Click to EnlargeSo, which ETF is the “best” option for shareholder friendliness? Truth be told, are all solid options. Both PKW and TTFS have handedly beaten the S&P 500 over their respective lives (see chart), and SYLD has beaten the S&P 500 as well, though its trading history only goes back to May of last year. Though past performance is, of course, no guarantee of future returns, I consider it reasonable that all will continue to outperform over time.
Interestingly, SYLD has the lowest expense ratio of the three — 0.59% vs. 0.99% for TTFS and 0.71% for PKW, respectively — despite the fact that SYLD is the most actively managed of the lot. SYLD doesn’t have a long enough trading history for portfolio turnover, but management estimates that portfolio turnover will be “about 50%” per year. This is about in line with TTFS and considerably lower than PKW. Lower fees and portfolio turnover are certainly points in SYLD’s favor.
TTFS has a smaller average cap weighting than SYLD or PKW; Morningstar classifies TTFS as a “mid-cap” ETF rather than large-cap. This is a selling point if you’re specifically looking to avoid a large-cap bias. But given the relatively high turnover of all three ETFs, that may not always be true. (All else equal, PKW should have the largest average market cap due to its market-cap weighting.)
My personal preference would be to utilize SYLD for its broader shareholder methodology rather than TTFS and PKW’s more limited focus on share repurchases. But investors could also choose to invest in separate dividend-focused ETFs, such as the Vanguard Dividend Appreciation ETF (VIG), to complement their investments in TTFS and PKW.
Finally, I’m going to offer one piece of advice that managers would probably prefer I leave out. If you prefer to buy individual stocks rather than ETFs or funds, you can piggyback on the research of all three funds by going to their websites and viewing their complete portfolio holdings.
Something I have done in the past is compare the holdings of my favorite ETFs for overlap. If a stock is held by two or more of these ETFs — and perhaps by VIG as well — that might be a stock you single out for further research.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he was long SYLD and VIG. Check out his new premium service, Macro Trend Investor, which includes a free copy of his e-book, The New Megatrend Investor: The Ultimate Buy-and-Hold Strategy That Will Make You Rich.