SDIV - SDIV: Only If International Outperforms

2023-07-23 06:44:42 ET

Summary

• The Global X SuperDividend ETF (SDIV) has a lot of negativity on Seeking Alpha primarily due to its tantalizingly high dividend yield against relatively poor total return.
• SDIV's impressive track record in dividend consistency is noteworthy, as it has made monthly dividend payments for 12 consecutive years since its inception in 2011.
• SDIV's massive yield is undoubtedly appealing for income-oriented investors, but the total return just isn't there.

We must all suffer one of two things: the pain of discipline or the pain of regret or disappointment. - Jim Rohn

The Global X SuperDividend ETF ( SDIV ) has a lot of negativity on Seeking Alpha, primarily due to its tantalizingly high dividend yield against relatively poor total return. Could there be an upcoming cycle though that favors SDIV?

Understanding SDIV's Investment Strategy

SDIV seeks to replicate the performance and yield of the Solactive Global SuperDividend Index before fees and expenses. The core investment strategy revolves around investing in some of the highest-yielding dividend stocks worldwide. This approach results in a robust dividend yield that is several times the average yield of the S&P 500 and significantly higher than the risk-free return that investors can earn from 10-year Treasuries.

SDIV's impressive track record in dividend consistency is noteworthy, as it has made monthly dividend payments for 12 consecutive years since its inception in 2011.

SDIV boasts a highly diversified portfolio, holding 100 stocks. Its top 10 holdings comprise are not concentrated, ensuring no single holding excessively influences the fund's performance. Furthermore, SDIV's holdings span across various industries and geographical locations. This point is important from an attribution perspective.

Geographic Diversification

SDIV maintains a balanced geographic mix. Only 35% of the fund's holdings are based in North America, making it a viable option for U.S. investors seeking international exposure.

The geographic diversity could serve as a potential headwind or tailwind, depending on global economic conditions. The exposure to Asia and Europe has been a historical drag, which broadly means that if you're bullish on US large-cap dominance ending and broadening out to global breadth, those headwinds could become a tailwind from an asset allocation perspective. I think there's an opportunity for international stocks to work in a big way, just after a traditional risk-off sequence globally.

Understanding The Risks

Despite its appealing 30-Day SEC yield of around 11%, SDIV is not without its risks. Investors must think in terms of total return, not just yield, and total return has been lackluster. Again - much of this can be attributed to international exposure.

SDIV's Performance

SDIV has underperformed the broader market year-to-date, and if we look at the ratio of SDIV to the S&P 500 ( SPY ), we can clearly see a relative downtrend intact, though it could be in the process of bottoming should US large-cap tech mania be nearing its relative peak.

Conclusion: To Invest or Not to Invest in SDIV?

SDIV's massive yield is undoubtedly appealing for income-oriented investors, but the total return just isn't there. Sure - it has a monthly payout schedule, which size-wise is appealing. However, the fund's performance over the past decade leaves much to be desired, much like investing in anything outside of mega-cap US stocks.

Although the ETF could potentially outperform in the future, and its 12-year streak of monthly payouts is commendable, investors should be aware of global momentum. If you believe that US stocks will not maintain dominance in the long run versus global equities, and believe Technology stocks are extended, SDIV just from a global exposure and sector allocation perspective makes sense. Otherwise, this remains a challenged story.

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