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Which Is The Best High Yield ETF?

By , 12 April 2014

Which Is The Best High Yield ETF?
Which Is The Best High Yield ETF?

I'm planning to move some of my money into a high dividend yield index fund for a few of reasons. Firstly I like dividends, secondly I like franking credits, and thirdly dividends seem to predict company health (and growth) pretty well. So here is the research I've done into the index funds / ETFs I've found on the Australian Stock Exchange.

The four ETFs I looked at are:

Which Is The Best High Yield ETF?

The table belows show how they compare in terms of what index they track, how the securities in the index are selected and balanced, the management fees and the performance. I'm mostly interested in how the securities are selected.

  Vanguard iShares SPDR Russell
Indexer FTSE ASFA S&P/ASX MSCI Russell
Securities from FTSE200 ASX300 MSCI IMI Custom (incl REITs)
Criteria Forecast yield Past yield Past yield Forecast yield
# of holdings 58 53 42 50
Weighting method Market cap Equal* Market cap  
Max weight (company) 10% 4% 10% varies
Max weight (sector) 40% 20% 40% varies
Top 10 weight 72% 41% 64% 54%
Rebalance frequency Quarterly Semiannually Semiannually Semiannually
Management cost 0.25% 0.30% 0.35% 0.46%
Distribution frequency Quarterly Quarterly Quarterly Quarterly
Franking level 87.2% 87.8% 87.4%  
1yr return to 31 Mar 14 13.09% 6.28% 8.6% 11.54%

* iShares fund is weighted to maximise yield withing the weighting restrictions. The net effect is fairly even distribution of securities in each sector.

So far, I'm leaning towards the Vanguard product. I think I prefer to have a slightly top-heavy fund than own 4% of everything like the iShares fund. Apart from that, I'm already invested in Vanguard and like their products.


About Roger Keays

Which Is The Best High Yield ETF?

Roger Keays is an artist, an engineer, and a student of life. Since he left Australia in 2009, he has been living as a digital nomad in over 40 different countries around the world. Roger is addicted to surfing. His other interests are music, psychology, languages, and finding good food. Click here to subscribe to his weekly blog, or stalk him on Facebook and Twitter.

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