Franklin unveils ETFs blending high dividends and low volatility, aiming for reduced portfolio risk
Franklin Templeton Canada has unveiled a new series of low-cost, index Exchange-Traded Funds (ETFs) designed to blend the beneficial factors of high dividends and low volatility.
The aim is to reduce the overall risk within an investment portfolio.
The newly announced ETFs includes:
- Franklin Canadian Low Volatility High Dividend Index ETF (FLVC),
- Franklin US Low Volatility High Dividend Index ETF (FLVU)
- Franklin International Low Volatility High Dividend Index ETF (FLVI)
All of which are now listed on CBOE Canada Inc. The costs associated with these ETFs are set at 15, 12, and 25 basis points for FLVC, FLVU, and FLVI, respectively.
Ahmed Farooq, SVP, head of Retail ETF Distribution at Franklin Templeton Canada, highlighted the strategy behind these ETFs, emphasizing the integration of sustainable high dividends and low volatility as a dual approach.
This strategy aims to offer investment advisors a solution that enhances income while mitigating risk, thus serving as an excellent complement to both active and passive investment strategies.
Farooq elaborated on the distinctiveness of these ETFs, pointing out their forward-looking dividend strategy that not only assesses past dividend payments but also evaluates the potential for future dividend sustainability and company profitability.
The construction of these ETFs is based on a rules-driven index methodology that incorporates several key factors:
- High dividends are ensured through a screening process that selects stocks likely to maintain high dividend yields, backed by the projection of continued profitability over the next four quarters to support their dividend payments.
- Low volatility is determined by assessing both realized price and earnings volatility, alongside projected earnings, to gauge market sentiment and risk levels.
- A stable yield score is calculated by marrying sustainable dividend yield with volatility measures, adjusting the yield based on the volatility levels to optimize income stability.
Andrew Ashton, head of Americas (ex-US) Distribution and chairman of Franklin Templeton Canada, expressed the company's dedication to importing and adapting its best strategies, such as the $2bn low volatility, high dividend strategy popular in the US market, for Canadian investors.
This move is part of Franklin Templeton's broader initiative to diversify its ETF and income product lineup in Canada.
In line with its commitment to affordability, Franklin Templeton continues to prioritize offering ETFs with competitive fees, as illustrated by the recent announcement regarding the low fee structure of Franklin Multi-Asset ETF portfolios.
To commemorate the launch of FLVC, FLVU, and FLVI, Franklin Templeton employees will participate in the ceremonial ringing of CBOE's closing bell on April 3, marking the successful listing of these ETFs.
