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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?
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Launched on 12/02/2010, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $478.49 million, this makes it one of the average sized ETFs in the Financials ETFs. KBWD is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
The KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the US.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 1.24%.
It's 12-month trailing dividend yield comes in at 7.62%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For KBWD, it has heaviest allocation in the Financials sector --about 98.30% of the portfolio.
Looking at individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.75% of total assets, followed by Newtek Business Services Corp (NEWT - Free Report) and Armour Residential Reit Inc (ARR - Free Report) .
The top 10 holdings account for about 35.88% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -4.12% so far, and is up roughly 21.49% over the last 12 months (as of 01/25/2022). KBWD has traded between $16.70 and $21.58 in this past 52-week period.
KBWD has a beta of 1.39 and standard deviation of 32.75% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $11.38 billion in assets, Financial Select Sector SPDR ETF has $45.83 billion. VFH has an expense ratio of 0.10% and XLF charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?
Launched on 12/02/2010, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $478.49 million, this makes it one of the average sized ETFs in the Financials ETFs. KBWD is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
The KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the US.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 1.24%.
It's 12-month trailing dividend yield comes in at 7.62%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For KBWD, it has heaviest allocation in the Financials sector --about 98.30% of the portfolio.
Looking at individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.75% of total assets, followed by Newtek Business Services Corp (NEWT - Free Report) and Armour Residential Reit Inc (ARR - Free Report) .
The top 10 holdings account for about 35.88% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -4.12% so far, and is up roughly 21.49% over the last 12 months (as of 01/25/2022). KBWD has traded between $16.70 and $21.58 in this past 52-week period.
KBWD has a beta of 1.39 and standard deviation of 32.75% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $11.38 billion in assets, Financial Select Sector SPDR ETF has $45.83 billion. VFH has an expense ratio of 0.10% and XLF charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.