Market Overview

A Quality Yield ETF Arrives

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A Quality Yield ETF Arrives

Global X added to its lineup of unique income-oriented exchange traded funds earlier this week with the debut of the Global X S&P 500 Quality Dividend ETF (CBOE: QDIV).

The newest ETF from New York-based Global X tracks the S&P 500 Quality High Dividend Index.

What Happened

QDIV's underlying index is comprised of 200 S&P 500 components that rank at the top of the benchmark U.S. equity gauge in terms of quality and yield scores.

While the quality factor does not get the acclaim of its value and growth counterparts, it is widely observed within the investment community. Quality traits can include low debt ratios, efficient management teams, impressive cash flow generating ability and commitment to shareholder rewards, including dividends.

Why It's Important

While high dividend stocks and ETFs can seduce income-hungry investors, yield strategies are not perfect. For example, some companies with high dividend yields can have crimped balance sheets, indicating negative dividend action could be afoot. Additionally, high-yield sectors and strategies are often vulnerable to rising Treasury yields.

“We believe QDIV can be used for core U.S. equity exposure in a portfolio seeking dividend income from companies that score well on quality metrics like return-on-equity, accruals ratio and financial leverage,” said Global X. “It can also be used in combination with other dividend strategies, such as high dividend yield, by helping to balance a portfolio’s exposure and add more defensive characteristics.”

QDIV's holdings have an average market value of $62.29 billion.

What's Next

The new ETF is lightly allocated to high-yield sectors with bond-like traits. QDIV has no exposure to the rate-sensitive utilities sector and the real estate and telecommunications sectors combine for just 10 percent of the ETF's weight.

QDIV is consumer-heavy, as the consumer discretionary and staples sectors combine for 35.43 percent of the fund's weight. Technology and financial services names combine for over 23 percent. None of QDIV's holdings exceed weights of 1.51 percent.

QDIV's annual fee is 0.35 percent, or $35 on a $10,000 investment.

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Posted-In: Long Ideas News Broad U.S. Equity ETFs Dividends Dividends New ETFs Trading Ideas ETFs Best of Benzinga

 

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