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Jan. 29, 2021, 7:29 a.m. EST

ETF Wrap: Sons of anarchy and dividends of aristocrats

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By Andrea Riquier

What just happened?

If 2020 was the doom and gloom we never thought we’d see in our lifetimes — plague, fires, violence and civil unrest — 2021 is the post-apocalyptic playground.

Unless you’ve been living under a rock, you know that this week’s market turbulence was caused by legions of bored amateur traders using retail platforms to put the squeeze on short sellers. In the first week of the new year, marauders came to Capitol Hill; now they’ve got their sights on Wall Street.

Bloomberg’s John Authers called it “ rage against the financial machine … driven by righteous anger, about generational injustice, about what they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later, and about lacerating poverty and inequality.”

The question now, as with so many things, is have we gone too far in our rush to flatten the world, democratize everything, give everyone their fifteen minutes of fame?

Brexit can’t be un-referendumed, newspapers will probably never again be a voice of authority, and personal finance is now in the hands of the people. It’s a bit like the moment when Jurassic Park’s raptors figured out how to open doors.

(Here is MarketWatch’s coverage of the RobinHood traders , a story defining a short squeeze and a notable example of a squeeze involving an exchange-traded product from the summer)

Thanks for reading, as always.

‘Old-money’ funds get some new holdings

Changes are coming to the “Dividend Aristocrats” ETFs that many investors rely on for fixed income, wrote CFRA’s Todd Rosenbluth in a recent analysis.

Rosenbluth focuses on two dividend ETFs that call themselves “aristocrats”: the SPDR S&P Dividend ETF /zigman2/quotes/206871683/composite SDY +2.93% , which tracks an index called the S&P High Yield Dividend Aristocrats Index, and the ProShares S&P 500 Dividend Aristocrats ETF /zigman2/quotes/208747379/composite NOBL +2.62% , which tracks the S&P 500 Dividend Aristocrats Index.

What makes them so upper crust? SDY only holds stocks from companies that have boosted their dividends for more than 20 consecutive years — and NOBL for 25 years.

But “old money” may come with some drawbacks. The two ETFs have significantly lower exposure to the tech sector than other dividend-focused ETFs — about 2% of the two portfolios, versus about 21% for the iShares Core Dividend Growth ETF /zigman2/quotes/209953705/composite DGRO +1.90% , Rosenbluth noted.

“We think the lack of tech exposure hurt performance in 2020, as NOBL’s 8.2% and SDY’s 2.0% total return sharply lagged the S&P 500,” he wrote.

The index provider, S&P Dow Jones, recently announced that both indexes would receive an additional tech stock before Feb. 1. But as Rosenbluth is very fond of pointing out, it pays for investors to know the specifics.

The NOBL index will pick up International Business Machines /zigman2/quotes/203856914/composite IBM +2.00% , a company which earlier in January announced its seventh straight quarter of declining adjusted earnings and guidance, which gave analysts little hope for a long-awaited turnaround.

SDY will nab a company called Badger Meter /zigman2/quotes/205487140/composite BMI +2.06% , a small-cap engaged in selling water meters, primarily to municipal customers.

US : U.S.: NYSE Arca
$ 121.48
+3.46 +2.93%
Volume: 318,620
June 2, 2023 4:00p
US : U.S.: Cboe BZX
$ 90.73
+2.32 +2.62%
Volume: 474,344
June 2, 2023 4:00p
US : U.S.: NYSE Arca
$ 50.31
+0.94 +1.90%
Volume: 1.09M
June 2, 2023 4:00p
$ 132.42
+2.60 +2.00%
Volume: 5.38M
June 2, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$120.24 billion
Rev. per Employee
$ 145.00
+2.93 +2.06%
Volume: 139,901
June 2, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$4.25 billion
Rev. per Employee
1 2
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