Roundhill Launches Tax-Focused S&P 500 ETF Without Dividends
- The new ETF tracks S&P 500 performance while avoiding dividend payments to shareholders.
- The fund is designed to help investors defer taxes by eliminating annual dividend income.
- Roundhill's strategy involves selling S&P 500 ETF holdings before their ex-dividend dates.
Roundhill Investments plans to launch the S&P 500 No Dividend Target ETF (XDIV) on June 10, a new fund that aims to deliver S&P 500 returns without forcing investors to pay taxes on dividends each year, according to the prospectus.
The fund represents a new approach to tax-efficient investing for investors who want S&P 500 exposure but prefer to defer tax obligations until they sell their shares, according to the filing.
How the XDIV ETF Works
The ETF works by investing in major S&P 500 index funds, like the SPDR S&P 500 ETF Trust (SPY), the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO), but sells these holdings before their ex-dividend dates to avoid receiving dividend payments, according to the prospectus.
Traditional S&P 500 ETFs distribute dividends to shareholders, creating taxable income even when investors don't sell their shares, according to the document. XDIV's strategy eliminates this annual tax burden by avoiding dividend income entirely.
The fund carries a 0.19% management fee but has agreed to cap total expenses at 0.0849% through June 2026, according to the filing. Roundhill Financial Inc. serves as the adviser while Exchange Traded Concepts acts as sub-adviser.
The timing aligns with recent market strength, as Roundhill noted in a July report that the S&P 500 gained 10.6% in the second quarter despite various economic headwinds. The firm emphasized that "Time in the market beats timing the market" as stocks recovered from their April lows.
Dividend ETF Strategy Appeals to Tax-Conscious Investors
For investors in higher tax brackets, traditional dividend payments can create unwanted tax liabilities each year, according to the prospectus. XDIV's approach allows investors to potentially grow their wealth without annual dividend tax consequences.
The fund will trade on the New York Stock Exchange and targets investors seeking S&P 500 total returns without receiving any distribution payments, according to the filing.
Portfolio managers include Timothy Maloney and William Hershey from Roundhill, along with several managers from Exchange Traded Concepts, according to the prospectus.
