RBC Global Asset Management has launched the RBC US Banks Yield Index ETF (RUBY CN) on Toronto Stock Exchange, providing exposure to high income stocks from the large-cap US banking universe.
Mark Neill, head of RBC ETFs.
“Through our ongoing discussions with investors and advisors, there has been notable interest in further exposure to the US banking sector,” said Mark Neill, head of RBC ETFs. “This is driven by a desire for more diversification in the financial sector and by recent trends in the US, such as strong growth signals and changing monetary policy that has created a positive long-term outlook for US banks. As one of Canada’s leading providers of ETFs, we are pleased to offer an innovative and low-cost solution that will enable investors and advisors to invest in this sector.”
The smart beta fund tracks the Solactive US Banks Yield Index, composed of the 21 largest US dividend-paying bank stocks.
From the starting universe of all US dividend-paying banks, securities with a dividend yield higher than 150% of the universe average are excluded to avoid securities with unsustainable yield and risk of dividend cuts. The remaining securities are ranked according to their market capitalization and the largest 21 are selected for the portfolio.
Each stock is then ranked by its dividend yield with the top seven yielding stocks receiving a 50% index weight (7.1% each), the next seven yielding stocks receiving a 33.3% index weight (4.8% each), and the bottom seven yielding stocks receiving a 16.7% index weight (2.4% each). The portfolio is reconstituted and rebalanced quarterly.
The fund’s largest seven holdings are Wells Fargo, BB&T, SunTrust Banks, KeyBank, Huntington Bancshares, Citizens Financial, and US Bancorp, each of which accounts for approximately a 7.1% weight in the portfolio.
RUBY trades in Canadian dollars, while investors may also choose from US dollar-denominated (RUBY.u CN) and CAD-hedged (RUBH CN) share classes.
All three share classes have management fees of 0.29%. Income generated within the fund’s portfolio is distributed to investors on a monthly schedule.