JP Morgan Launches US Dividend ETF

JP Morgan has launched a new fund focused on providing exposure to the U.S. equity space. It invests in companies offering high dividends.

JPMorgan (NYSE:JPM) U.S. Dividend ETF JDIV tracks the JP Morgan US Dividend Index.

Fund Characteristics

The fund utilizes a rules-based methodology to select stocks based on volatility and yield. It has AUM of $25.2 million and seeks to provide exposure to higher-yielding equities, while minimizing unsystematic risk. It charges 12 basis points as fee per year and has top holdings in Dowdupont Inc (NYSE:DWDP) , Hollyfrontier Corp (NYSE:HFC) and Digital Realty Trust Inc (NYSE:DLR) , with 1.1%, 0.8% and 0.7% exposure, respectively (as of Nov 20, 2017). It bears less concentration risk as all just a little over 7.5% is allocated to the top 10 holdings.

From a sector look, the fund has high exposure to Utilities, Financials and Consumer Goods, with 15.9%, 15.0% and 14.2% exposure, respectively (as of Nov 20, 2017).

Market Impact

Moreover, markets anticipate an interest rate hike in the December meeting of the Fed. Per the CME Fed Watch tool, there is a 91.5% chance of a 25 basis point rate hike and 8.5% chance of a 50 basis point rate hike in December. This fund is expected to be significantly impacted because higher interest rates reduce the appeal of dividend-focused funds. However, Janet Yellen has warned that faster rate hikes might cause inflation to go below the Fed’s 2% target. Moreover, newly elected Fed chair, Jerome Powell, is seen as a dovish lead, who will not steer much from the current policy.

There is increased uncertainty with regard to Trump’s tax reform and deregulation plans. This might increase investors’ appeal for safety and in turn make them shift to dividend-focused funds.

Competition

The fund faces high competition from other funds focused on providing exposure to the same space. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Total Market (U.S.) ETFs here).

Vanguard Dividend Appreciation ETF (AX:VIG)

This fund seeks to provide exposure to U.S. companies providing high dividends.

It has AUM of $26.1 billion and charges a fee of 8 basis points a year. From a sector look, the fund has high exposures to Industrials, Health Care and Consumer Services with 33.1%, 13.7% and 13.5% allocation, respectively (as of Oct 31, 2017). The fund’s top three holdings are Microsoft Corp. (NYSE:T) , Johnson & Johnson (NYSE:JNJ) and PepsiCo Inc. (NYSE:PEP) with 4.8%, 4.2% and 3.7% allocation, respectively. The fund has returned 16.8% in a year and 15.6% year to date (as of Nov 21, 2017). It has a dividend yield of 2.0%. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

iShares Select Dividend ETF DVY

This fund seeks to provide exposure to U.S. companies with a track record of paying dividends for 5 consecutive years.

It has AUM of $17.2 billion and charges a fee of 39 basis points a year. From a sector look, the fund has high exposures to Utilities, Consumer Discretionary and Financials with 30.0%, 14.4% and 14.1% allocation, respectively (as of Nov 20, 2017). The fund’s top three holdings are Lockheed Martin Corp (NYSE:T) , CME Group Inc Class A (NASDAQ:CME) and MC Donalds Corp (NYSE:MCD) with 4.2%, 3.4% and 2.4% allocation, respectively (as of Nov 20, 2017). The fund has returned 11.0% in a year and 8.0% year to date (as of Nov 21, 2017). It has a dividend yield of 3.0%. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

SPDR S&P Dividend (P:SDY_OLD) ETF (TO:SDY)

This fund seeks to provide exposure to U.S. companies providing high dividends.

It has AUM of $16.1 billion and charges a fee of 35 basis points a year. From a sector look, the fund has high exposures to Consumer Staples, Industrials and Financials with 15.7%, 14.6% and 14.5% allocation, respectively (as of Nov 20, 2017). The fund’s top three holdings are Tanger Factory Outlet Centers Inc. (NYSE:T) , AT&T Inc. (NYSE:T) and National Retail Properties Inc. (NYSE:NNN) with 2.3%, 2.1% and 2.0% allocation, respectively (as of Nov 20, 2017). The fund has returned 11.2% in a year and 9.3% year to date (as of Nov 21, 2017). It has a dividend yield of 2.4%. It has a Zacks ETF Rank #3 with a Medium risk outlook.

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