The case for investing in dividend-paying companies is well known, and these stocks may have a beneficial impact on the portfolios of investors who are seeking income.

We employ a dynamic, rules-based investment process to access these opportunities. Taking the S&P 900 as a selection universe, we select the 60 highest-yielding stocks in the index. We then weight these stocks by revenue (instead of market capitalization) to provide investors with a balanced approach to dividend investing.

Revenue weighting enables us to overweight dividend stocks with attractive fundamentals, and within sectors, we believe weightings are optimized.

The Oppenheimer Ultra Dividend Revenue ETF Construction Process

Our selection universe is the S&P 900. We use a two-factor model in the portfolio construction process, analyzing both dividends and revenue. The initial screen helps us find consistent dividend payers, as it takes into account the trailing 12-month dividend yields at the end of the previous four quarters. We then average those four trailing data points, and the 60 stocks with the highest yields constitute the portfolio.

Next, we apply our standard methodology of weighting each stock by its revenue, and cap the weighting of each stock at 5% of the total portfolio to avoid overexposure to any particular company. By using the S&P 900 as a universe, we avoid the behavioral bias in the market that tends to lead investors predominately to large-cap stocks in the search for consistent dividends. Our revenue-weighting methodology, combined with our dividend screen, may lead to a more attractively valued dividend portfolio.

Ultra Dividend Revenue ETF Sector Breakdown

To meet their objective of delivering a high yielding product, high-yield dividend funds are generally concentrated in the following sectors:

  • Energy
  • Financials
  • Utilities

We believe our universe of stocks (the S&P 900), the trailing yield screen and the revenue-weighting methodology have the potential to produce a product that protects investors from overvalued, dividend-paying stocks and potentially helps reduce portfolio risk.

Our screening process is dynamic, and the Fund invests in stocks across multiple industries. Because we adhere to a rules-based investment process, as stocks become overvalued and their yield dilutes, they naturally fall out of the selection process.

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