CONTRIBUTORS
Ahmed Farooq, CIMA, CFP
Head of Retail ETF Distribution,
Franklin Templeton Canada
2024 started with such a bang.
It seemed that nothing was going to stop the momentum of the equity markets as all North American indices were heading toward all-time highs. Though inflation remained sticky in the US, we were seeing inflation steadily come down in Canada. Eventual rate cuts were on the horizon supported by increasing unemployment rates and consumer debt levels. And it was all driving momentum in equities. But, as equities continued to rise, so did a growing sense of uneasiness.
Today, it feels like that uneasiness is playing a bigger role in the conversation.
In the US, progress on the inflation fight seems to have stalled bringing some ambiguity to the rate cutting narrative. Escalating geopolitical conflicts, particularly in the middle east, continue to worry investors. And, in Canada, there are very real questions about the strength of the economy, and the likelihood of a soft landing.
In my recent conversations with advisors, I do feel a larger sense of concern and apprehension. The markets have run up too high and the magnificent 7 (now the fantastic 4) have sold off. Advisors are wondering if it’s time to make changes and finally take some profits. Protecting some of those gains could be prudent, and rebalancing to a more defensive position backed by high quality dividends has been sounding like a very viable option. That’s why I am glad to introduce our new Low Volatility High Dividend suite of ETFs.
Piggy backing on the success of our US ETF offerings, which have raised $1.6 billion in USD, the new Low Volatility High Dividend suite deploys a strategic beta strategy that focuses on high long-term sustainable dividends, while screening to reduce both price and earnings volatility. There are a couple of things that make our strategy unique.
A lot of dividend ETFs tend to only screen for trailing 12-month dividends. We screen for both 12-month trailing and 12-month projected dividends for an added measure of certainty. And – unlike other dividend ETFs – we take the extra step of performing volatility screening, assessing future earnings while analyzing the volatility of the underlying stock price. I feel this is an important step to focus on for investors that want to maintain a low risk profile while maximizing yield. It’s also important to note that this ‘best of both worlds’ approach comes at a very competitive low cost offering.
Here is the suite:
FLVC - Franklin Canada Low Volatility High Dividend Index ETF (15bps)
FLVU - Franklin U.S. Low Volatility High Dividend Index ETF (12bps*)
FLVI - Franklin International Low Volatility High Dividend Index ETF (25bps**)
These strategies can easily be included in a dividend income portfolio, complementing core holdings, or as a core for investors that are more risk adverse, looking for income with less overall volatility.
Please reach out to Franklin Templeton wholesaler and ETF specialist to learn more.
Footnotes:
*Management fee waived from 0.27% to 0.12% for the first year ending March 31, 2025. For additional information, please consult the prospectus.
**Management fee waived from 0.40% to 0.25% for the first year ending March 31, 2025. For additional information, please consult the prospectus.
Franklin Templeton Canada is a business name used by Franklin Templeton Investments Corp.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in mutual funds and ETFs. Please read the prospectus and fund fact/ETF facts document before investing. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and ETF expenses will reduce returns. Performance of an ETF may vary significantly from the performance of an index, as a result of transaction costs, expenses, and other factors. Indicated rates of return are historical annual compounded total returns for the period indicated, including changes in unit value and reinvestment distributions, and do not take into account any charges or income taxes payable by any security holder that would have reduced returns. Mutual funds and ETFs are not guaranteed. Their values change frequently. Past performance may not be repeated.
ETF units may be bought or sold throughout the day at their market price on the exchange on which they are listed. However, there can be no guarantee that an active trading market for ETF units will develop or be maintained, or that their listing will continue or remain unchanged. While the units of ETFs are tradable on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress.