Advisors Asset Management, another newcomer to the ETF industry, today has rolled out two high-dividend funds as its first entrants into the space. The AAM S&P 500 High Dividend Value ETF (SPDV) and the AAM S&P Emerging Markets High Dividend Value ETF (EEMD) target stocks that offer high dividend yields while exhibiting characteristics of firms that provide sustainable dividend distributions.
Both funds list on the NYSE Arca. SPDV comes with an expense ratio of 0.29%, while EEMD charges 0.49%.
“Reaching for the highest-yielding stocks is not always the best course of action,” said Lance McGray Jr., AAM’s head of ETF product, in a press release.
“Just as important as the actual dividend yield is the sustainability of that dividend. In our opinion, Free Cash Flow yield is an ideal indicator of dividend sustainability, and when coupled with Dividend yield in the selection process, the result can be powerful,” he added. “This may help investors not only meet their current cash flow needs, but also potentially provide future capital growth.”
The two underlying indexes have similar methodologies, though the U.S. fund’s benchmark is derived from the S&P 500, while the emerging market fund’s benchmark uses the S&P Emerging Plus LargeMidCap Index as its parent index.
The methodologies first normalize any dividend yields or free-cash-flow yields that fall into the top or bottom 2.5% of the stocks in the parent indexes. The eligible components are scored based on a combination of those two metrics and ranked within their respective sectors. The methodologies then select the five top-scoring stocks from each of the 11 sectors, according to the prospectus.
Both indexes are equal-weighted and reconstituted semiannually.
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