New entrant Advisors AM launches two dividend ETFs

Dec 1st, 2017 | By | Category: Equities

Advisors Asset Management has entered the US ETF market with the launch of two dividend-focused ETF strategies targeting US-listed and emerging market equities. The NYSE Arca-listed funds aim to enhance the sustainability of their dividend yields by employing a quality screen to constituent selection.

Newcomer Advisors AM launches two dividend ETFs

The funds screen stocks by dividend yield and free cash flow yield.

“We are excited to enter the ETF market,” said Lance McGray, managing director, head of ETF product, Advisors AM. “For nearly two decades we have offered investors innovative income generating solutions, and these ETFs are the most recent addition to our diverse product suite.”

The funds track indices from the S&P Dividend and Free Cash Flow Yield Index series, which are designed to balance current cash flow with future capital growth. The series focuses on two valuation indicators to identify sustainable dividend-paying stocks offering fundamental value: dividend yield and free cash flow yield.

According to Advisors, a high dividend yield may indicate an attractive market price and a company’s willingness to return capital to its shareholders, which may help meet the cash flow needs of investors. A high free cash flow indicates a healthy operating condition and strong balance sheet which may help avoid value traps among high dividend yield stocks.

McGray added: “Reaching for the highest yielding stocks is not always the best course of action. Just as important as the actual dividend yield is the sustainability of that dividend. In our opinion, free cash flow yield is an ideal indicator of dividend sustainability, and when coupled with dividend yield in the selection process, the result can be powerful. This may help investors not only meet their current cash flow needs, but also potentially provide future capital growth.”

The AAM S&P 500 High Dividend Value ETF (SPDV US) tracks the S&P 500 Dividend and Free Cash Flow Yield Index, and the AAM S&P Emerging Markets High Dividend Value ETF (EEMD US) tracks the S&P Emerging Markets Dividend and Free Cash Flow Yield Index.

Each index methodology selects the five most attractive stocks from each GICS sector based on free cash flow yield and dividend yield. Constituents are equally weighted within the index.

Andrew S. Williams, president of Advisors AM, said: “There has been massive growth within the ETF industry and we are excited to be part of the ETF landscape. We are committed to offering specialized solutions to our financial advisor partners. We will continue to provide offerings such as these ETFs to empower advisors to broaden their portfolios, while potentially meeting their clients’ income challenge.”

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