A new U.S. dividend exchange-traded fund is entering the industry that will have a strong focus on the technology sector.....
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Horizons ETFs Management (Canada) Inc. has announced Wednesday the Horizons Active US Dividend ETF (HAU), an actively managed ETF that provides investors with regular dividend income and modest long-term capital growth by investing in high-quality U.S. dividend paying stocks.
HAU will begin trading as of Feb. 25, 2015.
Unlike other U.S. dividend ETFs in Canada, HAU has a higher weighting in the U.S technology sector at 11.7 per cent, including Apple Inc. and Microsoft Corp.
“HAU will have meaningful exposure to the U.S. technology sector, which has been a key driver of U.S. stock market performance, but not traditionally considered a ‘dividend-rich’ sector,” said Howard Atkinson, president of Horizons ETFs, in a statement. “We believe that this gives investors a good balance of dividend yields, while also giving them exposure to the performance of the broad U.S. stock market.”
A majority of U.S. dividend ETFs in Canada have significant holdings held in sectors such as utilities, industrials, consumer discretionary or consumer staples. Management fees for U.S. dividend ETFs can range from HAU at 0.75 per cent and BMO US Dividend ETF (ZDY) being the lowest at 0.30 per cent There are several actively managed US dividend ETFs in Canada including ZDY, Purpose US Dividend Fund (PUD), RBC Quant U.S. Dividend Leaders ETF (RUD) and First Asset Morningstar US Dividend Target 50 Index ETF (UXM).
HAU may hedge some or all of its non-Canadian dollar currency exposure back to the Canadian dollar, and will be sub-advised by Guardian Capital LP.
Srikanth Iyer, managing director, head of systematic strategies at Guardian Capital, and Fiona Wilson, portfolio manager at Guardian Capital, will take on lead portfolio management responsibilities for HAU.
“The analysis of a company’s cash flow and the way it uses its cash flow in a shareholder friendly manner shall be over the next decade the single most important criteria in evaluating its performance,” Mr. Iyer said in a statement. “Therefore, companies hitherto not known for their dividends and cash flow, like the technology sector, will become the bastions of strong balance sheets, and sustainable dividend yields.”
Guardian Capital sub-advises four exchange-traded funds for Horizons ETFs, including Horizons Active Global Dividend ETF (HAZ). HAU uses Guardian’s proprietary GPS Stock Selection Process, which targets a diversified set of stocks with different growth and yield characteristics, and includes a range of high growth, early stage companies with low dividend yields such as technology, through to mature, slower-growing companies that provide high dividend yields, such as utilities and telecoms.
“By segmenting the U.S. dividend market into these categories, one of the big advantages of this mandate over other traditional U.S. dividend strategies is the sector diversification beyond traditional ‘dividend rich’ sectors,” Mr. Atkinson said.