Saturday, May 18, 2013

Two STI ETFs, Different Dividends

One question that you might have when researching on STI ETFs is, why does the dividends differ since both are doing the same thing i.e. tracking Straits Times Index?

SPDR Straits Times Index ETF
Current Price : S$3.46
Dividend : S$0.04 (Date Paid : 19 Feb 2013)
Assets : S$380.46M

Nikko AM Singapore STI ETF
Current Price : S$3.49
Dividend : S$0.035 (Date Paid : 10 May 2013)
Assets : S$130.57M

To put things into perspective, the difference in half-a-cent dividend means for every 1,000 units, you would be getting $5 less in dividends. Let's dig a little further and we'll see one possible reason - expense ratio.

SPDR Straits Times Index ETF
Expense Ratio : 0.30

Nikko AM Singapore STI ETF
Expense Ratio : 0.48

Lower expense, higher dividends? Why is the expense ratio different? Is SPDR Straits Times Index ETF enjoying economies of scale due to it's larger fund size?

Moreover, let's take a look at Bloomberg's profile of each STI ETF, and you will see that their fund holdings proportion are different. With different underlying fund holdings proportion, it makes sense that the dividends will possibly differ as well.

SPDR Straits Times Index ETF (top holding is Singapore Telecommunications 9.956%)
Nikko AM Singapore STI ETF (top holding is Oversea-Chinese Banking Corp 10.223%)

Both ETFs may be tracking STI, but make no mistake about it, they are not the same thing. In this Motley Fool article, it mentioned that Nikko AM Singapore STI ETF will no longer be using financial derivatives, unlike SPDR Straits Times Index ETF.

Is this yet another reason to consider which ETFs you would be ultimately buying?


  1. ETF is subjected to tracking errors risk

  2. any idea if there has been any change to the total expense ratio for Nikko AM STI ETF? There has been a change in their investment policy recently, where they will stop using derivatives to track the index.  

    1. Checked out the latest fund prospectus. The fund prospectus stated that for financial year ended 30 June 2012 the expense ratio is 0.40%.