ETFs For Dividend Surprises In 2012 | Self Directed Investor

Dividend investing has always drawn a large crowd for its stability and high current income focus. For the most part, companies choose to make cash distributions when experiencing excess cash or when they want to skew their debt-to-equity ratios. Recently, however, a new trend has developed in which companies have even more incentive to let go of excess cash. As the fiscal cliff approaches, businesses fear that Congress will not be able to come to a viable solution and that tax rates will go back to pre-Bush tax cut levels. This incentive to give shareholders a special dividend before the year’s end may be more appealing to firms than paying the higher tax rates themselves [for more financial ETF news and analysis subscribe to our free newsletter].

Below are firms that Goldman Sachs expect will pay out a special dividend before new taxes take effect:

Goldman Sachs believes this asset management company may pay a special dividend before the year end that will yield 4.5%. Currently there are two ETFs that offer exposure to FII:

Franklin Resources Inc. (BEN)

Goldman Sachs also believes this asset management company could pay a special dividend in the near future that will yield 0.9%. Currently there are two ETFs that offer exposure to BEN, one of which also provides exposure to Federated Investors:

KBW Capital Markets Portfolio (KBWC): Allocating 8.44% to Franklin Resources makes it the second-largest holding in the portfolio, only behind State Street Corp.
SPDR S&P Capital Markets ETF (KCE): This ETF allocates 3.08% to BEN, less than it does for Federated and other financial institutions.

General Dynamics (GD)

After a closer look, Goldman Sachs believes this aerospace and defense company may pay a special dividend yielding 3.1%. Currently there are four ETFs that offer exposure to GD:

Dow Jones US Aerospace & Defense Index Fund (ITA): By allocating 5.89% to GD, this industrial equities ETF offers by far the most exposure to the firm.
Aerospace & Defense (PPA): While PPA mostly holds industrial firms like GD, which makes up 5.05% of the fund’s total assets, there is also a number of minority holdings in technology and consumer cyclical firms.
SPDR S&P Aerospace & Defense ETF (XAR): GD is one of XAR’s largest holding, allocating 4.58% to the company out of its 36 holdings.
Dynamic Industrials (PRN): Comprising of companies evaluated by fundamental growth, stock valuation, investment timeliness and risk factors, GD makes up 2.43% of the fund.

Las Vegas Sands Corp (LVS)

Goldman Sachs expects that this Vegas gaming corporation will pay out a 2.1% special dividend before 2013. Currently there are four ETFs that offer exposure to LVS:

Market Vectors Gaming ETF (BJK): This gaming ETF offers exposure to companies like Wynn Resorts, Sands China and MGM Resorts, but the heaviest allocation is in Vegas Sands at 8.26%.
Large-Cap Growth Equity Strategy Fund (RWG): With a large range of focuses from technology, consumer cyclical and healthcare, LVS is one of the largest of the 53 holdings with its 3.88% weighting.
Wilshire 4500 Completion ETF (WXSP): By removing the 500 stocks on the S&P from the Wilshire 5000 Index, investors gain more exposure to LVS, which at 0.95% is again the top holding.
Extended Market ETF (VXF): This domestic equities fund is set up much like WXSP, with a broad overview of the entire market, but with 3,040 holdings, its top allocation, LVS, only makes up 0.64% of the fund.

Goldman Sachs expects that this credit card giant will pay out a comparatively smaller 0.2% special dividend before the year is through. Currently there are three ETFs that offer exposure to MA:

This technical medical corporation is expected to pay out a 1.5% special dividend in the next month. Currently there are two ETFs that offer exposure to SYK: