BlackRock launches dividend and buyback ETF on Cboe

Nov 14th, 2017 | By | Category: Equities

BlackRock has launched the iShares US Dividend and Buyback ETF (DIVB US) on Cboe ETF Marketplace, providing access to US equities with a history of dividend payments, share buybacks or both.

BlackRock launches dividend and buyback ETF on Cboe

Martin Small, head of US iShares at BlackRock.

Martin Small, head of US iShares at BlackRock, commented: “Long-term stock market returns have been largely driven by the twin engines through which companies return cash to investors – dividend income and share repurchases. We believe all investors should seriously consider whether they are maximising total payout exposure, and evaluate DIVB as a compliment, or wholesale replacement, for the traditional high dividend or dividend growth allocation.”

DIVB tracks the Morningstar US Dividend and Buyback Index. Stocks are selected from the Morningstar US Market Index on the basis of total shareholder yield – a combination of dividend yield and net buyback yield. Net buyback yield, which controls for companies using new issues, is averaged over eight trailing quarters and only companies that have returned capital to shareholders over that period are included.

Securities are selected for the dividend and buyback index in order of decreasing total shareholder payout dollars (payout yield multiplied by market capitalisation) until 90% coverage of the US Market Index’s total shareholder yield is reached.

Constituents are weighted by total shareholder payout dollars, a system that, according to Morningstar, retains the benefits of market cap weighting and anchors the index in the shares of relatively stable mega-caps. The index is reconstituted annually and rebalanced quarterly.

The index currently has 384 members, the largest being Apple (5.0%), Microsoft (3.1%), Johnson & Johnson (2.0%) and JP Morgan Chase (1.8%). The largest sector exposures of DIVB are information technology (21.1%), financials (17.2%) and consumer discretionary (13.7%).

DIVB becomes the eighth US-listed iShares ETF focused on dividends, a range that has a combined AUM of $31 billion.

The ETF has a total expense ratio (TER) of 0.25%, which is relatively low compared to the US-listed buyback ETFs that DIVB will be competing with – the PowerShares Buyback Achievers Portfolio (PKW US), launched back in December 2006, has $1.3 billion in assets and a TER of 0.63%.

There are also a number of European-listed ETFs offering exposure to equities with a history of buybacks, including the PowerShares Global Buyback Achievers UCITS ETF (SBUY LN), the Amundi MSCI Europe Buyback UCITS ETF (AMEB GR), the iShares US Equity Buyback Achievers UCITS ETF (CEM2 GR) and the Amundi S&P 500 Buyback UCITS ETF (B500 GR). These ETFs all have higher TERs than DIVB, except B500, which has a TER of just 0.15%.

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