XLF off by 18% but not really


From the look of the chart XLF appears to be falling off a cliff, actually it’s not. It’s all due to the 11th sector: Real Estate, being born from the Financials Sector.

XLF will be shedding its current real estate holdings in the form of a special dividend, which will be paid to XLF shareholders in shares of XLRE, as well as a small cash residual that will solve for the fact that fractional shares in XLRE cannot be issued. The ex-date for XLF is Sept. 19, 2016. Buyers of XLF on that date will not be entitled to the special dividend. On Sept. 19, XLF’s share price will drop by an amount that will approximate the value of the special dividend. The record date for the dividend will be Sept. 21 and the pay date Sept. 22.

From SPDJI: The dividend distribution may be characterized as both return of capital and income for tax purposes. As of Sept. 9, 2016, the amount of the dividend that will be treated as return of capital is estimated to be between 70% and 80%; the remaining 20%-30% is expected to be taxed as ordinary income. The amount of return of capital is an estimate and subject to change based upon multiple factors including fund performance, shareholder activity, and general market movement up until the payable date of the distribution.

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