VanEck is planning to launch a fund that will track the Morningstar US Dividend Valuation Index. The VanEck Vectors Morningstar High Dividend ETF has a somewhat more complex methodology than most dividend funds.
Its underlying index will use the Morningstar U.S. Market Index, which covers 97% of U.S. market capitalization, as its starting point. Stocks eligible for inclusion must fall into the 50% of stocks based on 12-month trailing dividend yield and the top 50% of their peer groups in terms of their distance-to-default score, which is a measure of a company’s stability. Morningstar has split the universe into two peer groups, with financial stocks representing one and all other stocks falling into the other, the prospectus says.
Further, eligible companies must also fall into the top 70% of rankings in terms of how attractively priced they are based on Morningstar’s uncertainty-adjusted security valuation, which it refers to as its “star score,” according to the document.
The prospectus notes that, as of the end of last year, the underlying index included 86 securities, with concentrations in the consumer staples, energy, financial services, health care and information technology sectors.
The filing does not include an expense ratio or ticker, but does indicate the fund will list on the NYSE Arca exchange.
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