{"id":45058,"date":"2023-08-06T04:52:46","date_gmt":"2023-08-06T08:52:46","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/the-timing-may-be-perfect-for-this-dividend-stock-fund-if-the-market-is-getting-close-to-a-top\/"},"modified":"2023-08-06T04:52:48","modified_gmt":"2023-08-06T08:52:48","slug":"the-timing-may-be-perfect-for-this-dividend-stock-fund-if-the-market-is-getting-close-to-a-top","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=45058","title":{"rendered":"The timing may be perfect for this dividend-stock fund if the market is getting close to a top"},"content":{"rendered":"

Investors see warnings every day and under all economic conditions that the stock market is overvalued. Last year, high-flying technology companies led a broad decline for stocks, and many of those same companies have led this year\u2019s rebound. With the market so heavily concentrated toward the largest tech names, you might now believe we\u2019re near another frothy top. If so, the TrueShares Low Volatility Equity Income exchange-traded fund may be a well-timed investment choice.<\/p>\n

\n

The TrueShares Low Volatility Equity Income ETF
\n DIVZ
\n is actively managed, unlike most ETFs, which are designed to track stock indexes automatically. Austin Graff, the fund\u2019s portfolio manager, explained how he selects stocks and pointed to sectors he believes investors should be focused on now.<\/p>\n

First, let\u2019s take a look how the 11 sectors of the S&P 500
\n SPX
\n and the broad indexes have performed this year, and compare their forward price-to-earnings ratios with those at the end of each of the past two years. (All returns in this article include reinvested dividends.) <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n Sector or index<\/strong><\/p>\n<\/td>\n\n 2023 return<\/strong><\/p>\n<\/td>\n\n 2022 return<\/strong><\/p>\n<\/td>\n\n Return since end of 2021<\/strong><\/p>\n<\/td>\n\n Forward P\/E<\/strong><\/p>\n<\/td>\n\n Forward P\/E \u2013 Dec. 30, 2022<\/strong><\/p>\n<\/td>\n\n Forward P\/E \u2013 Dec. 31, 2021<\/strong><\/p>\n<\/td>\n<\/tr>\n
\n Information Technology\u00a0<\/p>\n<\/td>\n\n 46.7%<\/p>\n<\/td>\n\n -28.2%<\/p>\n<\/td>\n\n 3.6%<\/p>\n<\/td>\n\n 27.7<\/p>\n<\/td>\n\n 20.0<\/p>\n<\/td>\n\n 28.2<\/p>\n<\/td>\n<\/tr>\n
\n Communication Services\u00a0<\/p>\n<\/td>\n\n 45.3%<\/p>\n<\/td>\n\n -39.9%<\/p>\n<\/td>\n\n -14.4%<\/p>\n<\/td>\n\n 17.4<\/p>\n<\/td>\n\n 14.4<\/p>\n<\/td>\n\n 21.0<\/p>\n<\/td>\n<\/tr>\n
\n Consumer Discretionary\u00a0<\/p>\n<\/td>\n\n 34.7%<\/p>\n<\/td>\n\n -37.0%<\/p>\n<\/td>\n\n -16.2%<\/p>\n<\/td>\n\n 27.2<\/p>\n<\/td>\n\n 21.5<\/p>\n<\/td>\n\n 34.2<\/p>\n<\/td>\n<\/tr>\n
\n Industrials\u00a0<\/p>\n<\/td>\n\n 13.7%<\/p>\n<\/td>\n\n -5.5%<\/p>\n<\/td>\n\n 6.3%<\/p>\n<\/td>\n\n 19.3<\/p>\n<\/td>\n\n 18.4<\/p>\n<\/td>\n\n 21.3<\/p>\n<\/td>\n<\/tr>\n
\n Materials\u00a0<\/p>\n<\/td>\n\n 10.9%<\/p>\n<\/td>\n\n -12.3%<\/p>\n<\/td>\n\n -3.5%<\/p>\n<\/td>\n\n 18.4<\/p>\n<\/td>\n\n 15.7<\/p>\n<\/td>\n\n 16.6<\/p>\n<\/td>\n<\/tr>\n
\n Real Estate\u00a0<\/p>\n<\/td>\n\n 5.0%<\/p>\n<\/td>\n\n -26.1%<\/p>\n<\/td>\n\n -22.7%<\/p>\n<\/td>\n\n 17.1<\/p>\n<\/td>\n\n 16.9<\/p>\n<\/td>\n\n 24.7<\/p>\n<\/td>\n<\/tr>\n
\n Financials\u00a0<\/p>\n<\/td>\n\n 4.3%<\/p>\n<\/td>\n\n -10.5%<\/p>\n<\/td>\n\n -7.3%<\/p>\n<\/td>\n\n 13.8<\/p>\n<\/td>\n\n 12.9<\/p>\n<\/td>\n\n 16.1<\/p>\n<\/td>\n<\/tr>\n
\n Consumer Staples\u00a0<\/p>\n<\/td>\n\n 2.9%<\/p>\n<\/td>\n\n -0.6%<\/p>\n<\/td>\n\n 2.3%<\/p>\n<\/td>\n\n 20.2<\/p>\n<\/td>\n\n 20.6<\/p>\n<\/td>\n\n 21.4<\/p>\n<\/td>\n<\/tr>\n
\n Energy\u00a0<\/p>\n<\/td>\n\n 1.0%<\/p>\n<\/td>\n\n 65.7%<\/p>\n<\/td>\n\n 64.6%<\/p>\n<\/td>\n\n 12.0<\/p>\n<\/td>\n\n 9.8<\/p>\n<\/td>\n\n 11.1<\/p>\n<\/td>\n<\/tr>\n
\n Healthcare\u00a0<\/p>\n<\/td>\n\n -1.0%<\/p>\n<\/td>\n\n -2.0%<\/p>\n<\/td>\n\n -1.9%<\/p>\n<\/td>\n\n 17.8<\/p>\n<\/td>\n\n 17.7<\/p>\n<\/td>\n\n 17.2<\/p>\n<\/td>\n<\/tr>\n
\n Utilities\u00a0<\/p>\n<\/td>\n\n -4.6%<\/p>\n<\/td>\n\n 1.6%<\/p>\n<\/td>\n\n -1.7%<\/p>\n<\/td>\n\n 17.0<\/p>\n<\/td>\n\n 18.7<\/p>\n<\/td>\n\n 20.4<\/p>\n<\/td>\n<\/tr>\n
\n <\/td>\n\n <\/td>\n\n <\/td>\n\n <\/td>\n\n <\/td>\n\n <\/td>\n\n <\/td>\n<\/tr>\n
\n S&P 500
\n SPX\n <\/td>\n		\n 20.3%<\/p>\n<\/td>\n\n -18.1%<\/p>\n<\/td>\n\n -2.3%<\/p>\n<\/td>\n\n 19.6<\/p>\n<\/td>\n\n 16.8<\/p>\n<\/td>\n\n 21.5<\/p>\n<\/td>\n<\/tr>\n
\n Dow Jones Industrial Average
\n DJIA\n <\/td>\n		\n 8.8%<\/p>\n<\/td>\n\n -6.9%<\/p>\n<\/td>\n\n 0.3%<\/p>\n<\/td>\n\n 17.9<\/p>\n<\/td>\n\n 16.6<\/p>\n<\/td>\n\n 18.9<\/p>\n<\/td>\n<\/tr>\n
\n Nasdaq Composite Index
\n COMP\n <\/td>\n		\n 37.1%<\/p>\n<\/td>\n\n -32.5%<\/p>\n<\/td>\n\n -9.0%<\/p>\n<\/td>\n\n 28.0<\/p>\n<\/td>\n\n 22.6<\/p>\n<\/td>\n\n 32.0<\/p>\n<\/td>\n<\/tr>\n
\n Nasdaq-100 Index
\n NDX\n <\/td>\n		\n 44.3%<\/p>\n<\/td>\n\n -32.4%<\/p>\n<\/td>\n\n -4.0%<\/p>\n<\/td>\n\n 27.3<\/p>\n<\/td>\n\n 20.9<\/p>\n<\/td>\n\n 30.4<\/p>\n<\/td>\n<\/tr>\n
\n Source: FactSet<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

The technology sector leads this year, but the communications sector runs a close second, and it includes tech stalwarts Meta Platforms Inc.
\n META,
\n -0.79%<\/bg-quote>
\n and Alphabet Inc.
\n GOOGL,
\n -0.26%<\/bg-quote>.<\/span>\n <\/p>\n

The forward price-to-earnings ratios for most of the sectors and the indexes are below their levels at the end of 2021, but the valuation for the tech sector is almost as high as it was then. For perspective, the S&P 500\u2019s current weighted forward P\/E is 19.6, compared with a 10-year average of 18.9. The tech sector\u2019s P\/E is 27.7, compared with a 10-year average of 21.9. <\/p>\n

We cannot predict how long the current bull market may last. When the Federal Reserve sends a clear signal that it is ready to take an extended break from raising interest rates, the stock market could make another upward move as investors look ahead to declining interest rates, which make bonds less attractive and can help support stock prices.<\/p>\n

Meanwhile, Joseph Adinolfi considers how long momentum can drive a stock rally.<\/p>\n

Weathering a storm<\/h2>\n

In an interview, Graff, who has previous experience as an investment banker at Goldman Sachs and as a fund manager at Pimco Investment Management, explained that he maintains a list of between 100 and 125 stocks within the S&P 500 of companies whose dividend yields are higher than that of the index, or that he expects to increase their dividend payouts at a more rapid pace than the index does as a whole. <\/p>\n

Then he narrows the list by analyzing the \u201cprofit drivers\u201d for the companies as part of a qualitative analysis \u201cto select companies that can perform through the business cycle.\u201d<\/p>\n

\u201cThere are times when consumer cyclicals benefit because consumers have more money,\u201d but selecting companies for investment based on those trends can lead to \u201cmore volatility of earnings and cash flow,\u201d Graff said. \u201cThat is what we are not interested in owning.\u201d <\/p>\n

From his pared list, Graff typically holds between 25 and 35 stocks in the DIVZ portfolio, seeking to buy at attractive entry points and hold for the long term.<\/p>\n

DIVZ pays its own dividends quarterly. The current dividend yield is 3.29%, compared with a yield of 1.43% for the SPDR S&P 500 ETF Trust
\n SPY,<\/span>
\n which tracks the benchmark index.<\/p>\n

DIVZ was established on Jan. 27, 2021. Here\u2019s how it has performed since then, compared with SPY:<\/p>\n

<\/p>\n
<\/p>\n
<\/div>\n<\/figure><\/div>\n

These total returns are net of expenses, which are 0.65% of assets annually for DIVZ and 0.095% for the passively managed SPY. From its inception through Aug. 1, DIVZ has underperformed SPY, but it has been a smoother rise for investors. During 2022, SPY fell 18.2% while DIVZ had a positive return of 3.5%.<\/p>\n

Buying on the (big) dip<\/h2>\n

When asked about recent purchases, Graff said he had scooped up shares of Charles Schwab Corp.
\n SCHW,
\n -1.44%<\/bg-quote>
\n in May, following a decline of more than 30% for the stock after the brokerage firm, which relies heavily on its bank subsidiary, was \u201ccaught in some of the regional-banking crossfire.\u201d<\/p>\n

The three large U.S. bank failures this year \u2014 Silicon Valley Bank, Signature Bank of New York and First Republic Bank of San Francisco \u2014 had varying catalysts but ultimately resulted from runs on deposits. Shares of regional banks and Schwab fell not necessarily because investors feared more failures, but because of rising funding costs. Savers have been moving to get higher yields after so many years of being paid next to nothing by banks before the Federal Reserve began to raise interest rates last year.<\/p>\n

\u201cThey have plenty of capital to get through the current environment,\u201d Graff said about Schwab. The stock rose 11% on July 18, after Schwab Chief Financial Officer Peter Crawford said the deposit outflow had been slowing.<\/p>\n

Another bank stock that Graff said he picked up at a good price was New York Community Bancorp
\n NYCB,
\n +0.07%<\/bg-quote>,<\/span>
\n which has soared following the bank\u2019s discounted purchase from the Federal Deposit Insurance Corp. of deposits and some assets from the failed Signature Bank of New York.<\/p>\n

Read:<\/strong> New York Community Bancorp\u2019s profit up 148% with boost from Signature Bank acquisition, as stock rises<\/p>\n

Here are the largest 15 holdings of the TrueShares Low Volatility Equity Income ETF:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n Company<\/strong><\/p>\n<\/td>\n\n Ticker<\/strong><\/p>\n<\/td>\n\n % of the TrueShares Low Volatilty Equity Income ETF<\/strong><\/p>\n<\/td>\n\n Dividend yield<\/strong><\/p>\n<\/td>\n\n Forward P\/E<\/strong><\/p>\n<\/td>\n<\/tr>\n
\n Charles Schwab Corp.<\/p>\n<\/td>\n\n SCHW,
\n -1.44%<\/bg-quote>\n <\/td>\n		\n 5.01%<\/p>\n<\/td>\n\n 1.52%<\/p>\n<\/td>\n\n 17.4<\/p>\n<\/td>\n<\/tr>\n
\n UnitedHealth Group Inc.<\/p>\n<\/td>\n\n UNH,
\n -0.42%<\/bg-quote>\n <\/td>\n		\n 5.00%<\/p>\n<\/td>\n\n 1.49%<\/p>\n<\/td>\n\n 18.9<\/p>\n<\/td>\n<\/tr>\n
\n Broadcom Inc.<\/p>\n<\/td>\n\n AVGO,
\n -0.38%<\/bg-quote>\n <\/td>\n		\n 4.63%<\/p>\n<\/td>\n\n 2.00%<\/p>\n<\/td>\n\n 20.6<\/p>\n<\/td>\n<\/tr>\n
\n British American Tobacco PLC ADR<\/p>\n<\/td>\n\n BTI,
\n -0.73%<\/bg-quote>\n <\/td>\n		\n 4.57%<\/p>\n<\/td>\n\n 8.42%<\/p>\n<\/td>\n\n 6.7<\/p>\n<\/td>\n<\/tr>\n
\n Verizon Communications Inc.<\/p>\n<\/td>\n\n VZ,
\n -1.33%<\/bg-quote>\n <\/td>\n		\n 4.39%<\/p>\n<\/td>\n\n 7.81%<\/p>\n<\/td>\n\n 7.1<\/p>\n<\/td>\n<\/tr>\n
\n Exxon Mobil Corp.<\/p>\n<\/td>\n\n XOM,
\n +0.28%<\/bg-quote>\n <\/td>\n		\n 4.20%<\/p>\n<\/td>\n\n 3.41%<\/p>\n<\/td>\n\n 11.9<\/p>\n<\/td>\n<\/tr>\n
\n Philip Morris International Inc.<\/p>\n<\/td>\n\n PM,
\n -1.24%<\/bg-quote>\n <\/td>\n		\n 4.17%<\/p>\n<\/td>\n\n 5.17%<\/p>\n<\/td>\n\n 14.9<\/p>\n<\/td>\n<\/tr>\n
\n Johnson & Johnson<\/p>\n<\/td>\n\n JNJ,
\n -0.94%<\/bg-quote>\n <\/td>\n		\n 4.10%<\/p>\n<\/td>\n\n 2.82%<\/p>\n<\/td>\n\n 15.3<\/p>\n<\/td>\n<\/tr>\n
\n FirstEnergy Corp.<\/p>\n<\/td>\n\n FE,
\n -1.31%<\/bg-quote>\n <\/td>\n		\n 4.07%<\/p>\n<\/td>\n\n 4.00%<\/p>\n<\/td>\n\n 14.9<\/p>\n<\/td>\n<\/tr>\n
\n Chevron Corp.<\/p>\n<\/td>\n\n CVX,
\n -0.23%<\/bg-quote>\n <\/td>\n		\n 4.00%<\/p>\n<\/td>\n\n 3.72%<\/p>\n<\/td>\n\n 11.9<\/p>\n<\/td>\n<\/tr>\n
\n Lockheed Martin Corp.<\/p>\n<\/td>\n\n LMT,
\n -0.49%<\/bg-quote>\n <\/td>\n		\n 3.80%<\/p>\n<\/td>\n\n 2.66%<\/p>\n<\/td>\n\n 16.3<\/p>\n<\/td>\n<\/tr>\n
\n American Electric Power Co. Inc.<\/p>\n<\/td>\n\n AEP,
\n -0.91%<\/bg-quote>\n <\/td>\n		\n 3.80%<\/p>\n<\/td>\n\n 3.95%<\/p>\n<\/td>\n\n 15.4<\/p>\n<\/td>\n<\/tr>\n
\n Qualcomm Inc.<\/p>\n<\/td>\n\n QCOM,
\n +2.36%<\/bg-quote>\n <\/td>\n		\n 3.79%<\/p>\n<\/td>\n\n 2.42%<\/p>\n<\/td>\n\n 14.1<\/p>\n<\/td>\n<\/tr>\n
\n Kroger Co.<\/p>\n<\/td>\n\n KR,
\n +0.18%<\/bg-quote>\n <\/td>\n		\n 3.74%<\/p>\n<\/td>\n\n 2.39%<\/p>\n<\/td>\n\n 10.7<\/p>\n<\/td>\n<\/tr>\n
\n New York Community Bancorp Inc.<\/p>\n<\/td>\n\n NYCB,
\n +0.07%<\/bg-quote>\n <\/td>\n		\n 3.69%<\/p>\n<\/td>\n\n 5.00%<\/p>\n<\/td>\n\n 5.3<\/p>\n<\/td>\n<\/tr>\n
\n Source: FactSet<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

Click on the tickers for more about each company, fund or index.<\/p>\n

Click\u00a0here\u00a0for Tomi Kilgore\u2019s detailed guide to the wealth of information available for free on the MarketWatch quote page.<\/p>\n

Graff commented further about his approach and the fund\u2019s holdings.<\/p>\n