I’m sure this will get moved to “Investments”, where it will be forgotten about forever. But I want to give it a small breath of life, which is why it starts out in the WC.
Looking at some iShares ETFs. They have two high-dividend funds, HDV and DVY. Same beta, same yield, but wildly different portfolios. One is heavy into financials and utilities, while the other is heavy into energy and healthcare.
Why would two funds that have the same mandate have such differing holdings? And which one would you recommend and why? (Strange that the smaller of the two funds, HDV, has an ER of .08, while DVY has an ER of .39.)
More importantly, how did you come up with such a conclusion? Is there some website that’s already done all the heavy lifting for us?
Personally I have no preference between those sectors of 3% yielding S&P500 companies, and would go with 5% yielding preferred stock (PFF), or 6% yielding Chinese common stocks. I mean there’s a lot of risk in those sky high SPX valuations, that 3% yield won’t make up for a 30% drop in share price. I’d at least like to see some chunkier yield for my risk.
It looks like the differences are due to the index construction methodologies.
DVY is based on DJ US Select Dividend Index, which seems to be constructed on only dividend and liquidity criteria: specifically yield, yield growth and volume.
HDV is based on the Morningstar Dividend Yield Index, which applies a proprietary screen for “financial health”.
This probably explains the sector difference, since some sectors tend to have different leverage, or other metrics that affect Morningstar’s calculation. Since DJ also considers dividend growth, there might be some cyclicality in their selection as well.
An asteroid is predicted to hit earth in the next 100 years, leading to an extinction event. Investments don’t matter.
Orbital Elements at Epoch 2457600.5 (2016-Jul-31.0) TDB****Reference: **** JPL 90 **** (heliocentric ecliptic J2000) **** Element Value Uncertainty (1-sigma) **** Unitse .1237067718705962 7.3873e-08 a .9466321928815017 1.0049e-09 au q .8295273801513475 6.9563e-08 au i 22.32407440339525 1.3148e-06 deg node 331.1581253538043 1.1493e-06 deg peri 46.08977036927552 1.2872e-05 deg M 61.3310623173134 2.533e-05 deg tp 2457543.187636592630 (2016-Jun-03.68763659) 2.3627e-05 JED period 336.4111112229808 0.92 5.3565e-07 1.467e-09 d yr n 1.070119232064794 1.7039e-09 deg/d Q 1.063737005611656 1.1292e-09 auOrbit Determination Parameters# obs. used (total) 356 # delay obs. used 18 # Doppler obs. used 0 data-arc span 13575 days (37.17 yr) first obs. used 1977-02-18 last obs. used 2014-04-20 planetary ephem. DE431 SB-pert. ephem. SB431-BIG16 condition code 0 fit RMS .38132 data source ORB producer Otto Matic solution date 2014-Jun-11 11:00:10Additional InformationEarth MOID = .028871 au Jupiter MOID = 4.14523 au T_jup = 6.280
Thanks. I want to look into these a little further to find out what the Morningstar screen is all about.
For the time being, I’m going to stick with DVY. Even though its ER is 5 times higher It has less exposure to energy (we have enough exposure to it in West Texas), and more to industrials, financials, and utilities. The other one is loaded with IT, telecommunications, and health care (which surprises me in a “high dividend” fund.)
Both ETFs have similar yields but different fees and historical returns. Might also have a look at the analysis tools on windfactor.com, which show the trade off between the fees you pay the manager and the potential for higher returns over the next year (based on a holdings-level historical “best-match” algorithm). DVY looks pretty good through that lens but not HDV.
