Dividend investors are always on the lookout for new sources of stable and growing income. And one of the hottest new dividend ETFs that just hit the market is Roundhill S&P Dividend Monarchs ETF (NYSEMKT: KNGS).
Launched on 11/02/23, this brand-new ETF aims to tap into the power of “Dividend Kings” – elite stocks that have increased their dividends for 50+ consecutive years.
What Is Roundhill S&P Dividend Monarchs ETF?
Roundhill S&P Dividend Monarchs ETF tracks the S&P Dividend Monarchs Index, which comprises Dividend King stocks that have achieved the impressive milestone of half a century of rising dividends.
As of December 2023, there are just 36 Dividend Kings in existence. And KNGS holds all of them in its portfolio, weighted by dividend yield. This gives higher allocations to the Kings with higher current yields.
The ETF is managed by Roundhill Investments, a relative newcomer founded in 2018 that focuses on thematic ETFs. And it trades on the NYSE Arca exchange.
KNGS commands an expense ratio of 0.35%, which is on the lower end for thematic ETFs but higher than broad market index funds. Assets under management stand at just $4 million since it just launched.
Why Invest In Roundhill S&P Dividend Monarchs ETF?
There are a few key reasons why dividend investors may want to consider parking some money in Roundhill’s KNGS ETF:
1. Targeted Exposure To Elite Dividend Stocks
The Dividend Kings represent the highest pedigree of dividend excellence. The 50+ year rising dividend streak is an incredible achievement only managed by 36 companies.
These stocks have survived numerous recessions, financial crises, and other upheavals while still delivering rock-solid income growth. So KNGS offers exposure purely to these elite payers.
2. High Current Income
Although KNGS is new and hasn’t paid its first dividend yet, the ETF’s underlying index sports a dividend yield of around 3.5%.
That’s significantly higher than the S&P 500’s average 1.5% yield. So this ETF should deliver a steady stream of above-average income.
3. Less Work Than Selecting Dividend Kings Yourself
It takes time and effort to cherry-pick Dividend Kings stocks on your own. KNGS does the work for you by packaging them up into a single fund.
This provides instant diversification across all 36 Kings – you’d need a portfolio of over $3.5 million to build the same breadth individually!
4. Emphasis On Higher-Yielding Kings
Since the ETF weights the Kings by dividend yield, you get greater exposure to those with higher current payouts.
Recently, that’s put more assets into stocks like AT&T, AbbVie, and PepsiCo. This boosts the portfolio yield versus an equal-weight approach.
5. Continuous Rebalancing
The ETF methodology rebalances quarterly to maintain yield-based weights. This forces it to trim stocks that have become overvalued and buy more of ones that have lagged.
That disciplined rebalancing enforces a “buy low, sell high” approach that helps maximize income over time.
Key Features of Roundhill S&P Dividend Monarchs ETF
Here are some key details for investors considering KNGS:
- Expense Ratio: 0.35%
- Dividend Yield: 3.5% (estimated)
- Number of Holdings: 36 Dividend Kings
- Weighting Methodology: Weighted by indicated dividend yield
- Rebalancing Frequency: Quarterly
- Top 10 Holdings: Johnson & Johnson (7.4%), Coca-Cola (7.1%), Procter & Gamble (6.8%), PepsiCo (5.7%), Walmart (5.5%), Chevron (5.2%), AbbVie (5.1%), Sysco (5.0%), Illinois Tool Works (4.9%), Colgate-Palmolive (4.8%).
- Launch Date: 11/02/23
- Assets Under Management: $4 million
- Exchange: NYSE Arca
- Trading Volume: Light so far
How Does KNGS Compare To Other Dividend ETFs?
Roundhill’s Dividend Monarchs ETF enters a crowded field of dividend ETFs. Here’s how it stacks up to some popular incumbent funds:
Versus Vanguard High Dividend Yield ETF (VYM)
- VYM is a long-running, low-cost fund with $44 billion in assets. It tracks the FTSE High Dividend Yield Index of 400+ stocks.
- KNGS is much newer and smaller but focuses purely on elite Dividend Kings. Its yield is also higher.
- VYM charges just 0.06% vs. KNGS’ 0.35% expense ratio. But if you want concentrated Dividend King exposure, the extra cost of KNGS may be justified.
Versus Vanguard Dividend Appreciation ETF (VIG)
- Like KNGS, VIG zeroes in on companies with long dividend growth histories. But its focus is on 10+ years of rising payouts.
- KNGS sets a higher bar at 50+ years but has a smaller pool of stocks. Its yield is also markedly higher than VIG’s 1.8%.
- However, VIG is vastly larger at $65 billion in assets and charges less at 0.06% expense ratio. So it offers more liquidity.
Versus Schwab US Dividend Equity ETF (SCHD)
- SCHD lands in the middle between VYM and VIG. It holds 100 stocks with at least 10 years of dividend growth.
- KNGS has stricter criteria at 50+ years but a smaller portfolio. Its yield is superior to SCHD’s 3.1%.
- SCHD has attracted $37 billion in assets since launching in 2011. Its ultra-low 0.06% fee gives it a cost edge.
Versus Global X S&P 500 Quality Dividend ETF (QDIV)
- QDIV selects S&P 500 stocks with best blend of yield and payout growth stability. Its approach is less stringent than KNGS.
- KNGS sports a much higher yield, while QDIV offers broader diversification. Expenses are identical at 0.35%.
- QDIV’s assets and trading volume dwarf the fledgling KNGS. But KNGS offers a more targeted dividend focus.
Should You Buy Roundhill S&P Dividend Monarchs ETF?
Roundhill S&P Dividend Monarchs ETF brings a fresh approach to dividend ETFs, zeroing in on the elite Dividend Kings. For investors who place a priority on long dividend growth histories, it could be an appealing choice.
Its main drawbacks are its newness, small size, light trading volume, and high expenses compared to some popular rivals. However, its targeted strategy and high yield may offset those weaknesses for some dividend connoisseurs, especially those intrigued by the impressive Dividend Kings.
While the ETF needs more of a track record before making a definitive judgment, KNGS is undoubtedly one to watch. Investors seeking Dividend King exposure may want to put it on their radars, even if they wait for more of a history before buying.
With its unique approach to dividend investing, this ETF could carve out a niche over time if it can continue gathering assets.