Decomposing High Dividend ETFs (DVY)

I have written a lot about iShares Select Dividend ETF (DVY) over the years and been a long term advocate and holder.  I am a fan of the underlying index methodology and still believe it is the best combination of fundamental factors to support long-term growth of principal with a high level of income.  However, despite DVY being an ETF with its high level of transparency, it is hard to nail down the sources of return without some sleuthing.  Such is the case with today’s huge $0.12 per share increase in the quarterly dividend; from $0.75/share in December to $0.87/share declared today.

On the surface, some of the increase must have come from normal dividend increases on its holdings, but a more interesting source seemed to come from the changes in the portfolio from December to now.

I checked the change in the portfolio from December to now and see a swing in over a $1 billion in low yield holdings into higher yield holdings.  Per the table below, DVY sold $1.1 billion of holdings at a 2.00% forward yield (with YTD total return of 11.46%) and bought $1.7 billion of holdings at a 4.15% forward yield (with YTD return of 15.52%).


I cant tell exactly when these transactions occurred, but more than doubling the yield on about 6% of the portfolio during the quarter has a lot to do with the dividend increase.  Other things like the unusual low dividend payment in December, timing of dividend payments, and other portfolio rebalancings are also factors.