Daily ETF Watch: High Div SPY Debuts

SSgA rolls out an ETF tracking a high-dividend derivation of the S&P 500.

Reviewed by: Heather Bell
Edited by: Heather Bell

Today State Street Global Advisors added an ETF tracking the highest-dividend paying stocks from its iconic SPDR S&P 500 ETF (SPY | A-99). The index underlying the SPDR S&P 500 High Dividend ETF (SPYD) selects the 80 stocks with the highest dividend yields among the 500 components of the S&P 500 and equally weights them.

SPYD should not be confused with the factor-focused family of ETFs launched by Invesco PowerShares that is also derived from the S&P 500.

The fund charges an expense ratio of 12 basis points, while SPY charges 0.09 percent.

‘Price Matters’ Filing

A recent filing from Invesco PowerShares outlines plans for a family of six ETFs that will each use the same core smart-beta index methodology developed by RiverFront Investment Group, which is designed to target companies with “superior risk/return profiles.”

The RiverFront “Price Matters” methodology scores companies in the designated universe according to multiple factors falling under what what the firm terms “core attributes” such as value, quality and momentum, according to the prospectus. It applies a proprietary selection process that is designed to optimize the index’s exposure to the highest-scoring stocks while controlling for different types of risk. Companies are weighted by their scores.

The PowerShares RiverFront Price Matters Asia Portfolio will cover companies domiciled in Australia, Canada, Hong Kong, Japan, New Zealand and Singapore. The fund will also apply a proprietary currency hedging methodology that uses a variety of quantitative data to establish hedging positions ranging from zero to 100 percent of the portfolio. The prospectus said that the index could include up to 500 components.

The PowerShares RiverFront Price Matters Emerging Market Portfolio will track an index that can include companies from roughly 25 developing markets. Meanwhile, the PowerSharesRiverFront Price Matters Europe Portfolio will cover companies from 16 developed European markets, but also Canada and Israel. Both the emerging markets and Europe ETFs will use a similar hedging methodology to the Asia fund and each fund’s index can include up to 500 components.

The PowerShares RiverFront Price Matters Global High Dividend Portfolio uses the same methodology, but it also adds a dividend growth scoring process in the first stage of the index’s construction, using it to weed out companies that have low levels of dividend growth. Components are selected from developed markets, including Hong Kong and the U.S., and each region is afforded a fixed allocation. The fund can hold up to 200 components, and like the other funds, will make use of the firm’s proprietary hedging methodology.

The PowerShares RiverFront Price Matters US Dividend Growth Portfolio will use the same approach, but it will confine its selection universe to U.S.-listed securities. Like the global fund, it will have up to 200 components.

Finally, the PowerShares RiverFront Price Matters US Flex-Cap Portfolio will track an index that uses the Price Matters methodology to determine allocations for different size segments of the U.S. stock universe. The index, which can cover up to 200 components, will score the companies falling within each size index to select its constituents.

The filing did not include tickers or expense ratios, but it did indicate that all six ETFs would list on the Nasdaq stock market.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.