The iShares DJ Select Dividend Index Fund (AMEX: DVY) is an exchange-traded fund (ETF) comprised of relatively high-yielding U.S. stocks. Despite that, the ETF has lagged the S&P 500 index by more than 2.8 percentage points over the past two months.
The culprit: weakness in financials and utilities, which account for 39% and 22%, respectively, of the fund's top 20 holdings.
Still, regardless of my view that both sectors will likely see more downside in the long run, the odds are that with Monday being the start of a new quarter, we may see buying of those depressed sectors by bargain-hunters looking to benefit from a contrarian bounce, which will support the price of the ETF.
Currently unsettled market conditions may also give the ETF a lift, as worried investors who nevertheless prefer to remain invested in equities seek a higher-than-average-yielding safe haven from a potential market storm.
Finally, the iShares DJ Select Dividend Index fund is now back to the same levels it was relative to the S&P 500 index in early 2004 and the spring of 2006. On both occasions, the ETF rebounded sharply on a comparative basis.
Given all that, this ETF might be worth a look in the near term.
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.
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