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The ETF Underdogs, Part 4: Dividend Edition
Part four of our series on ETFs with under $50 million AUM focuses on dividend strategies.
For the fourth time, we're shining a spotlight on the underdogs of the ETF world, which I define as funds that have yet to cross the $50 million AUM mark. That threshold isn’t arbitrary.
Industry analysts often cite $50 million as the minimum level where an ETF can be considered economically viable. Running an ETF is a business, and while expense ratios vary, it’s usually around this point that the risk of a fund shutting down due to lack of inflows starts to meaningfully decline.
That said, not every ETF category is equally competitive. Some still have room for upstarts to find a niche. However, dividend ETFs aren’t really one of them.
Despite the dividend segment having just 164 ETFs as of August 26, according to ETF Central’s screener, it’s dominated by a few multi-billion dollar behemoths from Vanguard, Schwab, iShares, State Street, and WisdomTree. This makes it a highly competitive niche for new ETFs.
But that doesn’t mean these giants are the only ones worth watching, or that one of today’s minnows couldn’t become tomorrow’s whale. Here's a look at three NYSE-listed dividend ETF underdogs to keep on your watchlist.
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Amplify Natural Resources Dividend Income ETF NDIV+1.98%
Not all dividend ETFs aim to replicate the broad market. Some take a more targeted, thematic approach, and NDIV is a good example.
Natural resources aren't their own standalone GICS sector, so NDIV primarily draws from the energy and materials sectors. That includes companies in oil and gas, chemicals, agriculture, metals and mining, paper products, and timber.
All of this is done through the EQM Natural Resources Dividend Income Index, which selects dividend-paying companies in these areas. It owns both U.S.-listed natural resource stocks, and American Depositary Receipts (ADRs).
The appeal goes beyond yield. Natural resource companies often generate strong free cash flow, especially during periods of commodity price strength. These businesses can also serve as a hedge against inflation, particularly useful during years like 2022 when both stocks and bonds struggled.
NDIV currently pays a 7.26% 30-day SEC yield, distributes income monthly, and charges a 0.59% expense ratio. It currently has just under $11 million in AUM.
Global X S&P 500 Quality Dividend ETF QDIV+0.12%
The S&P 500 is one of the most widely used benchmarks in the world. It already screens for large, liquid U.S. companies with consistent earnings, making it a strong foundation for more refined strategies.
S&P Global has capitalized on this by developing several spin-off indices focused on dividend growth, high yield, and combinations of quality and income, often in collaboration with ETF issuers.
For investors interested in dividend income with a quality filter, QDIV offers a smart solution. Managed by Global X, this ETF tracks the S&P 500 Quality High Dividend Index, which screens the S&P 500 for the 200 top-yielding companies, then applies a composite quality score.
The quality score incorporates return on equity, accruals (to flag earnings manipulation), and financial leverage (to avoid overly indebted firms).
Although the index has been around since 2018, QDIV itself has flown under the radar with just $32.8 million in AUM, despite a modest 0.25% expense ratio.
Even so, its performance has been strong, delivering a five-year annualized total return of 12.66%, along with a 3.22% 30-day SEC yield. Distributions are paid monthly.
JPMorgan Dividend Leaders ETF JDIV-0.63%
JPMorgan Asset Management is one of the biggest issuers of active and income-generating ETFs. But despite the firm’s success with strategies like JEPI
JDIV is an actively managed global dividend strategy that aims to beat the MSCI All Country World Index (ACWI) by targeting both higher current yield and stronger dividend growth potential.
While ACWI holds thousands of stocks in market cap-weighted fashion, JDIV takes a much more concentrated approach, holding just 78 positions. Still, its regional mix is what you’d expect: roughly 60% in North America, 30% in developed international markets (EAFE), and 10% in emerging markets.
The 30-day SEC yield of 1.72% may not look impressive at first glance, but the fund is designed with an emphasis on dividend growth, not just headline yield. And with a 0.47% expense ratio, JDIV is competitively priced among actively managed global equity ETFs.
Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.
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