NEW YORK (TheStreet) -- One of the most successful ETF launches ever was the PowerShares S&P 500 Low Volatility Portfolio (SPLV) - Get Report. 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) - Get Report

. 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) - Get Report

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


(WIN) - Get Report

, the second-largest holding in the fund at 3.05% is similar to PBI.

This is not going to be the case with every stock in the fund, far from it, but these examples help to understand some of the risk factors to this space.

That these two stocks, the largest two, are only allocated 3% respectively of the fund means that a worsening of conditions for these companies will not crush the fund and of course should any of the holdings cut their dividends they would be rebalanced down or out of the fund depending on the size of the potential dividend cut.

For now the SPHD looks to pay a 4.45% yield. But as is the case with all new ETFs, the actual yield may differ from projections and should be expected to fluctuate over time.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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