The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- Earlier this summer Global X Launched the
Super Dividend ETF
This fund aims to be an all-world fund with a dividend bias similar to the
WisdomTree Global Equity Income Fund
. Both SDIV and DEW have some similarities under the hood and both are noticeably different than market cap weighted
iShares All Country World Index Fund
, the iShares fund.
All three are heaviest in the U.S. with ACWI at 42%, DEW at 17% and SDIV at 32%. The rest of the countries are a real mishmash with the biggest difference being SDIV's relatively large 24% weighting to Australia. The larger country weighs in the other funds top out at about 10% respectively. I would note that SDIV is much lighter in Western European countries than ACWI or DEW which could be a difference maker if the crisis in Europe worsens.
The financial sector in one form or another is the largest in all three funds. ACWI has 19%, DEW 25% and SDIV has 37% when the 22% allocation to REITs is figured in. Energy, tech and industrials are the next three largest sectors in ACWI. DEW has heavy exposure to telecom, utilities and health care. SDIV has large weightings in consumer discretionary and telecom.
The trailing dividend for ACWI is 2.1% compared to a trailing yield of 3.9% for DEW and SDIV does not have enough history for an actual trailing yield but Global X reports on its Website that the fund yields 4.9% based on current prices and dividends
Each fund has its own risk factors. ACWI has the largest combined exposure to the U.S., Western Europe and Japan which have been and continue to be ground zero for a lot of serious fundamental problems. DEW is the heaviest of the three in banks (within the financial sector weightings) which is problematic if the problems with bad real estate loans and ownership of debt securities requiring substantial hair cuts (think Greek debt) continues to worsen. I believe the banking sector to be the least attractive sector in the market.
The biggest risk factor for SDIV is the large exposure to Australia. Australia has benefited mightily from supplying natural resources to China. This has created a lot of prosperity in the country leading to excess in the Aussie real estate market. Any disruption of demand from China or any sort of real estate correction like what the U.S. is going through now would hurt Australian equities and should be expected to hurt SDIV.
I do not believe there is much threat of Chinese demand waning anytime soon but others do and any sort of real estate correction would hurt the Australian banks, but I do not believe the magnitude would be anywhere near the carnage that has occurred in the U.S.; the
Financial Sector SPDR
, a proxy for U.S.- based financial companies, is still down 61% from its 2007 highwater mark.
That the ACWI alternatives, DEW and SDIV, have risk factors is not a negative because all investment products have risk factors. What would be worse is not knowing the risk factors for a fund you own.
Looking forward, the largest global markets, the ones in ACWI could have more years of below normal growth, which makes the dividend yields available from DEW and SDIV all the more important to give investors preferring broad-based funds a better chance for normal returns over the long term. An extra 200 to 300 basis points in yield from both funds will make a huge difference if price appreciation continues to be weak.
At the time of publication, Nusbaum did not have positions in any of the equities mentioned.
Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;
to send him an email.