SSgA’s proposed global dividend ETF will sacrifice high yield in the name of stability.
State Street Global Advisors filed regulatory paperwork to bring to market a fourth dividend ETF, this time truly diving into “global” markets in a bid to diversify exposure to payout-rich stocks in an era of ultra-low bond yields.
The SPDR S&P Global Dividend ETF will draw holdings from a variety of companies in both the developed and developing world in countries including Australia, Canada, China, France, Germany, Hong Kong, Italy, Japan, Netherlands, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States, the filing said.
The fund, which will be based on the S&P Global Dividend Aristocrats Index, will join the SPDR S&P Dividend (NYSEArca: SDY), the SPDR S&P Emerging Markets Dividend ETF (NYSEArca: EDIV) and the SPDR S&P International Dividend ETF (NYSEArca: DWX) on SSgA’s ETF platter.
The index, from which the fund will cherry-pick securities using a representative sampling strategy, is designed to emphasize stability of dividend payments over higher-yielding securities, according to Carolyn Hill, an ETF analyst at San Francisco-based IndexUniverse.
Overall, SSgA’s plans fit into a broad trend of the past few years wherein investors have been gravitating toward globally diversified, dividend-focused equity funds to avoid the paltry returns of a bond market which, should ultra-low interest rates normalize, sell off powerfully.
The fund will comprise its holdings of the top 100 securities from its index with the highest-paying yields “with no more than 20 stocks selected from each country and 35 stocks in each GICs sector. To ensure diverse exposure, the weight of each Index constituent is capped at 3 percent, and no single country or GICS sector has more than 25 percent weight in the Index,” according to the prospectus.
To be included in the index, stocks must, among other things, have a history of increasing or stable dividends going back at least 10 consecutive years, with a maximum dividend yield of 10 percent, according to the filing.
The filing didn’t specify a ticker or an annual expense ratio for the proposed fund, but did say it will have its primary listing on Arca, the New York Stock Exchange’s electronic trading platform.