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3 Things Investors Should Know About The Lion-OCBC Securities APAC Financials Dividend Plus ETF

Invest in stable dividends and growth potential.


Lion-OCBC Securities APAC Financials Dividend Plus ETF

If you want steady income and growth potential in diversified financial stocks, look no further than the newly-listed Lion-OCBC Securities APAC Financials Dividend Plus ETF.

Listed on SGX on 13 May 2024, Lion-OCBC Securities APAC Financials Dividend Plus ETF offers a unique way for investors to gain exposure to the growing financial sector of the Asia-Pacific (APAC) region.

By tracking the top banking and finance stocks in the industry, including Singapore’s three major banks, this ETF allows you to capture potential growth while benefitting from regular dividend payouts.

Here are 3 important points you should know before you invest in the Lion-OCBC Securities APAC Financials Dividend Plus ETF.

#1 Why You Should Consider Investing In The Lion-OCBC Securities APAC Financials Dividend Plus ETF

The Lion-OCBC Securities APAC Financials Dividend Plus ETF tracks the performance of the iEdge APAC Financials Dividend Plus Index, which consists of the 30 largest financial institutions in the APAC region.

The financial services sector in this region, which includes Australia, Hong Kong, Japan, Singapore, Korea, Indonesia, Malaysia, and Thailand, offers potential for growth due to increasing economic integration and expanding middle-class population.

By investing in this ETF, you’re essentially buying a basket of APAC’s leading financial stocks. This provides diversification and reduces your risk compared to picking individual stocks.

Another key benefit is the attractive dividend yield. The ETF offers a minimum of 5% annualised payout based on the initial issue price of S$1 per unit for the first two years.

These payouts are distributed quarterly, with the first distribution expected to be in September 2024. The subsequent ones will be every March, June, September and December. From the third year onwards, quarterly dividend payouts are expected to be around 5% of the net asset value (NAV) less ETF expenses.

#2 What Are You Investing In With The Lion-OCBC Securities APAC Financials Dividend Plus ETF?

As a result of the underlying index constituents, banking stocks make up 84.9% of the ETF, followed by insurance (9.8%), and investment services (5.3%).

Japan occupies 20.6% of the ETF, followed by Singapore (20.4%), and Australia (19.8%).

The Lion-OCBC Securities APAC Financials Dividend Plus ETF underlying investments

Source: ETF brochure

As of 31 March 2024, the three Singapore banks of DBS Group, Overseas-Chinese Banking Corp (OCBC), and United Overseas Bank (UOB) took the top three spots of the ETF in terms of weight.

The top 10 companies in the ETF made up 56.2% of the portfolio.

No. Company Country Weight
1 DBS Group Holdings Singapore 7.3%
2 Overseas-Chinese Banking Corp Ltd Singapore 7.0%
3 United Overseas Bank Ltd Singapore 6.1%
4 KB Financial Group Inc South Korea 6.1%
5 Sumitomo Mitsui Financial Group Inc Japan 5.9%
6 Shinhan Financial Group Co Ltd South Korea 5.9%
7 China Construction Bank Corp Hong Kong 5.1%
8 Mizuho Financial Group Inc Japan 4.3%
9 Hana Financial Group South Korea 4.3%
10 Commonwealth Bank of Australia Australia 4.2%
Total 56.2%

 

The index will be reviewed and rebalanced semi-annually. There’s a 20% cap on the majority country weights and a 7% cap on individual stocks. This ensures that no one country or company takes up a huge proportion of the index.

New constituents joining the index must meet a minimum two-year average dividend yield of 3.5% while existing constituents must meet a minimum two-year average dividend yield of 3%.

The ETF follows a strategy called “direct replication”, mirroring the index’s performance by investing in the same stocks, with each stock making up the same weight as it does in the index. However, it may also adopt a “representative sampling” strategy if the manager believes that a direct replication strategy may not be the most efficient way to track the index.

The ETF has a management fee of 0.5% per annum.

Read More: Complete Guide To ETF Investing in Singapore [2024 Edition]

#3 How To Buy The Lion-OCBC Securities APAC Financials Dividend Plus ETF

You can buy units of the Lion-OCBC Securities APAC Financials Dividend Plus ETF through a brokerage account that allows trading on the Singapore Exchange (SGX). The buying process is similar to purchasing individual stocks.

The ETF can be bought under the ticker symbols YLD (for Singapore dollar counter) and YLU (for US dollar version), with the trading board lot size being one unit.

The Singapore dollar version of the ETF is currently priced at S$1.036 (as of 17 May).

The Lion-OCBC Securities APAC Financials Dividend Plus ETF is also classified as Excluded Investment Product (EIP). This means investors do not have to specifically qualify to trade it, unlike a Specified Investment Product (SIP) such as the Daily Leverage Certificates (DLCs).

While the ETF offers exposure to the promising financial sector with potential for income and growth, remember that all investments carry risk. It’s important to conduct your own research and understand your risk tolerance before investing in the ETF.

Read Also: Singapore Online Stock Brokerage Account Fees Comparison (2024 Edition)

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