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The Other Dow ETF Is Winning, Too

January 27, 2017 1:38 pm
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The Dow Jones Industrial Average is often assailed as an antiquated index for its price-weighting methodology and the fact that it is home to just 30 stocks. Still, the Dow also qualifies as venerable and widely followed, hence all the hoopla surrounding its ascent to 20,000.

That much ballyhooed level was finally breached on Wednesday, predictably providing some good news for the SPDR Dow Jones Industrial Average ETF (NYSE:DIA). Although 2017 is still in its infancy, DIA has already been one of this year's most prolific asset gatherers among exchange-traded funds as investors have poured into the fund in anticipation of “Dow 20K.”

DIA’s Competitor: DJD

DIA has an oft-overlooked competitor that is delivering as well as the Dow ascends to record levels. The Guggenheim Dow Jones Industrial Average Dividend ETF (NYSE:DJD) is also residing near all-time highs.

DJD, which debuted in December 2015, “seeks investment results that correspond generally to the performance, before the fund’s fees and expenses, of the Dow Jones Industrial Average Yield Weighted index,” according to Guggenheim.

DJD seizes on one of the Dow's biggest advantages, that being all 30 members pay dividends, by weighting the Dow's 30 stocks by trailing 12-month dividend yield.

While the weighting methodologies are clearly different, DJD and the Dow are not far off with their largest sector allocations. For example, the Guggenheim ETF devotes a combined 38 percent of its weight to industrial and technology stocks while those sectors combine for about 37 percent of the Dow. Healthcare and financial services combine for about 30 percent of the Dow and over 24 percent of DJD.

Over the past year, DJD has nearly equaled the 17.1 percent returned by the Dow, though there have been periods over that stretch where DJD has outpaced or lagged the traditional Dow. For example, DJD has lagged the traditional Dow by 330 basis points over the past 90 days.

Top Holdings

The Guggenheim ETF's top three holdings are Chevron Corporation (NYSE:CVX), Caterpillar Inc. (NYSE:CAT) and Boeing Co (NYSE:BA), a trip that combines for about 15 percent of that ETF's weight. Those stocks combine for just over 12 percent of DIA's roster.

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