The ETFs aim to deliver enhanced dividend income relative to portfolio risk.
The Franklin U.S. Dividend Multiplier ETF (XUDV US) and Franklin International Dividend Multiplier ETF (XIDV US) are now listed on NYSE Arca with expense ratios of 0.09% and 0.19%, respectively.
These ETFs are linked to indices developed through a collaboration between New Frontier and VettaFi. XUDV tracks the VettaFi New Frontier US Dividend Select Index, while XIDV follows the VettaFi New Frontier International Dividend Select Index.
The indices are constructed from initial universes represented by VettaFi’s established broad market benchmarks. The US index is based on the VettaFi US Equity Large-Cap 500 Index, representing 500 of the largest US-listed stocks and serving as a proxy for the S&P 500. The global ex-US index, meanwhile, is derived from the VettaFi Developed World ex United States Index, covering large- and mid-cap stocks in developed markets outside the United States. REITs are excluded.
The VettaFi New Frontier Dividend Select Indices aim to deliver “excess” dividend yield compared to dividend-weighted versions of their respective universes, while simultaneously mitigating risks related to volatility and concentration.
Portfolio construction involves three stages. First, New Frontier’s proprietary optimization techniques are applied to simulate thousands of portfolios, creating efficient portfolio frontiers. This process identifies the portfolio with the maximum ‘Dividend Information Ratio’ (DIR), which measures the portfolio’s excess dividend forecast yield relative to the dividend-weighted benchmark, divided by the portfolio’s standard deviation. DIR evaluates how effectively the portfolio generates dividend yield above the benchmark relative to overall risk.
In the second stage, diversification constraints are implemented. Individual security weights are capped at 5% for the US index and 2.5% for the global ex-US index. Sector weights are limited to 30% or 1.5 times the sector’s weight in the initial universe, whichever is lower. For the global ex-US index, country weights are capped at 30% or 2.0 times the country’s weight in the initial universe.
The final stage incorporates turnover constraints to balance portfolio optimization with trading efficiency. For the US index, a one-way turnover limit of 15% is applied per quarterly rebalance, while for the international index, the turnover limit is set at 20% per semi-annual rebalance. If turnover constraints render the optimization infeasible, the limits are incrementally relaxed by 1% until a solution is achieved.
Todd Mathias, Head of US ETF Product Strategy at Franklin Templeton, commented: “XUDV and XIDV demonstrate Franklin Templeton’s commitment to expanding our suite of portfolio solutions in order to meet the evolving needs of our clients. These ETFs provide cost-effective access to strategies that combine enhanced dividend income with next-generation portfolio design, serving as a compelling option for investors seeking access to long-only equity income. These strategies are particularly well-suited for fee-based advisors, sophisticated clients, and general retail investors seeking efficient, diversified equity solutions.”
Robert Michaud, Chief Investment Officer of New Frontier, added: “Our collaboration with Franklin Templeton and VettaFi on XIDV and XUDV marks a new era in both dividend investing and ETF innovation. These ETFs embody New Frontier’s mission to solve complex investor challenges using optimization techniques, creating highly efficient portfolios for reliable, long-term wealth building. By applying our time-tested optimization to dividend strategies, we’ve built an index to pursue enhanced dividend yield coupled with risk-managed capital appreciation. This launch is setting a new standard in the ETF industry through effective investment technology. We’re confident these ETFs will redefine expectations for dividend-focused investments and demonstrate the power of advanced optimization in portfolio construction.”