Investors who want exposure to dividend-paying stocks without incurring tax liabilities can do so via an exchange-traded note issued by Citi in 2014 and maturing in 2024 that’s based on the Miller/Howard Strategic Dividend Index Total Return.

The Index is designed to track the performance of 30 equally weighted stocks traded on U.S. exchanges that are selected quarterly pursuant to rules based upon fundamental factors, including dividend yield, expected growth of dividend yield, market valuation relative to book value, return on invested capital relative to price-to-earnings ratio and trailing 26-week stock price momentum.

“We’ve been managing money since 1991, focusing on income-producing equity,” said Steve Chun, director of marketing at Miller/Howard Investments. “One of the things that we always look for is dividend growth.”

Miller/Howard manages $9.2 billion, almost all of it via managed accounts. The Strategic Dividend Index “is one of our first attempts to come up with what we consider a retail product. and one that can be easily traded without all of the complexities of a managed account,” Chun told Markets Media. “The way we describe it would be a fundamental, factor-based index, something that goes beyond just market cap exposure.”

The index invests in high-dividend stocks but it doesn’t pay a yield. Hence, It’s not intended for income needs, but rather for investors that are looking at the dividend factor. “One advantage of this fund is that it doesn’t pay a dividend so there’s no dividend taxation,” said Chun. “It really is about the power of compounding. You do not have to pay any taxes, and therefore it increases the compounding power of the investment.”

The ETN is intended for investors “that buy into the notion that dividend payers and dividend growers will outperform non-dividend payers and also the broad market over market cycles,” he added. “There’s a growing constituency of investors that believe that these types of stocks that pay a high yield and grow their yield will outperform the S&P 500 companies.”

The Index screens dividend paying stocks based on yield and valuation, eventually choosing 35 stocks that meet its selection criteria. “Because this is re-balanced quarterly, momentum is a big factor and we are big believers in momentum as a near-term indicators of stock price,” said Chun. “We look for stocks with the highest 26-week total return and then we take that down to 30 stocks by eliminating 5 of the highest momentum stocks just to eliminate some of the outliers.”