CDC: Revisiting This Once Top-Performing High-Dividend ETF

seekingalpha03-14

ryasick Investment Thesis The VictoryShares US EQ Income Enhanced Volatility Weighted ETF (NASDAQ:CDC) was the worst-performing large-cap value ETF on the market in 2023, joining DIVZ, LVHD, and FDV ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2419607955?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/168523680/image_168523680.jpg","is_english":true,"pubTime":"2024-03-14 21:57","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2419607955","market":"sh","top_or_hot":-1,"title":"CDC: Revisiting This Once Top-Performing High-Dividend ETF","media":"seekingalpha","content":"<div>\n<p>ryasick Investment Thesis The VictoryShares US EQ Income Enhanced Volatility Weighted ETF (NASDAQ:CDC) was the worst-performing large-cap value ETF on the market in 2023, joining DIVZ, LVHD, and FDV ...</p>\n\n<a href=\"https://seekingalpha.com/article/4678169-cdc-revisiting-this-once-top-performing-high-dividend-etf\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>CDC: Revisiting This Once Top-Performing High-Dividend ETF</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCDC: Revisiting This Once Top-Performing High-Dividend ETF\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-14 21:57 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4678169-cdc-revisiting-this-once-top-performing-high-dividend-etf><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ryasick Investment Thesis The VictoryShares US EQ Income Enhanced Volatility Weighted ETF (NASDAQ:CDC) was the worst-performing large-cap value ETF on the market in 2023, joining DIVZ, LVHD, and FDV ...</p>\n\n<a href=\"https://seekingalpha.com/article/4678169-cdc-revisiting-this-once-top-performing-high-dividend-etf\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SG9999014575.USD","symbol_name":"UOB UNITED INCOME FOCUS TRUST FUND (USDHDG) INC","start_time":0,"source_url":"https://seekingalpha.com/article/4678169-cdc-revisiting-this-once-top-performing-high-dividend-etf","article_id":"2419607955","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/168523680/image_168523680.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2419607955","pubTimestamp":1710424641,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"ryasick Investment Thesis The VictoryShares US EQ Income Enhanced Volatility Weighted ETF (NASDAQ:CDC) was the worst-performing large-cap value ETF on the market in 2023, joining DIVZ, LVHD, and FDV a","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SG9999014575.USD":"UOB UNITED INCOME FOCUS TRUST FUND (USDHDG) INC","BK4532":"文艺复兴科技持仓","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","SPHD":"标普500高股利投资组合ETF-PowerShares","BK4177":"软饮料","KEY":"KeyCorp","LU2237443382.USD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A MIncA USD","BK4534":"瑞士信贷持仓","LU2237443549.SGD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A MIncA SGD-H","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0061474960.USD":"天利环球焦点基金AU Acc","SCHD":"Schwab US Dividend Equity ETF","FDN":"First Trust Dow Jones Internet I","KEY.AU":"KEY PETROLEUM LTD","LU1732800096.USD":"摩根大通环球收益基金A (irc)","SG9999011175.SGD":"Nikko AM Global Dividend Equity Dis SGD-H","LU2237443622.USD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A Acc USD","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","BK4559":"巴菲特持仓","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","BK4550":"红杉资本持仓","CDC":"VictoryShares US EQ Income Enhanced Volatility Wtd ETF","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU1732799900.SGD":"JPMorgan Investment Funds - Global Income A (irc) SGD-H","SG9999015341.SGD":"United Income Focus Trust Acc SGD-H","KLG":"WK Kellogg Co.","KBWP":"Invesco KBW Property & Casualty Insurance ETF","KO":"可口可乐","LVHD":"Franklin U.S. Low Volatility High Dividend Index ETF"},"translate_title":"疾控中心：重温这只曾经表现最佳的高股息ETF","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SPHD":1,"LVHD":1,"CDC":1,"FDN":1,"SCHD":1,"KBWP":1,"KEY":1,"KEY.AU":1,"KLG":1,"KO":1,"US7Y.BOND":0.79,"US6M.BOND":0.79,"US5Y.BOND":0.79,"US3Y.BOND":0.79,"US30Y.BOND":0.79,"US2Y.BOND":0.79,"US12M.BOND":0.79,"US10Y.BOND":0.79,"US912797GK78.BOND":0.6,"US912796CX52.BOND":0.6,"US912797FH58.BOND":0.6,"US912797FS14.BOND":0.6,"US912797GB79.BOND":0.6,"US912797HH31.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GQ49.BOND":0.6,"US912797GW17.BOND":0.6,"US912797GX99.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6},"content_text":"ryasick Investment Thesis The VictoryShares US EQ Income Enhanced Volatility Weighted ETF (NASDAQ:CDC) was the worst-performing large-cap value ETF on the market in 2023, joining DIVZ, LVHD, and FDV as one of only four funds to record a loss on total returns. I doubted CDC in December 2022 before downgrading it to a \"sell\" three months later. My most recent coverage in September 2023 also reiterated my bearish stance, reasoning that it's lost its low-beta advantage, its dividend yield wasn't competitive enough, its earnings growth rates were declining, and its market timing strategy only worked about 50% of the time. Today, I will revisit CDC with the knowledge that ETFs fall in and out of favor frequently and that past performance is not a good predictor of future results. A comprehensive fundamental analysis will help inform if CDC is worth the risk, and I look forward to taking you through this former top-performing fund in greater detail below. CDC Overview CDC tracks the Nasdaq Victory US Large Cap High Dividend 100 Long/Cash Volatility Weighted Index, selecting 100 companies with high dividend and low-volatility characteristics. The selection process is described below. 1. The Index starts with the largest 500 U.S. common stocks (no REITs) by market capitalization. 2. Securities without four consecutive profitable quarters are eliminated. 3. The remaining securities are sorted by dividend yield, with the top 100 selected. Securities are weighted inversely by their 180-trading-day standard deviation. 4. The Index reconstitutes semi-annually in March and September. Unique to CDC is a long/cash strategy whereby the Index exits equities in favor of cash if its benchmark Index price declines too far below its All-Time Highest Daily Closing Value, or AHDCV. As shown below, the trigger point is 8% before the Index switches to 75% cash. Victory Capital In a previous article, I determined that the strategy only realistically works 50% of the time over the long run, so it's more for protection purposes. Furthermore, CDC's returns have fallen behind CDL, an ETF with the same underlying holdings. Portfolio Visualizer The chart above highlights how CDC substantially outperformed in March 2020, and that's when it started gaining attention among dividend investors looking for significant downside protection. However, over the years, the underlying portfolio lost its low-beta advantage, and with the long/cash strategy's 50% success rate, it gradually became less attractive. CDC demonstrates why past performance is not a reliable predictor of future results. Consider how CDC ranked #6/69 large-cap value ETFs in 2020, #25/73 in 2021, #59/80 in 2022, and #87/87 in 2023. YTD through February, its -0.03% total return ranks #91/97. Investors relying on its strong results through the pandemic had a false sense of security, which a comprehensive fundamental analysis would flag. CDC Analysis Sector Exposures and Top Ten Holdings CDC's sector exposures are listed below. As comparators, I've included the Schwab U.S. Dividend Equity ETF (SCHD), the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), and the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD). Morningstar CDC stands out for its 23.60% allocation to Utilities stocks, which drives portfolio down. However, it also has the same allocation to the Financials, including 15% in banks, which tend to be high-beta stocks. Insurance stocks, which I recently recommended in my review of the Invesco KBW Property & Casualty Insurance ETF (KBWP), are not well-represented. The reason is that CDC screens for yield and weights by volatility, not vice versa. This approach is similar to SPHD, while LVHD emphasizes the volatility factor more. CDC's top ten holdings are below, totaling 14.55% of the portfolio. The reason for this low concentration is the standard deviation range for U.S. stocks is relatively tight. Unlike market-cap-weighted strategies, where one company's size (and, by extension, weight) can be 1,000x greater than the smallest Index component, volatility-weighted strategies are more similar to equal-weighted approaches. Victory Capital In CDC's case, its largest stock is Coca-Cola (KO) at 1.85%, while its smallest holding is KeyCorp (KEY) at 0.48%. There's also WK Kellogg (KLG) at 0.09%, but this relates to the recent spinoff, and the Index should remove it at the subsequent reconstitution. Dividend Analysis CDC has excellent Dividend Yield and Growth Grades but only a \"C-\" overall Dividend Grade from Seeking Alpha. The reason is that the grade for the number of years of consecutive dividend and dividend growth payments is \"F.\" Seeking Alpha Unfortunately, these grades are not entirely accurate, but CDC did miss its January 2023 distribution. Therefore, the system interpreted CDC as an inconsistent dividend payer, but realistically, that's not the case. The graph below confirms that CDC made dividend payments each year and has increased payments since 2021. Given these results, I expect CDC's overall dividend grade would otherwise be closer to an \"A-.\" Seeking Alpha That does not mean investors can expect CDC's 11.86% five-year dividend growth to continue. As I explained in this article on the DGI investing strategy, ETFs can create \"synthetic\" dividend growth with aggressive reconstitution schedules, which CDC does semi-annually. Since dividend yield is the primary screen, CDC sells winners and buys poor-performing but higher-yielding stocks twice yearly. Naturally, this enhances dividend yield and growth, but the ETF's dividend growth isn't consistent with the dividend growth of the underlying holdings. Those rates are 7.63% and 7.24% over the last three and five years, substantially less than the 24.91% and 11.86% figures from the earlier table. Similarly, CDC's 4.44% trailing dividend yield is not what current shareholders can expect, assuming the fund stays fully invested in equities. CDC's current constituents have only a 3.96% trailing weighted average dividend yield, and after deducting the ETF's 0.38% expense ratio, 3.58% is the more accurate figure at current prices. Fundamental Analysis By Sub-Industry The following table highlights selected fundamental metrics by CDC's top 25 sub-industries, totaling 87.84% of the fund. This concentration level is surprisingly high, given the strong diversification at the company level. However, it reflects the challenge of building a diversified portfolio of high-dividend stocks with low volatility. The Electric and Multi-Utilities sub-industries at the top make sense. Still, we also see several banks and energy sub-industries with high dividend yields but are riskier than the broader market. The Sunday Investor Here are five additional takeaways: 1. CDC's 0.89 five-year beta is similar to SCHD's, which doesn't screen for volatility. This suggests that CDC does not deliver on a critical investment objective. LVHD is a better choice if you want exposure to the volatility factor and reasonably high dividend payments. 2. As mentioned earlier, CDC's Index yield is 3.96%, and shareholders should net 3.58% after adjusting for fees. SCHD offers 3.54%, and that's because its low 0.06% expense ratio is negligible. SPHD and LVHD have expense ratios of 0.30% and 0.27%, respectively, but their Index yields are much higher. Again, LVHD is the superior choice, as shareholders should net above 4%. 3. CDC's 7.96/10 profit score is weak for a large-cap ETF, with SPHD and LVHD featuring a slightly better score but still far below SCHD's 9.37/10. Buying profitable stocks and holding them for the long run is a winning strategy, and I take comfort in the fact that SCHD will consistently produce a high-quality portfolio at each annual reconstitution. With CDC, not so much. 4. Growth is an area where most dividend ETFs struggle, and CDC is no exception. Its estimated 2.23% EPS growth rate is insufficient to sustain high dividend growth. In addition, CDC's weighted average free cash flow margins are just 4.58% compared to 15.22% for SCHD, so it's difficult to see how the ETF can deliver high dividend growth without sacrificing capital gains. 5. Surprisingly, CDC's Utilities stocks offer higher-than-average earnings growth rates and trade at favorable valuations. A Utilities ETF could be a better solution, as many pay 3%+ dividend yields and efficiently reduce portfolio risk. Investment Recommendation  CDC has numerous flaws that still exist since my prior review in September 2023. As a result, I've reiterated my \"sell\" rating. I plan to provide ongoing updates with each reconstitution, but until CDC can offer a truly low-beta portfolio or select higher-quality stocks with sufficient earnings growth to support future dividend increases, I recommend avoiding it. Thank you for reading, and I look forward to your comments below.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2419607955"}