First Trust Plans Dividend ETFs, Pyxis Files For Senior Loan Fund

Includes: EUFX
by: Stoyan Bojinov

With this shortened trading week, economic data releases remain mixed on the home front. ISM data came in weaker than expected on Monday morning, while positive factory orders and better-than-expected motor vehicle sales stole the headlines on Tuesday. Activity on the product development was fairly quiet, with ProShares debuting the much anticipated Short Euro (NYSEARCA:EUFX), and First Trust and Pyxis both gearing up to add to their own product lineups.

Income Comes First

First Trust, the issuer behind the AlphaDEX family of funds, is planning to roll out a pair of income-focused ETFs (see SEC filing):

  • First Trust Multi-Asset Diversified Income Index Fund: This ETF will be linked to the Nasdaq Multi-Asset Diversified Income Index, which is comprised of common stocks, depository receipts, real estate investment trusts (REITs), preferred stocks and Master Limited Partnerships (MLPs), as well as high-yield corporate bond ETFs. The component securities must meet several criteria including dividends paid for each of the last three years, minimum market cap of $1 billion and a dividend payout ratio of less than or equal to 80% (see also Monthly Dividend ETFdb Portfolio).
  • First Trust Nasdaq Technology Dividend Index Fund: This ETF will be linked to the Nasdaq Technology Dividend Index, which is a dividend-value weighted benchmark. This means that the fund will “cherry-pick” those securities with the most attractive payouts, allocating 80% of total assets to technology stocks and the remaining 20% to telecommunications companies. Some of the criteria include the underlying security must have a yield of at least 0.5% and must not have decreased dividend payments over the trailing 12-month period (see also High-Tech ETFdb Portfolio).

Pyxis Jumps into the ETF Market

Dallas-based money manager Pyxis Funds is planning to make its splash into the ETF industry with its first bond ETF (see SEC filing):
  • Pyxis/iBoxx Liquid Loan ETF (LQLN): This ETF will seek to replicate the price and yield performance of the Markit iBoxx Liquid Leveraged Loan Index. The underlying basket of holdings will primarily consist of below-investment grade senior loans from domestic and foreign corporations. The appeal behind this class of bonds is that senior loans have a higher recovery rate than other non-investment grade debt securities in the event of a default, giving them a unique risk/return profile (see also 12 High-Yielding Monthly Distribution Bond ETFs).

Disclosure: No positions at time of writing.

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