Dividend ETF Family Grows By 2

November 07, 2019

Today ProShares has launched two ETFs that will further expand its offering of dividend-strategy ETFs, bringing the total number of funds in that family to eight. The ProShares Russell U.S. Dividend Growers ETF (TMDV) and the ProShares S&P Technology Dividend Aristocrats ETF (TDV) both target companies that have raised their dividends consistently over consecutive years.

TMDV comes with an expense ratio of 0.35%, while TDV charges an expense ratio of 0.45%. Both funds list on Cboe Global Markets, the parent company of ETF.com.

“You can’t fake dividends,” said Simeon Hyman, global investment strategist for ProShares.

“Companies that grow their dividends each and every year will tend to have extremely strong quality metrics,” he added.

Methodologies

TMDV’s index includes companies in the broad Russell 3000 Index that have steadily raised their dividend payments annually for 35 or more consecutive years. That said, the index does have certain limitations in that it must include at least 40 components and all components must meet liquidity requirements. Also, an individual sector is limited to 30% of the total index’s weight, the prospectus says.  

Meanwhile, TDV’s index tracks technology companies pulled from the communication services and consumer discretionary sectors of the S&P 500 Index. Eligible companies must meet minimum liquidity thresholds and have raised their dividends for seven or more years in a row. The index must include at least 25 stocks, according to its prospectus.

The indexes for both funds are rebalanced quarterly and reconstituted annually. All components are equally weighted, per the funds’ documents.

A Source Of Quality

Hyman points out that the equal weighting aspect of the methodologies carries an interesting benefit in TMDV.

“Because it’s equal-weighted, you are overweight small- and midcap stocks compared to the Russell 3000,” he said, noting that because dividend stocks tend to score higher for quality metrics there is less volatility associated with the small- and midcap stocks in TMDV’s index.

The quality aspect of TDV is also key. Hyman says that share buybacks are a popular practice in the technology sector, and dividends less so. The dividend growth requirement in TDV’s index combines exposure to quality and technology in one vehicle.

“When a company does a share buyback, it’s telling you the good times were yesterday. When it increases dividends, they’re telling you they believe the prospects going forward are strong—because you never want to cut a dividend,” Hyman said.

TMDV’s factsheet says that its underlying index covers 68 securities, with consumer staples (20.45%), industrials (18.19%) and utilities (14.69%) as its three largest sectors. TDV’s factsheet notes that the index includes 34 components.

ProShares’ entire dividend ETF family has $7.6 billion in assets under management. The largest fund in the family and indeed in the entire ProShares lineup is the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) at $5.9 billion.

Contact Heather Bell at [email protected]

 

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