Artificial intelligence picks dividends… based on price return
White labeller Exchange Traded Concepts and Korean fintech company Qraft are teaming up to list a very interest new actively managed dividend ETF.
The QRAFT AI-Enhanced U.S. High Dividend ETF (HDIV) picks dividend stocks, but rather than basing its stock picks on how big companies’ dividends are, it picks them based on how much the share price has gone up.
According to the prospectus, the fund’s investment strategy is “based on the theory that short-term price return is potentially a better indicator of a higher dividend yield of a stock than the traditional method of high-dividend stock picking.”
Not too much is given away about how the fund does this. Other than to say it uses a “formula based on dividend and quality factors including… dividend yield and dividend growth.”
The fund charges 0.75% a year, meaning that dividend cheque better be really juicy or there won’t be much left for investors.
Analysis – a well-worn path, but a nice interpretation
Everyone loves a dividend cheque. But people heading into retirement love them more than most. Making things better (for ETF issuers) this demographic – retirees – have a lot of money. For this reason virtually every ETF provider has a dividend ETF, some have more than one.
Yet – as everyone in finance knows – buying companies based on dividends is a losing strategy. This is because it often involves giving up share price growth. If you look at the biggest companies in the US you can see why. Some of the best performers the past 10 years - like Facebook, Netflix, Google, Amazon - don’t pay dividends. While others – like Visa and Microsoft – pay dividends so small you forget they’re there. So if you'd picked the big dividend companies in 2010, you'd have been down on the market in a big way for the next 10 years.
So what can hopeful dividend-minded investors - or ETF issuers hoping to please them - instead?
Picking dividend payers based on how much their share prices are rising is an idea I’ve never seen. Usually the approach taken is the opposite. Will it work? I have no idea. So it will be interesting to see how it goes.The Hartford lists actively managed core bond ETF
The Hartford, one of America’s largest insurance companies, is adding to its ETF offering with a new actively managed bond ETF. The new fund has a nice and punchy name: Hartford Core Bond ETF (HCRB). It invests in all kinds of USD investment grade debts, including treasuries, mortgage-backed securities and corporate bonds.
The fund can buy US dollar debts issued outside the US, up to a maximum of 25% of the fund’s assets.
The fund will charge 0.29%.