SDIV: Super Dividend or No Dividend?

Global X launched a new ETF last week (6/9/11), which is intended to provide investors with exposure to 100 of the highest dividend yielding equity securities in the world.  The Global X SuperDividend ETF (SDIV) hopes to track the total return performance (minus fees and expenses) of the Solactive Global SuperDividend Index.   However, it's not clear whether or not SDIV will have a dividend of its own.

The underlying index was initially constructed from the 100 highest yielding securities (current holdings) from a global universe of stocks meeting a minimum yield requirement of 6% and various liquidity constraints.  Constituents will remain in the index during the annual February reconstitution as long as they are ranked among the 200 highest yielding and have a current yield in excess of 3%.  The 100 selected stocks will be equally weighted at 1% each during the annual reconstitution.

Unfortunately, Global X and the index provider both fail to offer up any yield data for the index or dividend payout plans for the fund.  I consider this a serious short-coming for any ETF that declares itself to be a high dividend fund.  The press release states “In an environment where people are seeking monthly income, the SuperDividend ETF offers convenient access…”, implying that the ETF will provide that monthly income.

However, SDIV does not have a monthly or quarterly distribution plan in place, and the prospectus (pdf) only requires an annual distribution.  Additionally, SDIV claims to be tracking a “total return” index, which leads me to believe the fund itself will have no yield at all.  Potential income-oriented investors need to know what to expect, but the current marketing materials provide no clues (or warnings).

Sector breakdown for SDIV is REITs 22.0%, Consumer Discretionary 16.0%, Telecommunications 16.0%, Financials 10.0%, Utilities 8.0%, Banks 5.0%, and others 23.0%.  Country allocation is U.S. 32.0%, Australia 24.0%, U.K. 10.0%, Canada 6.0%, Singapore 4.0%, Bermuda 2.0%, Brazil 2.0%, Czech Republic 2.0%, France 2.0%, Germany 2.0%, and others 14.0%.

Fund total operating expenses are pegged at 0.79% consisting of a 0.58% management fee and 0.21% acquired fund fees.  However, SDIV is not a fund-of-funds.  The acquired fund fees are based on estimates of the cumulative expenses charged by the business development companies (“BDCs”) in which SDIV invests and will vary over time.

Bottom Line:  This product appears to have been rushed to market before all the pieces were in place.  The marketing is either incomplete or inconsistent with the current product design point.  Until its dividend payment policies are clarified, it will be difficult to determine if SDIV can meet your objectives.  Hopefully, the summary page and fact sheet (pdf) will eventually inform investors what to expect.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.