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

Interested in China? Use our China ETFs Channel, library, and ETF screener.

Interested in oil? Use our oil ETFs channel, library and ETF screener!

ETF DAILY DATA

The gold ETF took in nearly $860 million on Monday, May 2, as gold prices spiked near $1,300.

SSgA and Invesco PowerShares saw the largest ETF outflows of all issuers on Monday, May 2.

ETF.COM ANALYST BLOGS

By Drew Voros

With the broad equity ideas all taken, issuers look for thinner slices of exposure.

By David Lichtblau

How funds wash away capital gains through create/redeem process.

By Dave Nadig

End investors are the big winners; brokers—not so much.

By Dave Nadig

ETF industry petitions the SEC for market microstructure changes.

ETF INDUSTRY PERSPECTIVE

By Sprott Asset Management

New fund’s underlying index targets equities sentiment on social media.

By Kristi Kuechler

Avoid taking unrewarded—or unintended—risks.

By Vanguard

The investing giant outlines its expectations for the markets and global economy in 2016.