In this episode of Strategic Investor Radio, host Charlie Wright interviews Ryan Ballantyne of Reality Shares, a San Diego-based asset management firm focused on dividends. Reality Shares issued its first ETF in December 2014 and won ETF.com’s Best New ETF Issuer award the following year. The firm also provides free ratings for 1,200 dividend-paying stocks at its website.
Mr. Ballantyne says he used to be a trader, but he sleeps much better at night since switching his focus to dividends. Dividends are real, he insists, adding “you can’t fake a dividend.” Regardless of who wins the presidential election or whatever else happens, Apple’s dividend policy is unlikely to be affected, according to Ballantyne. He also points out that companies like Coca-Cola, Procter & Gamble, and Johnson & Johnson didn’t cut their dividends in the wake of the financial crisis; and recent dividend hikes by Qualcomm and Home Depot have been enough to offset dividend cuts by energy firms in the S&P 500.
Reality Shares’ first ETF, DIVY, focuses on isolated dividend growth. Investors get exposure to the entire S&P 500, but the ETF “hedges out” share price movements so investors can express a directional view on dividend-growth. Ballantyne points out that other popular dividend funds require a stock to pay dividends for up to three years before adding them, and thus would miss out on a big dividend announcement from a non-dividend-paying stock like Google, for example, while DIVY would not.
Ballantyne also discussed Reality Shares’ long-only LEAD ETF, which bundles all of the “DIVCON-5” rated stocks in the S&P 500; as well as its long/short DFND and GARD ETFs, which each have the same long portfolio as LEAD, but combine it with between one-third as much (in the case of DFND) or up to an equal amount (in the case of GARD) of short exposure to stocks with low DIVCON ratings. These ratings, it should be noted, measure the probability of a stock raising or cutting its dividend.