A Seeking Alpha Contribution
- RDIV has a relatively high yield compared to its nearest competitors such as DVY.
- RDIV takes the S&P 500 Index, pulls out the top 60 highest yielding stocks, and then weights them by revenues.
- RDIV’s strategy in the current market environment results in a very utilities heavy portfolio.
RevenueShares takes a different approach to indexing. Instead of using the market capitalization approach to weighting index constituents, the firm uses a company’s share of revenues. RevenueShares takes an existing S&P index such as the S&P 500 Index and then applies the different weighting methodology.
One of the main arguments against market capitalization weighted indexes is the valuation argument. As the price of a stock rises, so does its market cap, and over time a market cap weighted index becomes increasingly weighted towards overvalued shares. By using revenues as a weighting strategy, as a stock price rises faster than its revenue share, it is sold off at rebalancings. If a company’s stock price falls, but its revenues are steady or rise as a share of the index, it is purchased at each rebalancing. In other words, stocks that are overvalued by the price-to-sales metric are sold, and stocks that are undervalued by the price-to-sales ratio are purchased… To Continue Reading Please, Click Here.
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