ETF Filing: High Div Funds Planned

August 01, 2017

ETF newcomer Advisors Asset Management has put two dividend-focused funds into registration that target the U.S. and the emerging market space. The funds will be subadvised by Vident Investment Advisory.

The AAM S&P 500 Sector High Dividend ETF will track an index derived from the S&P 500 that looks to maintain the parent index’s sector diversification while targeting stocks with high dividend yields and steady dividend payments. Only stocks from the parent index that have positive indicated annual dividend yields and free-cash-flow yields are included in the fund’s index.

From there, companies are scored based on those two metrics via a statistical normalization process, with the top five companies for each sector chosen for the index. Finally, the selected components are equally weighted when the index is reconstituted, which happens semiannually, the prospectus said.

The AAM S&P Emerging Markets Sector High Dividend ETF follows a similar methodology, except it tracks an index derived from the S&P Emerging Plus LargeMidCap Index.

Unique Methodology

With the continuing low-interest-rate environment, investors remain hungry for income, which these funds are designed to provide. Their methodology is unique in that it takes into account free cash flow and sector distribution and relies on equal weighting.

The largest U.S. fund in the space is the Vanguard High Dividend Yield ETF (VYM), which has $18.6 billion in assets under management. The methodology basically ranks the components of its selection universe by forecasted dividends and selects the top 50%, weighting them by market capitalization.

Meanwhile, the largest high-dividend emerging market ETF is the $1.9 billion WisdomTree Emerging Markets High Dividend Fund (DEM), which includes the top 30% of its selection universe based on dividend yield, and weights the selected stocks by annual cash dividends. 

Contact Heather Bell at [email protected]

 

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