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Is Your Mutual Fund/ETF Manager Shortchanging You ?
Old 08-03-2022, 05:37 PM   #1
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Is Your Mutual Fund/ETF Manager Shortchanging You ?

Received an email from contrarian outlook today. The gist of the article is that one of the top dividend ETFs, Schwab U.S. Dividend Equity (SCHD) which holds 104 dividend stocks, holds no Exxon Mobil.

The author goes on to point out that it’s a bull market in oil & a bear market in everything else (with the exception of the US dollar.)

At the time of the article, XOM was up 61% over the past year, while SCHD was down 6%

Even if Exxon was the number 1 holding in the fund, it wouldn't have made a huge difference. That being said, every little bit counts, & the manager should strive to provide the best return possible for shareholders.

https://contrarianoutlook.com/the-fa...-dividend-etf/



Since I own a similar ETF (Vanguard Dividend Appreciation Index Fund) (VIG)
I decided to see if it held Exxon shares. In spite of having 289 different dividend paying stocks, (unless I missed it) zero Exxon shares.

https://investor.vanguard.com/invest...rformance-fees

I'm somewhere in the middle when it comes to climate change, but I can't agree with this.

The fund summary at Vanguard states
“Large-cap equity, emphasizing stocks with a record of growing their dividends year over year”

There's only so many dividend aristocrats out there, & in my opinion, they should all be included in funds like these.
Save this BS for socially conscious funds.
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Old 08-03-2022, 05:53 PM   #2
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Not sure I understand the issue. You hired a stock picker and you don't like the stocks they picked? You think they should have been sure to pick all the stocks that were going to go up?

What does the full prospectus say? Are they compliant with the prospectus? What have the annual reports said?
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Old 08-03-2022, 06:44 PM   #3
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Exxon is a Dividend Aristocrat. If you want some exposure to Exxon, you may want to buy NOBL ETF, which has somewhat worse performance than SCHD.
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Old 08-03-2022, 08:25 PM   #4
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4.7 of SCHD is Oil and Gas stocks, while VIG is less than 1% O&G.
Doesn't sound like a Social Concsious issue to me.

Did VIG hold XOM when you bought it? I'm sure if they sold their entire holding it would have been noted in the annual report.
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Old 08-03-2022, 09:05 PM   #5
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Quote:
Originally Posted by Al18 View Post
Exxon is a Dividend Aristocrat.
Exactly.
That's why I find it strange that an ETF like (VIG) wouldn't own it ?

Product summary from the Vanguard page for (VIG)
Large-cap equity, emphasizing stocks with a record of growing their dividends year over year.

XOM is a large cap & has raised the dividend for 39 consecutive years.
Seems like that's the exact type of equity they'd have in the portfolio ?

Who knows?
Maybe they don't like the long-term prospects for the company.
I'll research NOBL.
Thanks for your input.
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Old 08-03-2022, 09:27 PM   #6
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Quote:
Originally Posted by GravitySucks View Post
Did VIG hold XOM when you bought it?
Doesn't sound like a Social Concsious issue to me.
No idea ?
I bought my first 25 shares way back in 2009, & haven't read an annual report
for ages

I researched the vanguard energy ETF (VDE) & as of 06-30-2022
Exxon is the number 1 holding at just under 22%
So it's definitely not a socially conscious issue with Vanguard.
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Old 08-03-2022, 09:36 PM   #7
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I have been selling off my SCHD shares. The dividend yield is no longer compelling when compared to a combination of bond yields and index equities.
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Old 08-04-2022, 03:59 AM   #8
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Quote:
Originally Posted by ownyourfuture View Post
Exactly.
That's why I find it strange that an ETF like (VIG) wouldn't own it ?

Product summary from the Vanguard page for (VIG)
Large-cap equity, emphasizing stocks with a record of growing their dividends year over year.

XOM is a large cap & has raised the dividend for 39 consecutive years.
Seems like that's the exact type of equity they'd have in the portfolio ?

Who knows?
Maybe they don't like the long-term prospects for the company.
I'll research NOBL.
Thanks for your input.
VIG is an index fund that tracks the S&P U.S. Dividend Growers Index. All index funds have construction rules that clearly define the criteria required for any stock to be included or excluded from their index.

For this index, the headline for what they include/exclude is located here: https://www.spglobal.com/spdji/en/in...ndex/#overview

"The S&P U.S. Dividend Growers Index is designed to measure the performance of U.S. companies that have followed a policy of consistently increasing dividends every year for at least 10 consecutive years. The index excludes the top 25% highest-yielding eligible companies from the index"

The details of their construction rules are located here: https://www.spglobal.com/spdji/en/do...dex-series.pdf

These sorts of things make for some pretty dry reading, but to me at least, it's pretty important to understand what it is I'm investing in.

Cheers,
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Old 08-04-2022, 05:58 AM   #9
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This blog entry explains how the index is constructed. It is simply about understanding what you’re invested in and if you don’t like it, investing in something else. https://www.indexologyblog.com/2021/...t-performance/

In this case the exclusion of the highest yielding is surely a matter of opinion, but it is clear what they are doing - presumably to mitigate against some volatility.
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Old 08-04-2022, 06:54 AM   #10
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Quote:
Originally Posted by big-papa View Post
VIG is an index fund that tracks the S&P U.S. Dividend Growers Index.

SCHD tracks a different index, but both VIG and SCHD are index ETFs.
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Old 08-04-2022, 08:39 AM   #11
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The linked article in the OP is IMO particularly low quality even judged against the internet average click bait. He complains that SCHD does not own XOM but makes no effort to find out why. He does not mention reviewing the prospectus. He does not mention reading its annual reports. He does not mention Morningstar or other analysis. He does not even mention the most trivial research -- reading the one-paragraph product summary on the Schwab site.

It’s a methodology that will never fail: Find a stock that has done well, find a stock-picker fund that doesn't own it and -- bingo! -- an easy topic for more click bait.
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Old 08-04-2022, 01:36 PM   #12
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Quote:
Originally Posted by big-papa View Post
The details of their construction rules are located here: https://www.spglobal.com/spdji/en/do...dex-series.pdf

These sorts of things make for some pretty dry reading, but to me at least, it's pretty important to understand what it is I'm investing in.

Cheers,
Big-Papa
I read far enough to see that the exclude REIT's. Didn't see anything that would explain not holding an oil company.
(Didn't read the entire report)
Thanks
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Old 08-04-2022, 02:22 PM   #13
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I see the article claims SCHD doesn't own XOM because dirty carbon, but in truth VLO is one of Schd top 10 holdings.

Click bait in pure form.
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