ETF Update: Japan Goes Global; PowerShares Clean Energy; Is the Worst of the Market Chaos Over?; Endangered Internet ETF; Dividend Based ETFs

by: Tom Lydon posted on: August 13, 2007 | about stocks: BHH / DLN / IWM / PBW / PHJ / SPY / VIG    
Topics included in this update: Global ETFs To Hit Japan ; PowerShares Clean Energy ETF; Is the Worst of the Market Chaos Over?; Endangered Internet ETF; Dividend Based ETFs

Global ETFs To Hit Japan
State Street Global Advisors has plans to launch global ETFs in Japan to boost available options for investors. As of now, ETFs have not proliferated in the land of the rising sun. Quite a few distributors are there who charge a small fee, but there is no incentive to sell ETFs. Japan might add a gold ETF to its current lineup, reports Ronan McCaughey for Global Pensions, in addition to its recently launched Asian bond ETF.

The ETF arena is dominated by the U.S. with $406.8 billion in assets, followed by Europe with $89.7 billion and Japan with $34.6 billion.


Clean Up With PowerShares Clean Energy
The PowerShares WilderHill Clean Energy (PBW) ETF could be paving the way of the future. As environmental concerns increase, alternative energy methods seem to offer the most promising solutions to these problems. Hence, conscientious investors are eager to invest in these areas. The name alone makes everyone feel good: PowerShares WilderHill Clean Energy Fund. It's like stepping into a fresh mountain spring.

Even Congress is starting to come around to the alternative energy's side, says Jack Uldrich for the Motley Fool. This could explain the renewed strength for PBW, as the ETF saw a new weekly high, reports Nick Perry for Schaeffer's Investment Research. PBW is up 6.5% for last week and is up 25.9% year-to-date.

Is the Worst of the Market Chaos Over?
Amid the market turmoil, ETFs are still coming out ahead. $13.2 billion of net inflow has gone into U.S. ETFs during last week through Thursday, according to TrimTabs Investment Research. Vincent Deluard, a TrimTabs analyst, adds that the $13.2 billion accounts for about 4.2% of all assets held in U.S. stock funds, making this the biggest weekly inflow for 2007.

Murray Coleman for MarketWatch reports the biggest winner was SPDRs (SPY), the original ETF, brought in an estimated $4.6 billion in assets. iShares Russell 2000 (IWM) came in second, with about the same assets as SPY. Some investors say these figures represent a bullish sentiment among institutional traders. Maybe the worst is behind us for now?

Endangered Internet ETF
Fiserv's (FISV) proposed buyout of CheckFree (CKFR) for $4.2 billion has the potential to kill B2B Internet HOLDRs (BHH), which is a type of ETF. BHH is part of the original HOLDRs and differs from most ETFs in that its holdings were selected when they were created, explains Jon C. Ogg for 24/7 Wall Street. The holdings for HOLDRs don't change unless a company closes. HOLDRs also don't track an index.

The BHH's holdings were made up of Internet companies that were created during the dot.com era. After the bubble burst and companies went under, BHH is now left with only four holdings. CKFR is by far the largest holding, weighing in at 69%. If the buyout goes through, BHH will have only three holdings. With trades already less than 50,000 shares per day, it looks like the end is near for BHH.

Dividend Based ETFs
When market morale is low, dividend-based ETFs tend to offer some relief because they guarantee investors dividends regularly. They also tend to be more financially sturdy than nondividend payers because they have the extra cash to pay the shareholders. One ETF provider that offers dividend-based ETFs is WisdomTree. Some other dividend-based ETFs to watch, according to Sonya Morris for Morningstar, include:

  • PowerShares High Growth Rate Dividend Achievers (PHJ) - On average, this ETF has a record of growing earnings and cash flow of more than 10% per year. It follows the Mergent Dividend Achievers Index with the highest 10-year annual dividend growth rate. It ranks the 100 stocks within the index by market capitalization.
  • Vanguard Dividend Appreciation ETF (VIG) - This ETF also follows the Mergent Dividend Achievers Index however it aims to identify and eliminate those companies that might have trouble increasing their dividends in the future. It's sector weightings are similar to the S&P 500's.
  • WisdomTree Large Cap Dividend (DLN) - This ETF tracks the largest 300 dividend payers and ranks them by market capitalization. Unlike some of the other dividend ETFs, it does not screen for companies that have increased dividends over time.
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    Tom Lydon

    Tom Lydon

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    This article has 1 comment:

    •  
      Elliott
      Aug 14 12:59 AM
      Dividend ETFs: this is where I think closed end funds have an advantage. ETFs always trade at NAV, so whatever dividend yield they pull in is what you get. OTOH, if you buy a CEF at discount to NAV, that has the effect of raising the yield. In other words, for a CEF at NAV with yield 5% would have a yield of 6% if the CEF is trading at a 10% discount. Same income stream divided by a smaller principal.

      ETF PHJ has a yield of only 1.9%. CEF BDJ, Blackrock "Enhanced Dividend Achievers Trust," trades at a discount of -7.6% (close $12.94 and NAV is 14.01). BDJ's yield is 9.4%.
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