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Is iShares Core High Dividend ETF (HDV) a Strong ETF Right Now?

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Making its debut on 03/29/2011, smart beta exchange traded fund iShares Core High Dividend ETF (HDV - Free Report) provides investors broad exposure to the Style Box - Large Cap Value 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

HDV is managed by Blackrock, and this fund has amassed over $12.43 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the Morningstar Dividend Yield Focus Index before fees and expenses.

The Morningstar Dividend Yield Focus Index offers exposure to high quality U.S. domiciled companies that have had strong financial health and an ability to sustain above average dividend payouts.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.08% for HDV, making it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 3.53%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector - about 26.90% of the portfolio. Healthcare and Information Technology round out the top three.

When you look at individual holdings, Exxon Mobil Corp (XOM - Free Report) accounts for about 9.01% of the fund's total assets, followed by Verizon Communications Inc (VZ - Free Report) and Chevron Corp (CVX - Free Report) .

The top 10 holdings account for about 41.35% of total assets under management.

Performance and Risk

The ETF return is roughly 0.91% and was up about 4.48% so far this year and in the past one year (as of 02/02/2023), respectively. HDV has traded between $91.29 and $109.92 during this last 52-week period.

HDV has a beta of 0.82 and standard deviation of 23.20% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Core High Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $54.04 billion in assets, Vanguard Value ETF has $102.37 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

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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