This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

An ETF Combining High Yield and Low Volatility

Stocks in this article: SPLV SPHD PBI WIN

NEW YORK ( TheStreet) -- One of the most successful ETF launches ever was the PowerShares S&P 500 Low Volatility Portfolio (SPLV). That fund is comprised of the 100 S&P 500 constituents with the lowest volatility. SPLV not only is less volatile then the S&P 500 but has slightly higher yield than the benchmark.

Now PowerShares has taken it one step further, culling the 50 highest-yielding stocks from SPLV to create the PowerShares S&P 500 High Dividend Portfolio (SPHD). Funds with lower volatility have become a popular niche as have funds with higher dividend yields and the new SPHD targets both.

SPHD and the related SPLV obviously tilt toward historically defensive sectors. This means that utilities is the largest sector at 21% of the fund, followed by consumer staples at 16%, surprisingly financial stocks makeup almost 13% and telecom is 10%.

The other big S&P 500 sectors have smaller weightings, including technology at just under 5%. In the last few years the tech sector has matured in such a way that valuations have become cheaper and many stocks have initiated dividend, many yielding 3% or more.

For now these stocks don't have much presence in the fund due to not meeting the volatility criteria so it will be interesting to see whether the funds come to have more tech exposure in the future; SPLV has a similar 5% weighting to tech.

The 50 stocks in SPHD are weighted by yield so Pitney Bowes (PBI) and its 10% yield is the largest holding in the fund at 3.14%. PBI is a relatively risky name, even if not very volatile. Year to date it is down 23%, it does have a lot of cash but a lot more debt, and both earnings and revenue are expected to decline from 2012 to 2013.

The risk in owning a stock with a very high dividend is that it implies a form of compensation for some threat to the company. High yields resulting from a big drop in the stock price that is then followed by a dividend cut followed by further price declines is not a unique pattern in the stock market. The picture for Windstream (WIN), the second-largest holding in the fund at 3.05% is similar to PBI.

1 of 2

Select the service that is right for you!

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 17,898.51 +93.71 0.53%
S&P 500 2,073.53 +2.88 0.14%
NASDAQ 4,778.7390 +13.3590 0.28%

Brokerage Partners

Rates from

  • 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