S&P 500 Reinvented: Dividends Out, Growth In With XDIV ETF

For shareholders who appreciate the long-term growth of the S&P 500 but prefer to avoid the tax implications associated with dividends, Roundhill Investments has recently introduced a new option.

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The Roundhill S&P 500 No Dividend Target ETF XDIV, which began trading on July 10, aims to achieve something no ETF has ever attempted before: providing exposure to the entire S&P 500 Index while actively reducing dividend payouts.

The pitch is simple. Most investors, especially those in tax accounts, view dividends as less “free money” and more as a yearly tax hassle. XDIV is designed for tax-conscious investors, offering the potential for long-term capital appreciation with distributions maintained at a level as close to zero as possible.

Roundhill CEO Dave Mazza noted that the dividend in itself is not bad. But for some investors, skipping them can equate to better after-tax results.

A Niche For The Tax-Savvy

In contrast to common dividend-averse strategies that avoid high-yielding stocks, XDIV forges a new path: it maintains full S&P 500 exposure while still attempting to avoid distributions. Although the ETF can’t guarantee zero distributions, its approach is designed to minimize them significantly, without compromising diversification.

It’s a niche concept, but one that could attract high-net-worth investors or capital gains managers with surgical-like precision. It might even appeal to younger investors seeking to compound returns without paying taxes each year.

It’s also unusually inexpensive. With a net expense ratio of 0.0849%, XDIV is among the cheapest S&P 500-tracking ETFs available.

Tax-efficiency is hardly a brand-new fix in ETF land, but XDIV raises it to an art form. Whether the public bites will hinge on whether they believe dividend avoidance is worthwhile, or whether they prefer to reinvest the payments themselves.

Nevertheless, in an ETF space where “thematic” tends to translate to “gimmicky,” Roundhill’s no-dividend spin comes off as refreshingly earthy. It’s not trend-hunting. It’s tax efficiency.

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