Reality Shares Crafts ‘Isolated’ Dividend-Focused ETFs

ETF Trends

Income generation is still a major investment theme, especially among retirees who are only looking for a little extra cash. Reality Shares, a new player in the exchange traded fund space, has filed to launch three ETFs to generate income.

According to a Securities and Exchange Commission filing, Reality Shares is working on three ETFs.

Reality Shares Isolated U.S. Dividend Growth Index ETF . The underlying index tracks a combination of long U.S. large-cap equities and ETFs, along with long and short positions in options based on U.S. large-cap equities and indices. The fund will hold at last 80% of total assets in component securities while investing up to 20% of total assets in derivative instruments to minimize the impact of price fluctuations.

Reality Shares Isolated Global Dividend Growth Index ETF . This ETF employs a similar strategy, except it selects a group of large-cap securities from the U.S., Europe and Japan.

Reality Shares Isolated Dividend Growth ETF . This fund is actively managed and uses Reality Share Advisors’ trading strategies to isolate and capture dividend growth of large-cap equities from the U.S., Europe and Japan.

Each of the three funds takes a type of long/short strategy to negate price appreciation or depreciation.

“The combination of such investments is intended to isolate the growth of the level of the dividends expected to be paid … while at the same time attempting to minimize the impact of changes in the trading price of such securities,” according to the filing.

Reality Shares posits that a company’s earnings provide a better measure of the company’s potential long-term value, compared to the price of the stock. Additionally, investment research has indicated that the level of dividends paid has been highly correlated to the level of corporate earnings. Consequently, Reality Shares believes that isolating the dividend from the stock price can generate positive long-term returns that are uncorrelated to broad equity and fixed-income returns.

“Unlike more traditional funds, the Fund seeks investment returns based on the growth of the level of the dividends expected to be paid on the securities … not the change of the stock price of such companies,” according to the filing.

For more information on dividend funds, visit our dividend 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.

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