SDIV: Long-Term Decay In Value And Distributions

seekingalpha07-31

Global X SuperDividend™ ETF invests in 100 dividend stocks around the world with some of the highest yields.The SDIV ETF yield and valuation look attractive, but the fund has lost 69% in price since ...

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I renew my sell rating due to continued underperformance and long-term decay in value and distributions. SDIV strategy Global X SuperDividend™ ETF (NYSEARCA:SDIV) started investing operations on 06/08/2011 and tracks the Solactive Global SuperDividend Index. It has 106 holdings, a 30-day SEC yield of 8.91%, a 12-month trailing yield of 10.84% and a net expense ratio of 0.58%. Distributions are paid monthly. As described in the prospectus by GlobalX ETFs, “the Underlying Index tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world”. The portfolio’s turnover rate in the most recent fiscal year is 91.6%, which is high for a dividend ETF. This article will use as a benchmark the MSCI ACWI IMI Index, represented by SPDR Portfolio MSCI Global Stock Market ETF (SPGM). Portfolio The portfolio includes all size segment, with a focus on small caps.   Size segment breakdown (Chart: author; data: Fidelity) The heaviest country is by far the U.S. with 33.8% of asset value. Other countries are below 11%. China, Hong-Kong and Taiwan weigh about 16% together, representing a significant exposure to geopolitical and regulatory risks related to China. The next chart lists the top 11 countries in the portfolio.   SDIV top countries weights in % (Chart: author, data: GlobalX) The heaviest sectors are financials (25.9% of assets), energy (23.4%) and real estate (18.2%). Other sectors are below 7%. Compared to the global equity benchmark, SDIV overweights the top 3 sectors listed above, and underweights mostly information technology and healthcare (ignoring completely the latter). At the industry level, oil, gas, and fuel come first at about 21%, followed by mortgage REITs at 18%.   SDIV sector breakdown (Chart: author, data: GlobalX) The portfolio is well-diversified and risks related to individual stocks are low. Positions are reset in equal weight at each rebalancing, but they drift with price action. The current top 10 companies, listed in the table below, represent 12.9% of assets and none of them weighs more than 2%. These are the stocks with the highest momentum since the last rebalancing.   Ticker Name Weight%   LU LUFAX HOLDING LTD-ADR 1.93   551 HK YUE YUEN INDUSTRIAL HLDG 1.31   AGAS NO AVANCE GAS HOLDING LTD 1.29   MFEA IM MFE-MEDIAFOREU-A 1.26   VLK NA VAN LANSCHOT KEMPEN NV 1.21   SVC SERVICE PROPERTIES TRUST 1.19   GNL GLOBAL NET LEASE INC 1.18   1308 HK SITC 1.18   ABDN LN ABRDN PLC 1.17   RWT REDWOOD TRUST INC 1.15   Click to enlarge Fundamentals SDIV looks much cheaper than SPGM regarding valuation ratios, and it shows a higher earnings growth rate, as reported in the next table. Nonetheless, sales and cash flow growth are inferior to the benchmark.     SDIV SPGM   Price/Earnings 7.41 21.05   Price/Book 0.77 2.83   Price/Sales 1.03 2.05   Price/Cash Flow 3.77 13.55   Earnings Growth 26.41% 20.90%   Sales Growth 2.57% 7.74%   Cash Flow Growth -1.36% 9.07%   Click to enlarge Source: Fidelity website. These numbers must be considered with caution because fundamental metrics are skewed by the heavy weight of financials. Indeed, valuation ratios are much cheaper and less reliable in this sector. Past performance The next chart compares the total return of SDIV since inception with SPGM and a U.S. high dividend benchmark: iShares Core High Dividend ETF (HDV). SDIV vs. SPGM, HDV, total return since 6/13/2011 (Seeking Alpha) SDIV is in loss since its inception (including dividends) and it has underperformed both benchmarks by a wide margin. It has also been lagging over the last 12 months: SDIV vs. SPGM, HDV, 12-month total return (Seeking Alpha) The price return chart below is even more concerning. It shows SDIV has suffered a capital decay of almost 70% since inception. Making things worse, the cumulative inflation in the same time was about 39%, based on CPI. SDIV vs. SPGM, HDV, price return since 6/13/2011 (Seeking Alpha) The sum of annual distributions is also down, from $4.85 per share in 2013 to $2.65 in 2023. Shareholders have lost 45% of income stream in 10 years, while the cumulative inflation was about 32% (based on CPI). SDIV distribution history (Seeking Alpha) Takeaway  Global X SuperDividend ETF invests in 100 dividend stocks around the world with some of the highest yields. It has a tilt to small caps, financials and energy. The distribution yield and valuation look very attractive, but the fund has lost 69% in share price since inception in 2011 and 45% in distribution since 2013. It represents a large decay in value and income stream for shareholders, amplified by inflation. SDIV was a sub-par investment in the strongest bull market in history, and it is unlikely to do better in the future.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","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":"4.29.3","shortVersion":"4.29.3","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/2455968470"}