From the January 2007 issue of Research Magazine • Subscribe!

Hunting Social, Other Dividends

New exchange-traded funds (ETFs) with specialized strategies have been the rage on Wall Street -- and the rage continues.

Targeting income-oriented investors, Vanguard has just introduced the High Dividend Yield ETF (Amex: VYM).

The fund tracks a customized index developed by the FTSE Group for Vanguard. The index is drawn from the U.S. component of the FTSE Global Equity Index Series and consists of stocks with higher-than-average dividend yields. Real estate investment trusts (REITs) and companies that have not paid a dividend during the previous 12 months are excluded. The expense ratio is 0.25 percent and the fund plans to pay quarterly dividends.

Jerry Moskowitz, managing director of FTSE Americas, says: "Working with Vanguard to create this new custom benchmark helps to demonstrate FTSE's skill in developing index solutions in line with investor and product issuer needs."

The activity of new ETFs with a socially responsible tilt is also heating up. The iShares KLD 400 Social Index Fund (Amex: DSI) plans to cater to investors that care about the social and environmental aspects of investing.

The underlying index consists of 400 companies drawn primarily from the universe of companies within the S&P 500 and the Russell 3000 indexes. Stocks with positive environmental, social and governance (ESG) performance relative to their industry peers and to the broader market are included in the mix. The fund has an expense ratio of 0.50 percent.

"The DSI provides investors with a cost-effective way to invest in a fund that tracks the highly regarded Domini 400 Social Index, which identifies a universe of socially responsible companies and completely avoids others that derive a substantial portion of their revenue sources from certain industries such as alcohol and tobacco," says Lee Kranefuss, CEO of BGI's intermediary ETF business.

Ron DeLegge is editor of www.eftguide.com.

Reprints Discuss this story
This is where the comments go.