When it comes to ASX exchange-traded funds (ETFs), Aussie investors are spoilt for choice. In addition to your typical (and popular) index funds like the iShares Core S&P/ASX 200 ETF (ASX: IOZ), the ASX is home to a variety of thematic ETFs. There are funds covering bank shares, silver bullion, mining shares, and even companies involved in the cryptocurrency space. But an often underlooked area on the ETF market is the dividend-focused ETF. Yes, the ASX is home to a number of ETFs that purely focus on maximising dividend income for their investors. And one such fund is the SPDR MSCI Australia Select High Dividend Yield Fund (ASX: SYI).
This ETF prom provider SPDR aims to track the MSCI Australia Select High Dividend Yield Index. According to the provider, this index is designed to "reflect the performance of listed Australian companies with relatively high dividend income and quality characteristics with the potential for franked dividend income".
How does the SPDR MSCI Australia Select High Dividend Yield Fund invest?
It currently holds just 32 shares, a far cry from an ASX 200 index fund with its 200 holdings. The top five of these holdings are as follows:
- Fortescue Metals Group Limited (ASX: FMG) with an 11.37% portfolio weighting
- BHP Group Ltd (ASX: BHP) with a weighting of 10.45%
- Rio Tinto Limited (ASX: RIO) with a weighting of 10.01%
- Wesfarmers Ltd (ASX: WES) with a weighting of 8.03%
- Mineral Resources Limited (ASX: MIN) with a weighting of 6.52%
Currently, SYI's portfolio offers a dividend distribution yield of 7.48%. This yield comes with franking credits too, which gives this yield an additional kick.
So let's see how this translates into performance. After all, the conventional wisdom dictates that investors usually take an overall performance hit if they want to maximise dividend income.
So SYI has returned 13.15% over the past 12 months (as of 31 December). It has also averaged a return of 11.19% per annum over the past 3 years, and 6.41% over the past 5.
In contrast, the iShares ASX 200 ETF that we discussed earlier has given investors a return of 17.11% over the past year. It has also averaged a return of 13.51% over the past 3 years, and 9.62% over the past 5.
So investors have indeed sacrificed some overall returns with this particular ETF compared to the ASX 200, in exchange for larger dividend distributions. But given we all have different investing goals and needs, this might suit some investors.
The SPDR MSCI Australia Select High Dividend Yield Fund charges a management fee of 0.35% per annum (or $35 a year for every $10,000 invested).
