Solactive and WBI Investments team up on quality income ETF launch

Dec 20th, 2016 | By | Category: Equities

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Boutique index provider Solactive has unveiled the Solactive Power Factor High Dividend Index, tracking the performance of 50 US-listed stocks exhibiting high dividend yields and strong fundamentals. The index has been licensed to WBI Investments as the underlying for the recently launched smart beta exchange-traded fund – the WBI Power Factor High Dividend ETF (NYSE: WBIY).

Don Schreiber WBI Shares

Don Schreiber, Jr., Founder and CEO of WBI Investments.

Don Schreiber, Jr., Founder and CEO of WBI Investments, commented: “We’re introducing a smarter approach for yield starved investors at a time when the need for consistent capital growth and capital preservation is absolutely critical. As investors rush into the high-yield dividend space, we feel that WBIY will provide them with a smarter approach that pairs the search for high yielding stocks with a preference for only those companies with the strongest fundamentals.”

Eligible components for the index must have a three-month average daily trading volume and a market capitalization in the top 70% and top 95% of the Solactive US Broad Market Index, respectively. As such the final index is likely to consist of firms from the large-, mid-, and small-cap segments of the US equity market.

The index is constructed by combining a selection of the highest-yielding dividend stocks with WBI’s Power Factor framework of quality investing. WBI’s methodology, licensed to Solactive for the construction of the index, considers three fundamental metrics – the earnings-to-price, cashflow-to-price and sales-to-price ratios – to rank stocks in a broad universe of US high dividend yield securities. The stocks with the highest composite quality score within their sector are chosen as index constituents. Constituents are weighted by dividend yield to further enhance the income characteristic of the index.

It is readjusted quarterly with a sector weight cap of 20%.

Henning Kahre, Head of Research at Solactive, commented: “The last two years have seen factor investing gaining much traction in the indexing space with a growing number of investment products tracking factor-based indices. By using a multi-step selection process that accounts for differences at the sector level, the [Solactive Power Factor High Dividend Index] methodology results in an index that is pretty robust in providing the targeted exposure.”

The fund’s total expense ratio (TER) is 0.67%.

In Europe several providers offer high dividend ETFs with quality screens. Those focusing on either global or US exposure include:

Lyxor SG Global Quality Income NTR UCITS ETF (LON: SGQD). TER – 0.45%
UBS ETF DJ Global Select Dividend UCITS ETF (LON: UBUM).TER – 0.30%
SPDR S&P Global Dividend Aristocrats UCITS ETF (LON: GLDV). TER – 0.45%

iShares MSCI USA Dividend IQ UCITS ETF (LON: QDIV). TER – 0.35%
SPDR S&P US Dividend Aristocrats UCITS ETF (LON: UDVD). TER – 0.35%
Source FTSE RAFI US Equity Income Physical UCITS ETF (LON: DVUS). TER – 0.35%

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