O'Leary is on the NYSE floor Tuesday to launch the O'Shares FTSE US Quality Dividend ETF, a basket of high-dividend stocks. But he's not doing this just to enter the crowded ETF space, which already has 1,700 ETFs and more than 50 ETF providers.
He's doing it because he needed an investment vehicle for the equity portion of his family trust, which he started in 1997. He wanted an investment vehicle that was rule-based, first and foremost, so no one would tinker with it.
And he wanted dividends. Why dividends? Because 70 percent of the returns in the stock market over the past decade or so have come from dividends, he says.
But O'Leary did not just want to buy a basket of the highest-yielding ETFs. You can get that already with Vanguard High Dividend Yield, and you can get variations, like the iShares Select Dividend, that screen by dividend-per-share growth rate, or the Vanguard Dividend Appreciation ETF, which focuses on companies that have steadily increased dividends.
O'Leary was looking for more specific criteria. He wanted:
- A total yield close to 3 percent
- with 20 percent less volatility than the market
- with stocks that all had strong balance sheets.
Why less volatility? He wants to avoid stocks that have experienced large price declines, which has occurred with some dividend-investing strategies. We are talking about energy stocks here, folks.
He ended up with 140 stocks selected from the FTSE USA Index, comprised of 600 of the largest U.S. publicly-listed equities.
O'Leary is so enthusiastic he is planning to launch four more ETFs in the coming 90 days that will use the same strategy to invest in high-yield stocks in Asia and Europe, in hedged and unhedged versions.
"This is what I am putting my own money into," O'Leary told me by phone. "The hope is that this is where I put my money for the equity portion of my trust and hold it for the rest of my life."