This week we had the opportunity to speak to Austin Graff, Co-Chief Investment Officer and portfolio manager with US ETF TrueShares Low Equity Income ETF (NYSE:DIVZ).
This is in direct contrast to the first generation – and still dominant – passive ETFs that follow an index as closely as possible, and where there is not human intervention.
On the Podcast
Graff is the first ETF portfolio manager we have had on the series and sheds some useful light on the differences between the active and passive ETF fund universe. He also provides insights on the differences between transparent and semi-transparent ETFs.
We also get a chance to compare and contrast dividend yielding ETFs and UK-listed high yielding investment trusts. Graff sees the dividend yielding ETF strategy as a very interesting area right now, and goes into detail on valuations, interest rates and the US inflation picture. As he says, it is more than just about getting an income stream today, but getting exposure to dividend growth over time.
Historically dividends have played a big role in equity returns, and have been under-appreciated in the last 10 years, where it has been more a case of investors focusing on capital gains than income. Graff talks about how picking above average dividend payers can make a big difference in portfolio returns.
With a US fund manager on the podcast we also took the opportunity to talk about the economic picture in the US, especially given the focus on the inflation numbers and the next steps the Fed may take. This obviously has a lot to do with how equities have been performing against US government debt, and how specific sectors have measured up against bonds. How will bond-like equity sectors behave if US interest rates go up?
Absolute dividend yield is a key concept with dividend-focused ETF funds – the podcast looks at this and how this performance is measured. Graff explains how this can provide attractive returns for investors.
The fund’s strategy can also benefit from M&A activity and we shoot some questions to Graff on the M&A market in America. What sort of deals look good for dividend hungry investors in the US? Among those discussed is the Norton Lifelock / Avast deal, and the spin off of WarnerMedia by AT&T.
Another big question is the suspension of dividends. With many companies now returning to paying dividends, we ask Graff about what he expects from dividends in 2021/22 and especially what might happen if Covid gets out of hand again in the US. He discusses the liquidity environment, US blue chip balance sheets and growth opportunities.
It is particularly interesting to get the perspective of a Wall Street money manager on what he does when companies pay a disappointing dividend. He also explains the difference in the dividend process in the US and that in the UK and Europe.