Since our last review, the Invesco S&P Ultra Dividend Revenue ETF (NYSEARCA: RDIV) exceeded my expectations, achieving a total return of 0.39%, mainly in a down market.In retrospect, I just underestimated how much sales we had in one year. short 8 months. His 5-year beta on the RDIV has risen from his 0.84 in April to 1.09 today, eliminating nearly half or more of his defensive utility holdings. Most importantly, the lack of predictability is the most significant risk for investors. While this strategy guarantees high dividends, it is difficult to adjust for quarterly changes on a regular basis, so we highly recommend using it only as a tactical addition to your portfolio.
Overview of ETFs
RDIV tracks the S&P 900 Dividend Income Weighted Index and selects the top 60 dividend yield stocks in the S&P 900 Index.Indexes containing large and mid-cap companies are run annually in January, April, July, and In October, portfolio turnover consistently exceeded 100%. We’ve talked about this before, but I’d like to emphasize that RDIV is his ETF that is very difficult for the average investor to monitor. You should trust strategies that weight these high-yielding stocks by earnings over the past 12 months. The only guarantees are high dividend yields and low valuations. Portfolio volatility, growth, and even profitability are unlikely to be consistent, so RDIV is inappropriate if managing these factors is part of your investment strategy. Before looking at the current configuration of RDIV, here is a list of statistics that you may find useful:
- Current Price: $44.25
- Assets under management: $958 million
- Expense ratio: 0.39%
- Release date: September 30, 2013
- Trailing Dividend Yield: 3.17%
- 3-year dividend CAGR: 1.03%
- 5-year dividend CAGR: -0.61%
- Number of securities: 60
- Portfolio turnover: 110% (74%, 122%, 98%, 97% from 2018 to 2021)
- Top 10 Assets: 48.11%
- 30-day median bid-ask spread: 0.04%
- Tracking Index: S&P 900 Dividend Income Weighted Index
Sector exposure and top 10 holdings
RDIV is very different from April. In the last two quarterly restructurings, its exposure to the performing utility sector was cut from 35.51% to 13.70%. Instead, energy rose to 18.50% from 5.71% and consumer goods rose to 14.58% from his 4.31%. These changes significantly increased his 5-year beta of the portfolio, turning his once defensive ETF into his aggressive ETF.
RDIV’s top 10 holdings totaled 48.11%, led by Best Buy (BBY), Walgreens Boots Alliance (WBA) and Intel (INTC). Chevron (CVX), Exxon Mobil (XOM) and Valero Energy (VLO) are the major Energy holdings, with Duke Energy (DUK) leading the utility sector.
Here are the 10 most significant changes compared to April.
- Best Buy (BBY): +6.09%
- Marathon Petroleum (MPC): -5.71%
- Cardinal Health (CAH): -5.48%
- Merck & Co. (MRK): -5.16%
- Pfizer (PFE): -5.01%
- Intel (INTC): +4.91%
- Phillips 66 (PSX): +4.79%
- Citigroup (C): +4.73%
- Chevron (CVX): +4.64%
- Duke Energy (DUK): +4.56%
The following graph shows the performance of RDIV against a 50/50 portfolio consisting of the Invesco S&P 500 Revenue ETF (RWL) and the Invesco S&P MidCap 400 Revenue ETF (RWK). This approach isolates the high-dividend factor, and this strategy generally increases volatility and can run counter to views on dividend-paying stocks.
This graph shows that the RDIV lags slightly behind the benchmark portfolio at an annualized rate of 0.24%, with slightly higher volatility and lower risk-adjusted returns (Sharpe and Sortino ratios). According to Portfolio Visualizer, his 40.38% drawdown of his RDIV in Q1 2020 was about 10% worse than the benchmark, but fully recovered within 11 months. I think the increased volatility is bad for dividend investors, but some may see it as an opportunity. My April suggestion that investors get some gains first didn’t seem like such a bad decision. But RDIV’s October reconstitution, which raised the beta, is timely, and you can see the impact on other popular high-dividend funds in the chart below. RDIV (orange line) has even broken in total returns since then, with his most outperforming November.
RDIV is not a good Dividend Growth ETF despite its solid initial yield. RDIV still has one distribution left this year, so its estimated 2022 earnings are $785. However, this is small compared to what the Schwab US Dividend Equity ETF (SCHD) should achieve ($955), and shows why investors should focus more on dividend growth than yield.
The following table shows selected indicators for the top 25 stocks on the RDIV. I’ve also included his April portfolio in RDIV and the SCHD index to showcase recent changes.
Compared to April, RDIV is now a more valuable ETF. Trading at just 11.54 times futures earnings, the constituents have a weighted average dividend yield of 4.31%. RDIV shareholders can expect a net profit of just under 4% after accounting for fees. This is an attractive feature, although his 5-year dividend growth rate for constituent stocks is weak at 5.34% and will continue to be a problem for long-term holders. Moreover, his RDIV profitability score of 7.79/10, calculated by normalizing Seeking Alpha’s profitability grade by holding, compares with his RWL score of 9.32/10, despite a portfolio holding 76.55% large caps. is below Most investors expect quality to drop when buying high-value stocks, but it’s a big sacrifice.
Alternatively, SCHD’s 5-year beta of 0.90 is stable each year, although restructuring can result in high turnover. Revenue growth is about the same as RDIV, but expected revenue growth is more than 7% higher, profitability is higher, and 11.67% 5-year dividend growth is better than SCHD’s lower 3.46% yield (minus fees). after 3.40%) will soon make up. .
When evaluating ETFs, it is imperative to see how well the strategy is executing and the quality of your current holdings. My problem with RDIV is not just because of the high portfolio turnover. The main reason is that its functionality is constantly changing, making it difficult to implement. Instead, the only guarantee is high dividend yields and low valuations, and ETFs should be able to do more.
There have been some positive results from the latest reconstitution, and dividend investors would prefer an expected yield near 4% for RDIV, at least in the short term. However, as we extend the planned holding period, a Dividend Growth ETF will look more attractive and come a point in an investor’s life where predictability is highly valued. maintains a neutral rating for However, for the current owner’s sake, I promise to review this his ETF on a quarterly basis. We hope that you will continue to check back for the latest information. thank you for reading. I look forward to discussing this and other Dividend ETFs further in the comments below.