PowerShares Launches High-Div/Low-Vol ETF

By
October 18, 2012
Share:

Invesco PowerShares, seeking to leverage the success of its PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV)—but with a twist—today is launching an ETF that cherry-picks stocks that have both high dividends and low volatility.

The PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD) will track the S&P 500 Low Volatility High Dividend Index, which consists of securities that have historically provided high-dividend yields with lower volatility. The benchmark assigns greater weights to those securities with the highest dividend yields.

It’s a clever twist that marries two of the most powerful trends in the ETF market over the past year. Investors are both looking for a way to minimize the sometimes-rough ride in markets while earning relatively attractive dividends to cushion the corrections in a post-crash era of ultra-low bond yields.

The question remains whether SPHD, which will have a 0.30 percent annual expense ratio, will have any of the success that PowerShares’ low-volatility fund SPLV and the iShares High Dividend Equity Index Fund (NYSEArca: HDV) had when they launched last year as the high-dividend and low-volatility trends began to gather heads of steam.

Indeed, SPLV and HDV were neck-and-neck last year for the honors of most successful product launches of 2011. SPLV is now a $2.48 billion ETF and HDV has assets of $2.23 billion.

SPHD comes to a space that is already well-populated by heavyweights such as State Street Global Advisors’ SPDR S&P Dividend ETF (NYSEArca: SDY), which boasts more than $9.43 billion in assets, as well as iShares' HDV.

While the SPHD does appear to offer something new, PowerShares is no stranger to the high-dividend yield strategy.

The company already offers a roster of equity income strategies, including the PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEArca: PEY) and the KBW High Dividend Yield Financial Portfolio (NYSEArca: KBWD), but the new fund will be the cheapest by far.

The $300 million PEY costs 0.60 percent and KBWD has a 1.32 percent expense ratio, which includes acquired fund fees of 0.95 percent.

The selection process begins with picking the 75 highest-dividend-paying names from the S&P 500, and then narrows down to the 50 stocks that showed the lowest realized volatility in the previous 12 months, according to SPHD’s prospectus.

 

ETF.COM CHANNELS

Learn why commodity ETFs are an essential part of a diversified portfolio with our Commodity ETFs channel.

Learn why bond ETFs are an essential part of a diversified portfolio with our bond ETF channel.

ETF DAILY DATA

The biotech ETF was the biggest loser in terms of outflows on Friday, Feb. 5.

Vanguard ETF assets ticked up on Friday, Feb. 5.

ETF.COM ANALYST BLOGS

By Dave Nadig

For all the hype, here’s an example of an ETF working just as it should.

By Matt Hougan

Here's why you should attend the largest ETF conference in the world next month.

By Dave Nadig

Barclays built in a premium to this exchange-traded note, so back away.

By Sumit Roy

Why this probably isn't the start of a bear market.

ETF INDUSTRY PERSPECTIVE

By Heidi Richardson

Opportunities in Germany and the eurozone.

By Shirish Malekar

How to protect your portfolio with liquid alts.