MBOX: An Underfollowed Dividend Growth Strategy Worth Shortlisting

seekingalpha05-20

MBOX is an actively managed vehicle that pursues promising dividend growth stories. Its strategy is based on fundamental analysis and quantitative methods.Incepted in May 2021, MBOX has had a fairly ...

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Its strategy is based on fundamental analysis and quantitative methods.Incepted in May 2021, MBOX has had a fairly ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694478-mbox-etf-underfollowed-dividend-growth-strategy-worth-shortlisting\">Source Link</a>\n\n</div>\n","source":"seekingalpha","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>MBOX: An Underfollowed Dividend Growth Strategy Worth Shortlisting</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\">\nMBOX: An Underfollowed Dividend Growth Strategy Worth Shortlisting\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-20 19:07 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694478-mbox-etf-underfollowed-dividend-growth-strategy-worth-shortlisting><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>MBOX is an actively managed vehicle that pursues promising dividend growth stories. Its strategy is based on fundamental analysis and quantitative methods.Incepted in May 2021, MBOX has had a fairly ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694478-mbox-etf-underfollowed-dividend-growth-strategy-worth-shortlisting\">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":"LU0256863811.USD","symbol_name":"ALLIANZ US EQUITY \"A\" INC","start_time":0,"source_url":"https://seekingalpha.com/article/4694478-mbox-etf-underfollowed-dividend-growth-strategy-worth-shortlisting","article_id":"2436171551","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/96672846/image_96672846.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2436171551","pubTimestamp":1716203275,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"MBOX is an actively managed vehicle that pursues promising dividend growth stories. Its strategy is based on fundamental analysis and quantitative methods.Incepted in May 2021, MBOX has had a fairly i","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU2491049909.HKD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (HKD) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU1267930730.SGD":"富兰克林美国机遇基金AS Acc SGD (CPF)","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU0456855351.SGD":"JPMorgan Funds - Global Equity A (acc) SGD","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","IVV":"标普500指数ETF","IE00B19Z3581.USD":"Legg Mason ClearBridge - Value A Acc USD","LU2237443382.USD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A MIncA USD","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","LU0079474960.USD":"联博美国增长基金A","IE0009355771.USD":"骏利亨德森环球生命科技A Acc","CI":"信诺保险","LU1712237335.SGD":"Natixis Mirova Global Sustainable Equity H-R-NPF/A SGD","MBOX":"Freedom Day Dividend ETF","LU2237443978.SGD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A Acc SGD-H","DGRO":"iShares Core Dividend Growth ETF","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","LU1261432733.SGD":"Fidelity World A-ACC-SGD","LU1169589451.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"A\" (USD) ACC","LU1551013425.SGD":"Allianz Income and Growth Cl AMg2 DIS H2-SGD","LU0114720955.EUR":"SUSTAINABLE GLOBAL HEALTH CARE \"A\" INC","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","VSDA":"VictoryShares Dividend Accelerator ETF","BK4534":"瑞士信贷持仓","NOBL":"ProShares S&P 500 Aristocrats ETF","BK4585":"ETF&股票定投概念","ASML":"阿斯麦","LU0097036916.USD":"贝莱德美国增长A2 USD","VOO":"Vanguard标普500ETF","FDN":"First Trust Dow Jones Internet I","LLY":"礼来","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","LU0368265418.SGD":"Blackrock World Energy Fund A2 SGD-H","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","BK4566":"资本集团","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","LU2602419157.SGD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"AC\" (SGD) ACC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0300736492.USD":"FRANKLIN NATURAL RESOURCES \"A\" (USD) INC","FELC":"FIDELITY ENHANCED LARGE CAP CORE ETF","CNQ":"加国自然资源","BK4559":"巴菲特持仓","03165":"华夏欧优股对冲","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","VIG":"股利增长指数ETF-Vanguard","LEAD":"Siren DIVCON Leaders Dividend ETF"},"translate_title":"MBOX：值得入围的未被充分关注的股息增长策略","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ASML":1,"VSDA":1,"VIG":1,"NOBL":1,"MBOX":1,"LLY":1,"LEAD":1,"IVV":1,"FELC":1,"DGRO":1,"CNQ":1,"CI":1,"FDN":0.9,"VOO":0.69,"03165":0.6},"content_text":"MBOX is an actively managed vehicle that pursues promising dividend growth stories. Its strategy is based on fundamental analysis and quantitative methods.Incepted in May 2021, MBOX has had a fairly impressive run, beating the market proxied with IVV, as well as a few dividend-growth-focused peers.In its portfolio, quality is nicely balanced with the value factor, while interesting dividend growth stories are abundant.Issues also do exist, chief among them being the decline in TTM distributions. Another problem is its rather small exposure to the growth factor.I believe it is worth shortlisting the fund, but a Buy rating is unjustified.   bobainsworth Today, I would like to initiate coverage of the Freedom Day Dividend ETF (NYSEARCA:MBOX), an actively managed vehicle offering exposure to the dividend growth factor. It is focused on U.S. companies, though exceptions do exist. Incepted in May 2021, the ETF has AUM of $101.47 million. The expense ratio is reasonable at 39 bps. The allure here is that, despite being somewhat underfollowed, MBOX has confidently outperformed the market proxied with the iShares Core S&P 500 ETF (IVV) since its inception, also besting a few peers. Moreover, my calculations showed that its portfolio has a weighted-average 5-year dividend CAGR 2.3x that of IVV. Having said that, I am of the opinion that a rating other than a Hold is unjustified, mostly owing to MBOX's disappointing trend in distributions that started last year. MBOX strategy overview According to the summary prospectus that can be found on its website, MBOX ...is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing in equity securities that the Sub-Adviser (Freedom Day Solutions, LLC) believes have the potential to provide rising dividend income streams to the Fund over time.  It is clarified that both \"fundamental analyses and quantitative methods\" are used to select holdings. In the first case, \"price multiples, earnings ratios, and other measures of value relative to the price of the security\" are considered. In the second, FCF, history of dividend payments, growth rates, and other parameters are assessed. MBOX performance: beating the market and peers Incepted in May 2021, MBOX beat IVV by 1.3% over the June 2021–April 2024 period, with the major contributor being its comparatively robust performance in 2022 (i.e., it declined by just 5.24% while IVV was down by 18.16%).    Metric MBOX IVV   Start Balance $10,000 $10,000   End Balance $12,963 $12,514   CAGR 9.30% 7.99%   Standard Deviation 16.54% 17.98%   Best Year 15.83% 26.32%   Worst Year -5.24% -18.16%   Maximum Drawdown -14.89% -23.93%   Sharpe Ratio 0.45 0.36   Sortino Ratio 0.74 0.53   Click to enlarge Data from Portfolio Visualizer Most importantly, it has also confidently beaten a few peers, including the following:  Vanguard Dividend Appreciation Index Fund ETF Shares (VIG); iShares Core Dividend Growth ETF (DGRO); ProShares S&P 500 Dividend Aristocrats ETF (NOBL); Siren DIVCON Leaders Dividend ETF (LEAD); VictoryShares Dividend Accelerator ETF (VSDA).         Metric MBOX VIG DGRO NOBL LEAD VSDA   Start Balance $10,000 $10,000 $10,000 $10,000 $10,000 $10,000   End Balance $12,963 $11,863 $11,814 $11,069 $12,200 $11,576   CAGR 9.30% 6.03% 5.88% 3.54% 7.06% 5.15%   Standard Deviation 16.54% 15.99% 15.71% 17.03% 19.19% 17.43%   Best Year 15.83% 14.50% 11.08% 8.11% 25.79% 9.12%   Worst Year -5.24% -9.81% -7.90% -6.51% -18.15% -4.41%   Maximum Drawdown -14.89% -20.19% -18.61% -17.48% -24.49% -16.02%   Sharpe Ratio 0.45 0.26 0.26 0.12 0.3 0.21   Sortino Ratio 0.74 0.41 0.4 0.17 0.45 0.33   Click to enlarge Data from Portfolio Visualizer MBOX factor mix As of May 20, MBOX had 50 stocks in its portfolio, chief among them being Eli Lilly and Company (LLY), a 63 bps-yielding healthcare sector bellwether with a 3.2% weight. Most holdings are U.S. companies. However, there are a few exceptions, like ASML Holding (ASML) and Canadian Natural Resources (CNQ). Overall, my analysis showed that six MBOX holdings (11.5% weight) are not constituents of the S&P Total Market Index. Financials were the key sector with a 17.7% weight, followed by information technology with 15.6%. Interestingly, this is not unique to MBOX, as DGRO, one of the largest dividend growth-focused ETFs in the market right now, is also heavy in financials (19.4%) and IT (16.6%).   Created by the author using data from Seeking Alpha and the ETF Both ETFs have exposure to only 10 out of 11 GICS sectors, though their preferences are slightly different: MBOX completely ignores utilities, while DGRO is pessimistic about real estate. Value factor exposure Delving deeper, we see a mostly comfortable valuation profile despite the ETF being overweight in mega-caps and having only 13.3% allocation to small- and mid-caps.       Metric Holdings as of May 20   Market Cap $183.95 billion   EY 5.562%   P/S 4.04   EV/EBITDA 14.3   Quant Valuation B- or higher 24.1%   Quant Valuation D+ or lower 62%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETF The weighted-average earnings yield is more than adequate at 5.6%. For context, IVV has an EY of 3.82%, with the adjusted one standing at 3.95%, as I discussed in the recent note on the Fidelity Enhanced Large Cap Core ETF (FELC). In the case of MBOX, it is unnecessary to adjust the EY as it was not impacted either by significant outliers or by negative figures (i.e., all the companies are profitable). As illustrated by the sector table above, this yield was bolstered predominantly by financials, consumer staples, and energy. There are a few detractors, though, with health care being the essential one. Importantly, we see that almost a quarter of the net assets are allocated to stocks with a B- Quant Valuation grade or higher. By mega-cap echelon standards, this is a nice achievement. To corroborate, IVV had about 8% allocated to such names as of May 17. Quality: IT, consumer discretionary boost ROA The quality factor is of paramount importance for dividend growth-focused portfolios, as without sufficient exposure to highly profitable companies capable of generating significant returns on capital, such a strategy has a serious risk of failure. Thankfully, MBOX calibrated a portfolio with solid quality characteristics.       Parameter Holdings as of May 20   ROA 8.8%   NI Margin 15.68%   Quant Profitability B- or higher 89.5%   Quant Profitability D+ or lower 6.1%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETF  First, even though Return on Assets is slightly disappointing as it is below 10%, this is still a great result for a financials-heavy portfolio (the sector tends to have low single-digit ROA), thanks to consumer discretionary and IT that are sporting 15.1% and 14.3% average ROA, respectively. Second, the net income margin looks more than sufficient, mostly because of the financial and IT sectors, which have average results well above 20%. On the negative side, industrials and consumer staples have detracted from it, as their average margins are just 10.2% and 8.2%, respectively. Third, the overweening majority of companies have the Quant Profitability grade of no less than B-, while over 71% are in the A league (including A+ and A-). When it comes to levered free cash flows, almost all holdings (except for, for example, banks, for which the concept of FCF is not applicable) delivered cash surplus in the last twelve months, with the exception being just four names with a 9.5% weight. In terms of balance sheet health, another important parameter for dividend-centered strategies, it is worth noting that just about 27.4% of the holdings have a Net debt/EBITDA ratio above 2x.  Growth factor: something to dislike MBOX managed to nicely balance quality and value, but what it missed is the growth factor, as neither the forward revenue nor EPS growth rates are alluring enough.    EPS Fwd Revenue Fwd   5.03% 4.04%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETF For example, the earnings growth rate is almost 3x lower than that of IVV, and the revenue growth rate is 2.6x lower. This might result in the ETF lagging the S&P 500 in the current market environment as growthier, longer-duration names are now again in vogue thanks to supportive inflation data. Dividend credentials Does MBOX deliver on the dividend growth front? There is no denying that it does. I suppose the data below speak for itself.    Metric MBOX IVV   Yield TTM 2.34% 1.32%   Div Growth 3Y 17.04% 7.33%   Div Growth 5Y 15.75% 6.39%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETF However, a nuance here is that the 5-year CAGR is impacted by Cigna's (CI) abnormally high growth rate of 163.6% (the 3-year figure is a bit more realistic at 69.8%). Adjusted for it, it is still fairly strong at 12.7%, solidly above that of IVV. Regarding the DY, MBOX is also ahead of IVV, with a result 1.8x higher. Growth in distributions is the primary disappointment Despite the current iteration of MBOX's portfolio having solid weighted-average DPS growth rates, there is an issue with this ETF's distributions.   Created by the author using data from the ETFs Looking at the TTM figures, we see that they peaked in March 2023. For context, DGRO does not have that issue, with distributions over the same period (March 2022–March 2024) growing consistently, with a tiny decline seen only in June 2022. So, it is not a coincidence that MBOX has a D- Dividend Grade.   Seeking Alpha Investor takeaway The Freedom Day Dividend ETF offers reasonable exposures for a reasonable fee. Under the hood, quality is nicely balanced with the value factor. Interesting dividend growth stories are abundant, as illustrated by the weighted-average growth rates discussed above. Performance since its inception has been fairly robust, as it has bested the market and a few peers.  However, issues also do exist, chief among them being the decline in TTM distributions. Another problem is its rather small exposure to companies with solid revenue and EPS growth rates, which is a vulnerability in the current market environment. In this regard, I believe it is worth shortlisting the fund, but a Buy rating is unjustified.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"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":"4.24.2","shortVersion":"4.24.2","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/2436171551"}