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What Were Once Vices Are Now Dividends: A Sinful New ETF

What Were Once Vices Are Now Dividends: A Sinful New ETF

A sinful new exchange traded fund is here. The AdvisorShares Vice ETF (NASDAQ: ACT), which is dedicated to so called sin or vice stocks, debuted earlier this week.

The actively managed ACT is managed by Dan Ahrens, managing director and chief operating officer of AdvisorShares, and Rob Parker, the director of capital markets for AdvisorShares.

The new ETF “employs a fundamental process to select equities in the ETF's portfolio, which focuses on consistent, steady growth combined with the significant, potential upside of certain emerging companies,” according to Maryland-based AdvisorShares

A Sinful Portfolio

About 81 percent of ACT's portfolio is allocated to alcohol and tobacco stocks, but the ETF is also an avenue to the booming marijuana industry, since the rest of ACT's roster is devoted to cannabis stocks.

“Alcohol and tobacco provide a long, established history of delivering all-weather, predictable returns in the equity markets,” according to AdvisorShares. “The emergence of cannabis-related companies and their significant growth potential adds a compelling element to an investment theme particularly resistant to market drawdowns and recessionary environments.”

Top holdings in ACT include Constellation Brands, Inc. (NYSE: STZ), Altria Group Inc. (NYSE: MO), Phillip Morris International Inc. (NYSE: PM) and Diageo Plc (NYSE: DEO).

A Yield Play

With over 80 percent of its portfolio allocated to consumer staples stocks, the sector where alcohol and tobacco companies dwell, ACT has some potential as a dividend play for income investors. The Consumer Staples Select Sector SPDR (NYSE: XLP), the largest consumer staples ETF by assets, yields 2.6 percent, well above the dividend yield on the S&P 500.

“The largest alcohol and tobacco companies are among the equity market’s best dividend payers, exhibiting a strong history of consistent growth and increasing dividends that can enhance the portfolio’s total return,” said AdvisorShares.

The conservative posture of alcohol and tobacco stocks is spiced up in ACT with the ETF's cannabis exposure, meaning the new fund could potentially deliver stronger upside appreciation than a traditional consumer staples fund.

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