DIVB: iShares Becomes Low-Cost Leader in Dividend ETFs
BlackRock fired off a salvo Tuesday in the battle to the fund-fee bottom, refreshing one of its dividend exchange-traded funds (ETFs) to make it the cheapest in its class.
The iShares Core Dividend ETF (DIVB)—formerly the iShares U.S. Dividend and Buyback ETF—will charge 0.05% in annual fees, or just $5 for every $10,000 invested. That matches the 0.05% fee average across iShares’ other 25 core funds, and undercuts its own iShares Core Dividend Growth ETF (DGRO, 0.08% fee) and iShares Core High Dividend ETF (HDV, 0.08% fee).
More importantly, that also undercuts three other ETFs—the Schwab US Dividend Equity ETF (SCHD), Vanguard Dividend Appreciation ETF (VIG), and Vanguard High Dividend Yield Index ETF (VYM), all at 0.06% in annual fees—becoming the least-expensive dividend-focused ETF for investors seeking income-generating assets.
As the iShares U.S. Dividend and Buyback ETF, DIVB tracked an index of U.S. stocks with a history of paying dividends and/or repurchasing shares. The fund, launched in 2017, charged 0.25% in annual expenses and managed roughly $230 million in assets before being repurposed. (For comparison, Core brethren DGRO and HDV boast a respective $22 billion and $12 billion in assets under management.)
Morningstar's Ben Johnson, Head of Client Solutions, Asset Management, reported that DIVB's underlying index will undergo a change in methodology on Dec. 16, 2022. This change in methodology will prioritize dividend stocks. Dividends will be weighted at 75%, and buybacks at 25%, when ranking stocks for index inclusion. The company will refocus on stocks with the highest adjusted shareholder yields, which will represent “50% of the market by total shareholder payout dollars, from 90%.” And the index will exclude the highest-yielding 5% of the selection universe to avoid dangerous dividend stocks.
Investors will need to wait until December, then, to see how the new methodology affects holdings and how much passive income DIVB will throw off.
DIVB is the 26th iShares Core fund to go live since the series’ launch in 2012, and the first since the iShares Core U.S. REIT ETF (USRT) in 2016.
Armando Senra, Head of iShares Americas at BlackRock, notes that “the lineup has nearly tripled over the decade,” and the Core funds now account for nearly $800 billion in assets.
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On the date of publication, Kyle Woodley did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
