HILO Columbia EM Quality Dividend Etf

PowerShares, one of the largest ETF providers both by AUM and total funds, hasn’t exactly launched a great deal of funds so far in 2012. In fact, the company has been relatively stable in terms of its lineup, having issued just five ETFs in the first nine months of the year.

However, this trend could be changing as we enter the final part of the year, as numerous launches from a number of other issuers have put the pressure on PowerShares’ product development team in order to debut some more funds. This trend, along with the general market focus at this time, has pushed the company to debut a brand new ETF, the S&P 500 High Dividend Portfolio (SPHD), marking the company’s first launch since July (read Three Overlooked High Yield ETFs).

This new product will track the S&P Low Volatility High Dividend Index, giving exposure to large and mid cap firms that have outsized payouts and that are less volatile than the broad market. This combination could generate a great deal of interest from investors thanks to the shaky market situation and the increased focus on yield in today’s low rate environment.   

The product will also be a low cost choice as it charges just 30 basis points a year in fees and hold 50 securities in total. The fund will be rebalanced and reconstituted twice a year, in both January and July. According to a recent press release, this focus will result in a yield of roughly 4.5%, easily beating out broad bond benchmarks, and many other income focused securities as well.

In terms of the portfolio, the focus on low volatility and dividends skews the holdings towards utilities (21.8%), staples (16.3%), financials (12.8%), and telecoms (10.2%). Meanwhile, the ETF is light in materials, technology, energy and discretionary stocks, as these four sectors each account for less than 6% of assets each (also see High Yield Bond ETF Showdown).

Unsurprisingly, this also results in a value tilt as the fund has roughly half its assets in large cap value, with just 7% going to large cap growth stocks. However, it should also be pointed out that mid caps take up a big chunk of assets too, with value in this segment making up about one third of the total.

ETF Competition

While this is an interesting product that is in a clearly in-demand market segment, it is a very competitive one as well. There are numerous ETFs that have a dividend focus that target U.S. large and mid cap stocks, suggesting that SPHD could have a rough battle for assets (see 12 Ways to Earn High Yields with ETFs).

Still, most ETFs targeting the U.S. market use only one of the low volatility or high dividend approaches, meaning that there are few crossover products in this space that combine both of these key attributes. Seemingly one of the only low volatility high dividend ETFs currently on the market right now is EGShares’ HILO.

This ETF, however, has a focus on emerging market securities giving it an entirely different focus than the just released SPHD. Yet, it should be noted that this EGShares product has seen some decent inflows since its inception a little more than a year ago, suggesting that there definitely could be a big appetite for high income and low volatility products, especially given the current market conditions (also see The Truth about Low Volume ETFs).

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EGS-LO VT EM DV (HILO): ETF Research Reports
 
(SPHD): ETF Research Reports
 
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