Amplify ETFs, begun trading a new dividend & option income ETF, the Amplify YieldShares CWP Dividend & Option Income ETF (Bats: DIVO), on Wednesday, December 14, 2016. Here is a synopsis of the new ETF:
|Name: Amplify YieldShares CWP Dividend & Option Income ETF
|Net Expense Ratio: 0.95%
The Amplify YieldShares CWP Dividend & Option Income ETF is an actively managed fund which seeks to provide current income as its primary investment objective and to provide capital appreciation as its secondary investment objective.
Under normal circumstances, the Fund will invest at least 80% of its total assets in dividend-paying U.S. exchange-traded equity securities and will opportunistically utilize an “option strategy” consisting of writing (selling) U.S. exchange-traded covered call options on such Equity Securities. Amplify Investments LLC is the investment adviser to the Fund. Capital Wealth Planning, LLC (CWP) and Penserra Capital Management LLC serve as investment subadvisers to the Fund. Penserra is responsible for implementing the Fund’s investment program by, among other things, trading portfolio securities and performing related services, rebalancing the Fund’s portfolio, and providing cash management services in accordance with the investment advice formulated by, and model portfolios delivered by, CWP and the Adviser. The Sub-Advisers are not affiliated with the Fund or the Adviser. The Fund’s portfolio is strategically designed to offer a higher total return on a risk-adjusted basis. The portfolio consists primarily of dividend-paying stocks that deliver cash flows from dividend and option income, and offers the potential for capital appreciation. CWP constructs a portfolio that is diversified across the industry sectors represented by the Standard & Poor’s 500 and sells call options tactically to generate additional income. CWP actively manages sector allocation and opportunities to participate in defensive and cyclical trends within economic cycles. CWP also screens for growth and value stocks that have a history of increasing dividends and possess strong fundamentals.
Equity Securities Portfolio
CWP seeks to identify Equity Securities of high-quality large capitalization companies from the S&P 500 that CWP believes are likely, over time, to sustain their earnings and cash flow growth and increase their dividends. In accordance with the its investment methodology, CWP seeks to identify Equity Securities of companies that are likely to raise annual dividends with consistency. In constructing a portfolio of approximately 20 to 25 of such Equity Securities (Portfolio), CWP considers which industry sectors represented by the S&P 500 appear to be outperforming relative to the overall market and over-weights those sectors by selecting Equity Securities that are outperforming relative to their peers within such sectors. Under normal market circumstances, the Portfolio’s aggregate exposure to any one sector will be less than 25%, and the maximum weighting of each of the Equity Securities will be no more than 8%.
The Equity Securities held by the Fund will, on an ongoing basis, be screened and adjusted according to other investment attributes, including market capitalization, management track record, earnings, cash flows and return on equity.
Covered Call Option Strategy
The Fund will also employ an option strategy in which it will write U.S. exchange-traded covered call options on Equity Securities in the Portfolio in order to seek additional income (in the form of premiums on the options) and selective repurchase of such options. A call option written (sold) by the Fund will give the holder (buyer) the right to buy a certain equity security at a predetermined strike price from the Fund. A premium is the income received by an investor who sells or writes an option contract to another party. CWP seeks to lower risk and enhance total return by tactically selling short-term call options on some, or all, of the Equity Securities in the Portfolio. Specifically, CWP seeks to provide gross income of approximately 2-3% from dividend income and 2-4% from option premium, plus the potential for capital appreciation. Unlike a systematic covered call program, CWP is not obligated to continuously cover each individual equity position. When one of the underlying stocks demonstrates strength or an increase in implied volatility, CWP identifies that opportunity and sells call options tactically, rather than keeping all positions covered and limiting potential upside.
Fund Top Holdings (09/30/16):
|KRAFT HEINZ COMPANY
|JP MORGAN CHASE & CO
|CISCO SYSTEMS INC
|UNITED HEALTH GROUP
|THE TRAVELERS COMPANIES INC
|BRISTOL-MYERS SQUIBB CO
|HOME DEPOT INC
DIVO Home Page
Here is a comment from Christian Magoon, ETF industry veteran and CEO of Amplify Investments:
“The DIVO launch is part of our long-term objective to build the Amplify YieldShares suite of income-oriented investment strategies. DIVO’s two-fold income approach may help to hedge traditional dividend investors’ portfolios from a rising rate environment.”