Yield hungry investors now have a daunting number of choices when it comes to high yield equity exchange traded funds. You can now add one more to the list. iShares, a subsidiary of BlackRock (BLK) and one of the largest ETP providers, debuted the iShares High Dividend Equity Fund (HDV) on March 29th. Despite the number of ETP choices available to dividend investors, this fund may have some appealing aspects.
The high yield dividend equity fund seeks to track the performance of an index called the Morningstar Dividend Yield Focus Index. The fund invests primarily in U.S. securities that have provided relatively high dividend yields on a consistent basis. The biggest difference with this ETF, compared to some others, is that HDV focuses on high quality companies. Companies are screened for quality and financial health using Morningstar's proprietary index methodology.
HDV currently has 75 holdings with an average market cap of $90 billion. The fund, launched only a few days ago, has a net asset value of just over $5 million. This is sure to rise given iShares dominance in the ETF marketplace.
Top Ten Holdings
|Name||Symbol||Percent Weight||Dividend Yield|
|Johnson & Johnson||JNJ||5.74%||3.65%|
|Procter & Gamble Co||PG||5.15%||3.13%|
|Philip Morris International||PM||4.87%||3.90%|
As you can see, HDV is composed mostly of large-cap, high quality holdings. When compared with other funds focusing on high yield, such as the SPDR S&P Dividend ETF (SDY), HDV holds much higher quality companies. You won't see companies paying 8% - 10% in this fund, but these aren't companies that will be cutting dividends any time soon.
HDV has an expense ratio of 0.40%, reasonable for this type of fund. The yield has yet to be published. As the asset value grows and the fund becomes more liquid, this fund will be a good alternative to other yield focused funds. Investors looking to add large-cap equity exposure and yield to their portfolio should consider HDV.