This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Buyback ETF Simplifies a Complex Investment

"At the time, dividends were the rave, but we had some investors that preferred investments that didn't have the tax consequences of dividends," says Ed McRedmond, Senior Vice President of portfolio strategies for Invesco PowerShares. "The Buyback Achievers Fund also seemed to be a nice complement to our Dividend Achiever Portfolio Fund (PFM)."

The Buyback Achievers Fund is classified as a Large Blend Fund by Morningstar. This is the same peer group that ETFs that track the S&P 500 fall into such as the SPDRs (SPY) and the iShares S&P 500 Index Fund (IVV).

About two-thirds of the Buyback Achievers Fund is allocated to large cap stocks. The remainder of the fund is invested in mid cap and small cap names. It has approximately 310 holdings and the expense ratio is about 0.7%. The fund is rebalanced on a quarterly basis and reconstituted on an annual basis.

Complex Strategy Made Easy

One of the advantages of this ETF is that it simplifies what might otherwise be a cumbersome process.

"It would be difficult for individual investors to implement this strategy on their own," says McRedmond.

Also, "the Buyback Achievers Index is based on actual share repurchases rather than on announced share buybacks which may never materialize," says Bill Rogers, Director of Equity Analysis for Mergent.

This ETF would be one to consider for long-term investors who are more interested in capital appreciation, as opposed to dividend payments.

"Certain investors, for their own personal needs, would rather have the cash flow from dividends instead of having companies using that cash to repurchase shares," says McRedmond. "If your focus is on the cash flow from dividends, this ETF might not be at the top of your list."

One point for potential investors to keep in mind about the Buyback Achievers Fund is its composition.

"The index is weighted using a modified market cap weighting scheme so that no single holding can be more than 5% of the index on the annual reconstitution date," says Rogers. "And because buybacks are a company-specific event, the mix of companies will change over time, causing the investor to have a different sector mix from period to period."

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,162.06 +30.09 0.18%
S&P 500 2,003.15 +4.17 0.21%
NASDAQ 4,562.23 +9.4710 0.21%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs