State Street Global Advisors (SSgA) has launched a new exchange-traded fund (ETF) designed for investors nearing retirement or seeking a high and reliable income stream from Australian equities.
The firm’s SPDR MSCI Australia Select High Dividend Yield ETF tracks a basket of shares derived from a custom MSCI index, and aims to target companies that have a higher-than-average dividend yield with potential for capital growth.
“We believe this new SPDR ETF gives financial planners the levers to provide a reasonable certainty of income and long-term capital appreciation you would expect from a diversified equity investment for their clients,” SSgA senior managing director in Australia Rob Goodlad said.
SSgA hoped the ETF would raise “well in excess” of $250 million over the medium term, he said.
The ETF’s annualised fee is 0.35 per cent and distributions will be made quarterly.
The product had a dividend yield of 7.83 per cent grossed up for franking credits at the end of August.
The ETF’s benchmark, the MSCI Australia Select High Dividend Yield Index, consists of 38 Australian securities with higher-than-average dividend yields and the potential for franked dividend income.
Only securities with a track record of consistent dividend payments and that have the capacity to sustain future dividend payments are eligible for inclusion in the index, according to MSCI.
Some of the ETF’s top 10 holdings at the end of August included Australia and New Zealand Banking Group, Commonwealth Bank of Australia, Westpac, AMP, Telstra and Foster’s.
“We are in a low return environment, and I think it has become abundantly clear that people are seeing dividends and dividends that can be associated with a fully franked Australian equity strategy as being something that’s a viable option going forward,” Goodlad said.
SSgA launched the first Australian ETF in 2001 and has $2.9 billion in funds under management across its suite of local ETFs, which include the SPDR S&P/ASX 200, SPDR S&P/ASX 50 and SPDR S&P/ASX 200 Listed Property.
The launch of SSgA’s new ETF follows rival Russell Investments’ release of the Russell High Dividend Australian Shares ETF in May, which charges an annual fee of 0.46 per cent.
SSgA’s SPDR MSCI Australia Select High Dividend Yield ETF will commence trading on the Australian Securities Exchange from 28 September under the ticker SYI.
