds, the small-cap and international dividend funds have other risks that investors might want to consider, including currency risk.

 

ETF DAILY DATA

International equity funds like 'HEDJ' and 'EFAV' added assets on Thursday, Jan. 29, as total U.S.-listed ETF assets rose above $2 trillion.

'SPY,' 'XLF,' 'XLI' and 'BIL' paced SSgA's issuer-leading outflows on Thursday Jan. 29, as total U.S.-listed ETF assets rose above $2 trillion.

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