Citi Adds a Dividend Reinvestment-Themed ETN
Citigroup has launched its third exchange traded note under its C-Tracks suite, providing access to a factor-based index that reinvests income generated from a group of high yield dividend payers.
According to a press release, the C-Tracks ETN Miller/Howard Strategic Dividend Reinvestor (DIVC) began trading September 16.
DIVC tries to reflect the performance of the Miller/Howard Strategic Dividend Index, which is comprised of 30 companies that equally weighted and selected based on certain quantitative fundamental factors such as dividend yield, expected growth of dividend yield, market valuation relative to book value, return o invested capital relative to price-to-earnings ratio and trailing 26-week stock price momentum.
As the name suggests, DIVC reinvests dividends paid by the index constituents back. Over time, investors can enjoy the compounding effect of reinvesting income on long-term returns.
The ETN leverages the dividend-focused investment styles of Miller/Howard Investments.
“In our view, cap-weighted indexes, by their all-encompassing nature, hold the good, the bad, and the ugly stocks. This Index is designed to retain the ‘good,’” Lowell G. Miller, founder and CIO of Miller/Howard, said in a press release. “Whereas traditional market cap-weighted indexes tend to overweight overvalued stocks, we try to improve on the model by equal weighting and limiting selection to companies that share positive factors such as dividend growth, yield, valuation, and profitability—all through a disciplined rules-based process with regular rebalancing.”
The company has also licensed another index for use under Citigroup’s C-Tracks ETNs linked to the Miller/Howard MLP Fundamental Index (MLPC) , which tracks master limited partnerships.
Investors should be aware that ETNs are not exchange traded funds. The C-Tracks ETNs are subject to the credit risk of Citigroup (NYSE: C), the underwriting bank. If Citigroup defaults on its obligations, an investor could lose some or all of his or her investment. Additionally, any changes to Citigroup’s credit rating may affect the ETN’s value.
For more information on new products, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
