Growth stocks have the undisputed U. S. market leaders for the better part of a decade now. To some extent that’s ushered dividend investing to the back burner because, using the magnificent seven as the bogey, many of the most beloved mega-cap growth stocks pay small dividends or no dividends at all.

Still, it should not be ignored that for roughly eight decades, dividends accounted for approximately 31% of the S&P 500’s total returns. It’s more in some years, less in others, but the point is dividends are important contributors to long-term total returns.

Dividends are also a reminder of the old adage that there’s no free lunch in investing. Said another way, those payouts carry tax liabilities for the recipients. No, those obligations aren’t taxed as highly as traditional income, but Uncle Sam still wets his beak, but there’s a way to avoid that.

Advisors and investors looking for a tax-advantaged S&P 500 wrapper have a new friend in the form of the Roundhill S&P 500(R) No Dividend Target ETF (XDIV). The actively managed XDIV, which turns three months old in a few days, does as its name implies: it follows the S&P 500 while not delivering dividends to investors.

Examining XDIV Benefits

In essence, XDIV is a “tax alpha” ETF, meaning it has the potential to provide superior long-term returns by mitigating investors’ tax exposure. As the Roundhill table below confirms, that alpha can be meaningful over time.

“Over a 30-year holding period, an investor in XDIV ends up with a portfolio value 7. 25% greater (0. 26% annualized) than an investor in a traditional S&P 500 ETF, despite identical total returns before taxes. That’s the impact of avoiding dividend taxation and letting compounding work harder on your behalf,” notes Roundhill’s Dave Mazza.

Another positive attribute for advisors and investors is that XDIV accomplishes its aims in easy-to-understand fashion. The fund holds two S&P 500 ETFs, though the vast majority of its assets are directed to the iShares Core S&P 500 ETF (IVV), and sells those funds before their ex-dividend dates. By doing so, XDIV doesn’t collect payouts and end users aren’t on the hook for dividend taxes.

Those benefits come with a low cost of admission. XDIV holds low-cost funds and as a result, its expense ratio is just 0. 084% annually.

XDIV May Be Intriguing for Wealthy Clients

Due to its tax alpha traits, XDIV may be a prime example of a new ETF advisors should consider bringing up with wealthy clients.

“XDIV is built for investors who care about what they actually keep and do not want the tax burden of distributions. It provides the full total return of the S&P 500 without quarterly dividend taxes. The benefits grow with time, making XDIV especially attractive for long-term investors in higher tax brackets,” adds Mazza.

The point: substantial wealth is built on after-tax basis. XDIV allows more after-tax capital to stay where it belongs: with investors, not Uncle Sam.