The ETF world opened up virtually every corner of the investing world, giving investors a multitude of options at their fingertips. Today we shed light on a unique product, the SuperDividend ETF (SDIV ), in an effort to keep our readers more informed on the exchange-traded world:
Inside SDIV's Strategy
SDIV invests in 100 of the highest yielding equity stocks from around the world. The holdings are equal weighted, giving the fund a good diversity and ensuring that no single ticker can sway the entire fund. The holdings span across multiple sectors and geographical locations, but real estate (34%) and the U.S. (33%) are the two biggest allocations respectively.
The majority of SDIV’s holdings fall under the mid-cap classification which gives the fund a bit of growth potential but also more risk than a product that focuses on large cap payers. There are a handful of dividend ETFs that focus on stable dividend companies rather than high yield, but SDIV has its sights set on the latter. The fund sports a high dividend yield and makes payouts to shareholders on a monthly basis. Best of all, SDIV’s payouts tend to be a consistent size, something it struggled with in its infancy.
Considerations on SDIV's Performance
As mentioned above, this ETF tends to focus on mid-cap stocks and those that fall under the real estate umbrella. That can make the fund somewhat volatile, as it offers a higher risk/reward profile than something like an (SPY ). Another aspect to consider is that because SDIV spreads its exposure across various sectors in numerous geographical locations, a bull run for SPY does not necessarily mean SDIV will perform well. The same is true in a bear market for SPY.
Investors in this fund will certainly be taking on a bit of risk, but the reward can sometimes be worth it, as SDIV is known for harboring mouth-watering yields [see also Dividend ETF Special: 25 Equity ETFs With Attractive Distribution Yields].
How to Use SDIV in a Portfolio
SDIV is likely not a core holding in a portfolio, but rather a compliment designed to create a steady income stream for the investor. The fund offers a healthy dose of diversity but its exposure may be too unfocused for some. Investors of this fund are after one thing and one thing only: the yield, which SDIV certainly delivers.
The fund charges 58 basis points for investment which falls on the more expensive side for an equity ETF (the broad exposure is likely what pushes that number up to its current level).
The Bottom Line
SDIV’s yield-hungry strategy is certainly not appropriate for everyone, but it can become a powerful income-providing tool for your portfolio. As always, be sure to look closely under the hood of this ETF prior to taking any kind of positions.
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Disclosure: Long SDIV.