2 New Dividend ETFs Launch

Two new dividend exchange-traded funds have launched. Reality Shares has now launched two alternative dividend growth funds. One is the Reality Shares DIVCON Dividend Defender ETF (DFND). The other ETFS is the Reality Shares DIVCON Dividend Guard ETF (GARD).

Reality shares notified journalists and newswires of the launch. Most ETFs launch on the New York Stock Exchange or NASDAQ, but both of the Revenue Shares ETFs were listed on the BATS Exchange. How these will pan out will depend upon the total share volume.

Reality Shares said:

DIVCON is a proprietary dividend health rating methodology which systematically ranks companies’ future dividend growth prospects based on a weighted average of seven quality factors correlated to dividend growth… Both the DIVCON Dividend Defender ETF and DIVCON Dividend Guard ETF seek to mitigate risk by combining long stock positions in the large-cap companies with the highest probability of increasing their dividends with short stock positions in large-cap companies with the highest probability of cutting their dividends, as measured by their DIVCON dividend health scores.

The GARD ETF is said to also features dynamic market exposure based on its proprietary quantitative gauge of market strength. Both new index ETFs feature rules-based stock selection and weighting based on DIVCON scores. The expense ratio for DFND is 0.95%, and the expense ratio for GARD is 1.05% with a net expense ratio of 0.95%.

Reality shares said:

We believe dividend health is an effective gauge of companies’ longer-term prospects, and our research supports our conviction that dividend-growing companies have historically outperformed the market while dividend cutters have produced negative returns. Based on that principle, the DIVCON Dividend Defender and DIVCON Dividend Guard ETFs offer investors who are seeking to mitigate risk with hedged strategies that invest in the companies our DIVCON methodology indicates are most likely to grow their dividends while shorting the ones most likely to cut.

The Reality Shares DIVCON Dividend Defender ETF seeks to provide returns through the use of a hedged (long/short) equity portfolio and invests 75% of its portfolio market value in the large-cap U.S. companies with the highest probability of increasing their dividends within a year. The remaining 25% of the portfolio market value is used to short the large-cap U.S. companies with the highest probability of cutting their dividends within a year.

The Reality Shares DIVCON Dividend Guard ETF seeks to reduce the impact of declining markets against performance by dynamically adjusting its market exposure based on the strength of the market via a quantitative tool that gauges market strength by comparing technical trends in market price and volatility to historical averages. It said:

When the Guard Indicator signals a strong market, the Fund invests 100% of its portfolio in the large-cap U.S. companies with the highest probability of increasing their dividends within a year, based on their DIVCON dividend health scores. When the Guard Indicator signals a weak market, that long stock weight is reduced to 50%, and the remaining 50% of the portfolio is allocated to a short stock position in the large-cap U.S. companies with the highest probability of cutting their dividends within a year.