There were quite a few new ETF launches recently. In this article, we’ll discuss two unique dividend ETFs from Reality Shares and one technology SPDR ETF. The dividend ETFs follow a long-short strategy, while the technology ETF is a long-only strategy. Let’s dive right in.
Dividend ETFs Outperform During Market Turmoil
Reality Shares is known for its dividend-based ETFs. Its investment approach is based on the idea that equities that are more likely to increase dividends will outperform the broad market, while equities that are more likely to cut their dividends will underperform the overall market. On January 14, 2016, this issuer launched two additional dividend-based ETFs.
Reality Shares Divcon Dividend Defender ETF (DFND )
DFND is a passive ETF that tracks the performance of the Reality Shares DIVCON Dividend Defender Index. The weights of equities in the index and ETF depend on the likelihood of dividend increases or decreases in the future. The only companies considered for inclusion in the index are large-cap U.S. companies. 75% of the ETF and index is invested in long positions in companies with the highest probability of increasing their dividends within the next 12 months. The remaining 25% is invested in short equity positions with the highest probability of decreasing dividends within the next 12 months. The probability of dividend increases versus decreases is determined by Reality Shares’ DIVCON Scoring System, which is a proprietary, rules-based scoring and weighting methodology. This system gives stocks a DIVCON Score and DIVCON Rating on several fundamental indicators that signal whether a company is more likely to increase or decrease its dividends in the future.
Realty Shares Divcon Dividend Guard ETF (GARD )
GARD is a passive ETF that tracks the performance of the Reality Shares DIVCON Dividend Guard Index. The index changes its exposure based on technical market indicators that determine market strength. The quantitative tool used to determine technical trends in market equity price and volatility is the proprietary Reality Shares Guard Indicator. When this indicator signals a strong market, the ETF and index holdings convert to 100% U.S. large-cap securities with the highest likelihood of dividend increases within the next 12 months. When the indicator signals bearish signs in the market, the allocation drops to 50% in those equities and 50% is allocated to short positions in large-cap U.S. equities with the highest probability of decreasing their dividends within the next 12 months.
Both of these ETFs have expense ratios of 0.95%.
Innovative Technology in Demand
The SPDR FactSet Innovative Technology ETF (XITK ) was recently introduced to the ETF world. It’s a passive ETF that seeks to replicate the performance of the FactSet Innovative Technology Index. The index tracks U.S. stocks and American depository receipts (ADRs) of technology and technology-related companies. There are approximately 85 holdings and these companies are in in the most innovative technology sector and electronic media subsector. The ETF was launched on January 13, 2016, with an expense ratio of 0.45%.