Daily ETF Watch: Reality Shares Adds Fund

Reality Shares today is rolling out its second fund. The Reality Shares DIVCON Leaders Dividend ETF (LEAD) is launching on the BATS exchange and joins the $39 million Reality Shares DIVS ETF (DIVY), which made its debut a little over a year ago.

LEAD will be the first of three Reality Shares funds that will employ the firm’s DIVCON methodology, which uses a proprietary process to determine the likelihood that targeted stocks will grow their dividend payment. The five-tiered ranking system’s DIVCON 1 stocks are the most likely to decrease their dividend payment, while DIVCON 5 stocks are the most likely to increase their dividend payment.

The DIVCON selection universe includes the 500 largest U.S.-listed companies in terms of market capitalization. The methodology then winnows down that number by excluding any companies that have not both paid a dividend in the past 12 months and announced a future dividend payment during the prior 12-month period. From there, the DIVCON methodology assigns the remaining stocks to one of five tiers using quantitative criteria.

LEAD’s underlying index must have at least 30 components, so it will include either all of the DIVCON 5 stocks or the 30 stocks in the DIVCON universe that are most likely to raise their dividend if there are not enough in the targeted tier. Component weightings are based on their DIVCON scores.

Two more funds are expected to launch later in the month. The Reality Shares DIVCON Dividend Defender ETF (DFND) and the Reality Shares DIVCON Dividend Guard ETF (GARD) will both be able to take long and short positions, unlike LEAD’s long-only approach.

LEAD comes with an expense ratio of 0.43%.

Contact Heather Bell at [email protected].