XLK - WKLY: Get Paid Every Week

2023-06-21 07:00:00 ET

Summary

• Earning dividends is great, but once you build an established portfolio, earning dividends every month is even better.
• If you want to take things a step further, you could set up a portfolio that would have you earning a dividend every week, which is pretty awesome.
• Let me introduce to you the Sofi Weekly Dividend ETF, which is the first equity ETF that pays out income distributions on a weekly basis.

This article was published at iREIT® on Alpha on Sunday June 18, 2023.

Earning dividends is great, as it allows for the power of compounding to play out in your favor. After all, Albert Einstein called the power of compounding, “the eighth wonder of the world.”

Getting dividend income, which can be used to increase your share count without requiring any new money from your bank, is the simplest idea of compounding. That process is put into overdrive when we're dealing with companies that consistently increase their dividends.

So, earning dividends is great, but once you build an established portfolio, earning dividends every month is even better.

If you want to take things a step further, you could set up a portfolio that would have you earning a dividend every week, which is pretty awesome.

It would take some detailed research to chart out when certain companies pay to get it nailed down exactly, or you can invest in an exchange-traded fund ("ETF") that already did the work and pays its dividend on a weekly basis.

Let me introduce to you the Sofi Weekly Dividend ETF ( WKLY ), which is the first equity ETF that pays out income distributions on a weekly basis.

The ETF is designed to invest in dividend-paying stocks that have consistently paid out their dividend for at least 12 months and are forecasted to continue paying out for the foreseeable future. Holdings are weighted by market cap, and the fund is rebalanced every quarter.

WKLY is looking to capitalize on the boom that has been created by the likes of income-related ETFs like the popular JPMorgan Equity Premium Income ETF ( JEPI ) and its sibling fund, the JPMorgan Nasdaq Equity Premium Income ETF ( JEPQ ).

Certain investors have become enamored with receiving dividend income on a more regular basis. Those two income funds pay out monthly, so WKLY takes things a step further.

The SoFi Weekly Dividend ETF was launched in May 2021 and is managed by Toroso Investments, LLC. The fund invests in growth and value stocks of companies across diversified market capitalizations.

It invests in dividend paying stocks of companies. The fund replicates the performance of the SoFi Sustainable Dividend Index, by using a full replication technique.

WKLY has $10.6 million in AUM (assets under management) and they have an expense ratio of 0.49% , which is on the higher side for more of a passively managed ETF.

As mentioned, this fund is a relatively new fund, having only been around for roughly 2 years. As such, here is a look at the fund's performance compared to the S&P 500 (SP500) over that period.

The S&P 500 has been on a tear during that time span, which has largely been one-sided by a group of technology stocks. Over that period, the S&P 500 has a total return of 22% compared to WKLY returning 12%, which any other year would be a quality return rate.

As I mentioned, the S&P 500’s return has largely been led by the Technology sector. After all, the technology and communication sectors account for nearly 40% of the S&P 500.

Knowing that, now let’s take a look at the performance over the past 12 months by adding in the Communication Services Select Sector SPDR ETF ( XLC ) and the Technology Select Sector SPDR ETF ( XLK ), which show total returns of 21% and 40%, respectively. Both of these sectors have pushed the S&P 500 higher.

Knowing the positive impacts and weight these two sectors specifically have had on the S&P 500, let’s see how big of a role they play within WKLY.

Here is a look at the funds sector breakdown.

As you can see, the technology sector accounts for less than 8%, with the communication sector accounting for only 3%, which makes the total return of 12% look that much better. The fund's top three sectors are financials, industrial, and energy.

Note: Around 3% of WKLY's holdings are in the "real estate" sector. As you know, I'm close to launching my own REIT ETF ( here's the Index ). What would you think about weekly dividends?

The Financial Select SPDR ETF ( XLF ) has had a rollercoaster year so far. Over the past 12 months, this sector ETF has climbed 9%, underperforming the S&P 500. The top five positions within the sector ETF are:

• Berkshire Hathaway ( BRK.B )
• JPMorgan Chase ( JPM )
• Visa ( V )
• Mastercard ( MA )
• Bank of America ( BAC )

These top five positions account for 41% of the ETF.

The Industrial Select SPDR ETF ( XLI ), on the other hand, has seen strong performance, with the sector ETF up 23% over the past 12 months. The top five positions within this ETF include:

• Raytheon Technologies ( RTX )
• Honeywell International ( HON )
• United Parcel Service ( UPS )
• Caterpillar ( CAT )
• Union Pacific ( UNP ).

The top five positions account for 21% of the ETF. The third largest sector is energy, which had a stellar 2022, leading the S&P 500, but has not seen that success as much in 2023 thus far.

The Energy Select SPDR ETF ( XLE ) is up only 4% over the past 12 months and down 4% in 2023. In 2022, the ETF climbed 45%. The top five positions within the sector ETF includes:

• Exxon Mobil ( XOM )
• Chevron ( CVX )
• ConocoPhillips ( COP )
• EOG Resources ( EOG )
• Schlumberger ( SLB ).

Those top five positions account for 55%, making the fund very top heavy.

The other thing about this ETF is the fact that the fund is not focused just on the U.S. but is a global ETF with some heavier exposure to the European region.

In fact, only 52% exposure is related to the U.S. followed by Japan, Switzerland, and Canada. So, for investors looking for a global ETF, WKLY is an option, but there are some headwinds internationally, which could pose some risks to the fund.

Now let’s take a look at WKLY’s top individual positions:

As you can see, the top 10 positions are very well diversified. The top six positions within WKLY are all from different sectors. This speaks to the safety of the fund, unlike being overweight to a certain sector. The fund has a total of 343 positions with the top 10 accounting for 26% of the entire fund.

Dividends

As we have already made clear, WKLY aims to pay out its dividend on a weekly basis. As a note, an investment shouldn’t be made based on how often a stock pays a dividend or based on the yield alone.

The weekly dividend payout does sound intriguing, but investors should be comfortable with the holdings before investing.

Right now, WKLY yields a dividend of 3.19%. The fund has paid a weekly dividend of $0.02 per share since the fund started trading a little over 12 months ago. The dividend looks to be plenty stable at the moment as well. The lack of dividend growth is a negative for the fund overall.

With 343 holdings , WKLY is definitely diversified and should appeal to the "Do-It-For-You" Investor (as opposed to the DIY investor). The 3.2% dividend yield is not as much juice as many retirees would like to see, so I suppose this ETF is geared towards a younger audience.

I'll be watching this one closely, though, as I do see the benefits of collecting dividend checks on a weekly basis , especially a REIT-focused ETF that offers a combination of high-yield, dividend growth, and weekly mailbox money. Here's an example (using a 6% dividend yield):

• A $100,000 investment at a 6% yield generates $115 per week .
• A $200,000 investment at a 6% yield generates $231 per week .
• A $300,000 investment at a 6% yield generates $346 per week .
• A $400,000 investment at a 6% yield generates $462 per week .
• A $500,000 investment at a 6% yield generates $577 per week .

I'm sure many of you don't care about weekly or monthly dividends, but I will be extremely interested to see what you think about WKLY...

As always, thanks for reading and commenting.

Happy SWAN Investing!

To date, we have covered the following ETFs on Seeking Alpha:

• VanEck Morningstar Wide Moat ETF ( MOAT )
• Schwab U.S. Dividend Equity ETF ™ ( SCHD )
• Vanguard Dividend Appreciation Index Fund ETF Shares ( VIG )
• JPMorgan Equity Premium Income ETF ( JEPI )
• iShares U.S. Real Estate ETF ( IYR )
• InfraCap Equity Income Fund ETF ( ICAP )
• Pacer US Cash Cows 100 ETF ( COWZ )
• iShares Core High Dividend ETF ( HDV )
• Vanguard Real Estate ETF ( VNQ )
• WisdomTree U.S. Quality Dividend Growth Fund ETF ( DGRW )
• S&P 500 GARP ETF ( SPGP )
• Vanguard Information Technology Index Fund ( VGT )

For further details see: