GE’s Dividend Cut Tempest In ETF Teapot

November 15, 2017

Dividend ETFs Don't Hold GE

In total, ETF.com classifies 147 funds as "Dividend ETFs." But looking at the ones that could potentially hold GE—that is, no ex-U.S. funds, only large-cap/total market ETFs, no REITs or other irrelevant themes, and so on—narrows the field considerably, down to just 56. (We also disregard exchange-traded notes (ETNs), which are bank notes that follow an index and don’t hold individual stocks.)

Of those 56 ETFs, just 24—or less than half—have any stake in GE whatsoever. They're listed in the table below:

 

Dividend ETFs That Hold General Electric
Ticker Fund AUM % GE of
Holdings
VYM Vanguard High Dividend Yield ETF $20.12B 2.18%
DVY iShares Select Dividend ETF $17.11B 0.31%
FVD First Trust Value Line Dividend Index Fund $4.03B 0.45%
SPHD PowerShares S&P 500 High Dividend Low Volatility Portfolio $3.01B 1.28%
SDOG ALPS Sector Dividend Dogs ETF $2.25B 1.60%
DLN WisdomTree U.S. LargeCap Dividend Fund $1.99B 1.22%
QDF FlexShares Quality Dividend Index Fund $1.83B 1.51%
FDL First Trust Morningstar Dividend Leaders Index Fund $1.66B 4.29%
DHS WisdomTree U.S. High Dividend Fund $1.21B 1.87%
DTN WisdomTree U.S. Dividend ex-Financials Fund $870.57M 0.62%
DTD WisdomTree U.S. Total Dividend Fund $608.03M 1.03%
OUSA O'Shares FTSE US Quality Dividend ETF $425.48M 1.27%
LVHD Legg Mason Low Volatility High Dividend ETF $425.38M 1.84%
QDEF FlexShares Quality Dividend Defensive Index Fund $315.29M 0.58%
SPYD SPDR Portfolio S&P 500 High Dividend ETF $232.06M 0.96%
FDRR Fidelity Dividend ETF for Rising Rates $199.19M 0.90%
DEW WisdomTree Global High Dividend Fund $101.21M 1.70%
FDVV Fidelity Core Dividend ETF $71.47M 0.33%
QDYN FlexShares Quality Dividend Dynamic Index Fund $58.73M 2.33%
JDIV JPMorgan U.S. Dividend ETF $24.97M 0.38%
DJD Guggenheim Dow Jones Industrial Average Dividend ETF $11.40M 3.72%
RNLC First Trust Large Cap U.S. Equity Select ETF $8.33M 0.14%
RNDV First Trust U.S. Equity Dividend Select ETF $5.20M 1.14%
DIVB iShares U.S. Dividend and Buyback ETF $2.50M 1.73%

Source: ETF.com. Data as of Nov. 14, 2017

 

But A Scratch

What should be obvious is that the stake these dividend ETFs do have in GE is minimal, at best. Only seven funds even make the company a top 10 holding. The fund with the largest holding, the First Trust Morningstar Dividend Leaders Index Fund (FDL), holds a whopping 4.29%. But even that is far above the mean; GE's average weight in these 24 ETFs is a paltry 1.39%.

So these ETF investors can safely put down the panic button, because GE doesn't determine the returns of any dividend ETFs on the market. At best, it's a glorified seat-filler. The real drivers of returns are tech stocks like Microsoft and Qualcomm; telecom companies like Verizon; financials like JPMorgan Chase; and energy stocks like Exxon-Mobil.

Instead, investors should consider looking on the bright side: GE's dividend cut is actually a sign of intelligence from its management team. What it had been doing—paying out dividends just to please investors, without the cash on hand to back them up—was unsustainable. But a dividend cut, coupled with the planned realignment of GE's business model with what it does best, might just mean better profits—and higher dividends—down the road.

Contact Lara Crigger at [email protected]

 

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